Summary

Both electronic benefits transfer and cash-out alternatives can reduce fraud, waste, and abuse associated with food stamp coupons, but the reductions possible under the two alternatives have not been quantified by the Agriculture Department's Food and Consumer Service. Neither alternative will reduce the overpayment of benefits--which totaled $1.8 billion in 1993--that occurs from fraud, waste, and abuse in the process for determining eligibility and benefits. Administratively, cash-out is the least expensive of the three systems for delivering benefits. Whether electronic benefits transfer will be less costly to run than the coupon system is unclear. Also, the popularly held assumption that electronic benefits transfer and cash-out will boost program participation has not been proven. With regard to ensuring that benefits are actually used to buy food, the electronic benefits transfer system appears superior to both the coupon and cash-out-systems. Currently, momentum is building to implement a new federal electronic benefits delivery system that would provide government payments and benefits for a host of federal and state programs. In GAO's opinion, the future value and utility of electronic benefits transfer are in the larger arena of a multi-program benefit delivery mechanism instead of in a system for delivery food assistance benefits alone.

GAO found that: (1) although electronic benefits transfer (EBT) and cash-out alternatives have the potential to reduce but not totally eliminate fraud, waste, abuse in the Food Stamp program; (2) neither of the alternatives will reduce benefit overpayments that result from the benefits eligibility determination process; (3) the EBT system will be more costly than the current coupon-based system if it is used solely to distribute food stamp benefits; (4) the cash-out system is the least expensive of the alternative benefit delivery systems; (5) demonstration projects have not been able to show that these alternative systems will increase program participation; (6) the EBT system appears to be superior to the coupon and cash-out systems in ensuring that program benefits are used for food purchases; and (7) the EBT system could be more cost-effective if it is used to deliver a wide variety of federal and state assistance programs and restructure the federal welfare system.