United States General Accounting Office

GAO Report to the Chairman, Committee on

the Budget, House of Representatives

September 1997 FOOD ASSISTANCE

A Variety of Practices

May Lower the Costs

of WIC

GAO/RCED-97-225

GAO United States

General Accounting Office

Washington, D.C. 20548

Resources, Community, and

Economic Development Division

B-277615 

September 17, 1997

The Honorable John R. Kasich

Chairman, Committee on the Budget

House of Representatives

Dear Mr. Chairman:

The Special Supplemental Nutrition Program for Women, Infants and

Children (WIC) is a federally funded nutrition assistance program

administered by the U.S. Department of Agriculture’s Food and Consumer

Service (FCS). This program provides lower-income pregnant and

postpartum women, infants, and children up to age 5 with supplemental

foods, nutrition counseling, and access to health care services. The food

benefits are typically provided in the form of a voucher that can be used to

obtain approved foods at authorized retail outlets (food stores and

pharmacies), commonly referred to as vendors. Food costs accounted for

about $2.7 billion, or about 74 percent, of the WIC program’s total costs in

fiscal year 1996. In administering WIC, the states1

 are allowed some

flexibility in the policies and procedures they use. Since WIC is a

discretionary program that serves as many individuals as the available

funding permits, any actions the states can take to reduce the program’s

costs will allow them to serve more eligible people.

This report is the second in a series of reports responding to your

December 20, 1996, request for information on certain aspects of WIC.

2

 In

this report, we (1) describe and assess the practices that the states use to

contain costs by controlling the foods approved for use in the WIC program

and by more closely selecting and regulating participating vendors and

(2) examine practices that the states use to ensure that WIC applicants’

incomes meet the program’s eligibility requirements. As a part of our

review, we surveyed the WIC directors in the 50 states and the District of

Columbia and analyzed the information provided by the 48 who

responded.3

1

As treated in the FCS regulations, “states” includes the District of Columbia.

2

Our first report was entitled WIC: States Had a Variety of Reasons for Not Spending Program Funds

(GAO/RCED-97-166, June 12, 1997).

3

We did not receive responses to our questionnaire from the state WIC directors in Minnesota, Oregon,

and South Dakota. Also, we did not include the 33 Indian tribal organizations and the U.S. territories in

our survey because of regulatory and program differences.

Page 1 GAO/RCED-97-225 Food Assistance
B-277615 

Results in Brief The states are using a variety of cost containment initiatives to control the

WIC program’s costs. For example, 10 states have contracted with

manufacturers to obtain rebates on WIC foods in addition to infant formula,

and some states have placed greater limits on WIC participants’ food

choices than other states. Separately, or in conjunction with efforts to

contain food costs, 39 states use various practices to restrict the number

of vendors and/or ensure that the prices vendors charge for WIC food items

are competitive. These and other practices to contain food costs have

saved millions of dollars annually and enabled more individuals to enroll

in the program, according to WIC directors. While the use of cost

containment practices could be expanded, certain obstacles, including the

states’ concern with how the program allocates the additional funds made

available through cost containment initiatives, may discourage the states

from adopting or expanding their use.

Federal regulations provide that WIC program applicants who participate in

the Food Stamp Program, Medicaid, and the Temporary Assistance for

Needy Families Program automatically meet the income eligibility

requirements of the WIC program. The states use a variety of procedures to

certify the income eligibility of the applicants who do not participate in

these programs. Thirty-two of the 48 state WIC directors responding to our

questionnaire reported that their states generally require these applicants

to provide documents, such as pay stubs and letters, to verify their

income. Of the remaining 16 WIC directors, 14 reported that their states do

not require documentation. These states allow applicants to declare their

income without providing supporting documentation. The other two

directors reported that income documentation procedures are determined

individually by the local WIC agencies.

Background Established in 1972, WIC is designed to improve the health and nutritional

well-being of participants by providing nutritious supplemental foods,

nutrition education, and referrals to health care services. The program is

available in each state, the District of Columbia, 33 Indian tribal

organizations, Puerto Rico, the U.S. Virgin Islands, American Samoa, and

Guam. FCS administers the program in cooperation with state and local

health departments and related agencies.

The supplemental foods that WIC provides include milk, cheese, fruit and

vegetable juices, iron-fortified adult and infant cereals, dried beans or

peas, peanut butter, eggs, and infant formula. Special infant formulas are

also available to meet unusual dietary or health-related conditions. Each

Page 2 GAO/RCED-97-225 Food Assistance
B-277615 

state designates the types and amounts of foods that local WIC agencies

can prescribe to meet each participant’s nutritional needs. The WIC food

benefit (referred to as a food package) can be provided through local WIC

health clinics or home delivery. More commonly, participants receive their

food benefits in the form of a check or a voucher that is used to purchase

the specific foods at authorized retail vendors. These vendors have been

selected by the state to participate in the program for a period of time.

FCS requires the states to operate a rebate program for infant formula. By

negotiating rebates with infant formula manufacturers for each can of

formula purchased through WIC, the states greatly reduce their average per

person food costs so that more people can be served. In fiscal year 1996,

infant formula rebates to all states totaled about $1.2 billion.

Federal WIC appropriations totaled $3.47 billion in fiscal year 1995 and

$3.73 billion annually in fiscal years 1996 and 1997. The program is

primarily funded by federal appropriations; some states supplement the

federal grant with their own funds. In fiscal years 1995 and 1996, the

average monthly WIC participation nationwide was about 6.9 million and

7.2 million, respectively, and in fiscal year 1997, the average monthly

participation was about 7.4 million through February 1997.

Grants to the states are divided into food grants and nutrition services and

administration grants. Food grants cover the costs of supplemental foods

and are allocated to the states through a formula that is based on the

number of individuals in each state who are eligible for WIC benefits

because of their income. The nutrition services and administration grants

are allocated to the states through a formula that is based on factors such

as the state’s number of projected program participants and WIC salary

costs. Nutrition services and administration grants cover costs for

program administration, start-up, monitoring, auditing, the development of

and accountability for food delivery systems, nutrition education,

breast-feeding promotion and support, outreach, certification, and

developing and printing food vouchers.

State WIC agencies establish program eligibility criteria that are based on

federal guidelines. To qualify for the program, WIC applicants must show

evidence of nutritional risk that is medically verified by a health

professional. In addition, participants may not have incomes that exceed

185 percent of the poverty guidelines that are established annually by the

Page 3 GAO/RCED-97-225 Food Assistance
B-277615 

U.S. Department of Health and Human Services.4 In 1997, for example, the

annual WIC income limit for a family of four is $29,693 in the 48 contiguous

states and the District of Columbia.5

 Federal regulations allow the states to

individually determine their income documentation requirements for

applicants seeking to participate in WIC. The states are also required by

federal regulations to automatically certify as income eligible those

individuals who document their participation in the Food Stamp Program,

Medicaid, and the Temporary Assistance for Needy Families Program.

Approximately two-thirds of all WIC participants were enrolled in one or

more of these programs in fiscal year 1994, the last year for which

complete data were available at the time of our review. In addition, WIC

participants are required by federal regulations to reside in the jurisdiction

of the state where they receive benefits, and the states are required to

check the identification of all participants when they seek certification for

program participation and when they receive their vouchers. Although the

applicants who meet the program’s health and nutrition, income, and

residency requirements may be certified as eligible to participate in WIC,

the number of participants that are actually served each year primarily

depends on the total amount of funds available to the states. According to

FCS’ estimates, about 75 percent of the eligible women, infants, and

children actually participated in WIC during fiscal year 1995.

Efforts to Control

Food Costs and

Manage Vendors Have

Reduced Costs, but

the Program’s

Structure May

Discourage Wider Use

States’ initiatives to control food costs by limiting the types and package

sizes of WIC foods and by more carefully selecting and regulating vendors

have reduced the program’s costs by millions of dollars. These practices

could be expanded in the states that have already implemented them and

could be adopted by other states. However, the National Association of WIC

Directors6 and some WIC directors we spoke with are concerned that,

among other things, the program’s regulations can constrain a state’s

ability to effectively use the additional funds that become available as a

result of cost containment initiatives.

States’ Efforts to Hold

Down Food Costs Have

Been Successful

Two practices that some states are using to contain food costs are

reported by state WIC directors to be saving millions of dollars. These two

practices include (1) contracting with manufacturers to obtain rebates on

4

In fiscal year 1996, only one state set WIC income eligibility below 185 percent of poverty: South

Dakota used 175 percent of poverty.

5

Poverty guidelines are established separately for Alaska and Hawaii.

6

The National Association of WIC Directors, located in Washington, D.C., is a voluntary membership

organization of state and local WIC directors, WIC nutrition coordinators, and members of corporate

organizations that provide leadership to the WIC community.

Page 4 GAO/RCED-97-225 Food Assistance
B-277615 

WIC foods in addition to infant formula and (2) limiting authorized food

selections by, for example, requiring participants to select brands of foods

that have the lowest cost.

Use of Competitively Bid

Rebate Contracts

In fiscal year 1996, nine state agencies received rebates for two

WIC-approved foods—infant cereal and/or infant fruit juices. Table 1 shows

the states that were receiving rebates during fiscal year 1996 from the

expanded use of rebates through individual or multistate contracts.

Table 1: State WIC Agencies Receiving

Infant Cereal and/or Infant Juice

Rebates Through Individual or

Multistate Contracts During Fiscal

Year 1996 State

agency

Infant

cereal

Infant

juice

Rebates for

infant cereal

and/or juice

Total

rebates

(including

infant

formula)

Food

expenditures

(minus

rebates)

California Xa $2,144,741 $184,928,836 $437,729,886

Connecticut X 149,791 8,213,539 25,272,861

District of

Columbia

Xa Xb 32,757 3,511,162 6,574,543

Indiana X 276,369 22,318,364 46,232,572

Maryland Xa Xb 236,793 16,769,477 34,033,689

Nevada Xa 76,116 6,375,653 11,361,869

New York X 2,398,888 88,507,822 200,143,479

Texas X 733,483 122,908,887 194,499,363

West Virginia Xa Xb 154,714 7,501,982 19,816,154

Total $6,203,652 $461,035,722 $987,026,285

aMultistate contract for infant cereal.

bMultistate contract for infant juice.

The cost savings resulting from these infant cereal and juice rebates are

relatively small in comparison with the savings resulting from infant

formula rebates. As shown by the figures in table 1, the rebates for infant

cereal and juices represented about 1 percent of the total rebates received

in these nine states in fiscal year 1996. The $6.2 million in infant cereal and

juice rebates reduced total food costs in these states by about six-tenths of

a percent in fiscal year 1996.

Eleven states—Alaska, California, Delaware, the District of Columbia,

Hawaii, Missouri, New Jersey, New York, Oklahoma, Rhode Island, and

West Virginia—reported that their agencies were considering, or were in

the process of, expanding their use of rebates to foods other than infant

Page 5 GAO/RCED-97-225 Food Assistance
B-277615 

formula. In May 1997, Delaware joined the District of Columbia, Maryland,

and West Virginia in a multistate rebate contract for infant cereal and

juices. California was the first state to expand its rebate program to

include adult juices, adding this option in March 1997. California currently

spends about $65 million annually on adult juice purchases. California’s

WIC director told us that the state expects to collect about $12 million in

annual rebates on the adult juices, thereby allowing approximately 30,000

additional persons to participate in the program each month.

According to FCS officials, there is the potential to reduce WIC costs further

through the expanded use of rebates. They said that FCS has encouraged

the states to examine and aggressively pursue rebates to stretch food

dollars to serve a maximum number of eligible participants. In May 1997,

FCS sent its regional directors a memorandum outlining a strategy to

“manage, contain, and control” food costs using rebates on products such

as special infant formula and other WIC foods in addition to infant formula.

The officials told us that if federal funding for WIC remains constant or

declines, more states may consider expanding the use of rebate contracts

to provide funds for their WIC programs. FCS officials also told us that some

states’ WIC agencies may not be expanding the use of rebates because

other cost containment practices have proven effective in reducing food

costs. For example, the states that have elected to use only store brand

foods may be incurring lower costs than the states that receive rebates on

national brand products.

While these rebates reduce costs, the procurement process requires

additional administrative effort by the states. The California WIC director

and FCS officials told us that the process of entering into and monitoring

rebate contracts can be complicated and time-consuming. In addition, FCS

officials told us that bid protests filed by the manufacturers that are not

awarded contracts impose additional administrative burdens on the states.

The administrative burden associated with procuring and monitoring

rebate contracts can be exacerbated if a state contracts with more than

one manufacturer for rebates. For example, when California expanded its

rebate program to include adult juices, the state requested bids on rebate

contracts from juice companies for frozen and ready-to-drink apple, grape,

orange, and pineapple juices that were available in all parts of the state

and had to negotiate five separate contracts.

The states also need to use additional resources to manage the rebate

contracts. FCS officials told us that disagreements between the states and

manufacturers occur over the rebate billings that the manufacturers are

Page 6 GAO/RCED-97-225 Food Assistance
B-277615 

obligated to pay the states. They said that the states must therefore

develop billing systems that track the amount of the manufacturers’

products selected by WIC clients using their vouchers. For example, the

California WIC director told us that before the state implemented its adult

juice rebate contracts, the state agency had to develop a system for

determining the amount and quantity of each type of juice selected by WIC

participants and a system for rebate billing that was acceptable to the juice

manufacturers.

FCS officials told us that the states could become increasingly dependent

on the funds provided by their rebate contracts. Historically, the annual

funds received by the states from their infant formula rebate contracts

have continued to increase, but this source of funding may not always be

reliable. If manufacturers begin offering lower rebates, the states could

have insufficient funds to provide program benefits to their current level

of WIC participants.7

 According to FCS officials, such a decrease in rebate

funds would be similar to an increase in food prices because of inflation,

something which the program has experienced before. In such instances,

the states would need to make adjustments to the foods they offer to

contain the escalating costs and/or remove people from the program.

Limits on Food Selection According to FCS officials, the prices of the food items provided by WIC can

vary dramatically, depending, for example, on the brand of the item or

how it is packaged. Individually wrapped sliced cheese can cost

substantially more than the same cheese in block form, and a national

brand of juice could cost substantially more than a vendor’s own brand.

All state WIC directors responding to our survey reported that their

agencies imposed limits on one or more of the WIC food items. The states

may specify certain brands; limit certain types of foods, such as sliced

cheese; restrict container sizes; and require the selection of only the

lowest-cost brands. Figure 1 shows the number of WIC directors who

reported that their states use various types of limits for one or more food

items.

7

Federal regulations permit the states to use up to 3 percent of their current year’s food funds to pay

their prior year’s food costs. This option is available to any state that experiences a reduction in its

rebates, according to FCS officials.

Page 7 GAO/RCED-97-225 Food Assistance
B-277615 

Figure 1: Types of Food Selection

Limits States Use to Control WIC Food

Costs

Number of WIC directors

0

10

20

30

40

50

Allow only certain

container or package sizes

Designate or disallow specific brands

Limit allowable types of foods

Require purchase of lowest-cost brands

Set a maximum

purchase price

Other limits

47

45 44

20

15

12

As the figure indicates, some types of restrictions are more widely used

than others. Forty-seven of the 48 WIC directors reported that their states’

participants are allowed to choose only certain container or package sizes

of one or more food items. For example, 27 of the 48 directors who

responded to our questionnaire reported that their states limit the

container or package size of infant juice. In addition, 8 states limit

allowable types of infant juice, and 18 do not offer infant juice.8

 Some

states have also extended limits to non-infant foods.

For example, Texas participants can select only cheese that is not

packaged as individually wrapped slices or shredded, and milk must be in

1-gallon or half-gallon sizes and must be the least expensive brand. In

Pennsylvania, dry beans or peas must be in 1-pound packages,

ready-to-drink juices must be in 46-ounce cans, and the price of a dozen

eggs must not exceed $1.75.

8

The regulations require states to provide infants either single-strength adult juice or infant juice.

Page 8 GAO/RCED-97-225 Food Assistance
B-277615 

While all states have one or more food selection restrictions, 17 of the 48

WIC directors responding to our questionnaire reported that their states are

considering the use of additional food selection limits to contain or reduce

costs in the WIC program.

Most of the 48 WIC directors reported that placing selection limits on WIC

foods has at least moderately decreased their food costs. Twelve of these

directors reported that selection limits have greatly or very greatly

reduced their WIC food costs. Figure 2 shows the range of food cost

reductions that the directors reported from implementing these

restrictions.

Figure 2: Impact on Food Costs

Resulting From States’ Use of Food

Selection Limits

Number of WIC directors

0

5

10

15

20

Very greatly decreased

Greatly decreased

Moderately

decreased

Somewhat decreased

Little or no decrease

Unsure of effect

4

8

19

10

3

4

Texas, for example, which reported that the restrictions had a very great

impact, uses a combination of food selection limits, including a least-cost

brand policy. The policy requires participants to buy the cheapest brand of

Page 9 GAO/RCED-97-225 Food Assistance
B-277615 

milk, evaporated milk, and cheese available in the store—usually the

store’s own brand. Texas also requires participants to buy the lowest-cost

46-ounce fluid or 12-ounce frozen fruit juices from an approved list of

types (orange, grapefruit, orange/grapefruit, purple grape, pineapple,

orange/pineapple, and apple) and/or specific brands. According to Texas

WIC officials, the least-cost brand policy has had a “tremendous” impact on

lowering the dollar amount that the state pays for WIC food products. For

example, in fiscal year 1989 (the first full fiscal year that the policy was in

effect), the cost of milk was reduced by about $3 million. In fiscal year

1996, Texas had a lower than average food cost per person among the 50

states and the District of Columbia even before rebates were factored in.

(See app. I.)

FCS headquarters officials told us that the selection by state agencies of the

foods available to participants is one of the states’ most powerful cost

containment tools. FCS encourages the states to approve WIC foods that are

low in price. However, the officials said that while cost efficiencies are

important, the states must maintain the nutritional integrity of the

program’s food package. The practice of limiting food items can have a

negative impact if participants do not select the food products or do not

eat them. For example, Texas WIC officials told us that they discontinued

the least-cost brand requirement for peanut butter when they discovered

that participants were not selecting the product.

In addition, FCS officials said that the restrictions may make food

selections more confusing for participants and burdensome for vendors.

For example, Texas WIC officials told us that participants and cashiers

often have difficulty determining which products have the lowest price. A

1995 study of participants’ selections of lowest-cost WIC foods performed

by a Texas WIC food chain found that 95 percent of the participants were

selecting one or more nonapproved food items that had to be exchanged

for the correct item. In response, the food chain, among other things,

upgraded the quality, location, and clarity of WIC labels and signs in all of

its stores, adding color displays and descriptions of approved WIC items.

The Texas WIC agency has also published and displayed a color brochure

of approved items that has helped participants to select the approved

foods. According to an official of the supermarket chain, these actions

have reduced exchanges of food items between 19 and 50 percent.

States’ Control Food Costs

by Managing Vendors

Separately or in conjunction with measures to contain food costs, some

state agencies have placed restrictions on vendors to hold down costs.

Page 10 GAO/RCED-97-225 Food Assistance
B-277615 

Some states are also selecting alternatives to vendor distribution for

certain food products.

Restrictions on Vendors Thirty-nine of the 48 states responding to our questionnaire reported that

they use special selection requirements or limits to contain the number of

authorized vendors. Twenty-nine WIC directors reported that they

considered it extremely or very important to contain the number of

vendors in order to control the program’s costs, and 9 reported that it is

moderately important. Of the 39 states, 34 reported using competitive food

costs as one of their criteria for selecting vendors. In addition, 27 states

have established price limits that vendors cannot exceed for allowable

foods, and 5 states require vendors to bid competitively for vendor slots.

The food prices of WIC vendors in Texas must not exceed by more than

8 percent the average prices charged by vendors doing a comparable

dollar volume in the same area. Once selected, vendors must maintain

competitive prices. According to Texas WIC officials, the state does not

limit the number of vendors that can participate in the WIC program.

However, Texas’ selection criteria for approving vendors exclude many

stores from the program. By approving only stores with competitive

prices, Texas officials said that they save WIC food dollars by paying

competitive prices for WIC products.9

Similarly, Delaware’s Project SAVE (Selecting Authorized Vendors

Efficiently) requires vendors to bid competitively for all authorized WIC

food items. Vendors that meet the minimum qualification requirements

and bid the lowest prices are selected to fill the available retail outlet slots.

Delaware selects vendors every 2 years.

Delaware’s WIC director said that while SAVE maintains the clients’ access

to vendors, administrative savings have been achieved by training and

monitoring vendors, and the number of potentially high-risk vendors has

declined. The director noted that SAVE enables the state to control

unexpected price increases because the prices are locked in for 2 years

through agreements with vendors, thereby allowing grant funds to be more

effectively and efficiently managed. Between fiscal years 1991 and 1996,

the director estimated, the agreements saved the program about

$1.8 million in food costs.

9

Texas does not have available data on the specific cost savings attributed to selecting vendors with

competitive prices.

Page 11 GAO/RCED-97-225 Food Assistance
B-277615 

Eighteen WIC directors reported that their states use ratios of participants

to vendors to restrict the number of vendors allowed to participate in the

program. By limiting the number of vendors, the states can more

frequently monitor stores and conduct compliance investigations,

according to FCS and state WIC officials. For example, Delaware uses a ratio

of 200 participants per store to determine the total number of vendors that

can participate in the program in each WIC service area.

Of the 39 states reporting that they contain the number of vendors, 31

states reported that as a result, their programs’ costs have decreased

somewhat or greatly. Figure 3 presents the WIC directors’ estimates of the

cost reductions resulting from limits on vendors and selection policies.

Figure 3: Impact on the Program’s

Costs Resulting From States’ Use of

Vendor Limits and Selection Policies

Number of WIC directors

0

5

10

15

20

25

Greatly decreased

Somewhat decreased

No effect

Somewhat increased

Do not know the effect

7

24

2

3

2

The WIC directors in 7 of the 39 states (Maine, Massachusetts, Nebraska,

New Mexico, Rhode Island, South Carolina, and Wisconsin) that currently

Page 12 GAO/RCED-97-225 Food Assistance
B-277615 

contain the number of vendors allowed to participate in the program

reported that they are planning to introduce additional initiatives, such as

requiring competitive food pricing by currently authorized vendors, to

contain the program’s costs. In addition, the directors in two other states

(Connecticut and North Carolina) also reported that they plan to select

vendors on the basis of competitive pricing.

FCS headquarters officials told us that limiting the number of vendors and

selecting vendors with competitive prices are important aspects of

containing WIC costs. However, they told us that the retail community does

not favor limits on the number of approved vendors. Instead, vendors have

pressured state WIC agencies and FCS officials to allow all vendors that

qualify to participate. According to the FCS officials, the amount that the

WIC program spends for food would be substantially higher if stores with

higher prices were authorized for the program.

Direct Distribution of Special

Infant Formula

Upon a physician’s instructions, WIC infants with special dietary needs or

medical conditions may receive special infant formula. While only a small

percentage of the WIC infants nationwide require these formulas, the

monthly retail costs for them can be high—ranging in one state we

surveyed from $540 to $900 for each infant. Twenty-one states avoid

paying retail prices by purchasing the special formula at much lower

wholesale prices and distributing it to participants.

Opportunities exist to substantially lower the cost of special infant

formula. Cost savings may be achieved if the states purchase special infant

formula at wholesale instead of retail prices. Additional savings may also

be possible if these states are able to reduce or eliminate the cost of

authorizing and monitoring the retail vendors and pharmacies that

distribute only special infant formula to WIC participants.

Pennsylvania, for example, turned to direct purchasing to make special

infant formula more available and to avoid the high cost of

vendor-provided formulas. It established a central distribution warehouse

for special formulas in August 1996 to serve the less than 1 percent of WIC

infants in the state—about 400—who needed special formulas in fiscal

year 1996. Pennsylvania purchases the special formulas directly from the

manufacturers at wholesale prices, usually for between $300 to $500 for a

1-month supply. The warehouse ships the special formulas, at the

participant’s option, either directly to the participant or to the WIC clinic.

According to the state WIC director, in many instances, the WIC warehouse

delivers the formula faster than pharmacies do. The program is expected

Page 13 GAO/RCED-97-225 Food Assistance
B-277615 

to save about $100,000 annually. In addition, by relying on its warehouse,

the state can remove over 200 pharmacies from the program, resulting in

significant and measurable administrative cost savings, according to the

WIC director.

Appendix II provides information on the states’ use of cost containment

practices that affect the program’s costs.

WIC Funding Structure

May Discourage the

Adoption of Cost

Containment Practices

According to the National Association of WIC Directors and some WIC

directors we spoke with, the program’s funding structure can constrain a

state’s ability to make effective use of the additional funds that become

available as a result of cost containment initiatives. FCS policy requires that

during the grant year, any savings from cost containment accrue to the

food portion of the WIC grant, thereby allowing the states to provide food

benefits to additional WIC applicants. None of the cost containment savings

are automatically available to the states for support services, such as

staffing, clinic facilities, voucher issuance sites, outreach, and other

activities that are needed to increase participation in the program. As a

result, the states may not be able to serve more eligible persons or they

may have to carry a substantial portion of the program’s support costs

until the federal nutrition services and administration grant is adjusted for

the increased participation level—a process that can take up to 2

years—according to the National Association of WIC Directors.

FCS officials pointed out that provisions in the federal regulations allow the

states where participation increases to use a limited amount of their food

grant funds for program support activities. However, some states may be

reluctant to use the option. For example, according to a Texas WIC official,

states may not want to redirect food funds to support services because

doing so may be perceived as taking food away from babies.

Although California implemented cost containment initiatives during the

current and past year, the WIC director told us that the state received less

funding for support services this year compared with last year. As a result,

she said California has a large, multimillion-dollar imbalance between food

money and program support funds that is likely to get worse. She told us

that the California program has been hampered by the lack of adequate

support funds to sustain its caseload. Some WIC directors told us that such

shortfalls in funding for support services may discourage state agencies

from expanding the use of cost containment initiatives.

Page 14 GAO/RCED-97-225 Food Assistance
B-277615 

FCS officials stated that while the WIC funding process does not

immediately adjust the amount of funds for support services to reflect cost

containment savings, such adjustments are generally made in the following

year’s funding allocation. FCS officials also noted that a major reason for

the lack of adequate funding for program support activities is an

insufficient appropriation level overall—a factor that affected California as

well as all WIC state agencies.

States’ Requirements

for Obtaining Income

Documentation From

Applicants Vary, but

States Report

Obtaining

Documentation in

Most Cases

Federal regulations allow the states to establish their own documentation

requirements for applicants who do not automatically meet the income

requirements for participation in WIC. Thirty-two of the 48 WIC directors

reported that their state agencies generally require documentation of

income eligibility for these applicants. Fourteen directors reported that

their states do not require documentation. These states allow applicants to

declare their income without providing supporting documentation. Finally,

two directors reported that income documentation procedures are

determined individually by the local WIC agencies. In addition, 20 state WIC

directors reported that their states do not require applicants to provide

proof of residency, and 12 reported that their states do not require

applicants to provide proof of identity when they seek certification for

program participation.

Thirty of the 32 states that generally require applicants to document their

income will waive this requirement under certain conditions. The

responses to our questionnaire and our review of state policies indicate

that waiving this requirement can be routine. For example, in some

instances when individuals report that they are homeless or lack any

income, the documentation requirement can be waived. We found that

some states also allow individuals to self-declare their income if they do

not bring income documents to their certification meeting.

While these states will waive their documentation requirements, 27 of the

32 state directors reported that 75 percent or more of the participants who

were not automatically income eligible provided documentation, such as

pay stubs and letters, to establish eligibility in fiscal year 1996. Appendix

III provides information on the states’ income documentation

requirements and the percentage of participants who were not

automatically income eligible and provided income documentation during

fiscal year 1996.

Page 15 GAO/RCED-97-225 Food Assistance
B-277615 

In addition to meeting income requirements, WIC applicants must reside

within the jurisdiction of the state where they expect to establish eligibility

to receive benefits.10 FCS allows the states to accept an applicant’s

declaration of state residency without documentation. While 20 of the 48

WIC directors reported that their states do not require applicants to provide

any proof of state residency, 28 states do require applicants to provide

proof of state residency. The types of residency documentation accepted

by these states include utility bills, rent receipts, driver’s licenses, voter

registration cards, and bank statements. To prevent duplicate payments,

the program’s regulations require the local WIC agency to check the

identification of each participant at certification and when issuing food or

food vouchers.11 The types of identification accepted by states include

driver’s licenses, birth certificates, hospital records, pay stubs, voter

registration cards, or recent correspondence. Twelve of the 48 WIC

directors reported that their states do not require such proof of

identification at certification.

There has not been a study of the incidence and magnitude of errors in

determining income eligibility for the WIC program since 1988.12 The 1988

study found that 5.7 percent of the participants were not eligible.

According to FCS officials, there is potential for error in making income

eligibility decisions, and income documentation requirements may need to

be tightened. FCS has begun a nationwide study, scheduled to be

completed in 1999, that will develop a national estimate of the number of

people participating in the program who are not income eligible. The study

will also assess the extent to which various income documentation

procedures reduce the level of participation by individuals who are

ineligible. The information from this study will assist FCS in determining

what changes are needed in income documentation to ensure that the

states provide benefits only to applicants who are eligible.

FCS officials told us they strongly encourage the states to obtain income

documentation. However, they said that imposing stricter documentation

requirements could result in increased administrative costs for state and

local agencies and might discourage some eligible individuals from

applying for benefits. They also noted that certain subgroups of the WIC

population, such as aliens, may find stricter documentation requirements a

107 C.F.R. 246.7(c)(1).

117 C.F.R. 246.7(l)(2).

12WIC Income Verification Study (1988), U.S. Department of Agriculture’s Food and Consumer Service.

Page 16 GAO/RCED-97-225 Food Assistance
B-277615 

barrier to participation because individuals may be intimidated by the

paperwork.

FCS officials also expressed concern that the states not requiring proof of

personal identification may not be able to ensure that they are complying

with the federal requirement that they check the identification of

participants when they are certified and when they receive vouchers. Also,

FCS officials expressed concern that the states not obtaining evidence of

participants’ residency may not be able to ensure that the participants are

residents of their states as required by federal regulations.

Conclusions A number of the states are making effective use of a variety of practices to

contain the WIC program’s costs and to extend coverage to more women

and children. However, these states have had to overcome various

obstacles to implement cost containment. These obstacles include

incurring the increased administrative burden associated with procuring

and monitoring rebate contracts, ensuring that cost reduction does not

result in a food package that is unacceptable to participants, and

overcoming resistance from the retail community when attempting to

establish special selection requirements or limits on vendors authorized to

participate in the program. Given such obstacles, and the states’ concern

with how the program allocates the additional funds made available

through cost containment initiatives, some states may be discouraged

from adopting or expanding the use of cost containment practices.

As they seek to expand cost containment practices, FCS and the states can

benefit from the experiences of those states that have implemented such

practices effectively. Expanding cost containment depends, in part, on

reducing or eliminating the obstacles that can discourage the states from

initiating such practices. The expansion of these practices can have a

substantial impact on the WIC program because for every 1-percent

reduction in food costs that may result from these initiatives, the federal

food expenditure of about $2.7 billion could be reduced by about

$27 million annually. Cost savings could be used to provide benefits to

additional participants, improve the quality of WIC services, and/or reduce

the cost of the program to the federal government.

The states that base income-eligibility decisions on WIC applicants’

declarations of income without documentation may be allowing applicants

who are not eligible to participate in the WIC program. It is clear that this

policy may result in unintentional or deliberate misreporting of income

Page 17 GAO/RCED-97-225 Food Assistance
B-277615 

information. However, the extent of the problem is unknown because

there has not been a recent study of the number of participants in the

program that are not income eligible. Information from the new study FCS

has begun should enable the agency to determine what changes are

needed in the program’s income documentation requirements.

Similarly, WIC participants must reside in the jurisdiction of the state where

they receive benefits and provide identification at the time they are

certified to participate in the program and when they receive their

vouchers. However, some states are not requiring proof of residency or

identity. Without such proof, the states cannot ensure that these

requirements are being met.

Recommendations To encourage further implementation of WIC cost containment initiatives,

the Secretary of Agriculture should direct the Administrator of FCS to work

with the states to identify and implement strategies, including policy and

regulatory and legislative revisions, to reduce or eliminate the obstacles

that may discourage such initiatives. These strategies could include

modifying policies and procedures that allow the states to use cost

containment savings for the program’s support services and establishing

regulatory guidelines for selecting vendors to participate in the program.

The Secretary should also direct the Administrator to take the necessary

steps to ensure that the state agencies are requiring participants to provide

evidence that they reside in the states where they receive WIC benefits and

to provide identification when their eligibility is certified and when they

receive food or food vouchers.

Agency Comments

and Our Evaluation

We provided the Food and Consumer Service with copies of a draft of this

report for review and comment. We met with agency officials, including

the Administrator, the Acting Deputy Administrator for Special Nutrition

Programs, and the Director of the Supplemental Food Program Division.

FCS generally agreed with the report’s findings and recommendations, but

FCS suggested revising the presentation of our first recommendation that

FCS work with the states to reduce or eliminate the obstacles that may

discourage the use of cost containment initiatives. FCS believed that the

clarity of our recommendation could be improved by emphasizing that a

variety of additional approaches could be taken by the agency to reduce or

eliminate cost containment obstacles or provide additional incentives to

Page 18 GAO/RCED-97-225 Food Assistance
B-277615 

encourage more cost containment. In response to these concerns, we

revised the wording of the recommendation.

FCS also provided us with a number of technical comments that we

incorporated into the report as appropriate.

Scope and

Methodology

In developing information for this report, we spoke with and obtained

documents from officials at FCS headquarters. We also spoke with officials

at all seven of FCS’ regional offices. We interviewed state WIC officials in

California, Delaware, Pennsylvania, and Texas. In addition, we collected

pertinent information from the National Association of WIC Directors. We

reviewed federal laws and regulations applicable to the establishment and

operation of the WIC program. We also mailed questionnaires to the WIC

agency directors in the 50 states and the District of Columbia. We received

responses to our questionnaire from 48 directors (94 percent).

We conducted our work from December 1996 through August 1997 in

accordance with generally accepted government auditing standards. We

did not, however, independently verify the accuracy of the state WIC

agency directors’ responses to our questionnaire.

We are sending copies of this report to the appropriate congressional

committees, interested Members of Congress, the Secretary of Agriculture,

and other interested parties. We will also make copies available upon

request.

If you have any questions, please call me at (202) 512-5138. Major

contributors to this report are listed in appendix IV.

Sincerely yours,

Robert A. Robinson

Director, Food and

 Agriculture Issues

Page 19 GAO/RCED-97-225 Food Assistance
Contents

Letter 1

Appendix I 

Average State Pre- and

Postrebate Monthly

Food Costs Per

Person for Fiscal Year

1996

22

Appendix II 

States’ Use of Cost

Containment

Practices That Affect

Their Programs’ Costs

24

Appendix III 

State Income

Documentation

Requirements and

Percentage of

Applicants Who Were

Not Automatically

Income Eligible and

Provided

Documentation

During Fiscal Year

1996

27

Appendix IV 

Major Contributors to

This Report

29

Page 20 GAO/RCED-97-225 Food Assistance
Contents

Tables Table 1: State WIC Agencies Receiving Infant Cereal and/or Infant

Juice Rebates Through Individual or Multistate Contracts During

Fiscal Year 1996

5

Table II.1: Number of States Using Various Practices That Can

Affect Their Programs’ Costs as Reported in Our Survey of State

WIC Program Directors

24

 Table II.2: States Using Practices Described in Report to Contain

Their Programs’ Costs

25

Figures Figure 1: Types of Food Selection Limits States Use to Control

WIC Food Costs

8

Figure 2: Impact on Food Costs Resulting From States’ Use of

Food Selection Limits

9

Figure 3: Impact on the Program’s Costs Resulting From States’

Use of Vendor Limits and Selection Policies

12

Abbreviations

FCS Food and Consumer Service

WIC The Special Supplemental Nutrition Program for Women,

Infants and Children

Page 21 GAO/RCED-97-225 Food Assistance
Appendix I 

Average State Pre- and Postrebate Monthly

Food Costs Per Person for Fiscal Year 1996

State

Prerebate average food

cost per person

Postrebate average food

cost per person

Alabama $48.25 $30.75

Arizona 45.70 29.69

Alaska 47.78 38.69

Arkansas 44.11 29.03

California 45.45 31.95

Colorado 41.32 30.07

Connecticut 44.63 33.69

Delaware 43.60 30.17

District of Columbia 52.15 34.00

Florida 48.02 32.45

Georgia 41.46 27.28

Hawaii 62.72 50.57

Idaho 37.95 26.94

Illinois 52.50 36.21

Indiana 43.10 29.07

Iowa 41.94 29.66

Kansas 43.65 30.45

Kentucky 43.25 30.04

Louisiana 50.96 34.87

Maine 39.39 28.60

Maryland 48.13 32.24

Massachusetts 39.90 28.09

Michigan 44.91 31.47

Minnesota 41.88 29.09

Mississippi 28.38 28.38

Missouri 45.80 31.27

Montana 39.35 25.59

Nebraska 44.51 32.21

Nevada 41.84 26.80

New Hampshire 37.52 25.93

New Jersey 42.07 30.71

New Mexico 43.01 31.15

New York 50.18 34.35

North Carolina 43.04 27.74

North Dakota 43.97 33.65

Ohio 41.04 26.64

Oklahoma 44.08 30.34

(continued)

Page 22 GAO/RCED-97-225 Food Assistance
Appendix I 

Average State Pre- and Postrebate Monthly

Food Costs Per Person for Fiscal Year 1996

State

Prerebate average food

cost per person

Postrebate average food

cost per person

Oregon 38.79 28.91

Pennsylvania 43.23 31.00

Rhode Island 42.82 29.95

South Carolina 41.07 28.22

South Dakota 40.92 29.64

Tennessee 48.65 33.00

Texas 41.26 25.28

Utah 42.03 31.39

Vermont 32.44 32.44

Virginia 44.80 32.18

Washington 45.11 32.30

West Virginia 42.02 30.48

Wisconsin 41.96 30.47

Wyoming 37.88 27.54

Average $43.54 $30.84

Source: Special Nutrition Programs Integrated Information System, FCS.

Page 23 GAO/RCED-97-225 Food Assistance
Appendix II 

States’ Use of Cost Containment Practices

That Affect Their Programs’ Costs

Table II.1: Number of States Using

Various Practices That Can Affect

Their Programs’ Costs as Reported in

Our Survey of State WIC Program

Directors

Practice Number of states using practice

Limiting participants’ selections for one or more WIC food items by:

Designating specific brands or disallowing

specific brands

45

Allowing only certain container or package

size for one or more WIC food items

47

Limiting allowable types of food (e.g., block

rather than sliced cheese) for one or more

WIC food items

44

Setting a maximum purchase price for one

or more WIC food items

15

Requiring purchase of lowest cost brand for

one or more WIC food items

20

Direct distribution of food packages 5

Home delivery of food 5

Contracted rebates on WIC foods other than

infant formula

10

Noncontracted rebates on WIC foods 18

Direct purchase of special infant formula 21

Printing maximum price for each food item

on WIC voucher

3

Printing maximum price for the entire WIC

food package on voucher

23

Reimbursing vendors for actual costs, up to

a state-set maximum

29

Reimbursing vendors for reasonable costs,

as determined by state, not actual shelf

prices

9

Using competitive food cost as a vendor

selection criterion

34

Vendor food prices cannot exceed limits set

by the state

27

Containing number of WIC vendors based

on a ratio of number of vendors to

participants or other ratios

18

Competitive bidding for vendor slots 5

Vendor monitoring 46

Source: WIC Directors Questionnaire, GAO, Mar. 1997.

Page 24 GAO/RCED-97-225 Food Assistance
Appendix II 

States’ Use of Cost Containment Practices

That Affect Their Programs’ Costs

Table II.2: States Using Practices Described in Report to Contain Their Programs’ Costs

State

Require

purchase of

lowest cost

brand for one

or more WIC

food items

Ratios to

contain the

number of

vendors

Using

competitive

food cost as a

vendor

selection

criterion

Competitive

bidding for

vendor slots

Vendor food

prices cannot

exceed limits

set by the state

Direct

purchase of

special infant

formula

Alabama X X

Arizona X X

Alaska X

Arkansas X X X

California X X X

Colorado X

Connecticut X X

Delaware X X X

District of Columbia X X

Florida X X X X

Georgia X X X X

Hawaii X

Idaho

Illinois X X X X

Indiana X X

Iowa X

Kansas X X X

Kentucky X X

Louisiana X X X X X

Maine X X X

Maryland X X X

Massachusetts X X X X X

Michigan X X

Mississippi X

Missouri X X X

Montana

Nebraska X X

Nevada X X X X

New Hampshire X X

New Jersey X X X X

New Mexico X X X X

New York X X

North Carolina X X

(continued)

Page 25 GAO/RCED-97-225 Food Assistance
Appendix II 

States’ Use of Cost Containment Practices

That Affect Their Programs’ Costs

State

Require

purchase of

lowest cost

brand for one

or more WIC

food items

Ratios to

contain the

number of

vendors

Using

competitive

food cost as a

vendor

selection

criterion

Competitive

bidding for

vendor slots

Vendor food

prices cannot

exceed limits

set by the state

Direct

purchase of

special infant

formula

North Dakota

Ohio X X

Oklahoma X X X X

Pennsylvania X X X X

Rhode Island X X X X

South Carolina X X X

Tennessee X X

Texas X X X X

Utah X X X X X

Vermont X X

Virginia X X X X

Washington

West Virginia X X X X

Wisconsin X X

Wyoming X X X

Note: Minnesota, Oregon, and South Dakota are not listed because they did not respond to our

survey.

Source: WIC Directors Questionnaire, GAO, Mar. 1997.

Page 26 GAO/RCED-97-225 Food Assistance
Appendix III 

State Income Documentation Requirements

and Percentage of Applicants Who Were Not

Automatically Income Eligible and Provided

Documentation During Fiscal Year 1996

Reported income documentation requirement

State

Documentation of

income is

required—but

requirement can be

waived in certain

circumstances

Local agencies

establish their own

requirement

Documentation is not

required, selfdeclaration of income

is allowed in all cases

Percentage of

applicants who were

not automatically

income eligible and

provided

documentation

Alabama X 6-25

Arizona X 76-95

Alaska X 76-95

Arkansas X 0-5

California X 76-95

Colorado X 26-75

Connecticut X 96-100

Delaware X 76-95

District of Columbia X 76-95

Florida X 0-5

Georgia X 0-5

Hawaii X 96-100

Idaho X 26-75

Illinois X 96-100

Indiana X 96-100

Iowa X No basis to judge

Kansas X 96-100

Kentucky X 0-5

Louisiana X No basis to judge

Maine X 96-100

Maryland X 96-100

Massachusetts X 76-95

Michigan X No basis to judge

Minnesota No response

Mississippi X No basis to judge

Missouri X 76-95

Montana X 96-100

Nebraska X 0-5

Nevada X No basis to judge

New Hampshire X 76-95

New Jersey X 96-100

New Mexico X 96-100

New York X 6-25

(continued)

Page 27 GAO/RCED-97-225 Food Assistance
Appendix III 

State Income Documentation Requirements

and Percentage of Applicants Who Were Not

Automatically Income Eligible and Provided

Documentation During Fiscal Year 1996

Reported income documentation requirement

State

Documentation of

income is

required—but

requirement can be

waived in certain

circumstances

Local agencies

establish their own

requirement

Documentation is not

required, selfdeclaration of income

is allowed in all cases

Percentage of

applicants who were

not automatically

income eligible and

provided

documentation

North Carolina X 6-25

North Dakota X 96-100

Ohio X 96-100

Oklahoma X No basis to judge

Oregon No response

Pennsylvania X 96-100

Rhode Island X 96-100

South Carolina X 0-5

South Dakota No response

Tennessee X 0-5

Texas X 96-100

Utah X 96-100

Vermont X No basis to judge

Virginia X No basis to judge

Washington X 0-5

West Virginia X 96-100

Wisconsin X 96-100

Wyoming X 96-100

Source: WIC Directors Questionnaire, GAO, Mar. 1997.

Page 28 GAO/RCED-97-225 Food Assistance
Appendix IV 

Major Contributors to This Report

Thomas Slomba, Assistant Director

Peter Bramble

Leigh McCaskill White

Carolyn Boyce

Carol Herrnstadt Shulman

(150267) Page 29 GAO/RCED-97-225 Food Assistance
Ordering Information

The first copy of each GAO report and testimony is free.

Additional copies are $2 each. Orders should be sent to the

following address, accompanied by a check or money order

made out to the Superintendent of Documents, when

necessary. VISA and MasterCard credit cards are accepted, also.

Orders for 100 or more copies to be mailed to a single address

are discounted 25 percent.

Orders by mail:

U.S. General Accounting Office

P.O. Box 37050

Washington, DC 20013

or visit:

Room 1100

700 4th St. NW (corner of 4th and G Sts. NW)

U.S. General Accounting Office

Washington, DC

Orders may also be placed by calling (202) 512-6000 

or by using fax number (202) 512-6061, or TDD (202) 512-2537.

Each day, GAO issues a list of newly available reports and

testimony. To receive facsimile copies of the daily list or any

list from the past 30 days, please call (202) 512-6000 using a

touchtone phone. A recorded menu will provide information on

how to obtain these lists.

For information on how to access GAO reports on the INTERNET,

send an e-mail message with "info" in the body to:

info@www.gao.gov

or visit GAO’s World Wide Web Home Page at:

http://www.gao.gov

PRINTED ON RECYCLED PAPER
United States

General Accounting Office

Washington, D.C. 20548-0001

Official Business

Penalty for Private Use $300

Address Correction Requested

Bulk Rate

Postage & Fees Paid

GAO

Permit No. G100