BILL ANALYSIS HUMAN SERVICES HB 2123 By: Maxey 3-24-97 Committee Report (Unamended) BACKGROUND In November, 1995, Texas launched a statewide electronic benefit transfer (EBT) program that allows recipients to access food stamp and welfare benefits with the Lone Star card. The card is a debit card similar to an automated teller machine card that can be used to make purchases at retail outlets. The Department of Human Services (DHS) administers the program. The U.S. Department of Agriculture (USDA) approves all retail applicants interested in participating in the program. The USDA is responsible for ensuring compliance with the program and managing retail relationships. The state's EBT contractor is responsible for providing stores equipment and training to use the cards. The USDA has limited resources on food stamp certification and retailer-related fraud enforcement. Most stores are approved without an on-site visit. An on-site inspection is often the only way to ensure that a store complies with requirements to participate in the EBT program and to identify retailers, using techniques not available prior to EBT, who traffic in fraudulent food stamp sales. EBT provides DHS' auditors and investigators with management and statistical reports that allow them to monitor suspicious activities on an ongoing basis. The system can assist DHS to detect duplicate accounts and redundant information. Moreover, the program can provide the Office of Inspector General and the USDA with information to monitor transaction data and and conduct desk audits, as-well-as, identify ineligible retailers. PURPOSE The purpose of this legislation is to direct the Texas Department of Human Services to improve its efforts to prevent fraud in its electronic benefit transfer program. RULEMAKING AUTHORITY In section 1 (a), the Department of Human Services is directed to develop and implement policies and procedures designed to improve the department's electronic benifits transfer cards discribed in the section. SECTION-BY-SECTION ANALYSIS Section 1. This section amends Chapter 22, Human Resources Code, by adding Sec. 22.0255 as follows: Sec. 22.0255. Returned-Mail Reduction. (a) directs the department (DHS) to implement policies and procedures to improve EBT cards used in federal and state entitlement programs. (b) DHS shall set an annual goal of reducing the amount of returned mail it receives under the programs described in subsection (a) to within one percentage rate of returned mail reported annually by credit and debit card industries. (c) DHS shall send a biennial report to the governor, legislature, and LBB detailing progress made in reaching goals in subsection (b). Section 2. This section amends Section 22.027, Human Resources Code, by adding subsections (e) and (f) to read as follows: (e) DHS and comptroller shall cross-train agency staff who work in fraud prevention and detection to enable staff to identify and report fraudulent activity in programs administered by the other agency. (f) local law enforcement agencies that seize an EBT card shall notify the agency of the seizure and return the cards to DHS. DHS will given written notice to the agencies to ensure law enforcement officials are aware of this requirement. Section 3. This section amends Chapter 33, Human Resources Code, by adding sections 33.0022 and 33.023. Section 33.0022. Fraud Prevention in Food Stamp Program. (a) the EBT system operator shall report to DHS and the USDA suspicious activity relating to a retailer's participation in EBT including noticeable absence of staple food products, low supply of staple food products in relation to other items in inventory, or improper food stamp redemption. (b) DHS shall determine whether the retailer is eligible to receive free point-of sale terminals. (c) DHS shall report on at least a quarterly basis any information reported under subsection (a) to the Public Assistance Fraud Oversight Task Force. (d) defines "retailer" as a business approved for participation in the food stamp program. Section 33.0023. Food Stamp Information Matching System. (a) DHS shall, through the use of a computerized matching system, compare, at least semiannually, food stamp transactions and redemptions of retailers and recipients with information obtained from the comptroller and other appropriate state agencies relating to those recipients and retailers. (b) DHS, the comptroller, and other agencies shall protect the confidentiality of information provided under this section. (c) defines "retailer" as a business approved for participation in the food stamp program. Section 4. This section amends subchapter B, Chapter 31, Human Resources Code, by adding section 31.043 to read as follows: Section 31.043. Inactive EBT Accounts. (a) this section applies only to an account which financial assistance has been transferred under the EBT system for access and use by a recipient of that assistance. (b) DHS shall close and account that has not been used by the account holder during the preceding 12 months. (c) the comptroller shall withdraw any unused benefits in the account and disburse the benefits as authorized by federal and state law. Section 5. Emergency clause.