Evaluation of food retailer compliance management demonstrations in EBT-ready states and related initiatives final report

              A/4-iW oolY-A'Ot flft.X J /^ 3 i/rx/U&C-USDA
United States
Department ot
Agriculture
Food and
Consumer
Service
Office ot
Analysis and
Evaluation
Evaluation of Food Retailer
Compliance Management
Demonstrations in EBT-Ready
States and Related Initiatives
Final Report
April 1997
**—""-- 2.
USDA United States
Department of
Agriculture
Food and
Consumer
Service
Evaluation of Food Retailer Compliance
Management Demonstrations in EBT-Ready
States and Related Initiatives
Office of
Analysis and
Evaluation
FINAL REPORT
April 1997
Authors:
Christopher W. Logan
Paul Elwood
Submitted by:
Abt Associates Inc.
55 Wheeler Street
Cambridge, MA 02138
Project Director: Christopher W. Logan
Submitted to:
Office of Analysis and Evaluation
USDA Food and Consumer Service
3101 Park Center Drive, Rm. 214
Alexandria. VA 22302
Project Officer: Ken Offerman
This study was conducted under Contract No. 53-3198-4-021 with tha Food and Consumer Sarvica. United Statas
Dapartmant of Aoricurture. undar tha authority of tha Food Stamp Act of 1977. as amended. Points of view or opinions
statad in this raport do not necessarty raprassnt the official position of tha Food and Consumar Sarvica.
P
ACKNOWLEDGEMENTS
The authors wish to acknowledge the many individuals who contributed to this study
and to the preparation of this report. We gratefully acknowledge the valuable guidance and
support of Ken Offerman, the project officer within FCS' Office of Analysis and Evaluation.
Also at FCS, Linda Walters and Preston Mears of the Benefit Redemption Division provided a
wealth of information, contacts and helpful comments from their perspectives as successive
demonstration coordinators. Additional thanks go to Steven Carlson and Ted Macaluso of the
FCS Office of Analysis and Evaluation, and to Jordan Benderly, Suzanne Fecteau, and Lynn
Jordan, of the Benefit Redemption Division. We also appreciated the assistance and information
provided by the following regional office staff: Dick Dees and Judy Johnson of the Southeast
Regional Office; and Bob Graybill, Ron Gwinn, Patty O'Malley, Phil Swain, and Betty Veasley
of the Southwest Regional Office. Last but certainly not least, we thank the staff of the New
Mexico and South Carolina FCS Field Offices for their time and thoughtful input on their
experiences in the demonstration; we also appreciate the cooperation of the staff of the Arkansas
and Mississippi FCS Field Offices, who provided the vital comparison data.
We are equally grateful for the extensive, unstinting cooperation of the New Mexico
Human Services Department and the South Carolina Department of Social Services. In New
Mexico, we especially appreciated the time and assistance of the EBT project manager, John
Waller, and of Debbie Roybal of his staff. In South Carolina, our special thanks go to Paul
Brawley, EBT Administrator; Robin Verenes, Deputy EBT Administrator; and Jim Apple.
Valerie Johnson and Ric Lawson of the EBT staff.
Finally, the authors want to thank the people at Abt Associates who aided the study.
John Kirlin was a valuable resource as the technical advisor. We are most grateful to Susan
Byers, who managed the production of this report and other project documents with significant
contributions from Jan Nicholson and Stefanie Falzone.
H
USDA
United Stetee
Dmpmnmmmul
AfriMrtHN
Food and
Consumer
Service
3101 Park
Center Drive
EVALUATION OF STATE RETAILER MANAGEMENT
Sim* DEMONSTRATIONS INEBT-READYSTATES
APRIL 1997
Enclosed for your information is a copy of "Evaluation of State Retailer
Management Demonstrations in EBT-Ready States." This study presents an
evaluation of the State Retailer Management Demonstrations.
The findings are based on retailer management demonstrations in New Mexico
and South Carolina. The evaluation compares the practices and procedures used
in the two demonstration States, the corresponding FCS Field Offices and two
comparison FCS Field Offices.
If you have any questions regarding this report, please contact Ken Offerman,
Family Programs Staff, Office of Analysis and Evaluation, (703) 305-2115.
AM iQUAJ. OPPORTUNITY EMPLOYE* S
Summary
Evaluation of State Retailer Compliance Management
Demonstrations in EBT-Ready States
Purpose
As Electronic Benefit Transfer (EBT) usage expands with national implementation, there has
been increased interest in possible alternatives and refinements to current retailer management
activities. The purpose of the demonstrations was to explore the option of opening retailer
management activities to States to pursue alternative approaches and initiatives with Food
Stamp Program (FSP) retailers. This study evaluates the Retailer Compliance Management
Demonstrations in EBT-ready States. In these demonstrations, the State food stamp agencies
in New Mexico (NM) and South Carolina (SC) assumed responsibility for managing the
participation of food retailers in the FSP, a task previously managed exclusively by the Federal
Government.
Method
The data for the evaluation were collected from the participating State agencies and, to provide
points of comparison for the demonstrations, from four Food and Consumer Service (FSC)
Field Offices. Data were collected from the New Mexico and South Carolina Field Offices
(the baseline offices). In addition, to provide data from settings unaffected by the
demonstration, the Little Rock, Arkansas Field Office served as a comparison site for the New
Mexico demonstration, and the Jackson, Mississippi Field Office was the comparison site for
the South Carolina demonstration. The principal data sources were three rounds of interviews
in New Mexico and South Carolina with State and field office staff, one round of interviews at
the comparison field offices, retailer management activity and participation data from FCS'
computer system, and demonstration cost reports.
Findings
• New Mexico and South Carolina successfully performed the field offices' principal retailer
management functions, with substantial training and technical assistance from the Field
Offices.
• The consolidation of EBT and FSP retailer management into a single point of contact
clearly improved coordination and communication with the EBT vendor, but the impact on
retailers' ease of access was mixed.
• The demonstrations highlighted the pressures of EBT implementation on States, FCS and
EBT vendors, and pointed out the competing priorities (i.e., NM limited staff resources;
developmental & implementation considerations related to the SC retailer management
computer system; and State & EBT vendor financial incentives to limit the number of POS
deployments/retailer authorizations) under an integrated system when FSP and EBT
retailers management are combined.
• EBT implementation had substantial effects (i.e., increased incidence of withdrawals and
reduced retailer population) on retailer management activity and retailer participation in
South Carolina, but the effects in New Mexico were less clear and modest at best.
•
Both States used the opportunity of store visits during EBT implementation to enhance the
presence of the FSP among retailers. The States identified ineligible or problematic stores
during these visits, but most of the withdrawals during EBT rollout were the result of EBT
vendor activity.
State labor costs for retailer management were remarkably similar to those of the FCS field
offices, once differences in workload and the role of EBT implementation activity were
taken into account.
While both States took definite steps to limit the number of marginal stores authorized to
participate in the FSP, the States, like the field offices, were hampered by the difficulty of
justifying the withdrawal of marginal stores under current regulations. Furthermore, due
to the circumstances of the demonstrations, a definitive measure of any discernible effects
on retailer authorizations, withdrawals, or disqualifications was not possible.
The States retained some retailer management functions at the end of the demonstration and
were willing to keep more. Future State participation in retailer management is clearly an
option, although funding issues have to be resolved.
There were clear synergies from the enhanced State involvement in retailer management
during EBT implementation, with benefits for both the States and FCS. The experience
with State retailer management after EBT implementation was more limited and less
conclusive, but potential benefits for retailer access and integrity emerged.
/
TABLE OF CONTENTS
Chapter Two
Chapter Three
EXECUTIVE SUMMARY i
Chapter One INTRODUCTION 1
1.1 Background 1
1.2 Retailer Management Demonstration Objectives 2
1.3 Evaluation Objectives and Design 3
1.4 Organization of Report 5
PROJECT IMPLEMENTATION: NEW MEXICO 7
2.1 Site Description 7
2.2 Project Origins 7
2.3 Startup 9
2.4 Retailer Management During EBT Expansion 11
2.5 Return to FCS Administration 13
PROJECT IMPLEMENTATION: SOUTH CAROLINA 15
3.1 Site Description 15
3.2 Project Origins 15
3.3 Startup 17
3.4 Retailer Management System Database 19
3.5 Retailer Management During EBT Expansion 21
3.6 End of the Demonstration 25
STATE AND FIELD OFFICE PROCEDURES FOR RETAILER
MANAGEMENT 27
4.1 Key Retailer Management Activities 27
4.2 New Mexico Human Services Department Retailer
Management Procedures 29
4.3 South Carolina Department of Social Services Retailer
Management Procedures 33
4.4 Comparison of Procedures 35
4.5 Chapter Summary 37
RETAILER MANAGEMENT ACTIVITY, RESOURCES, AND
RESULTS 43
5.1 Retailer Management Activity 43
5.2 Retailer Management Costs 46
5.3 Changes in Retailer Participation 52
Chapter Six LESSONS OF THE RETAILER MANAGEMENT
DEMONSTRATIONS 55
Appendix A: RETAILER MANAGEMENT FUNCTIONS IDENTIFIED IN THE
REQUEST FOR APPLICATIONS A-l
Chapter Four
Chapter Five
4\
EXECUTIVE SUMMARY
This report documents the Retailer Compliance Management Demonstrations in EBT-Ready
States. In these demonstrations, the state food stamp agencies in New Mexico and South
Carolina assumed responsibility for managing the participation of food retailers in the Food
Stamp Program, a task previously managed by the federal government. The report describes
these ground-breaking demonstrations and evaluates their results.
Background
The Food Stamp Program (FSP) provides benefits, in the form of paper food stamp
coupons or their electronic equivalents, to increase the food-purchasing power of needy families.
As the administering agency for the FSP, the Food and Consumer Service (FCS) of the U.S.
Department of Agriculture (USDA) is responsible for the authorization, training, and monitoring
of food retailers that agree to redeem FSP benefits. FCS strives to make the FSP as open as
possible to legitimate retailer participation while protecting the integrity of the program from
trafficking (the illegal sale of food stamp benefits for cash or nonfood items) and other types of
redemption fraud and abuse.
Many of the day-to-day activities involved in meeting these objectives are assigned to
the FCS Field Offices. These activities include processing applications from retailers wishing
to obtain FSP authorization, reauthorizing retailers to participate every two to three years,
withdrawing nonparticipating stores, providing FSP information to retailers, and enforcing
compliance with program regulations.
Recent developments have led FCS to reassess the way that retailer management is
carried out in the FSP and the potential roles of state food stamp agencies in this area. The
advent of electronic benefits transfer (EBT) systems, which eliminate paper food stamp coupons,
is changing the way that the Program interacts with retailers. As state agencies implement and
operate their EBT systems, they (or their EBT vendors) must recruit, equip, and train retailers
to accept EBT cards for food stamp (and, in most states, cash) benefits via point-of-sale (POS)
equipment. This process requires interaction with FCS to obtain and update lists of authorized
food retailers.
\/H
Executive Summary
At the same time, FCS is seeking new ways to improve the integrity of benefit
redemption, placing particular emphasis on the problem of food stamp trafficking. Routine state
contacts with retailers in the course of EBT operations may provide an "on-the-ground" presence
that can help ensure retailer compliance with program regulations. These changes have occurred
in a context of diminishing FCS resources for retailer management, especially for visiting stores
applying for authorization.
Retailer Management Demonstration Objectives
In May 1993, FCS solicited proposals to demonstrate "State Retailer Compliance
Management in EBT-Ready States." The stated purpose of the Request for Applications (RFA)
was "to explore the option of opening retailer management initiatives to States to pursue
alternative approaches and initiatives with Food Stamp Program retailers".1 The RFA was
specifically targeted to EBT-ready states, on the premise that such states' involvement with
retailer recruitment, training and management for their EBT projects would orovide an
opportunity for the states to assume broader retailer management roles. In addition to the
control and simplification that the states would gain by participating in the demonstration, the
availability of grant funds offered the states "an opportunity to defray some of the costs
associated with implementation and operation of EBT systems."
The New Mexico Human Services Department (NMHSD) and the South Carolina
Department of Social Services (SCDSS) received funding under the RFA, established cooperative
agreements with FCS, and conducted retailer management demonstrations in selected areas.
FCS contracted with Abt Associates Inc. to conduct an independent evaluation of these
demonstrations.
Evaluation Objectives and Design
In evaluating the retailer management demonstrations, the principal objectives were:
• to describe demorstration implementation and operations;
• to compare state retailer management procedures in the demonstration sites with
FCS procedures;
1 Request for Applications FNS 93-024-ASW.
ii
Vllj
Executive Summary
• to assess the states' retailer management performance, with comparison to FCS
field office performance;
• to compare the administrative costs of demonstration activities with those of
comparable FCS tasks; and
• to assess the demonstrations' implications for FCS retailer management policy and
procedures.
The data for the evaluation were collected from the participating state agencies and, to
provide points of comparison for the demonstrations, from four FCS Field Offices. Data were
collected from the New Mexico and South Carolina Field Offices (the baseline offices). In
addition, to provide data from settings unaffected by the demonstrations, the Little Rock,
Arkansas Field Office served as a comparison site for the New Mexico demonstration, and the
Jackson, Mississippi Field Office was the comparison site for the South Carolina demonstration.
The principal data sources were three rounds of interviews in New Mexico and South Carolina
with state and Field Office staff, one round of interviews at the comparison Field Offices,
retailer management activity and participation data from FCS' computer system, and
demonstration cost reports.
Project Description: New Mexico
Exhibit ES. 1 provides a profile of the New Mexico retailer manzgement demonstration.
The NMHSD combined two principal activities in its retailer management demonstration:
(1) assumption of responsibility for all aspects of FSP retailer management available
to the state under the terms of the demonstration, including authorizing, reauthoriz-ing
and disqualifying retailers, and making referrals to investigators, for seven
counties; and
(2) integration of FSP retailer management for the demonstration area with statewide
EBT retailer enrollment and liaison, both during and after EBT implementation.
New Mexico's EBT system had been fully operational in Bernalillo County (Albuquerque) since
1992. During most of the demonstration, NMHSD was in the process of implementing EBT in
the remaining counties in the state. The half-time retailer management specialist assisted in the
rollout by establishing contracts between the state and participating merchants and by visiting
stores in advance of implementation, he performed these tasks for the last two demonstration
counties placed on the EBT system, and also for the 25 nondemonstration counties subsequently
Hi
/*
Executive Summary
Exhibit ES.l
RETAILER MANAGEMENT DEMONSTRATION SUMMARY:
NEW MEXICO HUMAN SERVICES DEPARTMENT
EBT Pilot Implemented: March 1992
St. tewide EBT Rollout Began: January 1994
Retailer Management Demonstration Began: October 1, 1993
Demonstration Fully Operational: April 1, 1994
EBT Rollout in Demonstration Area Complete: September 1995
Retailer Management Demonstration Ended: March 31, 1996
Grant Amount: $66,780
Demonstration Area: 7 counties, including 591 retailers, or 46% of
New Mexico's retailer population (as of January
19%)
| Stuffing: One half-time employee, working exclusively on
the demonstration project
1995 Calendar Year Activity Level: Retailers as of January 1995: 600
New authorizations: 65
Re-authorizations: 215
Withdrawals: 69
Disqualifications: 1 1
converted to EBT.
Store visits were also an integral part of the first-time authorization process. Wherever
feasible, the retailer management specialist visited stores before authorizing them; otherwise, she
visited them within a month of authorization.
Project Description: South Carolina
Exhibit ES.2 provides a profile of the South Carolina retailer management demonstra-tion.
The SCDSS included the following three components in its Retailer Management
Demonstration:
(1) state management of retailer participation in the FSP in five counties,
(2) integration of FSP retailer management with statewide EBT implementation
activities, and
IV y
Executive Summary
Exhibit ES.2
RETAILER MANAGEMENT DEMONSTRATION SUMMARY:
SOUTH CAROLINA DEPARTMENT OF SOCIAL SERVICES
Retailer Management Demonstration Began: January 1994
EBT Pilot Implemented: November 1994
Demonstration Fully Operational: January 1, 1995
Statewide EBT Rollout Began: March 1995
Statewide EBT Rollout Completed: December 1995
Retailer Management Demonstration Ended: January 4, 19%
Grant Amount: $180,000
(demonstration Area: 5 counties, including ^20 retailers, or 19% of
South Carolina's retailer population (as of De-cember
1995)
Staffing: 8 staff at the state EBT project office worked on
the demonstration, of whom two were primarily
assigned to the retail management project
1995 Calendar Year Activity Level: Retailers as of January 1995: 769
New authorizations: 73
Reautl.orizations: 512
(includes stores from 1994 and 1995 lists)
Withdrawals: 217
Disqualifications: 0
(3) development of a retailer management information system, including up-to-date
redemption information, and a set of retailer fraud indicators.
Intensive work on EBT system development, testing, and implementation was ongoing
throughout South Carolina's retailer management demonstration. SCDSS arranged for the EBT
contractor (Citibank EBT Services) to fill out food inventory checklists during pre-implementa-tion
visits to stores. Demonstration staff participated fully in all aspects of implementation,
including coordinating and conducting visits to all stores during the first days of implementation
in each county. Development work on the retailer management database application continued
throughout the demonstration period. The system was designed to generate a list of "fraud-prone"
stores and to allow users to access the database by modem from remote locations.
*l
Executive Summary
Printed reports of fraud-prone retailers and limited online access were available in June 1995.
More complete online capabilities were available in early 1996.
Evaluation Results
The demonstrations in New Mexico and South Carolina provided a revealing test of
integrating retailer management for the FSP with EBT retailer liaison functions under state
control. The main lessons of the retailer management demonstrations and their implications for
future state involvement in retailer management are summarized below along four key
dimensions: state performance of retailer management activities, interactions with EBT
implementation and operations, impacts on retailer management activities and cost, and
implications for future state involvement in retailer management.
State performance of retailer management activities:
• New Mexico and South Carolina successfully performed the principal retailer
management functions normally performed by FCS Field Office staff: processing
new authorizations and ^authorizations, withdrawing closed or ineligible stores,
updating retailer information on STARS, and responding to retailer inquiries. New
Mexico, unlike South Carolina, also performed routine retailer monitoring
activities, such as reviewing reports on nonredeeming stores, and implemented
administrative sanctions against retailers found to have violated program
regulations.
• In both New Mexico and South Carolina, the state staff received a substantial
amount of training from the FCS Field Offices. Both states relied on the FCS
Field Offices for policy guidance. New Mexico HSD maintained a particularly
close working relationship with the New Mexico Field Office throughout the
demonstration.
• Both New Mexico and South Carolina visited all stores applying to participate in
the FSP. During the demonstration period, both FCS Field Offices visited few
such stores. (Subsequently, both Field Offices have dramatically increased the
frequency with which they visit retailers.)
• South Carolina accomplished its goal of developing a computer system for retailer
management and monitoring, but this achievement was eclipsed by similar FCS
efforts at the national level. The development process, which extended throughout
the demonstration period, was fraught with delays and technical problems.
Interaction of retailer management functions and EBT implementation and operations:
VI in
Executive Summary
The consolidation of EBT and FSP retailer management clearly improved state
coordination and communication with the EBT vendor.
The consolidation of EBT and FSP functions streamlined the process for retailers,
allowing them to get the information they needed from a single source. At times,
however, the demands of the EBT rollout process drew resources away from the
retailer management activities, resulting in delays in responding to retailer
inquiries, especially in New Mexico.
New Mexico and South Carolina used the store visits made during EBT implemen-tation
to enhance the presence of the FSP among retailers. Especially in South
Carolina, the EBT-related visits to stores provided an important opportunity to
identify retailers that had gone out of business, changed ownership, changed their
address, or changed their business in a way that affected their eligibility to
participate in the program.
South Carolina arranged for its EBT vendor to complete a food inventory checklist
on questionable stores. Although all parties agree that the use of such a checklist
is feasible and potentially valuable, the test of this process in South Carolina was
too limited to prove its effectiveness. Checklists were completed only in parts of
the state where the Field Office retained its retailer management responsibilities,
and Field Office staff had difficulties acting quickly and decisively on the EBT
vendor's information.
In approaching questions of r tailer eligibility, the states appeared to be more
inclined than the Field Offices to deny marginal retailer applications and to
withdraw marginal retailers identified during EBT rollout or reauthorization. State
staff were acutely aware of the financial costs and the risks to EBT system integrity
posed by the inclusion of marginal retailers, and less experienced than the Field
Office staff with the difficulty of sustaining determinations of ineligibility through
the administrative review process.
There was, however, very limited evidence of any impacts on withdrawals resulting
the states' store visits and their greater inclination to deny or withdraw marginal
stores. The limitations of the evaluation precluded a conclusive determination as
to whether the states had higher rates of withdrawn or denied applications. In
South Carolina, the Field Office withdrew only 12 of the 31 stores outside the
demonstration area that the state recommended for withdrawal based on information
from the rollout process, suggesting that the sta'e w 's indeed more aggressive but
not necessarily right. In New Mexico, the state i-etailer management specialist
deferred to the more conservative judgment of the Field Office when evaluating
applications from stores that she considered marginal.
There were clear synergies resulting from enhanced state involvement in retailer
management during EBT implementation, including:
► better state access to retailer information,
vn
Xit)
Executive Summary
► easier and tighter coordination between EBT and FSP retailer management,
and
► enhanced detection of ineligible or potentially noncompliant stores.
The experience with state retailer management after EBT implementation was more
limited and less conclusive, but several potential benefits emerged
► streamlined enrollment of new retailers into the FSP and the EBT system,
► a single point of contact for retailers with FSP or EBT questions and
problems,
► completion of inventory checklists during EBT vendors' pre-installation visits
to stores,
► more timely information for the state and its EBT vendor on retailer
withdrawals and disqualifications, and
» better flow of information to and from the State Law Enforcement Bureau
(SLEB).
Measured impacts of retailer management demonstrations:
• Differences among the study areas in the rate of new authorizations are small, and
it is unlikely that the demonstrations had a significant influence on the rate of new
authorizations.
• In both the state- and federally administered parts of South Carolina, stores were
withdrawn at a very high rate compared to other Field Offices in both the Southeast
and Southwest Regions. At the same time, fewer stores were withdrawn in both
parts of New Mexico compared to other Field Offices.
• The timing of EBT implementation had a powerful impact on the rate of
withdrawals, overwhelming any influence of the transfer to state retailer
management.
• State labor costs for retailer management were remarkably similar to those of the
FCS Field Offices, once differences in workload and EBT implementation activity
are taken into account. The demonstrations had modest start-up costs, with the
major exception of South Carolina's $171,000 in expenses for the development of
the retailer management computer system and other project equipment.
Implications forfuture state involvement in retailer management:
• Both states continue to seek a strong role in retailer management in the FSP,
although funding issues have prevented a continuation of the demonstrations. Both
states submitted proposals to FCS to continue the demonstrations, and South
Carolina sought to significantly expand the scope of its retailer management
vui /l/
Executive Summary
activity. FCS and the states, however, were unable to find a mutually acceptable
funding arrangement to extend the demonstrations.
States clearly are capable of assuming the more routine retailer management
functions of the FCS Field Offices, freeing the Field Office staff to focus more on
retailer monitoring and other compliance-related activities.
States require a significant level of training and initial support from FCS if they are
to take on retainer management responsibilities.
In performing certain infrequent but important retailer management activities, states
would benefit from technical assistance that could be provided by FCS staff.
Examples include disqualifying retailers and supporting administrative review.
Particularly sensitive and technical tasks, such as supporting judicial appeals, may
be best handled by FCS staff.
ix t\t
CHAPTER ONE
INTRODUCTION
This report documents the Retailer Compliance Management Demonstrations in EBT-Ready
States. In these demonstrations, the state food stamp agencies in New Mexico and South
Carolina assumed responsibility for managing the participation of food retailers in the Food
Stamp Program, a task previously managed by the federal government. The report describes
these ground-breaking demons'rations and evaluates their results.
1.1 BACKGROUND
The Food Stamp Program (FSP) provides assistance, in the form of paper food stamp
coupons and electronically-stored benefits, to increase the food purchasing power of needy
families. As the administering agency for the FSP, the Food and Consumer Service (FCS) of
the U.S. Department of Agriculture (USDA) is responsible for the authorization, training, and
monitoring of food retailers that agree to redeem FSP benefits. FCS strives to make the FSP
as open as possible to legitimate participation by food retailers while protecting the integrity of
the program from trafficking (the illegal sale of food stamp benefits for cash or nonfood items)
and other types of redemption fraud and abuse.
Many of the day-to-day activities involved in meeting these objectives are assigned to
the FCS Field Offices. Retailers wishing to obtain FSP authorization apply to the Field Offices,
which review the applications and determine if the stores qualify to participate. The Field
Offices also process the applications for reauthorization that participating retailers must submit
every two to three years (depending on the type of store). In addition, when stores close,
change ownership, cease to be eligible, or no longer redeem food stamp benefits, the FCS Field
Office staff withdraw them from the FSP. Field Office staff also provide information on
program regulations to authorized retailers, answer questions about program policy, and arrange
for educational materials and redemption certificates to be delivered to retailers. To enforce
compliance with program regulations, the Field Office staff monitor retailers' redemption
activity, receive and follow up on allegations of fraud, and impose disqualifications or monetary
penalties in cases of documented program violations.
Chapter One: Introduction
Recent developments have led FCS to reassess the way that retailer management is
carried out in the FSP and the potential roles of state food stamp agencies in this area. The
advent of electronic benefits transfer (EBT) systems is changing the way that the program
interacts with retailers. As state agencies implement and operate their EBT systems, they (or
their EBT vendors) must recruit, equip and train retailers to accept EBT cards for food stamp
(and, in most states, cash) benefits via point-of-sale (POS) equipment. This process requires
interaction with FCS to obtain and update lists of authorized food retailers. (Future EBT
systems may involve states with a broader array of retailers and sellers of food and services,
such as Medicaid providers and WIC vendors.)
At the same time, FCS is seeking new ways to improve the integrity of benefit
redemption, placing particular emphasis on the problem of food stamp trafficking. Routine state
contacts with retailers in the course of EBT operations may provide an "on-the-ground" presence
that can help ensure retailer compliance with program regulations.
These changes have occurred in a context of diminishing FCS resources for retailer
management. Cutbacks at the FCS Field Offices, including the closures of some satellite offices,
have substantially reduced the staff resources available for retailer management from nearly
1,000 staff working full-time in 1976 to 350 staff spending (on average) only a fraction of their
time on retailer management. A notable result of these staff reductions, and the accompanying
reductions in travel budgets, was that the Field Offices became unable to visit the great majority
of retailers applying for FSP authorization or reauthorization.
1.2 RETAILER MANAGEMENT DEMONSTRATION OBJECTIVES
In May 1993, FCS solicited proposals from states wishing to demonstrate "State Retailer
Compliance Management in EBT-Ready States." The stated purpose of the Request for
Applications (RFA) was "to explore the option of opening retailer management initiatives to
States to pursue alternative approaches and initiatives with FSP retailers".1 The RFA was
specifically targeted to EBT-ready states, on the premise that such states' involvement with
retailer recruitment, training, and management for their EBT projects would provide an
opportunity for the states to assume broader retailer management roles. In addition to the
control and simplification of EBT retailer management that the states would gain by participating
1 Request for Applications, FNS 93-024-ASW.
2
Chapter One: Introduction
in the demonstration, the availability of grant funds offered the states "an opportunity to defray
some of the costs associated with implementation and operation of EBT systems."
The New Mexico Human Services Department (NMHSD) and the South Carolina
Department of Social Services (SCDSS) received ftmdiog under the RFA, established cooperative
agreements with FCS, and conducted retailer management demonstrations in selected areas. To
obtain an independent evaluation of these demonstrations, FCS contracted with Abt Associates
Inc.2 The evaluation also included a study of State Law Enforcement Bureau (SLEB)
agreements, under which FCS authorizes states to use fooa stamp coupons in trafficking
investigations.3
1.3 EVALUATION OBJECTIVES AND DESIGN
In evaluating the retailer management demonstrations, the principal objectives were:
• to describe demonstration implementation and operations;
• to compare state retailer management procedures in the demonstration sites with
FCS procedures;
• to assess the states' retailer management performance, with comparison to FCS
field office performance;
• to compare the administrative costs of demonstration activities with those of
comparable FCS tasks; and
• to assess the demonstrations' implications for FCS retailer management policy and
procedures.
To provide points of comparison for the demonstrations, data were collected from four
FCS Field Offices. In each state, data were collected from the Field Office that had previously
served the demonstration area: the Albuquerque, New Mexico and Columbia, South Carolina
Field Offices. These two "baseline" offices still managed retailer participation in the rest of
their respective states; the New Mexico office managed retailer participation in a portion of
Texas as well.
2 FCS contract no. 53-3198-4-021.
3 Leo M. Allman and Christopher W. Logan, Study of State Law Enforcement Bureau Agreements,
Cambridge, MA: Abt Associates Inc.. September 1996.
Chapter One: Introduction
To provide data from settings unaffected by the demonstrations, the Little Rock,
Arkansas Field Office served as a comparison site for the New Mexico demonstration, and the
Jackson, Mississippi Field Office was the comparison site for the South Carolina demonstration.
The comparison sites were selected for their similarity to the demonstration sites along the
dimensions of region, number of authorized firms, retailer mix, and workload per staff-year.
The data sources for the evaluation were:
• three rounds of in-person interviews with demonstration personnel and other state
EBT project staff;
• three rounds of in-person interviews with FCS personnel in the baseline Field
Offices;
• one round of in-person interviews with FCS personnel in the comparison Field
Offices;
• telephone interviews with FCS Regional Office personnel involved with the
demonstrations;
• retailer authorization and participation data from the Store Tracking and Redemp-tion
Subsystem (STARS) of the FSP Integrated Information System; and
• demonstration cost reports prepared by state staff.
For state and federal program administrators, the results of this demonstration provide
valuable lessons on an alternative approach to FSP retailer management. They may not
necessarily predict, however, what might happen if other states assumed retailer management
responsibilities. The demonstration had some important limitations that necessitate caution in
interpreting the observed differences across sites.
The evaluation was based on data from a set of case studies. The number of assessed
sites was small (comprising two state agencies and four FCS Field Offices), and the states sought
the opportunity to participate. Moreover, state retailer management was implemented along with
EBT. This connection was one of the objectives of the demonstration, but it posed analytic
difficulties in separating the effects of EBT and state retailer management on the patterns of
retailer authorization and redemption activity, both in the demonstration sites and in the balance
of New Mexico and South Carolina. As a result, a number of the findings are suggestive, not
conclusive, and differences arising from state retailer management may have been masked by
greater influences from EBT implementation.
Chapter One: Introduction
1.4 ORGANIZATION OF REPORT
The next two chapters describe the history of the retailer management demonstrations
in New Mexico (Chapter Two) and South Carolina (Chapter Three). In Chapter Four, each
state's approach to retailer management is described. This chapter also compares the principal
featui PS of the states' procedures with those of the Field Offices. Chapter Five examines three
dimensions of demonstration outcomes—activity levels, costs, and retailer participation changes-through
comparisons with the four Field Offices in Uie study. The concluding chapter of the
report, Chapter Six, summarizes the lessons and other implications of the demonstrations with
respect to future retailer management activity, both by states and by FCS.
t MBMM
CHAPTER TWO
PROJECT IMPLEMENTATION: NEW MEXICO
This chapter presents a description of the New Mexico Retailer Compliance
Management Demonstration and a discussion of the implementation process. Section 2.1
describes the area included in the demonstration. Section 2.2 discusses the project origins, and
Section 2.3 focuses on demonstration startup. Section 2.4 address**0 the interaction of EBT
implementation and the state's retailer management activities, and action 2.5 discusses the
return to FCS management of retailer participation in the demonstration area.
A description of state and FCS retailer management procedures is contained in Chapter
Four.
2.1 SITE DESCRIPTION
The seven-county area included in the New Mexico demonstration encompasses a wide
geographic area. Over 590 retailers, or 46 percent of New Mexico's FSP-authorized retailers,
were included in the demonstration area. The seven counties, Bernalillo, Dona Ana, Sandoval,
San Juan, Santa Fe, Torrance, and Valencia, contain one large metropolitan area, Albuquerque,
and many very sparsely populated rural areas. The state's EBT system had been fully
operational in Bernalillo County (Albuquerque) sine: 1992. During much of the demonstration,
however, NMHSD was implementing EBT in the remaining counties in the state. Statewide
rollout began in late 1993, and the final set of counties went live on EBT in August 1995.
Exhibit 2.1 presents key dates in New Mexico's retailer management demonstrations, including
milestones in the EBT implementation process.
2.2 PROJECT ORIGINS
The New Mexico demonstration was conceived by NMHSD EBT project director. He
recognized in the RFA the opportunity to take advantage of synergies that might come from
combining EBT project management and FSP retailer management in a single state agency.
After learning of the RFA less than a week before an application was due to FCS, he quickly
planned the demonstration, established a budget, gained departmental approval, and submitted
an application. The state retailer management demonstration in New Mexico included the
Chapter Two: Project Implementation—New Mexico
Exhibit 2.1
NEW MEXICO DEMONSTRATION CHRONOLOGY
Date Event
| May 1993 FCS issues RFA for "State Retailer Compliance Management in EBT-Rcady States."
I! June 1993 NMHSD submits application to FCS.
October 1993 Two-year demonstration period begins.
December 1993 NMHSD hires retailer management specialist.
January 1994 Statewide Expansion Phase I: EBT implementation completed for retailers in
Sand oval, Valencia, Torrance, and San Juan Counties.3
March 1994 FCS notifies demonstration-area retailers of change to state administration. New
Mexico Field Office (NMFO) retailer files transferred to NMHSD.
April 1994 NMHSD takes over responsibility for all aspects of retailer management in demon-stration
area.
May 1994 FCS Minneapolis Computer Support Center (MCSC) assigns a STARS identification
number and password to NMHSD.
June 1094 NMHSD mails 1994 reauthorization applications to retailers.
August 1994 NMHSD gains full STARS capability.
September 1994 Statewide Expansion Phase II: EBT implementation completed for retailers in Santa
Fe and Dona Ana Counties.3
November 1994 NMHSD gains access to the FCS electronic mail system.
December 1994 Statewide Expansion Phase III: EBT system implementation completed for retailers
in seven counties not included in the retailer management demonstration.3
March 1995 Statewide Expansion Phase IV: EBT system implementation completed for retailers
in four counties not included in the retailer management demonstration.3
June 1995 NMHSD mails 1995 reauthorization packets to retailers.
| July 1995 FCS receives proposals from SC and NM to extend the demonstration.
| August 1995 Statewide Expansion Phases V and VI: EBT system implementation completed for
retailers in 13 counties not included in the retailer management demonstration. All
retailers in NM are now on the EBT system.3
| September 1995 FCS approves a six-month, no-cost extension of the NM demonstration.
March 19% NMFO notifies retailers in the demonstration area of the return of FSP retailer
management responsibility to the NMFO. NMHSD returns retailer files to the Field
Office.
April 19% Demonstration ends. NMFO resumes retailer management activity in the demon-stration
area.
3 Although all participating retailers were able to conduct EBT transactions after the first of the month, recipients were
gradually brought onto the system over several months.
Chapter Two: Project Implementation—New Mexico
following key elements:
• a half-time staff person supervised by the EBT project director,
• a service area of seven counties, including New Mexico's largest county
(containing the city of Albuquerque) and most of the state's other metropolitan
counties; and
• integration of FSP retailer management functions for the demonstration service area
with responsibility for statewise EBT retailer enrollment and liaison, both during
and after EBT implementation.
The concept behind the demonstration, bringing together EBT and FSP retailer
management functions in one agency, appealed to NMHSD for several reasons. First, the
NMHSD project director was concerned that the state was "out of the loop" on actions such as
retailer disqualifications. For example, the Field Office might know about negative findings
from a compliance investigation and might even have notified a retailer that he or she was going
to be disqualified. Retailers can appeal disqualification actions, however, and FCS will take
action only when the appeals, or the time limits governing the appeal rights, have been
exhausted. The state and its EBT vendor were learning of such actions only after they had been
officially implemented, which increased the risk of loss or unauthorized use of deployed EBT
equipment, for which the state was potentially liable. Additionally, through its visits to stores
during EBT implementation, NMHSD had encountered stores that were obviously ineligible for
participation in the FSP, but still authorized. The state wanted to resume the practice of making
regular visits to FSP-authorized stores and to have the ability to remove ineligible stores from
the system.
In September 1993, NMHSD received word that it had been awarded $66,780 for a
two-year demonstration. FCS and NMHSD establish d a cooperative agreement that called for
the retailer management demonstration to begin in October 1993 and end in September 1995.
2.3 STARTUP
Shortly after establishing the cooperative agreement, the EBT project director began
recruiting for the half-time retailer management position budgeted in the proposal. The retailer
management specialist began work December 23, 1993.
Chapter Two: Project Implementation— ,\ew Mexico
The NMFO had only recently learned of the project. In reviewing New Mexico's
proposal for statewide EBT expansion, Field Office staff noticed a reference to a retailer
management demonstration project. The NMFO initially viewed the project as an encroachment
on their area of responsibility and expertise, and resented headquarter's failure to consult with,
or even inform. Field Office staff of this major change to their mandate. Further, FCS Field
Office staff could hardly be faulted for viewing the project as a potential threat to their job
security. Despite the awkward beginning. Field Office staff played a crucial role in the
successful launch of the retailer management demonstration.
The state's retailer management specialist spent her first months in on-the-job training,
with the Field Office staff as her trainers. NMFO staff provided instructions in FSP regulations
and procedures.' NMFO provided a complete set of forms, including both standard-issue FCS
forms and forms developed locally. Importantly, it was through the Field Office that the
NMHSD retailer management specialist gained access to and training on the STARS system.2
In January 1994, the state requested access to STARS, a necessary condition for
authorizing and deauthorizing retailers to participate in the FSP. There were two elements
necessary for NMHSD to have routine access to STARS. First, the state needed special
communications software that would allow a PC to dial in to the system. Second, because the
security features of STARS restrict access to the system, NMHSD needed a system identification
number (ID) and password that would allow the appropriate level of access. Initially, FCS staff
were concerned that the state would have access to data on all retailers in the state, not just those
in the seven-county demonstration area. FCS determined, however, that it was not feasible to
restrict access to specified counties (because STARS security features are set up on a Field
Office basis, no. a county basis).
1 There was some confusion about which version of the FSC-318 Handbook NMHSD should use. The
NMFO was using for guidance a draft of the Handbook that had not been officially approved, because it was
part of authorizing legislation held up in Congress. NMFO felt they could net release the draft Handbook
to NMHSD. however, because it was still technically a draft version and had not been published for
distribution outside the agency. NMHSD wanted to follow the latest set of guidelines and to follow closely
NMFO procedures in most areas. Although NMHSD had only the 'old" version of the handbook, information
on the new guidelines was readily available from NMFO.
2 STARS, the Store Tracking and Redemption Subsystem of the FSP Integrated Information System, is
the nationwide system for maintaining information on FSP retailer authorization and redemption activity.
10
Chapter Two: Project Implementation—New Mexico
Initially, NMFO provided training to New Mexico's retailer management specialist
using an NMFO ID and password to access the STARS system. In May 1994, the Minneapolis
Computer Services Center (MCSC) assigned a STARS ID and password to NMHSD. The
communications software needed to dial in to the system, however, was not operational until
August 1994. In the intervening months, Field Office staff allowed the state's retailer
management specialist to access STARS from the Field Office, using the NMHSD ID and
password. These visits by the retailer management specialist to the NMFO provided an
opportunity for exchanging information and further technical assistance.
In March 1994, FCS sent a letter to all FSP-authorized retailers in the seven-county
demonstration area, announcing that effective April 1, NMHSD was the designated retailer
point-of-contact for the FSP. On March 30, 1994, NMFO transferred its retailer files for the
demonstration counties to NMHSD.
2.4 RETAILER MANAGEMENT DURING EBT EXPANSION
The NMHSD retailer management office consisted of the one half-time specialist in an
office near the state's EBT project office. The retailer management specialist reported directly
to New Mexico's EBT project director and operated with considerable autonomy. The office
was staffed four hours per day. At other times, the EBT project secretary or an answering
machine received calls.3 The retailer management office had access to STARS and the FCS
electronic mail system. The FCS New Mexico Field Office regularly forwarded electronic mail
on retailer management topics to NMHSD.4
The NMHSD retailer management specialist maintained a close working relationship
with the FCS Field Office throughout the demonstration, and relied on the FCS Field Office staff
for guidance when handling new or difficult situations. One food program specialist at the Field
Office had considerable expertise with the retailer aspects of the FSP (she was the only Field
Office staff member with sufficient tenure to have conducted store visits herself) That program
specialist therefore took the lead in working with New Mexico's retailer management specialist,
3 Initially, when the ciailer management specialist was not in the office, all calls were forwarded to the
EBT project office. This volume of retailer-related calls was too great for the already stretched EBT project
office. The answering machine relieved the burden on the EBT project office, but it meant that callers had
to wait for a return phone call.
4 NMHSD was able to access the FCS cc:mail system after No/ember 1994.
11
Chapter Two: Project Implementation—New Mexico
helping her develop store visit procedures and observing her initial visits. After gaining
experience, the NMHSD retailer management specialist continued to rely on NMFO for
assistance in special situat ns, such as handling a disqualification or an appeal of a denied
application. The NMHSD retailer management specialist also typically consulted with NMFO
on cases in which a store was only marginally qualified to participate in the program.
The FCS Field Office made it clear to NMHSD that, because responsibility for the
demonstration counties and their retailer management files would be returning to the FCS Field
Office after two years, the project should be operated consistently with existing Field Office
procedures. As a result, many procedures at the demonstration office were identical to those
followed by the Field Office. Chapter Four discusses in greater detail those areas of retailer
management activity in which the demonstration office followed a procedure that differed to
some extent from the procedures established at the FCS Field Office.
The NMHSD retailer management specialist found that her retailer management
responsibilities and EBT implementation responsibilities took more of her time than the 20 hours
per week for which she had been hired. As a result, she routinely worked extensive (unpaid)
overtime. In hindsight, NMHSD's project director feels the state underestimated the complexity
of the retailer management function. Because the demonstration was planned quickly in order
to meet the deadline for the funding application, NMHSD staff were not able to thoroughly
investigate all aspects of the functions they proposed to take over from the Field Office. A key
oversight was the reauthorization process. NMHSD did not realize that stores were reauthorized
biannually, and did not account for the staff time necessary to perform this set of retailer
management activities when it established the demonstration budget.
EBT Implementation
The retailer management specialist, along with a NMHSD EBT project staff member,
was responsible for establishing merchant agreements with all retailers in counties where EBT
was to be implemented, both within and outside the seven demonstration counties. The two staff
members visited each store one or two weeks before the scheduled implementation date in each
county. The purpose of the visit was to make sure that the retailer knew how to operate the
equipment and .vas otherwise ready for implementation.
12
Chapter Two: Project Implementation—New Mexico
These EBT implementation responsibilities accounted for a significant share of the
retailer management specialist's overall responsibilities from July 1994 to August 199S, during
which time 25 counties were added to the state's EBT system. The retailer vista during EBT
rollout would occasionally require the retailer management specialist to be away from the
Albuquerque office for a week at a time, with only an answering machine to take calls from
retailers. This resulted in a delayed response to some retailer inquiries, which was frustrating
for retailers who wanted an immediate response to their inquiries, and also to the EBT vendor
and the FCS Field Office, to whom retailers would turn when they did not reach someone who
could help them at NMHSD.
In addition to their EBT implementation purposes, these store visits had some value
from a retailer management perspective. Stores occasionally had questions about FSP issues.
The retailer management specialist was often the first representative of the FSP to visit the store
in many years. In a few cases, she encountered stores that were no longer eligible to participate
or that raised her suspicions. In coordinating with the Field Office, the retailer management
specialist either obtained updated application information or requested an investigation.
2.5 RETURN TO FCS ADMINISTRATION
In the summer of 1995, NMHSD submitted to FCS a proposal to extend the retailer
management demonstration for one year, requesting additional funding at a level that would
allow the retailer management specialist to increase her hours from 20 to 30 hours per week.
FCS declined the request for additional funding, but approved a six-month, no-cost extension.
On April 1, 1996, NMHSD returned its delegated food stamp retailer management responsibili-ties
to the FCS Field Office. New Mexico's EBT project continues to be responsible for liaison
with retailers and the FCS Field Office regarding the addition or removal of retailers from the
EBT system and other EBT retailer management matters.
13
II IMAM mm.
CHAPTER THREE
PROJECT IMPLEMENTATION: SOUTH CAROLINA
This chapter presents an overview of the South Carolina demonstration. Section 3.1
describes the area included in the demonstration. Section 3.2 discusses the origins of the
project. The period before the demonstration was fully operational is the focus of Section 3.3.
Section 3.4 examines a key component of the demonstration, the development and implementa-tion
of a computer-based Retailer Management System. Section 3.5 addresses the interaction
of EBT implementation and the state's retailer management activities, and Section 3.6 discusses
the return to FCS management of retailer participation in the demonstration area.
3.1 SITE DESCRIPTION
The South Carolina retailer management demonstration included five counties:
Berkeley, Charleston, Darlington, Dorchester, ana Florence. The area included the highly-urbanized
area of Charleston, as well as some very rural parts of South Carolina. The
demonstration involved 620 retailers, or 19 percent of the FSP-authorized retailers in South
Carolina.
SCDSS awarded a contract for EBT services to Citibank EBT Services in early 1994,
with a pilot scheduled for Darlington County in November 1994. SCDSS established an
ambitious agenda for statewide rollout, with new counties going live monthly, starting March
1, 1995, and ending December 1, 1995. Exhibit 3.1 presents a chronology of the retailer
management demonstration, including key events in the EBT implementation process.
3.2 PROJECT ORIGINS
The SCDSS retailer management project temporally spanned two leadership teams at
the SCDSS EBT Project. The RFA was received and the demonstration planned in May and
June 1993. The individual who was then managing the EBT project negotiated a cooperative
agreement with FCS that called for SCDSS to receive a grant of $180,000 for a two-year
demonstration project to begin in October 1993. In April 1994, SCEDSS created and filled a
new position of EBT administrator, a position to which all EBT project staff reported. In
September 1994, the previous project manager left the agency, and leadership of the retailer
15
Chapter Three: Project Implementation—South Carolina
Exhibit 3.1
SOUTH CAROLINA PROJECT CHRONOLOGY
Date Event
May 1993 FCS issues RFA for "State Retailer Compliance Management in EBT-Ready
States"
July 1993 SCDSS submits proposal to FCS
October 1993 Cooperative agreement begins
J jiuary 1994 SCDSS awards EBT vendor contract to Citibank EBT Services
April 1994 Paul Brawley becomes EBT administrator
| August 1994 Retailer management specialist hired
| November 1994 EBT pilot implemented in Darlington County (a demonstration county). SCDSS
begins 1994 reauthorization process
A January 1995 SCDSS takes on full responsibility for retailer authorization and withdrawal in
demonstration counties
| March 1995 EBT Implementation Phase I (Charleston County, a demonstration county)
1 April 1995 EBT Implementation Phase II (including two demonstration counties, Berkeley and
Dorchester)
June 1995 EBT Implementation Phase IV (bringing last retailer management demonstration
county, Florence, onto the EBT system).3 SCDSS demonstrates RMS system
July 1995 SCDSS submits proposal to extend and expand the retailer management
demonstration. SCDSS installs test version of RMS on a PC at the South Carolina
Field Office
September 1995 FCS and SCDSS agree to three-month, no-cost extension of the demonstration
December 1995 EBT Implementation Phase X completes the statewide rollout of EBT
January 19% FCS South Carolina Field Office resumes retailer management responsibility for
demonstration area
1 There were ten phases for EBT implementation in South Carolina. Only three implementation phases (I, D, and IV) and the
pilot phase involved demonstration counties.
16
Chapter Three: Project Implementation—South Carolina
management demonstration passed to a staff member, who for several years had played a key
role in planning EBT system implementation.
SCDSS included the following three components in its retailer management demon-stration:
(1) state management of retailer participation in the FSP in five counties,
(2) integration of FSP retailer management with statewide EBT implementation
activities, and
(3) development of a retailer management information system, including up-to-date
FSP-authorization and redemption information and a set of retailer fraud indicators.
3.3 STARTUP
As in New Mexico, the South Carolina demonstration relied on significant training and
information sharing from the local Field Office. The South Carolina Field Office (SCFO)
learned about the demonstration when SCDSS contacted the office in the process of preparing
its response to the RFA. Like the New Mexico Field Office staff, the South Carolina FCS staff
were concerned about being left out of the process and about the future implications of the
demonstration for the FSP and for themselves. Nevertheless, SCFO staff took a very
professional approach, providing all the information and training that the state requested. Local
and national FCS staff made it clear to SCDSS that they expected the FCS Field Office to
resume its retailer management duties at the end of the demonstration period and that,
consequently, FCS expected SCDSS to follow established procedures closely.
During the summer of 1994, FCS Regional and Field Office staff became concerned
that SCDSS showed few signs of being ready to manage retailer participation in the five
demonstration counties, as called for in the cooperative agreement.' The Field Office initiated
a series of meetings designed to encourage SCDSS to establish procedures and prepare for its
new role. The retailer management demonstration's startup activities were characterized by
competition for scarce resources and consequent delays. In particular, the demonstration was
hampered by the intensive effort by EBT project staff to prepare for the pilot of the EBT system.
1 The SCDSS proposal called for SCDSS to take on retailer authorization responsibilities in phases,
starting in Darlington County in February 1994, with the final demonstration counties to come under SCDSS
jurisdiction in April 1995.
17
Chapter Three: Project Implementation—South Carolina
In addition, the change in project leadership and a focus on the technical requirements of the
Retailer Management System (RMS) system delayed the start of demonstration operations.
SCDSS hired a retailer management specialist in August 1994. This individual spent
much time during her first months on the job at the South Carolina Field Office getting hands-on
training on the use of the STARS system and retailer management procedures in general.
Finally, in November 1994, SCDSS took on its first retailer management function by mailing
out reauthorization packets to retailers in the five demonstration counties. In January 1995,
SCDSS took on the full set of retailer management functions called for under the cooperative
agreement.
Gaining STARS access, an essential ingredient of retailer management, was problematic
in South Carolina, as it had been in New Mexico. 3CDSS needed more than just the basic Field
Office access to STARS. Their planned retailer data system (and indeed their EBT system)
relied on updated information on newly-authorized and withdrawn retailers. To facilitate this
update, MCSC (the site of STARS operations) needed to generate a file that SCDSS could
download daily. The technical problems of developing this functionality were not themselves
daunting, but gaining access to the programming resources at MCSC, at a time when STARS
was undergoing other modifications, took several frustrating months. As a consequence, this
capability was not fully operational until January 1995. The basic STARS access needed for
routine authorizations and withdrawals, however, was available to SCDSS earlier, in November
1994.
The retailer management demonstration in South Carolina was coupled with a less
mature EBT project than the project in New Mexico. New Mexico was one of the pioneers of
EBT, with a system serving the Albuquerque area since 1992. In contrast, South Carolina
implemented its EBT system on a pilot basis in Darlington County at about the mid-point of the
two-year demonstration period. SCDSS had also proposed a more ambitious retailer
management project than NMHSD because, in addition to managing retailer authorization, the
state planned to develop an innovative tool for monitoring retailer activity and identifying retailer
fraud. The RMS data system required a major development effort, and thus competed for staff
resources with the EBT system development effort. As a result, the RMS system development
was delayed until after the pilot EBT system was successfully implemented in November 1994.
18
Chapter Three: Project Implementation—South Carolina
3.4 RETAILER MANAGEMENT SYSTEM DATABASE
As noted, a major component of the SCDSS demonstration was the development of a
database application called the Retailer Management System. Housed in a high-capacity PC, the
RMS has played a critical and continuing function in EBT system operations, as well as
providing a tool for compliance monitoring and targeting investigations.
Each day, the RMS computer dials up the MCSC and downloads a file that contains
newly-authorized or newly-withdrawn retailers in South Carolina. This information is used to
update both the SCDSS RMS and Citibank's EBT retailer database. SCDSS staff telecopy a list
of newly-authorized and withdrawn stores to Citibank each day. SCDSS also receives from
Citibank each day an electronic file with information on all EBT transactions for the preceding
day. These data are used to update the RMS and to create a weekly redemption file that is sent
to the MCSC by courier.
The key output of the RMS has been a fraud-prone profile, which ranks retailers based
on a combination of indicators such as a high number of even-dollar transactions. The algorithm
used was developed in consultation with FCS Regional and Field Office staff and with
representatives of several investigative agencies. Staff at the FCS Regional and Field Office
have used the RMS to identify candidate stores for further research, which they conduct through
direct access to the transaction information on the Citibank EBT system. On the basis of the
Citibank transaction data, FCS has charged retailers with program violations and targeted stores
for criminal investigation.2
The RMS also allows users to make queries based on any of the individual indicators
that are components of the fraud-prone profile. Another feature of the RMS is the ability for
remote users to access the system via modem. With SCDSS' assistance, both the FCS Field
Office and the Southeast Regional Office have acquired the necessary hardware and software and
can dial up the RMS system.
SCDSS encountered delays and other challenges that limited the usefulness of the RMS
during the demonstration. The system as originally proposed was a software module that would
reside on the SCDSS mainframe computer. In 1994, SCDSS decided instead to develop the
2 Within FCS, investigations of program violations are normally conducted by the Compliance Branch.
Both New Mexico and South Carolina had previously established State Law Enforcement Bureau (SLEB)
agreements with FCS, authorizing the states to use food stamp coupons in undercover trafficking
investigations. The demonstrations did not give the states any new investigative authority.
19
Chapter Three: Project Implementation—South Carolina
system on a PC and to use new, high-powered database software recently developed for the PC
environment. The first RMS programming priority was to develop the capacity to update
automatically redemption data and FSP authorization data on the system. The. EBT control
system provided the RMS system with daily redemption data with minimal difficulty. The FSP
authorization data, however, were available was only from MCSC. Initially, SCDSS had
difficulty getting access to the decisionmakers at FCS who could facilitate the request for special
programming work at MCSC.
Once the programming resources were made available, there were still technical hurdles
to overcome. SCDSS' programming resources were also heavily committed at this time to
another effort, i.e., the implementation of the EBT system itself. Therefore, the SCDSS
programming work did not begin until late October. Finally, in January 1995, six months after
making its initial inquiries, SCDSS was able to download the necessary information from
STARS.
The next system development challenge was to define a set of indicators for use in the
proposed fraud-prone profile. Here the problem was one of communication between SCDSS and
the potential end-users of the system. These discussions culminated in a two-day meeting in
Atlanta in May 1995 that brought together FCS Southeast Regional Office (SERO) and SCFO
staff, USDA Office of Inspector General (OIG) investigative staff, and SCDSS's system
development team. During the meeting, SCDSS staff voiced their frustration that FCS would
not clearly define what fraud indicators the agency wanted SCDSS to use. For their part, FCS
staff were frustrated by the state's delays in providing specifics about the RMS and the potential
components of the fraud-prone profile. In addition, the meeting addressed highly technical
system design issues. Once the participants in the Atlanta meeting worked through the principal
design issues for the fraud-prone profile, SCDSS was able to proceed with this phase of RMS
development. By July, SCDSS had a test version of the RMS in operation. SCDSS equipped
the South Carolina Field Office with a PC that could access the RMS system via modem. SERO
acquired the necessary hardware and software in August 1995.
The RMS development effort, and subsequent efforts to smooth out the system's
problems, took much more time than expected. The lead programmer's unfamiliarity with the
hardware and software environment was one factor. Another was the sheer volume of data
involved, which pushed the limits of the system's processing capacity. Remote users found the
20
Chapter Three: Project Implementation—South Carolina
system to be unstable, frequently "locking up," and causing much frustration. The RMS, like
all the computers at the SCDSS office, used a different operating system, OS/2, than the
computers at FCS. No RMS documentation was available to users, and both the system designer
and users often lacked the time and patience for training on a new and complex system.
FCS staff made little use of the RMS's remote access capabilities before the end of the
demonstration in December 1995. As an interim measure, SCDSS provided printouts of the
fraud-prone profile, which ranked stores according to a set of indicators of suspicious
redemption patterns. FCS Field Office staff were able to use this list to identify stores for
further investigations.
By early 1996, a more stable version of the RMS was operational at SCDSS, the FCS
Soutn Carolina Field Office, and the FCS Southeast Regional Office. FCS staff used the RMS
in their retailer integrity efforts, using the fraud prone profile to identify stores for an in-depth
analysis of redemption patterns based on data drawn directly from the EBT system. By the end
of February 1996, FCS staff had used the RMS to take action on 16 stores with suspicious
redemption patterns. In most of the cases, SCFO initially requested that the store owner come
to the Field Office to discuss their FSP redemptions. One of the 16 had been referred to the
Compliance Branch for investigation, and 9 were disqualified (including 7 permanent
disqualifications).3 The RMS ultimately has proven to be a valuable tool, but FCS staff expect
it will be superseded by a recently-developed national system for gathering and analyzing EBT
redemption data.
3.5 RETAILER MANAGEMENT DURING EBT EXPANSION
The SCDSS retailer management demonstration was fully integrated with its EBT
implementation effort. The two retailer management specialists were full-time, permanent
members of the state's EBT project staff, with significant responsibilities in the roll-out effort.
These two staff played a role analogous to the food program specialists at an FCS Field Office.
Both SCDSS specialists made store visits and determined retailers' eligibility for the FSP. The
junior specialist managed STARS data entry and retailer files. Other members of the EBT
3 Of the remaining six cases, three received warning letters, one was withdrawn after failing to respond
to the request for a meeting, one explained the redemption patterns satisfactorily, and one case was still
pending at the time the information for this study was provided.
21
Chapter Three: Project Implementation—South Carolina
project staff, including clerical staff and the project's senior computer programmer, also worked
on the retailer management demonstration.
EBT implementation was intertwined with the demonstration at many levels. The list
of authorized South Carolina retailers on FCS' STARS database had obsolete information and
included many stores that were no longer eligible for participation in the FSP. This situation
resulted in an intensive effort, first by the SCDSS EBT office and later by the FCS South
Carolina Field Office, to resolve questions raised about individual retailers.
In the course of implementing the EBT system, representatives of South Carolina'. EBT
vendor (Citibank EBT Services) made a "pre-installation" visit to each store to verify its
location, get a merchant agreement signed, and complete a site survey.4 Citibank and SCDSS
found that a large number of authorized retailers had either closed, changed ownership, or
otherwise had a significant change in their eligibility status. Furthermore, in many rural parts
of South Carolina, the rural route system of addresses had recently been converted to street
addresses to support adoption of 911 emergency phone service. In this process, new addresses
were assigned to many authorized stores, making their addresses on the STARS system obsolete.
The pre-installation visits often resulted in "problem reports," which were essentially
a request by the EBT vendor for confirmation of the store's eligibility to participate in the FSP.
When the vendor staff could not locate stores, they submitted problem reports to verify the
stores' locations and status. When the problem was not the existence or location of the store,
but its eligibility for participation in the FSP, the EBT installers encountered a dilemma—should
they install the EBT equipment in a potentially ineligible store? The EBT vendor did not have
the authority to make an on-the-spot eligibility assessment, and the FCS Field Office (or, in
demonstration areas, the SCDSS retailer management specialists) did not have the benefit of
visiting the store in making an eligibility determination. All parties were concerned about
protecting the new EBT system from abuse (and bad publicity). Furthermore, the vendor was
at risk for the additional expense of removing a terminal, or even losing a terminal altogether
if a store was later deemed ineligible. In the end, the EBT installers chose not to install the
EBT equipment in certain stores they felt were clearly ineligible to participate in the FSP.
4 In contrast, the merchant agreement to participate in the EBT system in New Mexico was between the
state and the re' liler, and state staff were responsible for establishing the agreements with retailers. In both
states, the approach to the merchant agreement was established before the demonstration was planned, and
the basic approach was unaffected by the demonstration.
22
Chapter Three: Project Implementation—South Carolina
In the process of working with Citibank and the FCS Field Office on retailer eligibility
criteria, SCDSS sought to operationalize the concept of "ample variety" that is part of the
eligibility criteria for retailer participation in the FSP. The program definition may have been
adequate for trained FCS program specialists, but it left too much room for interpretation to be
used by me vendor's field representatives, who had no special knowledge of FSP regulations and
policies.
The FCS Southeast Regional Office provided SCDSS with guidance in the form of a
food inventor}' checklist. At SCDSS' request, Citibank agreed to have its field representatives
complete the food inventory checklists, which were then used by SCDSS and Field Office retail
management staff as evidence regarding the stores' eligibility for participation in the FSP. ^he
checklists were also used by SCDSS and vendor staff who made visits to all stores in the first
few days after the EBT system was implemented in a county.
In retrospect, Citibank staff had reservations about the value of their participation in the
eligibility assessment process. There were several cases in which Citibank chose not to equip
a store because it seemed to be ineligible for participation in the FSP. Months later, Citibank
learned that these stores were to be authorized for participation in the program. EBT installers
then had to return to the area and bring the store onto the EBT system. This "backfilling" was
costly to the EBT vendor, because the installation process had to be concentrated in a limited
area at any one time to achieve cost efficiencies.
SCDSS and the FCS Field Office divided the responsibility for handling problem reports
generated by the pre-installation visits according to the geographic areas where they had retailer
management responsibility. Citibank sent all problem reports to SCDSS, which passed on the
reports to be handled by the Field Office and reported the results back to Citibank. In the early
months of EBT implementation, most of the retailers were in the demonstration area, so the
SCDSS retailer management specialists handled most of the problem reports. (The exception
to this pattern was the Darlington County pilot site, where the FCS Field Office handled the
problem reports because the SCDSS retailer management team was not yet in place and lacked
STARS access.) Once the five demonstration counties were live on the EBT system, new
problem reports were primarily for retailers in the area managed by the FCS Field Office.
Ultimately, 1,330 problem reports were generated, of which 1,115 were handled by the
Field Office. The Field Office withdrew 897 stores from the FSP based on the problem reports;
23
Chapter Three: Project Implementation—South Carolina
the Field Office found these stores to be closed, ineligible, under new ownership, or no longer
willing to participate. SCDSS did not separately track withdrawals based on problem reports,
but many of the state's 217 withdrawals resulted from this process. The sheer volume of the
problem reports overwhelmed the capacity of the Field Office and required extensive interaction
between the SCDSS retailer management staff and Field Office staff. To help the Field Office
resolve the large number of problem reports, a staff member of the SERO was assigned to work
in Columbia for several weeks.
Retailer integrity was a major theme of the SCDSS demonstration effort, even though,
unlike New Mexico, South Carolina did not take up the option to assume responsibility for
compliance-related activities as part of the demonstration. South Carolina's approach
emphasized the "front-end" activities of authorization and reauthonzation, and the development
of the RMS. The major technique used to strengthen the integrity of store authorizations and
reauihorizations was the state's practice of making store visits to retailers applying for FSP
authorization and to some stores applying for reauthorization. As noted earlier, the state adopted
a food inventory checklist developed by SERO as a way to document store conditions observed
during these visits.
Over the course of the demonstration, some tension developed between the FCS Field
Office and SCDSS over a difference between the two agencies in their approach to assessing
retailers' eligibility for participation in the FSP. SCDSS was quLker to deny FSP participation
to stores whose eligibility was in question. FCS staff appeared to value the goals of client
access and retailer due process more highly than did the state. SCDSS staff were frustrated
when FCS did not withdraw stores identified by Citibank as potentially ineligible, and felt the
Field Office was too cautious and too overwhelmed by the volume of problem reports to make
a careful and timely assessment. For their part, FCS Field Office staff felt that the EBT vendor
had a pecuniary self-interest in limiting the number of terminals installed and may have
inappropriately discouraged unsophisticated merchants in rural areas from participating in the
program. FCS Field Office staff may also have been more aware than SCDSS staff of the
likelihood of successful appeals to the FCS Administrative Review Officers. Although it seems
likely that both SCDSS and the FCS Field Office were making eligibility assessments consistent
with the broad language of the Food Stamp Act, each office clearly brought different emphases
to their review of questionable stores.
24
Chapter Three: Project Implementation—South Carolina
3.6 END OF THE DEMONSTRATION
In July 1995, SCDSS submitted to PCS a proposal to extend and expand the retailer
management demonstration. The proposed expansion would have allowed the state to continue
its retailer management activity in the five original demonstration counties for two more years,
brought an additional dozen counties under the state's retailer management authority, enhanced
the state's role in compliance monitoring, and added remote functionality to the RMS system.
As with New Mexico, FCS declined to fund the new proposal, and arranged a three-month, no-cost
extension of the existing cooperative agreement instead.
On January 4, 1996, the FCS Field Office retrieved the retailer files from the SCDSS
office and began the process of integrating the new information into their filing system. Both
of the retailer management specialists have continued to work on the EBT project staff as part
on a new initiative funded by FCS, the Client Integrity Project. In this initiative, SCDSS will
establish coordinators at SCDSS field offices who will use EBT .nsaction data to identify and
charge clients suspected of trafficking their food stamp benefits. SCDSS will maintain and
enhance the RMS to facilitate this new demonstration project.
25
u mmmm
CHAPTER FOUR
STATE AND FIELD OFFICE PROCEDURES
FOR RETAILER MANAGEMENT
This chapter examines basic retailer management procedures in the two demonstrations.
It begins in Section 4.1 with an description of key retailer management procedures at FCS Field
Offices. Section 4.2 presents an overview of procedures followed by NMHSD, and Section 4.3
does the same for SCDSS. Section 4.4 draws on interviews with FCS Field Office staff in each
of the demonstration sites and two comparison sites to examine differences in retailer
management procedures. The levels of retailer management activity in each site are discussed
in Chapter Five.
4.1 KEY RETAILER MANAGEMENT ACTIVITIES
The FCS Field Offices are the primary points-of-contact for retailers who currently
participate in the FSP and those who want to participate. Retailers wishing to obtain FSP
au'horization request an application from the Field Offices. Retailers submit the applications
by mail, in most cases. FCS Field Office staff review the application for completeness, and
request documentation or other confirmation to verify information provided by the retailer. FCS
Field Office staff also provide information to retailers about FSP regulations and procedures.
These discussions often take place by telephone, but many Field Offices also conduct group
training and information sessions with new applicants, which provide an opportunity for in-person
discussions. After an eligibility determination has been made, Field Office staff enter
the appropriate information onto STARS via a modem-link to the FCS processing center.
Retailers must apply for reauthorization, usually by submitting an abbreviated application with
up-to-date information on tl.e store. FCS Field Offices mail out reauthorization packets prepared
by MCSC, receive the completed applications, enter the new information onto STARS, and
follow up with retailers who fail to return the reauthorization applications.
FCS Field Offices must also withdraw stores from the FSP when they cease to be
eligible. Stores typically become ineligible when they close or change ownership. Field Office
staff also answer questions on program policy and arrange for educational materials and
redemption certificates to be delivered to retailers. Field Offices play a key role in retailer
27
Chapter Four: State and Field Office Procedures for Retailer Management
integrity efforts through their review of reports on FSP redemption activity generated by MCSC.
MCSC provides each Field Office with a list of authorized stores that have redeemed no FSP
benefits (the non-redeemer report), a list of stores redeeming more FSP benefits than their
reported food sales would warrant (the high-redeemer report), and a list of redemptions by
unauthorized stores (known as the "Fast Freddy" report). MCSC also generates monthly reports
or. redemptions by all authorized retailers in each Field Office territory. Field Office staff use
this information to identify potentially ineligible or noncompliant stores. For example, the
nonredeemer report helps the Field Office identify stores that have gone out of the retail food
business.1 Because these defunct stores have authorization numbers on STARS, they are a
potential source of fraud. Regular review of the non-redeemer report is necessary because many
authorized retailers do not notify FCS when they go out of business.
Field Offices also receive and follow up on reports of alleged violations of FSP
regulations, and they take administrative action against retailers committing fraud against the
program. In cases of serious fraud, FCS Field Offices support the criminal and civil cases
brought against retailers.
The Request for Applications that structured the demonstrations in New Mexico and
South Carolina listed the retailer management activities performed by the Field Offices and
allowed the states to choose which activities to include in the demonstration.2 The states were
not given the option to undertake direct investigative activities (i.e., making compliance buys)
or support for judicial review of eligibility actions. NMHSD chose to take on all the activities
on the FCS list, whereas SCDSS chose to take on all except the compliance-related activities of
monitoring retailers and sanctioning those found to have violated program regulations. SCDSS
opted instead to provide FCS and other investigators with a new monitoring tool, the RMS.
Both states proposed to integrate the traditional FCS Field Office activities with the EBT
implementation activities that have usually been performed by the states. Exhibit 4.1
1 The report is typically generated once a year, but Field Offices can request updated lists more
frequently.
2 Appendix A lists the retailer management functions identified in the Request for Applications.
28
Chapter Four: State and Field Office Procedures for Retailer Management
Exhibit 4.1
RETAILER MANAGEMENT FUNCTIONS
| Function
FCS Field
Office SCDSS NMHSD
| Authorization, reauthorization, withdrawals,
|| updates ♦ ♦ ♦
] Retailer monitoring ♦ ♦
I Investigations, sanctioning ♦ ♦
Support EBT retailer enrollment, installation,
and start-up ♦ ♦
summarizes the retailer management activities performed by the typical FCS Field Office and
the activities taken on by each of the states participating in the demonstration.
The RFA encouraged state FSP agencies to "explore the possibility of teaming with
their WIC state agency in terms of retailer management activities in the area of authorization,
monitoring, high risk data collection and compliance investigation/buys." Although state WIC
agencies typically exchange some information about the authorization status of retailers with FCS
Field Offices, the potential exists for more extensive collaboration and cost-sharing between the
two programs. Neither New Mexico nor South Carolina took up this option. In both cases,
there was little routine interaction between state WIC program staff and the EBT project staff
running the retailer management demonstrations and no effort to increase coordination of retailer
management activities for the two programs.
4.2 NEW MEXICO HUMAN SERVICES DEPARTMENT RETAILER MANAGEMENT
PROCEDURES
The distinctive feature of NMHSD's approach to retailer management was that all
activities were conducted by a single half-time staff person. Making a virtue of necessity, the
NMHSD retailer management specialist offered FSP-authorized retailers in the demonstration
area a single point-of-contact, providing information on FSP policies, processing FSP
applications and withdrawals, and completing EBT merchant agreements with retailers.
29
Chapter Four: State and Field Office Procedures for Retailer Management
Retailer Authorization
Because there was only one staff person, the division of labor between a clerk-receptionist
and a food program specialist that typically exists at FCS Field Offices was not
present at the NMHSD retailer management office. The retailer management specialist would
either take a call regarding authorization in person or respond to a message. When she was out
of the office for an extended period of time, she would forward her phone to the EBT project
office. The clerks there could take messages or refer high-priority calls to the EBT project
director.
The retailer management specialist had a fairly in-depth conversation with each potential
applicant before sending out an application. The retailer management specialist felt that callers
often "didn't really know what they wanted." People would call and say they wanted EBT
access, but it would turn out that they were not yet authorized retailers. Others would call and
request an FSP application when they really wanted EBT equipment that AFDC recipients could
use to access their benefits.
The initial conversation also played a screening function. Some retailers would call and
request an application, but in the course of a brief conversation, it would become quite evident
that they were not qualified. Other retailers changed their minds about applying when they
learned that retailer management staff would be visiting their store and that sales and redemption
information would be reviewed. Although this sort of exchange may also occur at some FCS
Field Offices, a distinctive feature of the one-person NMHSD office was that a retailer's initial
contact was with the person who would ultimately evaluate the application.
NMHSD's policy was to visit the store of every new applicant for food stamp
authorization. In most cases, there were multiple contacts and even multiple store visits in the
process. Typically, the retailer management specialist made an initial unannounced visit to the
store to assess its eligibility, verify information, and request any information missing from the
application. (In response to an initiative from the SWRO, an inventory checklist was employed
after October 1995.)
Usually, there was a second conversation with the store owner or manager, either in
person (if it was convenient to do so) or over the telephone. During the second conversation
the retailer management specialist reviewed the retailer guidebook, discussing FSP regulations
30
Chapter Four: State and Field Office Procedures for Retailer Management
and procedures and also addressing any EBT issues. If she made the second contact at the store,
she delivered the authorization packet.
For stores that were a great distance away from the Albuquerque office, visits for
several stores were generally conducted on a single overnight trip. In some cases, this meant
that stores were visited after they had been authorized. In these cases, retailers were advised
that their authorization was conditioned on the outcome of the follow-up visit. The visits
typically were made within a month of the authorization, and it was never necessary to withdraw
a store based on information gathered during the visit.
Reauthorization. All aspects of the reauthorization process (mail-out, review, and data
entry) were performed by the lone retailer management specialist. The FCS Field Office simply
divided the New Mexico reauthorization list and packets into two groups, one for the
demonstration area and one for the Field Office area. (Starting in February 1995, the FCS New
Mexico Field Office was responsible for 26 Texas counties, in addition to the 25 New Mexico
counties outside the demonstration area.) The 1994 reauthorization project came shortly after
NMHSD had taken over responsibility for the demonstration area. For both the 1994 and 1995
reauthorization efforts, NMHSD added a letter on NMHSD stationery to the pre-stuffed
reauthorization packets provided by MCSC. With the new shorter form in 1995, the process
was very much streamlined. For stores that had been visited in the process of EBT implementa-tion,
there was no effort to require additional documentation when processing reauthorization
applications.
Retailer Monitoring and Compliance Management
The demonstration office performed all routine monitoring activities on the same
schedule as the FCS Field Office. When the Field Office received a STARS report, such as a
list of high redeemers or nonredeemers, Field Office staff copied the list, identified the retailers
in the demonstration area, and gave the annotated list to NMHSD.
Following Field Office practice, the retailer management specialist maintained a list of
newly authorized and withdrawn stores. Each month, she forwarded the list to the WIC central
office in Santa Fe and to seven WIC Field Offices. The WIC central office sent NMHSD and
NMFO an updated list of WIC-authorized vendors each quarter.
31
Chapter Four: State and Field Office Procedures for Retailer Management
Handling Complaints of Retailer Violations. NMHSD closely followed the FCS Field
Office's procedure in recording all complaints regarding retailer violations on a complaint log
(provided by the Field Office). The response depended on the nature of the complaint. For
minor complaints, the retailer management specialist usually called the retailer and discussed the
problem. If she was not satisfied with the retailer's response over the phone, she frequently
followed up with a store visit. For more serious issues, such as a retailer charging tax on food
stamp benefit purchases or accepting ineligible items, she routinely made a store visit. If there
was suspicion of trafficking, she did not make a direct contact with the store, but instead
referred the retailer for investigation by the NMHSD Inspector General (NMHSD IG), the office
designated under the State Law Enforcement Bureau agreement. The NMHSD IG typically did
not respond to a single complaint about a retailer accepting ineligible items, because the IG's
priority was to pursue trafficking investigations. In some cases, the NMHSD IG did investigate
repeated complaints of noncriminal violations of FSP regulations.
Coordination with Investigative Agencies. The NMHSD retailer management
specialist typically did not make referrals directly to NMHSD IG. Rather, she generally referred
complaints to her supervisor, the EBT Project Manager, who forwarded all complaints that he
received to the IG's office. The majority of retailer fraud complaints forwarded by the EBT
Project Manager to ^ie IG came through the EBT Help Desk, which received them directly from
retailers, recipients and county office staff. Referrals for investigations were done in the form
of telephone calls, net via the more structured written referral process used by FCS.
NMHSD IG contacted the retailer management office directly when seeking information
for an investigation. Investigators would call the NMHSD office for information or visit the
office to review files. The retailer management office also had occasional contact with the
USDA OIG investigator in Albuquerque and would share information with him, but referrals
were generally made to NMHSD IG.
Interface with Electronic Benefit Transfer System
On a day-to-day basis, the main retailer management interaction with the EBT system
was to advise the EBT vendor of new authorizations and changes in the status of existing
retailers. The retailer management specialist was responsible for establishing a merchant
agreement between the state and the retailer. Once new stores were authorized, the vendor
32
Chapter Four: State and Field Office Procedures for Retailer Management
would set up the merchant on the EBT database. The merchant's designated EBT transaction
acquirer had 10 days after the authorization notification to install EBT equipment. In the
occasional cases when a large chain was opening a new store, more extensive coordination with
the EBT vendor would be required to ensure that the store was able to do EBT transactions on
opening day.
Many retailers would contact the retailer management office when they had a question,
whether it was EBT-related or FSP-related, because the retailer management specialist had
visited many stores and was involved with both EBT rollout and FSP authorization. The retailer
management specialist estimated that she spent approximately 20 percent of her time responding
to such inquiries, and that one-third of the inquiries were about EBT issues (and thus could have
been handled by the state's EBT Help Desk). Although there was some overlap of responsibility
with the Help Desk, it certainly made sense to retailers to be able to speak with one person who
understood both aspects of the system. In many cases, the retailer management specialist was
able to simplify and clarify a potentially confusing situation for retailers, thereby facilitating
access to both the FSP and the EBT system.
4.3 SOUTH CAROLINA DEPARTMENT OF SOCIAL SERVICES RETAILER MANAGEMENT
PROCEDURES
In contrast to the one-person retailer management office at NMHSD, the retailer
management specialists are SCDSS were full-fledged members of the EBT Project staff. The
retailer management project thus had the benefit of administrative support and up-to-date office
equipment. Key elements of the retailer management process, such as a log for tracking
applications, were maintained on computer files accessible to all project staff over the office's
computer network. Also available over the office computer network was the RMS system
developed as part of the demonstration.
Authorization of Retailers
First-time Authorization. From the outset of the demonstration, SCDSS made store
visits a priority. When retailers called the EBT Project Office to request an application, they
were sent an application and instructions to call back to make an appointment for a store visit.
Applications could not be returned by mail and could only be submitted during an in-person visit
to the store by SCDSS staff. During the pre-authorization visit, an SCDSS retailer management
33
Chapter Four: State and Field Office Procedures for Retailer Management
specialist completed a food inventory checklist, reviewed the application, and asked about any
missing or questionable information. The retailer was required to produce a business license and
social security card for verification purposes. If the retailer appeared to qualify, the SCDSS
retailer management specialist would provide a copy of the relevant FSP regulations and discuss
FSP policies and EBT issues. The retailer was told that notice of an eligibility determination
would be sent within 30 days.
Although SCDSS closely followed the guidelines established by the FCS Field Office
for processing applications, SCDSS developed its own system for tracking applications. A
tracking file was established on a personal computer (PC), maintained by a clerk, but available
over the office's local area network to other EBT project staff. (A similar system was used for
tracking reauthorizations and the "problem reports" described below.)
Reauthorization SCDSS extensively screened the list of retailers due for reauthoriza-tion,
which was generated by the FCS MCSC. SCDSS compared the FCS reauthorization list
to its in-house retailer management database and removed withdrawn stores. The FCS Field
Office also removed certain retailers from the list, presumably because they were under
investigation.
Clerical staff mailed pre-stuffed and pre-addressed reauthorization packets provided by
FCS after adding an SCDSS cover letter. A clerk recorded the returned applications on a PC-based
tracking system that was separate from the RMS. A retailer management specialist
reviewed the applications, followed up on missing information, and entered the new information
on STARS.
SCDSS visited all non-chain stores on the 1994 reauthorization list. For the 1995
reauthorization, SCDSS decided that store visits would be the exception, not the rule, because
so many stores had recently been visited as part of the EBT implementation process. Therefore,
in conducting the 1995 reauthorization, SCDSS visited only the stores in the demonstration
counties about which some question regarding eligibility had been raised during EBT
implementation.
Retailer Monitoring and Compliance Management. In South Carolina, the FCS Field
Office retained responsibility for the compliance-related "back-end" activities related to retailer
management (i.e., the STARS monitoring reports, reports on investigations and sanctions).
Retailer integrity was clearly a major focus of the SCDSS demonstration effort, but the state's
34
Chapter Four: State and Field Office Procedures for Retailer Management
approach emphasized the front-end activities of authorization and reauthorization and the
development of a retailer database as a tool for use by investigative agencies.
Because the FCS Field Office had not handed over responsibility for compliance matters
to SCDSS, SCDSS did not review and follow up on the STARS monitoring reports. Similarly,
SCDSS had no formal procedure or log for recording complaints regarding retailers, which were
forwarded verbally to the FCS Field Office.
Coordination with Investigative Agencies. When SCDSS retailer management staff
suspected retailer fraud, they would make a referral through the deputy EBT project director to
the SCDSS Division of Investigation (DOI). As the designated agency under the SLEB
agreement, the DOI was responsible for coordination with federal investigators, including the
provision of EBT cards and accounts for investigations. The compliance specialist at the FCS
Field Office was the official point of contact with the federal investigative agencies, under
authority delegated by the FCS Southeast Regional Office.
Interface with Electronic Benefit Transfer System
Part of the RMS system, described in Chapter Three, involves a daily download of
changes made by FCS or SCDSS retailer management staff to the STARS database. SCDSS
uses this file to provide the EBT vendor with information about newly-authorized and newly-withdrawn
stores in all parts of South Carolina. As a result, FCS Field Office staff do not have
to communicate directly with the EBT vendor about changes in retailer authorization status.
4.4 COMPARISON OF PROCEDURES
This section examines how the specific retailer management procedures employed by
each demonstration site compare to those followed by FCS Field Offices. For comparison
purposes, we look in detail at retailer management procedures at two FCS Field Offices for each
demonstration: the baseline FCS Field Office (normally serving the demonstration area) and a
comparison FCS Field Office in the same region and of approximately the same scale as the
baseline Field Office. For this study, three site visits were conducted to each demonstration site.
At each of these site visits, information was also collected on procedures at the baseline FCS
Field Office. Data on procedures at the comparison sites were collected during a single site visit
to each comparison Field Office toward the end of the demonstration.
35
Chapter Four: Stale and Field Office Procedures for Retailer Management
For the New Mexico demonstration, the procedures followed by the state can be
compared to both the New Mexico Field Office and the Arkansas Field Office. Because the
NMHSD retailer management specialist was trained in FSP procedures by the Field Office staff,
and because retailer management procedures are highly structured by the FCS-318 Handbook,
there was more similarity than difference in the approach taken by the three offices in the
Southwestern region. The principal areas of difference in procedures are presented in Exhibit
4.2. Although NMHSD used many of the forms and procedures developed by the New Mexico
Field Office, NMHSD did not maintain records about requests for applications or applications
received. The Arkansas Field Office has developed a specific form on which to record
information about a retailer requesting an application, which is then kept on file. Like the New
Mexico Field Office, the Arkansas Field Office tracks applications on a personal computer.
Store visits are a key component of NMHSD's approach to retailer management. All
stores are visited, and the vast majority are visited before being authorized. Both FCS Field
Offices only recently resumed routine store visits, and both only visit those stores deemed at risk
for eligibility or compliance problems. For stores not visited in person, the New Mexico Field
Office conducts telephone interviews with a store owner or manager to veritv application
information and to review the information on FSP rules and procedures provided in the
authorization packet. The Arkansas Field Office also uses telephone interviews, but supplements
them with mandatory retailer training sessions.
In general, NMHSD's operating style entailed more direct contact and less paperwork
than either of the FCS Field Offices. A case in point is the approach taken to requests for
investigations (RFIs) involving stores suspected of program violations. Both FCS Field Offices
follow FCS procedure for RFIs, whereby Field Office staff prepare and submit a highly
structured written request to the regional office, which forwards the RFI to the Compliance
Branch. NMHSD requested investigations by calling the state investigative office and discussing
the case over the telephone.
For the South Carolina demonstration, we compared retailer management procedures
at SCDSS, the South Carolina Field Office, and the Mississippi Field Office. Exhibit 4.3
presents key areas where procedures differed. In South Carolina, the state converted the system
of paper logs used by the South Carolina Field Office to an automated system based on word
processing software residing on a networked PC. The Mississippi Field Office did not have a
36
Chapter Four: State and Field Office Procedures for Retailer Management
centralized tracking mechanism for either requests for applications or for the applications
themselves before approval.
Both FCS Fielu Offices used regional grocer education meetings to review applications
and train retailers in FSP rules and procedures. SCDSS relied on store visits; state retailer
management specialists accepted the application, requested additional information, and provided
information to retailers in a single, in-store meeting. SCDSS was the only one of the six sites
to use reauthorization as an occasion to visit stores (only "questionable" stores were visited
during the 1995 reauthorization effort). The Arkansas Field Office regularly supplemented the
reauthorization list with additional stores to make sure up-to-date information was available on
all stores (and to bring all stores with a single owner on to the same reauthorization schedule).
Unlike NMHSD, SCDSS did not assume responsibility for retailer monitoring and
sanctioning. SCDSS related information on retailers suspected of fraud to the state's Division
of Investigation with a telephone call, whereas the FCS Field Offices made written requests for
investigation to the Compliance Branch. Although SCDSS did not have a formal responsibility
for the compliance aspects of retailer management, the office was very attuned to retailer
integrity issues. Investigators from USDA OIG and the Compliance Branch were quite active
in South Carolina during the demonstration, in contrast to New Mexico, which saw very little
investigative activity during the demonstration. The South Carolina demonstration happened to
coincide with a major multi-agency effort to identify and prosecute stores trafficking in food
stamps in the Charleston area. Furthermore, there were simply more investigators working FSP
fraud cases in South Carolina than there were in New Mexico.
4.5 CHAPTER SUMMARY
At the outset of the demonstrations, in early 1994, both the South Carolina and New
Mexico demonstrations were quite innovative in their proposal to use store visits in the retailer
authorization process. By the end of the demonstrations, however, in early 1996, the baseline
and comparison FCS Field Offices in both regions had begun routinely visiting at least some
stores as part of the retailer authorization process. The other procedural innovations by the
states streamlined the process somewhat, but the range of innovation was limited to a large
degree by the need to conform to FSP regulations and established Field Office procedures. The
37
Chapter Four: State and Field Office Procedures for Retailer Management
Exhibit 4.2
HIGHLIGHTS OF RETAILER MANAGEMENT PROCEDURES
IN THREE SOUTHWEST REGION SITES
Questions
New Mexico Human
Services Department
(Demonstration)
FCS New Mexico
Field Office
(Baseline)
FCS Arkansas
Field Office
(Comparison)
First Time Authorizations
How are requests for
applications tracked?
No tracking Cover letter and
contact sheet kept on
file
"Kit request form"
kept on file
How are applications
tracked once received?
No tracking Computerized log Computerized log after
application is
substantially complete
Are stores visited
before or soon after
authorization?
All stores visited before
or soon after
authorization
In 1996, began visiting
stores targeted as "high
risk-
Since Fall 1995,
visiting 40% of
applicants, targeting
based on telephone
interviews
How are retailers
trained in FSP rules
and procedures?3
During store visit or
follow-up phone call
Telephone conversation Grocer education
meetings
Reauthorizations
What stores are visited
during reauthorization?
None None None
Who processes and
enters reauthorization
forms?
Retailer Management
Specialist
Clerk or FPS FPS
Retailer Compliance Management
What records cf
complaints against
retailers are kept?
Note in retailer file and
entry on paper complaint
log
Note in retailer file and
entry on paper
complaint log
Note in retailer file
and entry on paper
complaint log
What research is done
on complaints before
referring retailers for
investigation?
Call or visit to store Call retailer, review
redemption data,
complete FCS-238
contact sheet
Call retailer, review
redemption data,
complete FCS-238
contact sheet
To whom are referrals
for compliance
investigation made?
NMHSD Inspector
General (designated
SLEB)
FCS Compliance
Branch; occasionally to
USDA OIG
FCS Compliance
Branch
How are referrals for
compliance
investigation made?
Telephone call Written RFI Written RFI
38
Chapter Four: State and Field Office Procedures for Retailer Management
Exhibit 4.2 (continued)
HIGHLIGHTS OF RETAILER MANAGEMENT PROCEDURES
IN THREE SOUTHWEST REGION SITES
Questions
New Mexico Human
Services Department
(Demonstration)
FCS New Mexico
Field Office
(Baseline)
FCS Arkansas
Field Office
(Comparison)
Retailer Monitoring
What special In Fall 1995, began In Fall 1995, began Requests and reviews
monitoring efforts making monitoring visits making monitoring STARS monitoring
have been undertaken? to randomly- selected visits to randomly- reports on monthly
stores (in response to selected stores (in basis; added stores to
Southwest Regional response to Southwest reauthorization process
Office initiative) Regional Office
initiative)
Who researches Retailer management FPS works list FPS works list
retailers identified by specialist works lists generated semi- generated semi-
MCSC as non- generated semi-annually annually by MCSC annually by MCSC
redeemers and how by MCSC
often is this done?
Who researches Retailer management FPS works list FPS works list
retailers identified by specialist works lists generated annually by generated monthly by
MCSC as high generated annually by MCSC MCSC at Field Office
redeemers and how MCSC request
r^=r-. "1
often is this done?b
NOTE: FPS = Food Program Specialist; MCSC = FCS Minneapolis Computer Support Center
1 All sites provided retailers with a standard "authorization packet" that included a booklet of relevant program regulations.
b Following standard procedure, MCSC supplies all FCS Field Offices once a year with a list of retailers whose monthly
redemptions are greater than 90 percent of the total food sales recorded on STARS. Field Office staff research each case,
typically requesting updated sales information. Field Offices can request interim reports, as the Arkansas Field Office does.
The more frequent reports allow for a more rapid response to potential cases of fraud.
39
Chapter Four: Slate and Field Office Procedures for Retailer Management
Exhibit 4.3
HIGHLIGHTS OF RETAILER MANAGEMENT PROCEDURES
IN THREE SOUTHEAST REGION SITES
Questions
South Carolina
Department of Social
Services
(Demonstration)
FCS South Carolina
Field Office
(Baseline)
FCS Mississippi
Meld Office
(Comparison)
First Time Authorizations
How are requests for
applications tracked?
Computerized log Paper request log Contact sheet kept on file
How are applications
tracked once received?
Computerized log Paper applications log No log prior to authoriza-tion
Are stores visited
before or soon after
authorization?
Application accepted
only during store visit
Beginning Fall 1995,
visit 20-30% of appli-cants
before authori-zation
Since June 1995, visit all
stores (except supermar-kets)
before authorization
How are retailers
trained in FSP rules
and procedures?3
During store visit Grocer education
meetings
Grocer education meet-ings
Reauthorizations
What stores are visited
during reauthorization?
1994: All stores 1995:
Only marginal stores
identified during EBT
rollout
None Occasionally visit mar-ginal
stores
Who processes and
enters reauthorization
forms?
Clerks and retailer
management specialist
Clerks and, as
needed, FPSs
One FPS processes up to
the point data entry,
second FPS enters data in
STARS
Retailer Compliance Management
What records of com-plaints
against retailers
1 are kept?
FCS notified verbally,
no record at SCDSS
Note in retailer file
and entry on paper
complaint log
Note in retailer file and
entry on paper complaint
log
What research is done
on complaints before
referring retailers for
investigation?
None Since Fall 1995,
review SCDSS RMS
data. More recently,
review EBT transac-tion
detail
Call retailer, review
redemption data, com-plete
FCS-238 contact
sheet
To whom are referrals
I for compliance investi-
1 gation made?
SCDSS Division of
Investigation (desig-nated
SLEB)
FCS Compliance
Branch
FCS Compliance Branch;
occasionally to USDA
OIG
40
Chapter Four: State and Field Office Procedures for Retailer Management
Exhibit 4.3 (continued)
HIGHLIGHTS OF RETAILER MANAGEMENT PROCEDURES
IN THREE SOUTHEAST REGION SITES
South Carolina
Department of Social FCS South Carolina FCS Mississippi
Services Field Office Field Office
Questions (Demonstration) (Baseline) (Comparison)
How are referrals for Telephone call Written RFI Written RFI
compliance investiga-tion
made?
Retailer Monitoring
| What special monitor- Developed RMS data- Under SERO initia- Under SERO initiative.
1 ing efforts have been base application as a tive, requested sales requested sales documen-undertaken?
monitoring tool documentation for tation for retailers with a
retailers with a high high rate of redemptions
rate of redemptions.
used RMS fraud pro-file
as basis for
charge letters and
referrals for investi-gations
Who researches Retailer management FPS works list FPS works list generated
retailers identified by specialist works lists generated semi- semi-annually by MCSC
MCSC as non- generated semi- annually by MCSC
redeemers and how annually by MCSC
often is this done?
Who researches No SCDSS FPS works list FPS works list generated
retailers identified by involvement; Columbia generated annually by annually by MCSC
MCSC as high Field Office annually MCSC
redeemers and how works list for entire
j often is this done?b State
NOTE: FPS = Food Program Specialist; MCSC = FCS Minneapolis Computer Support Center
1 All sites provided retailers with a standard "authorization packet" that included a booklet of relevant program regulations.
b Following standard procedure. MCSC supplies all FCS Field Offices once a year with a list of retailers whose monthly
redemptions are greater than 90 percent of the total food sales recorded on STARS. Field Office stiff research each case,
typically requesting updated sales information. Field Offices can request interim reports, as the Arkansas Field Office does.
The more frequent reports allow for a more rapid response to potential cases of fraud.
41
Chapter Four: State and Field Office Procedures for Retailer Management
states proved that they could effectively implement FSP policies for retailer participation, but
converting to state administration had only modest impact on retailer management procedures.
As discussed in Chapter Three, SCDSS and the South Carolina Field Office were
occasionally at odds in the application of retailer eligibility criteria. In New Mexico, the
differences between the state and the field office in interpreting the regulations governing retailer
eligibility were less intense. Nevertheless, both states had a tendency to be more ready than the
FCS Field Offices to deny authorization or reauthorization to stores of questionable eligibility.
Within the limited time frame and scope of the demonstration, however, it is difficult to assess
what impact that difference may have made.
42
CHAPTER FIVE
RETAILER MANAGEMENT ACTIVITY,
RESOURCES, AND RESLXTS
In evaluating the retailer management demonstrations, we considered three outcome
dimensions:
• the level of retailer management activity;
• the cost of retailer management and other functions performed; and
• the changes in FSP participation by retailers.
Each of these dimensions is an important aspect of the basic question of how well the states
performed their retailer management responsibilities, encompassing considerations of
productivity, efficiency, and effectiveness. Therefore, we compared the demonstrations with
the four Field Offices in the study along the dimensions of activity, cost, and retailer
participation.
5.1 RETAILER MANAGEMENT ACTIVITY
The demonstrations were compared with the Field Offices on three measures oi" retailer
management activity: new authorizations, withdrawn firms, and disqualified firms. All three
of these activities contributed to the retailer management workload in the study sites, along with
retailer monitoring and support activities that occur more frequently but generally require less
effort for each episode of activity (e.g., answering retailer questions about FSP policy). The
chosen indicators are also the prime activities for which data could be obtained from STARS,
allowing an unobtrusive and consistent means of measuring activity in all sites.
Exhibit 5.1 summarizes the average monthly rates of retailer management activity in
the demonstrations, the baseline and comparison Field Offices, and the Southeast and Southwest
regions. All values are averages from February through December 1995, the period when both
demonstrations were operational and all Field Offices had stable service areas. The activity data
have been normalized as rates per 100 currently authorized retailers, to facilitate comparisons
43
Chapter Five: Retailer Management Activity, Resources, and Results
Exhibit 5.1
RETAILER MANAGEMENT ACTIVITY RATES FOR DEMONSTRATION,
BASELINE AND COMPARISON FIELD OFFICES, AND REGIONS
(February-December 1995, Averages)
1
Location
Total
Authorized
Firms
Monthly Rates per 100 Authorized Firms
New
Authori-zations
Withdrawals
Disqualifi-cations
New Mexico Demonstration 568 0.88 0.77 0.02
FCS New Mexico Field Office" 1,643 0.93 1.05 0.01
FCS Arkansas Field Office 2,610 0.91 1.58 0.06
Southwest Regionb 28,602 1.07 1.71 0.07
South Carolina Demonstration 664 0.91 2.42 0.1 lc
FCS South Carolina Field Office3 3,052 0.81 3.04 0.09
FCS Mississippi Field Office 4,161 1.14 1.48 0.12
Southeast Regionb 47,942 0.97 1.50 0.08
SOURCE: Store Tracking and Redempiion Subsystem (STARS), Food Sump Program Integrated Information System.
1 Data for baseline FCS Field Offices (South Carolina and New Mexico) exclude demonstration retailers and activities.
Regional data include retailers and activities in the demonstration sites and the areas served by the baseline and comparison
Field Offices. Therefore, the regional data represent averages against which the individual site data can be compared.
Disqualifications for retailers in the South Carolina demonstration were performed by FCS South Carolina Field Office.
across sites serving different numbers of firms. As indicators of the scale of operations in each
site, the total number of firms is provided.
As Exhibit 5.1 shows, the South Carolina demonstration had a slightly higher rate of
new authorizations per 100 currently authorized firms than the South Carolina Field Office (0.91
versus 0.81), whereas the New Mexico demonstration had a slightly lower authorization rate per
100 firms (0.88 versus 0.93). All four of these sites had authorization rates below their
respective regional averages, perhaps because the presence of EBT systems discouraged
applications from marginal retailers.
The use of store visits might be expected to reduce authorization rates in the
demonstration sites relative to other sites, but the data do not bear out this supposition. The lack
of a consistent pattern of demonstration-Field Office differences across the two regions suggests
44
Chapter Five: Retailer Management Activity, Resources, and Results
that these differences are more related to geography than to the use of store visits or other
procedural factors.1
The greatest difference in activity across the study sites was in the rate of withdrawals
of authorized firms. The South Carolina Field Office was the most active with over three
withdrawals per 100 firms—twice the average for the Southeast region. The South Carolina
demonstration had the second-highest monthly withdrawal rate by far, whereas the New Mexico
demonstration had the lowest withdrawal rate at only 0.77 per 100 firms. The withdrawal rates
in the Arkansas and Mississippi Field Offices were about average for their respective regions.
EBT implementation appears to have played the largest role in these cross-site
differences. The period of analysis coincided with the rollout of the EBT system throughout
South Carolina, with the exception of the Darlington County pilot site, where the EBT system
went live in November 1994. As discussed in Chapter Three, a large number of inactive and
ineligible stores were identified during EBT implementation in South Carolina, chiefly through
the problem reports submitted by the EBT system vendor. The lower rate of withdrawals in the
South Carolina demonstration (relative to the Field Office territory) is probably due to the fact
that the withdrawals associated with EBT implementation in Darlington County (one of the five
demonstration counties) had already taken place by February 1995, whereas all of the Field
Office territory was converted to EBT between March and December 1995.
Differences in the timing of EBT implementation may also explain the difference in
withdrawal rates between the demonstration and the Field Office in New Mexico. All of the
1995 EBT implementation activity in New Mexico took place outside the demonstration site, and
the Texas portion of the Field Office's territory also underwent EBT implementation during this
period. Thus, during this time period, only the Field Office dealt with withdrawals resulting
from EBT implementation. Both New Mexico sites had substantially lower withdrawal rates
than the Arkansas Field Office. This difference may be due to a more stable retailer population
in New Mexico, but the aggressive approach to non-redeemers by the Arkansas Field Office—in
part as preparation for the coming of EBT—probably was a factor as well.
1 The evaluation did not have access to data on the rates at which applications are denied or withdrawn,
which would have provided another test of the effectiveness of state store visits relative to the screening
techniques used by the Field Offices. The evaluation relied on STARS for uniform data on retailer
management, and denied or withdrawn applications are not recorded on STARS.
45
Chapter Five: Retailer Management Activity, Resources, and Results
The rate of disqualifications varied little between the demonstration sites and the
baseline Field Offices in New Mexico and South Carolina. The slightly higher rates in the
demonstration sites most likely reflect decisions about where investigators chose to target their
efforts, rather than any demonstration effects (especially in South Carolina, where the state took
no responsibility for disqualifications). A relatively low level of investigative resources in New
Mexico, plus the fact that a major sting operation by the NMSHD Inspector General had recently
concluded, led to the relatively low level of disqualifications throughout the state in 1995,
especially as compared to disqualification rates throughout the region.
5.2 RETAILER MANAGEMENT COSTS
The considerable differences in approach between the demonstrations in New Mexico
and South Carolina are highlighted by the comparison of total reported demonstration costs in
Exhibit 5.2, which is based on the claims for grant funds submitted to FCS. From the beginning
of the two demonstrations through December 1995 (when the South Carolina demonstration
ended). South Carolina spent $248,272—nearly five times as much as New Mexico, even though
the South Carolina demonstration served only about 17 percent more retailers. The principal
source of the cost difference between the demonstrations was the development of South
Carolina's RMS computer system, which required much of the $156,286 in expenditures for
equipment, software and data processing service consultants, as well as a substantial portion of
the project labor co