The U.S. Treasury disburses the great majority of federal  government payments, including benefit payments. Most of the 34 programs that made electronic payments indicated that  they did so for a majority of their recipients. The  remaining 2 programs that reported making 100 percent of their payments  electronically were USDA’s Nutrition Assistance for Puerto Rico and Food  Stamp programs. 4). For those 13 programs, the percentage of payments made by  paper check ranged from about 1 to 100 percent. Agencies Consider Various Factors When Implementing or Encouraging the Use of Electronic Payments

Federal and state agencies, industry representatives, and others widely  agree on the advantages of electronic payments, including timely  payments for recipients and reduced costs for agencies. According to Treasury, ACH provides the  recipient with a secure, dependable, and efficient way to receive  payments. Various Options Exist for Increasing the Use of Electronic Payments, Including Further Treasury Actions

Federal and state agencies could employ various options to increase the  use of electronic payments to distribute federal benefit payments. These  options include requiring recipients to receive their benefits electronically  through mandates, making electronic payment the default option,  promoting the benefits of electronic payment through public outreach,  using pilot programs, and applying EPCs in a variety of ways. These alternatives also include piloting electronic distribution  programs and applying EPCs in new ways. For example,  Treasury has met with CFOs from the largest federal agencies to discuss  Treasury’s program initiatives, such as increasing electronic payments. However, Treasury has no plans to meet with CFO agencies and other  smaller agencies on a regular basis. Treasury Has Introduced Three Initiatives and Conducted Limited Outreach with Federal Agencies to Support the Use of Electronic Payments

Treasury, as the primary disbursing agency for the federal government, has  introduced two initiatives and is working on a third program to encourage  the use of electronic payments to distribute federal benefit payments for  programs for which they disburse payments. Conducting  such an outreach effort on a more regularly scheduled basis—including  meeting with the agencies we identified in this report that did not use  electronic payments or did not fully use electronic payments to disburse  benefits—would allow Treasury to include more detailed discussions  about electronic payments and develop ongoing relationships with  agencies’ CFOs and staff who could use Treasury’s expertise to move  toward the use of electronic payments governmentwide. Appendix I: Objectives, Scope, and Methodology

Our objectives were to (1) describe the extent to which federal programs  are using electronic payment methods to disburse benefits; (2) identify  factors that agencies consider when implementing or using electronic  payments; and (3) identify potential options for increasing the use of  electronic payments, particularly the Department of the Treasury’s  (Treasury) actions to increase electronic payments. To respond to these objectives, we reviewed agency documents, reports,  and studies on electronic payments. These queries  ultimately returned 455 federal benefit programs. In selecting programs for case illustrations,  we considered survey responses that were important for describing the  characteristics of each program, such as the type and frequency of the  benefit payment; the number of recipients in the program; the dollar value  of benefit payments made to recipients in the program; and the extent to  which the program used electronic payments to disburse benefits.
Why GAO Did This Study

Traditionally, federal agencies made benefit payments by paper check, but they faced increased pressure to reduce costs and increase the convenience, security, and timeliness of payment delivery. In response to a 1996 congressional mandate, the U.S. Department of Agriculture's Food Stamp Program implemented Electronic Benefit Transfer (EBT) to distribute food stamps. According to agency evaluations, EBT has reduced program costs and fraud and offered recipients a quick, secure way to receive payment. These results spurred interest in using electronic payment methods for other benefit programs. GAO was asked to report on (1) the extent to which federal benefit programs are using electronic payments, and factors agencies consider for their use and (2) options for increasing the use of electronic payments, particularly the Department of the Treasury's (Treasury) actions to that end. GAO surveyed federal benefit programs identified from two federal databases; reviewed documents, reports, and studies on electronic payments; and interviewed federal and state agency, industry, and consumer representatives.

What GAO Found

Most federal benefit programs GAO surveyed (34 of 42) reported using 1 or more electronic payment methods, and the majority of those programs also indicated that most of their recipients received their benefits electronically. Less than half (18 of 42) of the programs surveyed provided data that would allow GAO to determine the percentage of payments made electronically, in part because state agencies disburse payments for many programs. For the 5 largest, by dollar value, programs that provided data, about 54 to 100 percent of payments were made electronically (see figure below). Agencies consider various factors, including financial burden to recipients, program and recipient characteristics, program costs, and fraud and security risks, when making a decision to use an electronic payment method for the delivery of benefits. Various options exist for agencies to increase electronic distribution of federal benefits, including (1) mandating that recipients receive benefits electronically, (2) making electronic payment the default option upon enrollment, (3) promoting electronic payments through public outreach, (4) piloting electronic distribution programs, and (5) using electronic payment cards in new ways. Treasury has introduced key initiatives in its efforts to support and increase the use of electronic payments, particularly programs for which Treasury disburses payments, such as Social Security benefits. However, Treasury does not disburse payments for all federal benefit programs. In 2006 and 2007, Treasury met with federal Chief Financial Officers (CFO) to discuss Treasury's cash management initiatives, such as increasing electronic payments. Treasury also discussed electronic payments with program staff from larger agencies for which Treasury disburses payments. However, Treasury has no plans to conduct these meetings regularly with CFO agencies and other smaller agencies. Treasury's role as the federal government's leader for payments and its experience with electronic payment methods suggest that it could provide valuable information and assistance to smaller agencies with less experience or expertise. Regularly scheduled outreach efforts to other agencies could provide opportunities for Treasury to increase the use of electronic payments.