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Report to Congressional Requesters: 

United States Government Accountability Office: 

GAO: 

July 2006: 

WIC Program: 

More Detailed Price and Quantity Data Could Enhance Agriculture's 
Assessment of WIC Program Expenditures: 

WIC-Only Vendors: 

GAO-06-664: 

GAO Highlights: 

Highlights of GAO-06-664, a report to congressional requesters 

Why GAO Did This Study: 

The Special Supplemental Nutrition Program for Women, Infants and 
children (WIC), authorizes retail grocers, called regular WIC vendors, 
to provide the food benefit. Recently, some states have seen an 
increase in vendors called WIC-only vendors, who stock only WIC food 
and accept only WIC vouchers. Both vendor types accept WIC vouchers in 
exchange for a cash payment, or redemption, from WIC state agencies 
with U.S. Department of Agriculture (USDA) grant funds. To determine 
what effect WIC-only vendors’ growth would have on program 
expenditures, in the absence of recent cost containment legislation, 
you asked GAO (1) what is known about WIC-only vendors’ growth and 
their share of the WIC market in recent years, (2) to what extent do 
WIC-only and regular WIC vendors differ, and (3) what would WIC-only 
vendors’ contribution to WIC program expenditures have been, if their 
market share increased. GAO analyzed national WIC vendor data, 
interviewed WIC state officials about vendors’ business practices, and 
analyzed redemption data from California, Texas and Florida. 

What GAO Found: 

The number of WIC-only vendors has tripled since 1999, with growth 
concentrated in a few states. However, WIC-only vendors’ share of the 
national WIC market was relatively small compared to that of regular 
WIC vendors in 2004. Nationally, WIC-only vendors increased in number 
from 394 in 1999 to 1,180 in 2004, but 84 percent of these vendors are 
in California, Texas, and Florida. Despite their growth, WIC-only 
vendors accounted for 3 percent of all WIC vendors nationwide, and 
their market share, that is, their percentage of all WIC redemptions 
nationally, was on average 6 percent in 2004. Because of limitations in 
the data, we were unable to calculate annual growth rates or analyze 
changes in market share over time. 

WIC-only and regular WIC vendors generally employed different business 
and marketing practices, largely in response to the two different 
customer groups they served, according to WIC state agency officials. 
Because WIC participants are not required to consider retail prices, 
WIC-only vendors competed for participants’ business by emphasizing 
customer service, which participants seemed to value. On the other 
hand, regular WIC vendors served non-WIC consumers as well as WIC 
participants. Because these non-WIC consumers are price sensitive, 
regular WIC vendors competed for their business based on price and 
competitors’ behavior. An important difference in these approaches was 
that because WIC participants were not price sensitive, they might 
choose the service offered by WIC-only vendors, regardless of price. 
Finally, WIC-only and regular WIC vendors used similar food purchasing 
practices, because the cost of food purchased for resale is related 
more to the volume purchased than to the type of vendor purchasing the 
food. Both WIC-only and regular WIC vendors were able to lower the 
average cost of food purchased for resale when they bought in volume, 
according to WIC state agency officials. 

If WIC-only vendors’ market share in 2004 had doubled in California, 
Texas, and Florida, either about 3 percent—about 136,000—fewer 
participants could have been served in each state, or program food 
expenditures would have increased about 3 percent—about $50 
million—according to our scenario estimates. The average value of all 
vouchers redeemed by WIC-only vendors in 2004 was higher than the 
average value of all vouchers redeemed at regular WIC vendors. Thus, if 
the number of vouchers redeemed by WIC-only vendors had increased and 
state food expenditures remained at 2004 levels, fewer vouchers could 
have been issued, and fewer participants served. Conversely, if the 
number of vouchers issued remained at 2004 levels, the higher average 
value of vouchers redeemed at WIC-only vendors would have resulted in 
increased program expenditures. However, the price and quantity of the 
individual food items that make up the vouchers were not available to 
us; therefore we could not determine if the higher average value of 
vouchers meant that prices for individual food items were higher at WIC-
only vendors. Making price comparisons would require food item price 
and quantity data for both WIC-only and regular WIC vendors, at a 
minimum. 

What GAO Recommends: 

GAO recommends that the USDA Secretary require, if collecting detailed 
information on WIC food purchases is cost-effective through electronic 
benefits transfer, that WIC state agencies collect data on the price 
and quantity of each food item purchased. USDA generally agreed with 
our findings. 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-06-664]. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Cynthia Fagnoni at (202) 
512-7215 or fagnonic@gao.gov. 

[End of Section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

WIC-Only Vendors Increased in Number during Fiscal Years 1999-2004, 
although Their Market Share Remained Relatively Small in Fiscal Year 
2004: 

WIC-Only Vendors and Regular WIC Vendors' Business and Marketing 
Practices Differ in Their Approach to Customer Service and Price: 

We Estimated That Program Participation Would Have Decreased by about 
136,000 WIC Participants or Expenditures Would Have Increased by About 
$50 Million if WIC-Only Vendors' Market Share Had Doubled in 2004: 

Conclusions: 

Recommendation for Executive Action: 

Agency Comments: 

Appendix I: Scope and Methodology: 

Appendix II: Number of WIC-Only Vendors, Fiscal Years 1999-2004: 

Appendix III: Average Monthly Redemptions per WIC-Only Vendor by State 
in Fiscal Year 2004: 

Appendix IV: WIC Vouchers Most Frequently Used at WIC-Only and Regular 
WIC Vendors in California, Texas and Florida: 

Appendix V: GAO Contacts and Staff Acknowledgments: 

Tables: 

Table 1: Number of WIC-Only Vendors by State, Fiscal Years 1999 and 
2004: 

Table 2: Estimated Change in the Number of Participants Served if WIC- 
Only Vendors' Market Share Increased while Program Expenditures Were 
Held Constant at Fiscal Year 2004 Levels: 

Table 3: Difference between the Average Value of WIC-Only and Regular 
WIC Vendor Food Vouchers in 2004 and the Market Share of WIC-Only 
Vendors in California, Texas, and Florida: 

Table 4: Change in Program Expenditures if WIC-Only Vendors' Market 
Share Increases while Maintaining the Total Number of Food Vouchers at 
Fiscal Year 2004 Levels: 

Table 5: Time Periods Other than Monthly That WIC State Agencies Used 
in Reporting Fiscal Year 2004 Redemption Data to FNS: 

Table 6: Example of Application of Model to Actual Data for California: 

Table 7: Example of Calculation of WIC-Only and Regular WIC Vendors' 
Number and Average Value of Food Vouchers for California: 

Table 8: Example Calculation of Decline in Number of Participants for 
California: 

Table 9: Results of the Calculation of WIC-Only and Regular WIC 
Vendors' Number and Average Value of Food Vouchers for California, 
Texas, and Florida: 

Table 10: Results of the Calculation of Decline in Number of 
Participants for California, Texas, and Florida: 

Table 11: Results of Allowing Program Food Expenditures to Increase for 
California, Texas, and Florida: 

Figures: 

Figure 1: Sample Voucher from California: 

Figure 2: National Total of WIC-Only Vendors: 

Figure 3: Share of Total WIC-Only Vendors Nationwide by State and the 
Top Three Metropolitan Areas in 2004: 

Figure 4: Percentage of Total WIC Vendors Represented by Each Vendor 
Type, Nationwide and in Select States: 

Figure 5: Average Monthly WIC Redemptions per Vendor in 2004, by Vendor 
Type: 

Figure 6: Share of Total Average Monthly WIC-Only Redemptions by State 
in 2004: 

Figure 7: Available WIC Food Items at WIC-Only Vendor in Texas: 

Figure 8: Interior of WIC-Only Vendor in California: 

Figure 9: Proximity of WIC-Only Vendor to WIC Clinic in Texas: 

Figure 10: Sample WIC-Only Vendor Promotional Flyer: 

Figure 11: Marquee of WIC-Only Vendor in Florida: 

Figure 12: Example of the Average Value of Food Vouchers Redeemed by a 
WIC-Only Vendor: 

Figure 13: Example of Hypothetical Vouchers Specifying Price and 
Quantity: 

Figure 14: Average Monthly Redemptions per WIC-Only Vendor by State in 
Fiscal Year 2004: 

Figure 15: Most Frequently Used Vouchers for WIC-Only, Regular and 
State Total for California, 2004: 

Figure 16: Most Frequently Used Vouchers for WIC-Only, Regular and 
State Total for Texas, 2004: 

Figure 17: Most Frequently Used Vouchers for WIC-Only, Regular and 
State Total for Florida, 2004: 

Abbreviations: 

EBT: electronic benefits transfer: 

FNS: Food and Nutrition Service: 

GIS: geographic information system: 

IOM: Institute of Medicine: 

ITO: Indian Tribal Organization: 

MSA: metropolitan statistical area: 

TIP: The Integrity Profile: 

USDA: U.S. Department of Agriculture: 

WIC: Special Supplemental Nutrition Program for Women, 
Infants, and Children: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

July 28, 2006: 

The Honorable Tom Harkin: 
Ranking Democratic Member: 
Committee on Agriculture, Nutrition and Forestry: 
United States Senate: 

The Honorable Herb Kohl: 
Ranking Democratic Member: 
Subcommittee on Agriculture, Rural Development and Related Agencies: 
Committee on Appropriations: 
United States Senate: 

Each month, the Special Supplemental Nutrition Program for Women, 
Infants, and Children, better known as WIC, provides nutritious food, 
nutrition education, and referrals to health care to more than 8 
million low-income women, infants, of Agriculture's (USDA) Food and 
Nutrition Service (FNS) through WIC state and local agencies that 
implement the program and manage the food delivery system. WIC is a 
discretionary program, as Congress does not set aside funds to allow 
every eligible individual to participate, and was funded at a level of 
more than $5 billion in fiscal year 2005. 

In most states, WIC participants receive vouchers to exchange for food 
from authorized retail grocery stores that are known as WIC vendors in 
the program.[Footnote 1] These vouchers provide participants with a 
prescribed type and quantity of supplemental WIC foods tailored to 
their health needs, such as infant formula, milk, and peanut butter. 
Participants generally are not required by the federal WIC program to 
obtain all items on a voucher. However, they may not use the voucher to 
purchase items that are not listed on it. Because participants receive 
food in exchange for their vouchers, without exchanging any cash, their 
purchasing decisions are not price sensitive, that is, they do not need 
to consider the prices WIC vendors charge for the items.[Footnote 2] 
The vendors, which include independent stores as well as national and 
local chains, accept the vouchers and exchange them for a cash payment, 
or redemption, from the WIC state agency. Until recently, retail 
grocery stores that commonly carry a variety of foods including 
supplemental WIC foods--or regular WIC vendors, as they are referred to 
in this report--represented 98 percent or more of the stores each WIC 
state agency authorized as WIC vendors. However, beginning in about 
fiscal year 2000, some WIC state agencies noticed an increase in 
another type of authorized vendor in the WIC vendor market, one that 
sells only WIC-authorized food items to program participants and 
accepts only WIC vouchers. Prior to changes introduced by the Child 
Nutrition and WIC Reauthorization Act of 2004, these vendors were 
called WIC-only vendors.[Footnote 3] With data reported by the WIC 
state agencies, FNS has tracked WIC-only vendors' redemptions since 
1998, but little else is known at the national level about the 
percentage of total WIC redemptions that WIC-only vendors are 
receiving, that is, their market share, or about their business 
practices. 

Questions have been raised about whether WIC-only vendors charge higher 
prices than other vendors and therefore will place a higher demand on 
overall program expenditures over time. If so, the WIC program may need 
to restrict program participation or seek additional funding. Concerned 
about the potential consequences of increasing claims on program funds, 
in fiscal year 2004, Congress established cost containment provisions 
to ensure that the WIC program is not charged more for food items 
obtained at WIC-only vendors than it would be for the same items at 
regular WIC vendors.[Footnote 4] Also, in fiscal year 2005, Congress 
prohibited the payment of administrative funds to any state agency that 
authorized any new WIC-only vendors, unless deemed necessary to ensure 
participant access, for 2 years.[Footnote 5] To determine what the 
effect of WIC-only vendors' growth on WIC program expenditures would 
have been without the recent cost containment changes and the 
prohibition on authorizing new vendors, and to better understand how 
they do business, you asked us (1) what is known about WIC-only 
vendors' growth and their share of the WIC market in recent years, (2) 
to what extent do the business and marketing practices of WIC-only and 
regular WIC vendors differ, and (3) what would WIC-only vendors' 
contribution to WIC program expenditures have been if their market 
share increased. 

To find out what is known about WIC-only vendors' growth and their 
share of the WIC market in recent years, we analyzed data from FNS's 
administrative data files on the national WIC vendor population--The 
Integrity Profile (TIP)--for fiscal years 1999-2004 to determine the 
number and distribution of WIC-only vendors. We focused exclusively on 
data from the 50 states and the District of Columbia, and excluded from 
our analysis any vendor type other than WIC-only vendors and regular 
WIC vendors.[Footnote 6] To determine WIC-only vendors' share of the 
WIC market, we analyzed redemption data for an average month in fiscal 
year 2004 from FNS's regional office files.[Footnote 7] However, 
because TIP does not record when vendors enter or exit the WIC program, 
but instead records any vendor that participated in WIC during the 
fiscal year, it may overstate the number of vendors in operation at any 
point in time. As a result, we calculated the number of WIC-only 
vendors in the program each year, but we were unable to determine 
percentage-based growth from year to year. In addition, because 
national redemption data for fiscal years 1999-2004 did not meet GAO's 
data reliability standards, we could not use these data to analyze 
changes in WIC-only vendors' share of the WIC market over time. 
However, the fiscal year 1999-2004 TIP data on the number of vendors 
and FNS regional office redemption data were sufficiently reliable for 
our purposes.[Footnote 8] 

To determine the difference in WIC-only vendors and regular WIC 
vendors' business and marketing practices, we interviewed WIC state 
agency officials in seven of the eight states that had authorized more 
than 10 WIC-only vendors in fiscal year 2004: Alabama, Arkansas, 
California, Florida, Georgia, North Carolina, and Texas.[Footnote 9] To 
complement these telephone interviews, we visited 4 WIC-only vendors 
and 4 regular WIC vendors in California, Texas, and Florida, for a 
total of 24 site visits. Our vendor selection criteria included urban 
and rural locations, years in operation, and redemption practices. WIC 
state officials' accounts and the site visits to vendors provided 
insight into the distinctions in WIC-only and regular WIC vendors' 
business behavior, but were not quantifiable or applicable beyond the 
states and vendors they represented. 

To calculate the contribution of WIC-only vendors to WIC program 
expenditures, we obtained administrative data from the California, 
Texas, and Florida WIC state agencies on the redemption value for every 
voucher redeemed in those states in fiscal year 2004. We selected these 
three states because they represent more than 80 percent of the 
national WIC-only vendor market. Because we needed data on both the 
price and the quantity of WIC food items purchased from WIC-only and 
regular WIC vendors to isolate the effect of WIC-only vendors' prices 
on program expenditures, and both of those data elements were not 
available from any existing data source, we developed a scenario 
analysis that used redemption data.[Footnote 10] We used the redemption 
data to determine the actual number of vouchers redeemed and to 
calculate the average value of all vouchers redeemed in each of the 
states by WIC-only and by regular WIC vendors. We applied the number of 
vouchers redeemed and the average value of all vouchers redeemed to the 
scenario analysis to estimate the effect on program participation and 
expenditures of successive increases in WIC-only vendors' market share. 
However, because redemption data do not break out the price and 
quantity of the individual food items on each voucher, we could not 
determine whether prices of individual food items were higher at WIC- 
only vendors than at regular WIC vendors. Thus, even though we were 
able to calculate the average value of all vouchers redeemed by both 
types of vendors, we were not able to explain why the values may have 
been different. 

Appendix I provides a detailed description of our methodology and its 
limitations. We conducted our work from April 2005 through June 2006 in 
accordance with generally accepted government auditing standards. 

Results in Brief: 

The number of WIC-only vendors has grown substantially in recent years. 
However, their location is concentrated in a few states, and their 
share of the national WIC market remained small in 2004. The number of 
WIC-only vendors in operation at any point during the fiscal year 
increased from 394 in 1999 to 1,180 in 2004. WIC-only vendors are 
concentrated geographically: in 2004, 84 percent of all WIC-only 
vendors operated in California, Texas, or Florida, home to nearly a 
third of all WIC participants. Moreover, nearly half were located 
within three metropolitan areas: Los Angeles, California; Riverside, 
California; and Miami, Florida. Notwithstanding the increase in WIC- 
only vendors, in 2004 they represented only 3 percent of the 
approximately 45,000 WIC vendors nationwide. Although we could not 
determine the growth of WIC-only vendors' market share over time, WIC- 
only vendors generated 6 percent of business in the WIC market on an 
average monthly basis in 2004, compared to the 94 percent generated by 
regular WIC vendors. However, on an individual store basis, WIC-only 
vendors redeemed about twice the monthly average redemption value of 
regular WIC vendors. 

WIC-only and regular WIC vendors used different business models, 
reflecting, for the most part, the different customer groups they 
served, according to WIC state agency officials. Because WIC 
participants are not price sensitive, WIC-only vendors competed for 
their business by structuring their stores to emphasize customer 
service, which participants seemed to value. For example, to simplify 
the WIC food purchase, officials pointed out that WIC-only vendors 
often gathered the food items listed on the voucher for WIC 
participants from food maintained behind a counter. This practice 
eliminated the stigma participants may feel because of backups in 
regular WIC vendors' checkout lines when they select an unauthorized 
food item. WIC-only vendors, we were told, also tended to locate near 
WIC clinics, places that were very accessible to WIC participants. 
However, regular WIC vendors, who served non-WIC consumers as well as 
WIC participants, focused their businesses on their non-WIC customers, 
state officials told us. Because these non-WIC consumers are price 
sensitive, regular WIC vendors competed for their business based on 
price and competitors' behavior. For example, regular WIC vendors made 
location decisions based on their broader customer base and often used 
price-based incentives, such as "buy-one-get-one-free" offers, 
specials, or discount cards to appeal to their non-WIC, price sensitive 
customers. An important difference in these approaches was that because 
WIC participants were not price sensitive, they might take advantage of 
the service offered by WIC-only vendors, even if their prices were 
somewhat higher. In contrast to the vendors' different customer service 
and marketing practices, state officials told us that both WIC-only and 
regular WIC vendors are able to lower the average cost of food they 
purchase for resale when they buy in volume, according to a majority of 
WIC state agency officials interviewed, by expanding from one outlet to 
a chain or forming consortia. However, we did not analyze the effect of 
decreasing food-purchasing costs on WIC-only and regular WIC vendors' 
food prices. 

If WIC-only vendors' market share in 2004 had doubled in California, 
Texas, and Florida, either program participation would have decreased 
by about 3 percent--about 136,000 participants--or program food 
expenditures would have increased about 3 percent--about $50 million-- 
according to our scenario estimates. Our estimates showed that the 
average value of all vouchers redeemed by WIC-only vendors in 2004 was 
higher than the average value of all food vouchers redeemed at regular 
WIC vendors: $0.87 higher in California, $9.83 higher in Texas, and 
$4.42 higher in Florida. As a result, if the number of food vouchers 
redeemed by WIC-only stores had increased and total expenditures 
remained fixed at 2004 levels, fewer vouchers could have been issued 
and fewer participants could have been served. Conversely, if the total 
number of vouchers issued to participants remained at the 2004 level, 
the higher average value of vouchers redeemed at WIC-only vendors' 
would have resulted in increased program expenditures. However, because 
we used the average value of all food vouchers in our analysis without 
knowing the price or quantity of the individual food items that made up 
the vouchers, we could not determine if the higher average value meant 
that prices for individual food items were higher at WIC-only vendors. 
WIC-only vendors' higher average value of redeemed vouchers could mean 
that they charge higher prices for WIC food but could also mean that 
WIC-only vendors' customers are more likely to select all of the food 
items on their vouchers. Making price comparisons would require both 
food item price and quantity data for WIC-only and regular WIC vendors, 
at a minimum. 

To assist WIC state agencies in more effectively monitoring WIC 
vendors' redemption practices, in implementing the new cost containment 
requirements, and in analyzing program expenditures, we are 
recommending that the Secretary of Agriculture require, if collection 
of more detailed information on WIC food purchases is cost-effective 
through electronic benefits transfer (EBT) implementation, that WIC 
state agencies collect data on both the price and the quantity of each 
WIC food item purchased, especially in each state that authorizes WIC- 
only vendors. In oral comments on a draft of this report, FNS officials 
generally agreed that our methodology was reasonable, given data 
limitations, and did not dispute our findings. However, officials did 
not believe that the small-scale study we recommended in the draft they 
read would be cost-effective or necessary, because of the difficulty in 
collecting price and quantity data under the current system and because 
state agencies already are required to collect shelf price data and 
redemption data from authorized vendors. We acknowledged that USDA's 
research funds are limited and that its research agenda is full. 
However, we maintained that because the cost containment provisions are 
complex, it is important for FNS to monitor state agencies' 
implementation of the provisions closely, to help ensure that program 
expenditures are in fact contained. In response, we removed our 
recommendation for further study and further clarified our 
recommendation for collection of data on both the price and the 
quantity of WIC food items purchased under a cost-effective EBT system. 

Background: 

WIC aims to protect the health of low-income women, infants, and young 
children who are at nutritional risk by providing nutritious foods to 
supplement diets, information on healthy eating, and referrals to 
health care at no charge to participants. Permanently established in 
1974, WIC serves more than 8 million participants each month, including 
women who are pregnant, postpartum, or breastfeeding; 
infants under the age of 1; and children under the age of 5, the 
largest category of participants. To participate in the program, 
eligible applicants must meet income guidelines, be deemed 
nutritionally at risk by a health professional (e.g., having a poor 
diet, low weight, or anemia), and must apply in the state in which they 
reside. 

In fiscal year 2005, the federal government spent over $5 billion on 
WIC. WIC is not an entitlement program that allows every eligible 
individual to participate; rather, it is a federal discretionary grant 
program for which Congress authorizes a specific amount of funds each 
year. At the federal level, WIC is administered by FNS, which provides 
grants to WIC state agencies for food and for nutrition services and 
administration. The nutrition services and administration grant covers 
the cost of certifying participants and determining nutrition risks; 
providing outreach and nutrition education services, including 
breastfeeding promotion; and printing vouchers and administering the 
food delivery system. FNS also determines WIC program policy and 
guidance, provides technical assistance to the WIC state agencies and 
sponsors research on program issues. In turn, WIC state agencies 
operate the program through thousands of local agencies and clinic 
sites. The 90 WIC state agencies include 50 state health departments, 
as well as those of the District of Columbia, 34 Indian Tribal 
Organizations, and five U.S. territories (Northern Mariana, American 
Samoa, Guam, Puerto Rico, and the Virgin Islands). 

How the Retail Food Delivery System Works: 

In most WIC state agencies, WIC participants receive vouchers to 
purchase supplemental food in appropriate amounts tailored to their 
health needs from authorized retail stores, known as vendors in the WIC 
program.[Footnote 11] Vouchers prescribe food that is high in nutrients 
found to be lacking in a participant's diet, such as milk, cereal, and 
eggs, and are adapted from a set of federally established food packages 
that differ according to participant type (e.g., infants or pregnant 
woman). Each WIC state agency designs its own vouchers and usually 
issues vouchers that contain a combination of WIC food items. For 
example, one frequently used voucher contains eggs, juice, cereal, 
cheese, milk, and beans. However, some vouchers contain only one food 
item, such as formula or cereal. (See app. IV.) Most participants 
receive multiple vouchers each month for all of the food they are 
prescribed. However they may not use the voucher to purchase items that 
are not listed on it. Figure 1 shows a sample voucher for food items 
from California's WIC state agency. 

Figure 1: Sample Voucher from California: 

[See PDF for image] 

Source: California Department of Health. 

[End of figure] 

Unlike some other food assistance program models, WIC vouchers do not 
provide an incentive for program participants to consider vendor prices 
for supplemental foods. For example, the Food Stamp and WIC Farmers' 
Market Nutrition Programs generally provide electronic benefits or 
coupons that are used like cash at grocery stores or through farmers, 
and which encourage participants to make cost-conscious decisions 
regarding food choices. In contrast, because WIC participants purchase 
supplemental foods with vouchers that prescribe the type and quantity 
of foods a participant may receive, regardless of the prices charged by 
vendors to the WIC program, WIC participants are not price sensitive, 
that is, participants do not have an incentive to purchase their food 
benefit from lower-priced vendors.[Footnote 12] 

The approximately 45,000 vendors in the WIC program accept vouchers and 
exchange them for cash payment--or redemption--from their WIC state 
agency. Vendors are subject to price limitations, often in the form of 
an overall maximum, not-to-exceed amount for each voucher, determined 
by WIC state agencies. As shown in figure 1, a state may clearly print 
the not-to-exceed amount for the total amount charged on the voucher. 

Like other retail grocery stores, WIC vendors sell to participants 
small quantities of food items that they typically purchase from 
manufacturers, wholesalers, or, on occasion, other retailers. The 
methods that grocery stores use to purchase food items are important 
business practices, because the cost of buying goods for resale is the 
largest single expense for an average grocery store, according to Food 
Marketing Institute research.[Footnote 13] 

How WIC Vendors Are Managed: 

Through regulation and program guidance, FNS provides broad oversight 
to WIC state agencies on cost containment and vendor management. FNS 
provides the food grant that state agencies use to reimburse vendors 
for redeemed vouchers, gathers program integrity data, supports 
upgrades to states' management information systems, and sponsors 
research on vendor management issues. Because federal legislation 
grants primary responsibility for WIC vendor management to the WIC 
state agencies, WIC state agencies have considerable flexibility in 
designing and implementing their vendor management systems. FNS 
regulations require that WIC state agencies' vendor management systems 
include six areas of activity: 

² authorization and reauthorization--The authorization process begins 
with a vendor's application and an on-site visit by WIC state agency 
staff to verify the information provided in the application. Authorized 
vendors must enter into a written agreement, which may be reauthorized, 
usually every 1-3 years. 

² training--WIC state agencies train vendor staff on the purpose of the 
WIC program and program procedures such as accepting vouchers from 
participants at the point of sale. 

² representative monitoring--State agencies are required to conduct 
routine monitoring visits of at least 5 percent of their vendors 
annually to observe vendor and participant transactions and collect 
shelf prices to ensure they are within the required state limits. 

² voucher review and redemption--State agencies are required to develop 
and implement an edit system of the vouchers turned in for redemption 
to detect noncompliance with program regulations. The redeemed-voucher 
review includes checking that charges for food items do not go over the 
not-to-exceed payment amount for vouchers, set by the state, and other 
edits such as transactions or redemptions outside of valid dates. 

² high-risk vendor monitoring--WIC state agencies identify high-risk 
vendors through on-site monitoring visits or through the redemption 
system and must investigate a minimum of 5 percent of vendors meeting 
high-risk criteria, such as high rates of redemption at or near the not-
to-exceed payment amount for vouchers. 

² sanctions--State agencies may impose sanctions ranging from fines to 
disqualification on vendors that violate program requirements or may 
impose a civil money penalty when a disqualification would result in 
inadequate participant access. A temporarily disqualified vendor may 
reapply after the disqualification period has expired. 

How Vendor Management in the WIC Program Has Evolved: 

In the past few years, the WIC program has initiated significant 
changes in vendor management practices to contain costs and maximize 
the number of eligible women, infants, and children that can receive 
benefits. Prior to fiscal year 2004, FNS characterized authorized WIC 
vendors that participate in the program as: 

² retail grocery stores--vendors that commonly stock a variety of 
foods, including supplemental WIC foods, and serve a wide variety of 
customers, referred to as regular WIC vendors in this report; 

² WIC-only vendors--vendors that stock only WIC-approved food and 
accept only WIC vouchers; 

² military commissaries--vendors located on military installations and 
designed for military families; 
and: 

² pharmacies--vendors that only provide infant formula, exempt infant 
formula, or WIC-eligible medical foods.[Footnote 14] 

The Child Nutrition and WIC Reauthorization Act of 2004[Footnote 15] 
established new cost containment provisions designed, in part, to 
ensure that the WIC program is not charged more for the same 
supplemental food items provided in exchange for vouchers that 
participants might use at WIC-only vendors instead of at regular WIC 
vendors. These cost containment provisions require state agencies to 
implement a vendor peer group system that groups stores according to 
similar characteristics, such as vendor size and geographic location, 
in a manner that ensures that the WIC program pays all authorized 
vendors competitive prices for supplemental foods. FNS expects to 
complete certification of states' plans for cost containment by 
September 2006. 

One cost containment provision created a new category of vendors 
referred to as above 50 percent vendors, which include any vendor whose 
revenue from the sale of WIC supplemental food is more than half of its 
annual revenue from food sales.[Footnote 16] In addition, the Act 
prohibited above 50 percent vendors from providing any incentive items, 
such as free diapers, detergent, baby strollers, or bicycles, to 
participants unless the incentives are of nominal value or were 
obtained at no cost. On November 29, 2005, USDA issued an interim rule, 
effective on December 29, 2005, that incorporated the cost containment 
provisions of the Act into program regulations that are applicable to 
WIC state agencies.[Footnote 17] To help ensure that vendors' prices 
are competitive, these regulations require states to collect and review 
vendors' shelf prices at least every 6 months after authorization. The 
regulations also require state agencies to compare the average cost of 
each type of food instrument redeemed by WIC-only vendors against the 
average cost of the same type of food instrument redeemed by regular 
vendors. 

In December of 2005, attorneys representing an association of WIC-only 
vendors and three food companies, the plaintiffs, filed an action in 
federal district court for the District of Columbia to stop 
implementation of FNS's regulations. Arguing that the regulations were 
contrary to the Act and to congressional intent, the plaintiffs 
asserted that the cost containment provisions concerning above-50- 
percent vendors would reduce their WIC reimbursements to a level that 
would be unsustainable. In describing services that WIC-only vendors 
offered WIC participants, the plaintiffs characterized WIC-only vendors 
as small businesses and acknowledged that their cost of doing business 
was higher than that of large stores, referred to as box stores, that 
purchased food in high volume at discount prices. The plaintiffs 
estimated that WIC-only vendors' prices were about 8 to 15 percent 
higher than prices charged at box stores, on average. On February 23, 
2006, the court dismissed the case, finding that the cost containment 
provisions of the interim rule were consistent with the plain language 
and purpose of the Act.[Footnote 18] 

Recent initiatives suggest that more changes to the WIC program are 
forthcoming. In 2003, FNS developed a plan to transform WIC from its 
paper-based food benefit delivery system to an electronic benefits 
transfer system. Through pilot projects in many states that are still 
under way, FNS is working toward a national model that is both 
technically and financially viable for implementation of EBT by 2008. 
In addition, in 2004 the Institute of Medicine (IOM) began examining 
WIC food packages to determine if modification could help participants 
eat a healthier diet. In its 2005 report, IOM recommended revisions to 
the food packages that match current dietary guidance for infants and 
young children, encourage consumption of fruits and vegetables, 
emphasize whole grains, lower saturated fat, and appeal to diverse 
populations.[Footnote 19] 

WIC-Only Vendors Increased in Number during Fiscal Years 1999-2004, 
although Their Market Share Remained Relatively Small in Fiscal Year 
2004: 

Since 1999, WIC-only vendors have increased in number, with 
concentrated growth in a few states, but their share of the national 
WIC market stayed small in comparison to the share of regular WIC 
vendors during an average month in 2004. The number of WIC-only vendors 
nationwide tripled from 1999 to 2004, and the number of states with WIC-
only vendors also grew over this period. Notwithstanding these 
increases, in 2004 the majority of WIC-only vendors were located in 
California, Texas, and Florida, and nearly half of all WIC-only vendors 
operated in a few metropolitan areas within these states. Nationwide, 
WIC-only vendors still accounted for about 3 percent of all WIC vendors 
in 2004 and generated about 6 percent of business in the WIC market 
during an average month that year, compared to regular WIC vendors' 
predominant market share. On a store-by-store basis, however, WIC-only 
vendors' redemption value was greater, on average, than regular WIC 
vendors' during this period. 

WIC-Only Vendors Tripled from Fiscal Year 1999 to Fiscal Year 2004, and 
They Are Highly Concentrated Geographically: 

The 1,180 WIC-only vendors in operation at any point during 2004 were 
three times the number in business at any point in 1999 (see fig. 
2).[Footnote 20] 

Figure 2: National Total of WIC-Only Vendors: 

[See PDF for image] 

Source: GAO analysis of FNS 199-2004 TIP files. 

Note: Vendor counts include any vendor in operation at some point 
during the fiscal year. 

[End of figure] 

Just as the total number of WIC-only vendors has increased, the number 
of states with WIC-only vendors has grown in recent years. Of the 50 
states and the District of Columbia, 15 had WIC-only vendors in 2004, 
an increase from 12 in 1999 (see table 1).[Footnote 21] 

Table 1: Number of WIC-Only Vendors by State, Fiscal Years 1999 and 
2004: 

State: California; 
1999: 235; 
2004: 715. 

State: Texas; 
1999: 69; 
2004: 162. 

State: Florida; 
1999: 57; 
2004: 109. 

State: North Carolina; 
1999: 2; 
2004: 72. 

State: Arkansas; 
1999: 4; 
2004: 42. 

State: Georgia; 
1999: 0; 
2004: 22. 

State: Alabama; 
1999: 0; 
2004: 19. 

State: Louisiana; 
1999: 4; 
2004: 11. 

State: Oklahoma; 
1999: 5; 
2004: 8. 

State: New Mexico; 
1999: 4; 
2004: 7. 

State: Virginia; 
1999: 5; 
2004: 6. 

State: Kansas; 
1999: 0; 
2004: 3. 

State: Utah; 
1999: 2; 
2004: 2. 

State: District of Columbia; 
1999: 0; 
2004: 1. 

State: Tennessee; 
1999: 2; 
2004: 1. 

State: Oregon; 
1999: 5; 
2004: 0. 

State: Total; 
1999: 394; 
2004: 1,180. 

Source: GAO analysis of FNS 1999 and 2004 TIP data. 

Note: Vendor counts include any vendor in operation at some point 
during the fiscal year. Any state not listed had no WIC-only vendors 
authorized during either fiscal year. 

[End of table] 

Even with the increase in recent years in both total WIC-only vendors 
and the number of states with such vendors, in 2004 most WIC-only 
vendors were located in three states, and nearly half operated in three 
metropolitan areas. Figure 3 shows that, at the national level, 84 
percent of all WIC-only vendors operated in California, Texas, or 
Florida. Moreover, approximately one out of every two WIC-only vendors 
nationwide operated in Los Angeles, California; Riverside, California; 
or Miami, Florida. In contrast, each of the remaining states with WIC- 
only vendors accounted for less than 7 percent of total WIC-only 
vendors in 2004. 

Figure 3: Share of Total WIC-Only Vendors Nationwide by State and the 
Top Three Metropolitan Areas in 2004: 

[See PDF for image] 

Source: GAO analysis of FNS 2004 TIP file. 

Note: Vendor counts include any vendor in operation at some point 
during the fiscal year. All figures have been rounded to the nearest 
whole number except for states that accounted for less than 0.5 percent 
of all WIC-only vendors, which are marked as "<1 percent." Metropolitan 
areas were determined using U. S. Census Bureau definitions for 
metropolitan statistical areas. 

[End of figure] 

The total number of WIC-only vendors in operation at any point in 2005 
is not yet available, but may be lower than the 1,180 reported for 
2004. For example, WIC state agency officials in Texas and Florida have 
indicated that the number of WIC-only vendors in their respective 
states decreased after 2004. Both WIC state agencies continued to 
monitor and occasionally disqualify WIC-only vendors. At the same time, 
Texas WIC agency officials have indicated that a number of WIC-only 
vendors went out of business. Moreover, because the Consolidated 
Appropriations Act of 2005 prohibited states from authorizing 
additional WIC-only vendors after December 8, 2004, WIC state agencies 
could not replace WIC-only vendors that departed the program with new 
WIC-only vendors during much of fiscal year 2005. 

Despite Recent Growth, WIC-Only Vendors Represent a Fraction of All WIC 
Vendors: 

Notwithstanding the increase in the number of WIC-only vendors in 
recent years, WIC-only vendors have remained a fraction of total WIC 
vendors. Nationally, the share of all WIC vendors accounted for by WIC- 
only vendors increased from approximately 1 percent in 1999 to about 3 
percent in 2004 (see fig. 4). During the same period, the number of 
regular WIC vendors in operation at any point changed only slightly, 
from 43,712 in 1999 to 43,463 in 2004. However, in California, Texas, 
and Florida, WIC-only vendors have accounted for a larger proportion of 
all WIC vendors than in the nation as a whole. At the same time, these 
three states were home to nearly one-third of all WIC participants 
nationwide. 

Figure 4: Percentage of Total WIC Vendors Represented by Each Vendor 
Type, Nationwide and in Select States: 

[See PDF for Image] 

Source: GAO analysis of FNS TIP files 1999 and 2004. 

Note: Vendor counts include any vendor in operation at some point 
during the fiscal year. 

[End of Figure] 

WIC-Only Vendors Had the Smaller Share of the WIC Market in 2004 but 
Redeemed about Twice the Average Monthly Amount per Vendor as Regular 
WIC Vendors: 

Nationally, as their numbers might suggest, WIC-only vendors had the 
smaller share of the WIC market during an average month in 2004, but on 
a store-by-store basis, they redeemed about twice as much as regular 
WIC vendors.[Footnote 22] Whereas regular WIC vendors accounted for 94 
percent of business in the WIC market, or about $784 million on an 
average monthly basis in 2004, WIC-only vendors redeemed about $47 
million, or 6 percent of all WIC redemptions.[Footnote 23] However, WIC-
only vendors nationwide redeemed nearly $40,000 per vendor during an 
average month that year, about twice the average monthly amount from 
WIC as regular WIC vendors that participated in the program (see fig. 
5). 

Figure 5: Average Monthly WIC Redemptions per Vendor in 2004, by Vendor 
Type: 

[See PDF for Image] 

Source: GAO analysis of FNS regional office 2004 TIP files. 

[End of Figure] 

Because these data represent simply the average monthly payments 
received per vendor from WIC state agencies, differences between WIC- 
only vendors' redemptions and those of regular WIC vendors could 
signify that a vendor type charges higher prices for WIC food, but 
could also reflect the number of participants that shop at each vendor 
type; the probability that a participant selected all or only part of 
the food items on a voucher; the amount of WIC business volume 
conducted, on average, by WIC-only and regular WIC vendors; or all of 
these practices.[Footnote 24] For example, a WIC-only vendor that 
serves a far greater number of WIC participants than a regular WIC 
vendor would tend to have higher redemptions for the same WIC items 
even if both vendors' prices for those items were comparable. 

At the state level, the three states with the most WIC-only vendors 
also produced the majority of total WIC-only vendor business volume 
during an average month in 2004. Though the average monthly redemptions 
per WIC-only vendor in California, Texas, and Florida fell below the 
high of nearly $64,000 per vendor in Oklahoma, the three states 
accounted for 90 percent of all WIC-only redemptions during that period 
(see fig. 6).[Footnote 25] 

Figure 6: Share of Total Average Monthly WIC-Only Redemptions by State 
in 2004: 

[See PDF for Image] 

Source: GAO analysis of FNS regional office 2004 TIP files. 

[End of Figure] 

WIC-Only Vendors and Regular WIC Vendors' Business and Marketing 
Practices Differ in Their Approach to Customer Service and Price: 

WIC-only and regular WIC vendors generally employed different business 
and marketing practices, largely in response to the two different 
customer groups they served and the nature of the markets they faced. 
Because WIC participants are not required by the WIC program to 
consider retail prices, vendors that served only WIC participants 
competed for their business by emphasizing customer service, which 
participants seemed to value. On the other hand, regular WIC vendors 
served non-WIC consumers as well as WIC participants. Because these non-
WIC consumers are considered price sensitive, regular WIC vendors 
competed for their business based on price and competitors' behavior. 
These differences in customer base also affected decisions on where to 
locate stores and how to advertise. WIC-only stores tended to locate 
near WIC clinics, while regular WIC vendors considered their broader 
customer base when choosing locations. Also, WIC-only vendors used 
community-based media and word-of-mouth to advertise, while regular WIC 
vendors were more likely to use mass media. Finally, WIC-only and 
regular WIC vendors used similar food purchasing practices, because the 
cost of food purchased for resale by vendors is related more to the 
quantity of food purchased than the type of vendor purchasing the food. 
Both WIC-only and regular WIC vendors were able to lower the average 
cost of food purchased for resale when they bought in volume, according 
to WIC state agency officials. 

WIC-Only Vendors Emphasized Customer Service, while Regular WIC Vendors 
Focused on Price: 

WIC-only vendors employed a business model that allowed them to 
emphasize customer service for program participants rather than price, 
while regular WIC vendors focused on attracting a broader customer base 
by offering competitive prices. These differences have likely evolved 
because WIC shoppers need not be price sensitive. WIC-only vendors 
attracted WIC participants, who were not price sensitive, by 
emphasizing customer service. Because WIC participants were not price 
sensitive, they responded to non-price inducements, like service, which 
they valued. As a result, they might take advantage of the service 
offered by WIC-only vendors, even if their prices were somewhat higher. 
In comparison, regular WIC vendors more often used price reductions to 
appeal to a broad customer base, most of whom were price-sensitive 
shoppers, according to WIC state agency officials. 

Although WIC-only vendors did not compete on the basis of price, WIC- 
only vendors did compete with other WIC-only and regular WIC vendors on 
the basis of customer service, a central feature of their business 
model, according to WIC state officials. WIC-only vendors typically 
organized their stores in ways that emphasized service to their WIC 
participant customers. Because WIC-only vendors stocked only WIC- 
approved items (see fig. 7), they eliminated the need for WIC 
participants to identify WIC-eligible foods. Moreover, WIC-only vendors 
often kept food behind a counter, and employees gathered and bagged the 
WIC items customers requested, according to most WIC state agency 
officials we interviewed and our observations during site visits. (see 
fig. 8) As a result, customers did not need to spend time finding 
products in store aisles or face the risk or stigma of selecting an 
unauthorized food item and creating a delay in the checkout line. 
Several state officials thought that this feature of WIC-only vendors' 
business model was a prime attraction for WIC participants. 

Figure 7: Available WIC Food Items at WIC-Only Vendor in Texas: 

[See PDF for Image] 

Source: GAO. 

[End of Figure] 

Figure 8: Interior of WIC-Only Vendor in California: 

[See PDF for Image]

Source: GAO. 

[End of Figure] 

Some state officials told us they believe the customer service features 
of WIC-only vendors' business model, together with their use of only 
one or two checkout points, their limited customer floor area, and 
their location in low-income neighborhoods, would reduce their 
operating expenses. However, we were unable to obtain the data needed 
to confirm these views. 

Few WIC-only vendors used price-based incentives such as buy-one-get- 
one-free specials, sale items, or discount cards to attract WIC 
customers. Because WIC participants purchase items with vouchers and 
are not price sensitive, price discounts would not induce them to go to 
a store with lower prices. However, for this same reason, WIC-only 
vendors would not risk losing WIC customers, even if their prices were 
higher. 

In the past, WIC-only vendors also have given away food and non-food 
items, called incentives, to attract customers. For example, WIC-only 
vendors gave away strollers and diapers in California and North 
Carolina, cash in Arkansas, and gift certificates in Georgia, according 
to WIC state agency officials. Because WIC-only vendors' main source of 
revenue was the WIC benefit, paid for by the WIC program, offering such 
incentives raised concerns about the use of federal funds. However, 
several WIC state agency officials noted that the use of incentives by 
WIC-only vendors has decreased as a result of rule changes required by 
the Child Nutrition and WIC Reauthorization Act of 2004.[Footnote 26] 
In fact, the WIC state officials we spoke with in California, North 
Carolina, and Arkansas said that WIC-only vendors no longer give away 
most of the items they provided in the past. None of the WIC-only 
vendors we observed on our site visits provided such incentives, with 
the exception of one in California that gave customers a small amount 
of free produce for purchasing a certain quantity of food items. 

In contrast to WIC-only vendors, the retail grocers that we define as 
regular WIC vendors targeted the population at large and did not focus 
on customer service, according to WIC state agency officials.[Footnote 
27] Regular WIC vendors served WIC participants, but their largest 
group of customers was non-WIC consumers, who are price sensitive. For 
the most part, regular WIC vendors targeted their business practices on 
their non-WIC customers and set prices in response to this group. The 
regular WIC vendors we observed on our site visits provided examples of 
their business practices that contrast with those of WIC-only vendors. 
Of the 12 regular WIC vendors we visited, none gathered the WIC food 
items listed on the voucher for WIC customers and only 3 had food items 
authorized by the WIC program placed together on an aisle shelf to 
assist participants in finding the items on their vouchers. Having to 
search store aisles and shelves for the correct food type, brand, and 
size listed on their voucher can make shopping for WIC food items at 
regular WIC vendors challenging or uncomfortable for WIC participants. 

WIC state officials told us that regular WIC vendors' marketing 
practices are price-based, that is, they competed in the market based 
on price and their competitors' behavior. Regular WIC vendors commonly 
use buy-one-get-one-free specials, sale items, discount cards, and 
other price-based incentives to attract a broad client base that is 
price sensitive. Since the rule changes required by the Child Nutrition 
and WIC Reauthorization Act of 2004, regular WIC vendors, who have 
sources of revenue other than federal funds from their broad customer 
base, continue to provide higher-priced incentives to attract 
customers, according to several of the WIC state agency officials and 
WIC vendor employees whom we interviewed. 

Despite these differences, WIC-only vendors and regular WIC vendors 
used some similar business or marketing practices that did not involve 
price-based incentives. For example, both employed checkout staff who 
spoke one or more languages other than English, according to the 
majority of WIC state agency officials interviewed, a practice we 
observed on our site visits. In addition, both vendor types in several 
states organized community outreach activities, ranging from baby 
clothes exchanges to barbecues. 

WIC-Only Vendors Tend to Locate near WIC Clinics; 
Regular WIC Vendors Base Location Decisions on Their Broader Customer 
Base: 

WIC-only vendors are often located in places readily accessible to WIC 
participants. All WIC state agency officials we interviewed stated that 
WIC-only vendors tend to locate their stores as close to WIC clinics as 
possible (see fig. 9), and several officials indicated that WIC-only 
vendors may also operate in low-income neighborhoods--geographic areas 
that are often one and the same. 

Figure 9: Proximity of WIC-Only Vendor to WIC Clinic in Texas: 

[See PDF for Image] 

Source: GAO. 

[End of Figure] 

In contrast, WIC state agency officials told us that regular WIC 
vendors typically make their location decisions based on their entire 
customer population, not just WIC participants. While WIC state 
agencies consider participant access when authorizing regular WIC 
vendors, they need not ensure that the vendor will be located near a 
WIC clinic. 

WIC-Only Vendors Used Community-Based Media to Advertise; 
Regular WIC Vendors Use Mass Media: 

WIC-only vendors generally advertise with publicity flyers, word-of- 
mouth, and community-based media. WIC officials in all seven states 
reported that WIC-only vendors tend to use publicity flyers to 
publicize their stores; figure 10 presents an example of this type of 
advertisement. Further, word-of-mouth is the most important advertising 
practice for some WIC-only vendors. In addition to using flyers and 
word-of-mouth, some WIC-only vendors in Alabama, Florida, and North 
Carolina advertise in local newspapers, and a few WIC-only vendors in 
California and North Carolina promote their stores via radio. 

Figure 10: Sample WIC-Only Vendor Promotional Flyer: 

[See PDF for Image] 

Source: Profile Unlimited. 

[End of Figure] 

In addition, most of the WIC-only vendors we visited post signs 
indicating that they accept vouchers. In California, the majority of 
the WIC-only vendors we visited post signs indicating that the stores 
accept vouchers. In Texas and Florida, several stores have replaced the 
name of the store in the marquee over the front door with statements 
such as "WIC Checks Accepted Here" (see fig. 11).[Footnote 28] 

Figure 11: Marquee of WIC-Only Vendor in Florida: 

[See PDF for Image] 

Source: GAO. 

[End of Figure] 

In contrast to WIC-only vendors, which used community-based media, 
regular WIC vendors typically advertised to a broad client base through 
mass media such as newspapers, television, radio, and billboards, 
according to most WIC agency officials and regular WIC vendor employees 
interviewed. However, most of the regular WIC vendors that we visited 
do not post signs indicating that they participate in the WIC program, 
even though most WIC state agency officials whom we interviewed said 
that they provide regular WIC vendors with a state-authorized sign 
indicating that the store accepts vouchers. 

Officials Told Us That WIC-Only and Regular WIC Vendors Lower Food- 
Purchasing Costs by Buying in Volume, although the Effect on Retail 
Food Prices Is Unclear: 

Although their marketing and advertising practices differ, WIC state 
officials told us that WIC-only and regular WIC vendors use similar 
food-purchasing practices. Wholesalers tend to offer WIC-only and 
regular WIC vendors lower prices for higher volume purchases, according 
to a majority of WIC state agency officials interviewed. Some vendors 
have lowered food-purchasing costs by expanding the number of outlets 
they operate or forming consortia to buy in greater volume. For 
example, one WIC-only vendor in California operates a chain of 49 
outlets. A few WIC-only chains in California and Florida have become 
wholesalers themselves because they are large enough to purchase food 
directly from manufacturers. WIC state agency officials in two states 
indicated that WIC vendors increase the amount of food purchased by 
forming a consortium with other vendors. For example, several WIC-only 
vendors in Florida purchase food collectively to earn volume discounts 
from wholesalers. 

In contrast to WIC vendors that form consortia or are large enough to 
purchase independently from wholesalers or manufacturers, some small 
WIC vendors--including both WIC-only and regular WIC vendors--purchase 
food for resale from other retail sources. The small WIC vendors may 
not have the room to store large amounts of goods or may not be able to 
buy on credit from wholesalers. Although several WIC state agency 
officials said that buying from other retailers leads to higher costs, 
a few officials noted that WIC vendors with a small purchasing capacity 
may in fact pay less by buying food from other large retailers, such as 
Wal-Mart or Costco, instead of from wholesalers. 

Even though WIC vendors can reduce their average food-purchasing costs 
by buying food in greater volume, existing data did not permit us to 
determine the relationship between food-purchasing costs and retail 
food prices. The retail price for food items reflects numerous store- 
operating expenses in addition to the cost of buying food for resale-- 
such as employee salaries, rent, and insurance--and a decrease in 
average food-purchasing costs over time does not necessarily result in 
a reduction in other business costs. 

We Estimated That Program Participation Would Have Decreased by about 
136,000 WIC Participants or Expenditures Would Have Increased by About 
$50 Million if WIC-Only Vendors' Market Share Had Doubled in 2004: 

If the market share of WIC-only vendors had doubled in California, 
Texas, and Florida, either program participation would have decreased 
by about 3 percent--about 136,000 participants--or program expenditures 
would have increased by about 3 percent--about $50 million--in those 
states, according to our scenario estimates using conditions present in 
2004.[Footnote 29] These changes would have occurred because the 
average value of all food vouchers redeemed by WIC-only vendors in 2004 
was higher than the average value of all food vouchers redeemed at 
regular WIC vendors. However, even though the change would be a similar 
3 percent of 2004 levels across all three states, the reasons for the 
size of the change differ among the states, depending on WIC-only 
vendors' market share and the difference in WIC-only and regular WIC 
vendors' average voucher value. Because the average value of all food 
vouchers we calculated did not specify either the price or quantity of 
individual items that make up the voucher, we could not determine 
whether the prices for individual items at WIC-only vendors were higher 
than at regular WIC vendors. At a minimum, data on both the price a 
vendor charges for individual food items and the quantity purchased by 
participants are needed to make price comparisons. 

If WIC-Only Vendors' Market Share Had Doubled in 2004 and Program 
Expenditures Were Held Constant, We Estimated That Program 
Participation Would Have Decreased by About 136,000 WIC Participants: 

The number of participants that could have been served would have 
decreased if the WIC-only vendors' market share increased while holding 
total WIC food expenditures constant at 2004 levels, according to our 
first scenario.[Footnote 30] 

As shown in table 2, if redemptions at WIC-only vendors had doubled in 
each state, the decrease in the number of participants that could be 
served would be 136,202, or about 3 percent of 2004 levels for the 
three states. 

Table 2: Estimated Change in the Number of Participants Served if WIC- 
Only Vendors' Market Share Increased while Program Expenditures Were 
Held Constant at Fiscal Year 2004 Levels: 

Percentage increase in WIC-only vendors' market share: 10 percent 
increase; 
California: Decline in number of participants served[A]: - 6,277; 
California: Decline as a percentage of 2004 level[B]: 0.29; 
Texas: Decline in number of participants served: -5,271; 
Texas: Decline as a percentage of 2004 level[B]: 0.36; 
Florida: Decline in number of participants served: -2,072; 
Florida: Decline as a percentage of 2004 level[B]: 0.31; 
Total for 3 states: Decline in number of participants served: -13,620; 
Total for 3 states: Decline as a percentage of 2004 level[B]: 0.32. 

Percentage increase in WIC-only vendors' market share: 20 percent 
increase; 
California: Decline in number of participants served[A]: - 12,553; 
California: Decline as a percentage of 2004 level[B]: 0.59; 
Texas: Decline in number of participants served: -10,542; 
Texas: Decline as a percentage of 2004 level[B]: 0.72;  
Florida: Decline in number of participants served: -4,145; 
Florida: Decline as a percentage of 2004 level[B]: 0.61; 
Total for 3 states: Decline in number of participants served: -27,240; 
Total for 3 states: Decline as a percentage of 2004 level[B]: 0.64. 

Percentage increase in WIC-only vendors' market share: 30 percent 
increase; 
California: Decline in number of participants served[A]: - 18,830; 
California: Decline as a percentage of 2004 level[B]: 0.88; 
Texas: Decline in number of participants served: -15,814; 
Texas: Decline as a percentage of 2004 level[B]: 1.08; 
Florida: Decline in number of participants served: -6,217; 
Florida: Decline as a percentage of 2004 level[B]: 0.92; 
Total for 3 states: Decline in number of participants served: -40,861; 
Total for 3 states: Decline as a percentage of 2004 level[B]: 0.96. 

Percentage increase in WIC-only vendors' market share: 50 percent 
increase; 
California: Decline in number of participants served[A]: - 31,383; 
California: Decline as a percentage of 2004 level[B]: 1.47; 
Texas: Decline in number of participants served: -26,356; 
Texas: Decline as a percentage of 2004 level[B]: 1.79; 
Florida: Decline in number of participants served: -10,362; 
Florida: Decline as a percentage of 2004 level[B]: 1.53; 
Total for 3 states: Decline in number of participants served: -68,101; 
Total for 3 states: Decline as a percentage of 2004 level[B]: 1.59. 

Percentage increase in WIC-only vendors' market share: 100 percent 
increase; 
California: Decline in number of participants served[A]: - 62,766; 
California: Decline as a percentage of 2004 level[B]: 2.95; 
Texas: Decline in number of participants served: -52,712; 
Texas: Decline as a percentage of 2004 level[B]: 3.58; 
Florida: Decline in number of participants served: -20,724; 
Florida: Decline as a percentage of 2004 level[B]: 3.05; 
Total for 3 states: Decline in number of participants served: -136,202; 
Total for 3 states: Decline as a percentage of 2004 level[B]: 3.18. 

Source: GAO analysis of California, Texas, and Florida WIC state agency 
redemption data for 2004. 

[A] We calculated the number of participants that would be affected by 
using the average number of redemptions per participant in each state. 
(See app. I): 

[B] To develop our estimates for fiscal year 2004, we used our 
redemption data to calculate the number of people who redeemed a 
voucher that year: 2.1 million people redeemed vouchers in California, 
1.5 million in Texas, and 0.679 million in Florida. To avoid double 
counting, we used a unique identification number for each person that 
was available in our data and counted each person only once. Because we 
had data for every voucher redeemed in each of the three states, for 
every month in fiscal year 2004, our calculations of annual program 
participation likely exceeded FNS's estimates based on average monthly 
participation. (See app. I): 

[End of table] 

Because the average value of all food vouchers redeemed by WIC-only 
vendors in all three states in 2004 was higher than the average value 
of all food vouchers redeemed by regular WIC vendors, more funds would 
have been needed to reimburse WIC-only vendors than regular WIC vendors 
for the same number of vouchers.[Footnote 31] As a result, when the 
number of food vouchers redeemed by WIC-only vendors increased and 
program expenditures were held constant in our scenario estimate, fewer 
food vouchers could be issued and fewer participants could be served. 
This constraint was reflected in our analysis by a reduction in the 
number of vouchers redeemed by regular WIC vendors. 

The Reasons for the Size of the Decrease in Program Participation 
Differ among the Three States: 

Even though the size of the decrease in program participation would be 
a similar 3 percent of 2004 levels across all three states, the reasons 
for the size of the decrease differ among the states. Two key factors 
would affect the size of the decrease in each state: (1) the size of 
WIC-only vendors' share of the total WIC vendor market and (2) the 
difference between the average value of food vouchers redeemed by WIC- 
only and by regular WIC vendors.[Footnote 32] As shown in table 3, in 
California, WIC-only vendors' market share was 41.46 percent in 2004, 
and the difference in the average value of food vouchers redeemed by 
WIC-only and regular WIC vendors was $0.87. Because WIC-only vendors' 
market share is 41 percent in California, doubling their market share 
means that WIC-only vendors would account for most of the WIC market in 
that state. 

Table 3: Difference between the Average Value of WIC-Only and Regular 
WIC Vendor Food Vouchers in 2004 and the Market Share of WIC-Only 
Vendors in California, Texas, and Florida: 

State: California; 
Average value of WIC-only food voucher redeemed: $13.15; 
Average value of regular WIC food voucher redeemed: $12.28; 
Difference between WIC-only and regular WIC redemptions: $0.87; 
WIC- only vendors' market share: 41.47%. 

State: Texas; 
Average value of WIC-only food voucher redeemed: $31.55; 
Average value of regular WIC food voucher redeemed: $21.72; 
Difference between WIC-only and regular WIC redemptions: $9.83; 
WIC-only vendors' market share: 7.93%. 

State: Florida; 
Average value of WIC-only food voucher redeemed: $22.92; 
Average value of regular WIC food voucher redeemed: $18.50; 
Difference between WIC-only and regular WIC redemptions: $4.42; 
WIC- only vendors' market share: 12.8%. 

Source: GAO analysis of California, Texas, and Florida WIC state agency 
redemption data for 2004. 

[End of table] 

Conversely, in Texas and Florida, redemptions at WIC-only vendors 
accounted for a smaller market share than in California in 2004--8 
percent in Texas and 13 percent in Florida. The difference between the 
average value of food vouchers redeemed at WIC-only and regular WIC 
vendors in 2004, however, was higher than in California--$9.83 in Texas 
and $4.42 in Florida. Therefore, although WIC-only vendors accounted 
for a larger portion of the WIC vendor market in California than in 
Texas and Florida, the smaller difference in WIC-only and regular WIC 
vendors' food voucher values would have helped counteract the overall 
effect of an increase in California WIC-only vendors' market share. 
Conversely, the smaller market share held by WIC-only stores in Texas 
and Florida would have partially offset the overall effect of the 
larger difference in average food voucher value in those two states. 

We acknowledge that we could have increased the market share held by 
WIC-only vendors in Texas and Florida in 2004 further in our scenario 
analysis. However, our analysis is based on the relative market shares 
and the corresponding differences in average food voucher values in 
2004. Over time, the differences in average food voucher values as well 
as the market share held by WIC-only vendors could increase or decrease 
with corresponding implications for program resources. 

If WIC-Only Vendors' Market Share Had Doubled and Program Expenditures 
Were Not Held Constant, Program Expenditures Would Have Increased About 
$50 Million: 

Program expenditures would increase if the market share of WIC-only 
vendors grew and all else remained the same, including the overall 
number of food vouchers redeemed by both WIC-only and regular WIC 
vendors in 2004.[Footnote 33] As shown in table 4, if redemptions at 
WIC-only stores doubled in each state, program expenditures would 
increase by about $50 million, or 3 percent above the three states' 
2004 levels. As discussed previously, the size of WIC-only vendors' 
share of t See appendix IV for the range of vouchers in California, 
Texas, and Florida that we analyzed. The total WIC vendor market and 
the difference between the average value of food vouchers redeemed by 
WIC-only and by regular WIC vendors in part explain why the changes for 
the three states are similar. 

Table 4: Change in Program Expenditures if WIC-Only Vendors' Market 
Share Increases while Maintaining the Total Number of Food Vouchers at 
Fiscal Year 2004 Levels: 

Dollars in millions. 

Percentage increase in WIC-only vendors' market share: 10 percent 
increase; 
California: Change in WIC dollars: $2.52; 
California: Change as a percent-age of 2004 levels[A]: 0.29%; 
Texas: Change in WIC dollars: $1.78; 
Texas: Change as a percent-age of 2004 levels[A]: 0.35%; 
Florida: Change in WIC dollars: $0.69; 
Florida: Change as a percent-age of 2004 levels[A]: 0.30%; 
Total for 3 states: Change in WIC dollars: $4.99; 
Total for 3 states: Change as a percent- age of 2004 levels[A]: 0.31%. 

Percentage increase in WIC-only vendors' market share: 20 percent 
increase; 
California: Change in WIC dollars: $5.04; 
California: Change as a percent-age of 2004 levels[A]: 0.57%; 
Texas: Change in WIC dollars: $3.55; 
Texas: Change as a percent-age of 2004 levels[A]: 0.69%; 
Florida: Change in WIC dollars: $1.38; 
Florida: Change as a percent-age of 2004 levels[A]: 0.59%; 
Total for 3 states: Change in WIC dollars: $9.97; 
Total for 3 states: Change as a percent- age of 2004 levels[A]: 0.61%. 

Percentage increase in WIC-only vendors' market share: 50 percent 
increase; 
California: Change in WIC dollars: $12.60; 
California: Change as a percent-age of 2004 levels[A]: 1.43%; 
Texas: Change in WIC dollars: $8.89; 
Texas: Change as a percent-age of 2004 levels[A]: 1.73%; 
Florida: Change in WIC dollars: $.45; 
Florida: Change as a percent-age of 2004 levels[A]: 1.48%; 
Total for 3 states: Change in WIC dollars: $24.93; 
Total for 3 states: Change as a percent- age of 2004 levels[A]: 1.53%. 

Percentage increase in WIC-only vendors' market share: 100 percent 
increase; 
California: Change in WIC dollars: $25.20; 
California: Change as a percent-age of 2004 levels[A]: 2.86%;  
Texas: Change in WIC dollars: $17.77; 
Texas: Change as a percent-age of 2004 levels[A]: 3.46%; 
Florida: Change in WIC dollars: $6.89; 
Florida: Change as a percent-age of 2004 levels[A]: 2.96%; 
Total for 3 states: Change in WIC dollars: $49.86; 
Total for 3 states: Change as a percent- age of 2004 levels[A]: 3.07%. 

Source: GAO analysis of California, Texas, and Florida WIC state agency 
redemption data for 2004. 

[A] In 2004, the value of redemptions was $880 million in California, 
$513 million in Texas, and $233 million in Florida. 

[End of table] 

Data Limitations Prevented Us from More Fully Analyzing the Effects of 
WIC-Only Vendors on WIC Program Participation and Expenditures: 

Although our two scenario estimates are based on the best available 
data concerning WIC-only vendors' contributions to expenditures and 
participation, they are illustrative only and have limitations. Because 
food item price data and quantities of food items purchased were not 
available, we were unable to construct analyses that would have 
isolated the effect of actual prices charged by WIC-only and regular 
vendors on program expenditures or participation. For example, some 
food vouchers in our data were composed of a single item, but most of 
them contained multiple food items, such as milk, cheese, and 
cereal.[Footnote 34] Because most of the vouchers contained several 
types of WIC food and allowable quantities for each food item, the 
value of an individual voucher was not the price a vendor charged for 
an individual food item. The value of an individual food voucher was 
the sum of the price of each food item on the voucher times the 
quantity purchased. As a result, the difference in value between WIC- 
only and regular WIC vouchers could be due to differences in prices for 
individual items or differences in the quantities redeemed or both. For 
example, if some participant customers of regular WIC vendors select 
only a portion of the food items on a voucher, regular WIC vendors' 
average redemption value would be lower than WIC-only vendors', if 
their WIC customers received all of the items on the voucher. As a 
result, without these data, we could not attribute with certainty the 
changes in WIC program participation and expenditures we identified to 
WIC-only vendors' prices. 

Conclusions: 

The growth in the number of WIC-only vendors in recent years, combined 
with our finding that individual WIC-only vendors generally had more 
than twice the business volume of regular WIC vendors in an average 
month in 2004, suggest that WIC-only vendors' share of the WIC retail 
market was increasing before the 2004 legislation. Although in some 
states the number of WIC-only vendors has not grown, in others the 
number has grown quickly and the future effect of the new cost 
containment requirements on this growth is not known. Our scenario 
analyses suggest that continued WIC-only vendor growth could have 
resulted in either fewer participants being served or higher program 
costs. Moreover, given the current program model that focuses on 
ensuring participants receive prescribed foods without having to 
consider the costs of the commodities, participants would likely 
continue to take advantage of the customer service and convenient 
location offered by WIC-only vendors, even if prices are higher. 

The lack of price and quantity data needed to explain the higher 
monthly average redemptions of WIC-only vendors and the higher average 
value of vouchers redeemed by WIC-only vendors leaves important 
questions unanswered. We could not determine how WIC-only and regular 
WIC vendors' prices differ. Our study was a first attempt to develop a 
national picture of WIC-only vendors, to inform policy initiatives and 
practice. However, absent a systematic analysis of vendor-level data, 
it is difficult to determine with more certainty how changes in market 
share between WIC-only and regular WIC vendors would affect WIC program 
expenditures. 

The lack of price and quantity data on WIC food purchases also has 
broader program implications. Although WIC state agencies have used 
routine and high-risk vendor monitoring and voucher review to promote 
accountability, for the most part they authorize and reimburse their 
WIC-only and regular WIC vendors without knowing precisely which 
prescribed foods were purchased and in what quantities, what price the 
program was being charged for food, and whether participants were 
receiving the whole food package or only part of it. Collecting these 
data under the current system would be costly and burdensome to states. 
Under the new interim rule, WIC state agencies are required to collect 
vendors' shelf price data but not the actual price charged the program 
or the quantity purchased. However, two recent developments in the WIC 
program--the implementation of electronic benefits transfer and the 
redesign of the WIC food package to include fruit and vegetables--may 
lead to changes in the WIC voucher and present WIC state agencies the 
opportunity to collect price and quantity data during the WIC 
transaction in a cost-effective way. This information could be used to 
determine whether the prices that both WIC-only and regular WIC vendors 
charge the program are reasonable and to analyze the effects of WIC 
vendors' prices on program expenditures with greater certainty. 

Recommendation for Executive Action: 

To assist WIC state agencies in more effectively monitoring WIC 
vendors' redemption practices, in implementing the new cost containment 
requirements, and in analyzing program expenditures, we recommend that 
the Secretary of Agriculture require, if collection of more detailed 
information on WIC food purchases is cost-effective through EBT 
implementation, that WIC state agencies collect data on both the price 
and the quantity of each WIC food item purchased, especially in each 
state that authorizes WIC-only vendors. 

Agency Comments: 

We provided a draft of this report to the U.S. Department of 
Agriculture for review and comment. On June 14 and 16, 2005, FNS 
officials provided us with their oral comments. The officials generally 
agreed that our methodology was reasonable, given data constraints, and 
did not dispute our findings on the recent growth of WIC-only vendors, 
the business model differences between WIC-only and regular WIC 
vendors, and the likely effect on the WIC program of further growth of 
WIC-only vendors' market share based on 2004 data. However, they raised 
several concerns. They asked us to make clear that the 2004 data we 
used to determine the growth in the number of WIC-only vendors preceded 
the current moratorium on approving new WIC-only vendors, and the data 
we used to calculate the effect of additional growth on the program 
were gathered before the full implementation of new cost containment 
provisions. These provisions, enacted when the program was reauthorized 
in 2004, are intended to help ensure that the program pays competitive 
prices to all authorized vendors. We incorporated additional references 
to these recent changes where appropriate. 

FNS officials also commented on our finding that although the average 
value of all vouchers redeemed by WIC-only vendors in our three states 
in 2004 was higher than that of vouchers redeemed by regular WIC 
vendors in these states, we could not determine with certainty whether 
prices charged by WIC-only vendors are higher than those charged by 
regular WIC vendors because we could not disaggregate price from 
quantity at the level of purchase. Officials acknowledged the ongoing 
challenges in collecting these data for foods provided under the WIC 
program. However, they expressed concern that this finding would be 
misinterpreted to mean there is no price difference between WIC-only 
and regular WIC vendors, and our finding on the likely effect on the 
program of continued growth of WIC-only vendors under 2004 conditions 
would be overlooked. We made some minor technical revisions to our 
report wording to clarify our findings and the limitations of available 
data on prices charged by WIC vendors. 

Further, in the draft these officials read, we recommended that FNS 
consider conducting a small-scale study to better understand how WIC- 
only vendor prices and operations contribute to program expenditures. 
Officials did not believe this study would be necessary or cost- 
effective because of the difficulty in collecting price and quantity 
data on WIC purchases under the current paper-based system, and because 
program regulations already require monitoring of shelf prices and 
redemption data as a component of their vendor management. We 
understand that USDA has limited funds available for research, with 
multiple demands on these funds. Since the cornerstones of the new 
legislative requirements are that prices at above-50-percent vendors 
should be competitive with those charged by regular vendors and that 
vendors that derive more than 50 percent of their revenue from WIC food 
instruments do not result in higher food costs to the program than do 
other vendors, officials are hopeful that the new cost containment 
provisions will ensure the program pays competitive prices to all 
vendors. However, the cost containment provisions are complex and 
entail significant changes for some states. We believe it is important 
for FNS to closely monitor implementation of cost containment 
provisions to help ensure that program costs are in fact contained as 
intended. Moreover, as long as the program is structured so that 
participants need not pay attention to price, and given the current 
lack of available information on whether participants are actually 
receiving their prescribed foods and at what price, we believe FNS 
should proactively take advantage of all cost-effective ways of 
gathering data that will help contain costs and ensure the program is 
meeting its overall goals. In response, we have removed our 
recommendation for further study and further clarified our 
recommendation for additional data collection on the price and quantity 
of WIC food items purchased under a new EBT system. 

FNS also made additional technical comments, which we have incorporated 
where appropriate. 

As arranged with your office, unless you publicly announce its contents 
earlier, we plan no further distribution of this report until 30 days 
after the date of this letter. At that time, we will send copies to the 
Secretary of Agriculture, relevant congressional committees, and other 
interested parties. We also will make copies available to others upon 
request. In addition, the report will be made available at no charge on 
the GAO Web site at [Hyperlink, http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-7215 or fagnonic@gao.gov. Contact points for 
our Office of Congressional Relations and Public Affairs may be found 
on the last page of this report. GAO staff that made major 
contributions to this report are listed in appendix V. 

Signed by: 

Cynthia M. Fagnoni: 
Managing Director, Education, Workforce, and Income Security Issues: 

[End of section] 

Appendix I: Scope and Methodology:  

This appendix discusses in detail our methodology for determining 
whether the vendors authorized by the Special Supplemental Nutrition 
Program for Women, Infants and Children (WIC) that are known as WIC- 
only vendors contribute more to WIC program expenditures than do 
regular WIC vendors. The study was framed around three questions: (1) 
what is known about WIC-only vendors' growth and their share of the WIC 
market in recent years? (2) To what extent do the business and 
marketing practices of WIC-only and regular WIC vendors differ?(3) What 
would WIC-only vendors' contribution to WIC program expenditures have 
been if their market share increased? 

Scope: 

Because existing research on WIC-only vendors consisted of a few single-
state studies or analyses of a small number of individual states, we 
sought to develop a national picture. To ensure comparability of costs 
and business practices, we focused on the WIC retail vendor market, 
excluding Mississippi, which operates a direct distribution system, and 
Vermont, which uses a home food delivery system. To prevent potential 
duplication of data, we limited the study to the geographically 
contiguous states, omitting the 32 Indian Tribal Organizations that 
authorize many of same vendors authorized by the geographic WIC state 
agencies in which they reside. Given the large size of the WIC retail 
vendor population, we used existing data sources for our national-level 
analyses of WIC-only vendors' growth and market share. Because WIC food 
instrument and redemption systems are unique to each state, we focused 
our analyses of WIC-only vendors' contribution to program expenditures 
at the state level, concentrating on California, Texas, and Florida, 
the states that authorize 84 percent of WIC-only vendors. To examine 
WIC-only and regular WIC vendors' business and marketing practices, we 
relied on the experience of WIC state agency officials who have managed 
a substantial number of WIC-only vendors, including officials from 
seven states that had authorized 10 or more WIC-only vendors in fiscal 
year 2004. 

Methodology: 

We used separate sources of data for each study question, including 
national-level administrative data for the entire WIC vendor 
population, state-level administrative data for every WIC food 
instrument redeemed in fiscal year 2004, telephone interviews with WIC 
state agency directors and vendor management staff, and on-site 
observations and interviews at WIC-only and regular WIC vendor 
establishments. Before deciding to use the administrative data, we 
conducted a thorough data reliability assessment of each data base, 
including a review of the data collection and reporting system that 
produced the data, guidance on variable definitions and measures 
provided to entities that reported the data, and steps the Food and 
Nutrition Service (FNS) or the WIC state agencies took to ensure data 
reliability. Once we received the administrative data files, GAO's 
methodologists conducted electronic tests to check for the accuracy and 
completeness of individual data elements. We discuss our testing 
procedures and steps we took to mitigate any data limitations below, as 
part of the methodology for each study question. On the basis of these 
efforts, we believe the data are sufficiently reliable for our 
purposes. We conducted a descriptive analysis of WIC-only vendors' 
growth and market share, a scenario analysis of WIC-only vendors' 
potential contribution to WIC program expenditures, and a comparative 
analysis of WIC-only and regular WIC vendors' business and marketing 
practices. 

Procedures for Analyzing WIC-Only Vendors' Growth and Market Share: 

To determine what is known about WIC-only vendors in recent years, we 
gathered various federal and other data sources. We collected copies of 
FNS's The Integrity Profile (TIP) for federal fiscal years 1999 through 
2004. TIP is a database that includes information on all vendors 
authorized to provide food benefits under the WIC program at any point 
during a fiscal year. For each vendor entry, TIP identifies vendor 
type, location, and WIC redemption amounts, among other data. TIP data 
is provided by 90 WIC state agencies, representing all 50 states, the 
District of Columbia, Indian Tribal Organizations (ITOs), and U.S. 
territories. WIC state agencies submit electronic data to FNS on an 
annual basis in accordance with instructions provided by FNS.[Footnote 
35] To complement information provided by TIP, we conducted a 
literature search to compile a list of all research conducted on WIC- 
only vendors in recent years, but found that few such studies exist. As 
a result, our analysis focused largely on TIP. 

Data Collection: 

As one step in our data reliability assessment process, we evaluated 
the integrity of TIP data. This procedure revealed two primary 
limitations. First, TIP does not report the actual date when a vendor 
enters or exits the WIC program; rather, it only indicates whether a 
vendor was authorized by a WIC state agency at any point during a 
fiscal year. As a result, TIP likely overstates the number of vendors 
in operation on any given date. For example, the number of WIC vendors 
in operation on the first day of a particular fiscal year--October 1-- 
is probably less than the number reported by TIP for the same fiscal 
year, as TIP includes all WIC vendors for that fiscal year that were 
authorized as of October 1, in addition to all vendors that entered the 
program after that date. Thus, we could not calculate a percentage- 
based growth rate from year to year using TIP. Instead, we could only 
calculate the total number of WIC vendors of a specific type in 
operation for at least 1 day during a particular fiscal year. 

The second limitation we identified was that national TIP redemption 
data did not meet GAO's data reliability standards, based upon 
information provided by FNS. Although FNS had requested that WIC state 
agencies submit average monthly redemption data for all WIC vendors 
during fiscal years 1999-2003, FNS officials determined subsequently 
that not all WIC state agencies had followed these instructions. FNS 
officials concluded that some WIC state agencies had submitted 
redemption data in formats other than average monthly amounts, such as 
annual or quarterly figures, but they were uncertain about the time 
period used by any particular WIC state agency in reporting redemption 
data. In recognition of this problem, for fiscal year 2004, FNS 
requested that WIC state agencies specify the time period that their 
redemption figures covered when submitting TIP data. FNS then 
annualized all redemption figures not submitted as annual amounts by 
multiplying the figures that were other than annual by the appropriate 
number of months. However, this process may have resulted in overstated 
redemption figures for certain WIC vendors in fiscal year 2004, as FNS 
annualized the redemption figures for all WIC vendors that did not have 
annual redemption amounts--including those vendors that were not 
authorized to participate in WIC for the entire fiscal year. As a 
result of these issues, we determined that we could not use FNS's 
national TIP data to report trends in redemption amounts over time, or 
to calculate average annual redemption amounts by vendor type for any 
particular fiscal year. However, because FNS had requested that WIC 
state agencies specify the time period used in reporting redemption 
data for fiscal year 2004, we concluded that we could use the original 
state data files from that year to calculate average monthly redemption 
figures. 

We converted redemption figures for all WIC-only and regular WIC 
vendors with valid redemption data into average monthly redemption 
amounts for any state that reported redemptions in a form other than 
monthly (see table 5 for these other time periods reported by states to 
FNS for fiscal year 2004).[Footnote 36] For example, for any state that 
reported redemption amounts using quarterly figures, we divided each 
WIC vendor's redemption total by three to create an average monthly 
figure. In converting redemption amounts, we excluded vendors that were 
not authorized to participate in the WIC program but that were 
sometimes included in the state files. When such vendors appeared, they 
were clearly identified as being unauthorized. 

Table 5: Time Periods Other than Monthly That WIC State Agencies Used 
in Reporting Fiscal Year 2004 Redemption Data to FNS: 

State: Alaska; 
Redemption data reporting period used: No valid redemptions 
reported[A]. 

State: Delaware; 
Redemption data reporting period used: Quarterly. 

State: District of Columbia; 
Redemption data reporting period used: Annual. 

State: Kentucky; 
Redemption data reporting period used: Annual, specifying the number of 
months in operation. 

State: Maine; 
Redemption data reporting period used: Annual, specifying the number of 
months in operation. 

State: Maryland; 
Redemption data reporting period used: Quarterly. 

State: Mississippi; 
Redemption data reporting period used: Not applicable[B]. 

State: New Hampshire; 
Redemption data reporting period used: Annual, specifying the number of 
months in operation. 

State: New Jersey; 
Redemption data reporting period used: Quarterly. 

State: New Mexico; 
Redemption data reporting period used: Annual. 

State: Ohio; 
Redemption data reporting period used: Annual. 

State: Oregon; 
Redemption data reporting period used: Annual. 

State: Pennsylvania; 
Redemption data reporting period used: Annual. 

State: Rhode Island; 
Redemption data reporting period used: Annual, specifying the number of 
months in operation. 

State: Vermont; 
Redemption data reporting period used: Not applicable[C]. 

State: Virginia; 
Redemption data reporting period used: Annual. 

State: West Virginia; 
Redemption data reporting period used: Annual.  

Source: FNS regional office 2004 TIP files. 

[A] Alaska's WIC state agency did not report valid redemption data for 
fiscal year 2004; 
therefore, we excluded Alaska from our redemption analysis. However, 
Alaska was included in our analysis of national WIC vendor numbers. 

[B] Mississippi did not authorize any WIC-only or regular WIC vendors 
during fiscal year 2004. 

[C] Vermont did not authorize any WIC-only or regular WIC vendors 
during fiscal year 2004. 

[End of table]

In addition to eliminating specific analysis procedures due to data 
reliability issues, we narrowed the focus of our analyses to certain 
geographic areas and WIC vendor types. Because TIP includes data from 
ITOs and U.S. territories in addition to the 50 states and the District 
of Columbia, some WIC vendors may have been listed in more than one 
state agency TIP file. For example, both a state and an ITO located 
within that state may have authorized, and thus included in their data 
file submitted to FNS, the same WIC vendor. To eliminate these 
potential data-reporting redundancies, our analysis of TIP focused 
exclusively on the 50 states and the District of Columbia. Concerning 
our vendor focus, TIP includes some vendor types and additional food 
delivery systems that are not directly comparable to WIC-only vendors. 
The noncomparable vendor types include military commissaries, usually 
located on military installations, and pharmacies, which often only 
provide infant formula and WIC-eligible medical foods. In addition, 
some state agencies authorize other food delivery systems, such as home 
food delivery and direct distribution. We eliminated from our analysis 
these noncomparable vendors and alternate food delivery systems, and 
defined our total WIC vendor population as consisting entirely of WIC- 
only vendors and regular WIC vendors. 

Data Analysis: 

Our findings are the result of two primary analyses. First, we 
generated frequency statistics concerning the number and location of 
WIC-only vendors and regular WIC vendors for fiscal years 1999 through 
2004, and used geographic information system (GIS) software to map the 
location of WIC-only vendors in fiscal year 2004. Second, using the 
original state data we received from FNS's regional offices for fiscal 
year 2004, we analyzed average monthly WIC redemption amounts by vendor 
type, both nationally and by state. 

Procedures for Determining the Extent to Which WIC-Only and Regular WIC 
Vendors' Business and Marketing Practices Differ: 

To identify WIC-only and regular WIC vendors' business and marketing 
practices, we used two data collection strategies: group telephone 
interviews with WIC state agency directors, vendor management staff, 
and local agency staff that participate in vendor monitoring in 
selected states, and site visits to three of the states selected for 
telephone interviews. We developed criteria and selected states and 
officials for the telephone interviews and the site visits. 

Sample Selection: 

Because we were relying on WIC state officials' experience managing 
their WIC-only and regular WIC vendors to identify their business and 
marketing practices, we selected states for the telephone interviews 
that had authorized a substantial number of WIC-only vendors and 
specified 10 as the minimum number of vendors. Using TIP data for 
fiscal year 2004 to determine the number of vendors in operation, we 
selected states that had at least 10 WIC-only vendors that year. During 
fiscal year 2004, the number of WIC-only vendors in the 16 states that 
authorized them varied from 1 to 715, but eight states--California, 
Texas, Florida, North Carolina, Arkansas, Alabama, Georgia, and 
Louisiana--had 10 or more. We treated Puerto Rico as a separate case 
and, because of Hurricane Katrina, excluded Louisiana, leaving seven 
states for interviews. To select telephone interview respondents, we 
asked the WIC state agency director to identify staff who had observed 
WIC-only and regular WIC vendors' business and marketing practices 
directly through representative monitoring and compliance 
investigations. 

To ensure that we visited establishments with a range of key 
characteristics, we selected states for site visits from among those 
with the greatest number of WIC-only vendors--California, Texas, and 
Florida. We selected vendor establishments to visit in consultation 
with the WIC state agency director. Our selection criteria included 
urban and rural locations, years in operation, food price range, and 
vendor size, measured by WIC redemption volume. The California and 
Texas WIC state agencies provided us with a list of vendors from which 
we chose vendors according to our selection criteria. The Florida WIC 
state agency provided us with a list of vendors that met our criteria. 
We visited four WIC-only and four regular WIC vendors in each of the 
three states. 

Data Collection: 

We developed an interview guide with a standard set of questions for 
the telephone interviews and data collection instruments for the site 
visits. As a first step, we compiled a list of business and marketing 
practices from an interview with WIC state agency directors and vendor 
managers; interviews with representatives of vendor associations, such 
as the National Grocers Association, the Gulf Coast Retailers 
Association, and the California Independent Grocers Association; 
and existing studies of WIC-only vendors. These practices include 
selling shelf space to manufacturers; location of stores near clinics 
or military bases; advertising methods such as announcing weekly 
specials in newspaper ads or placing flyers on windshields in parking 
lots; incentives offered to participants at no cost, such as strollers, 
diapers, and bicycles; reduced price offers, such as buy one item, get 
one free; and transportation for participants to and from the vendor's 
establishment. For the telephone interviews, we converted the list of 
practices to a separate set of questions about WIC-only and regular WIC 
vendors. The site visit data collection instruments covered the same 
topics as the telephone instrument to permit comparisons of the 
information provided by WIC state agency staff and our observations of 
vendor establishments and interviews with store managers. However, the 
site visit instrument was designed with fixed-response questions in a 
checklist format to facilitate completion during observation. To 
complement the observational and interview data, we obtained digital 
cameras and, with the WIC vendors' permission, took interior and 
exterior photographs of the vendor establishments we visited. 

Data Analysis: 

For all of the seven states we interviewed by telephone, we prepared a 
state-level table that synthesized the interview responses separately 
by vendor type and key business and marketing practice categories. We 
also prepared summary tables that further aggregated the business and 
marketing practice data within vendor type for each state. We used the 
summary tables to make cross-state comparisons. For the site visit 
interview responses, we created a matrix to summarize key findings on 
store characteristics, illustrative price data, and selected business 
and marketing practices. 

Scenario Analyses of WIC-Only Vendors' Contribution to WIC Program 
Expenditures, if Their Market Share Increases: 

In order to assess WIC-only vendors' contribution to WIC program food 
expenditures, if their market share increased, we developed two 
scenarios, based on available data for 2004 (the latest data 
available). In these scenarios we asked: 

² Scenario 1: What would have happened to the number of food vouchers 
that could have been issued and the number of WIC participants that 
could have been served in 2004, if we increased the number of food 
vouchers redeemed at WIC-only vendors while holding program food 
expenditures constant at fiscal year 2004 levels? 

² Scenario 2: What would have happened to program food expenditures in 
2004 if we increased the number of food vouchers redeemed at WIC-only 
vendors while program expenditures were not held constant and the 
number of food vouchers issued to program participants remained at the 
2004 level? 

Data Collection: 

We obtained copies of administrative data files from WIC state 
agencies' management information systems in California, Texas, and 
Florida. These data included information on every food voucher that had 
actually been redeemed--that is, submitted for payment and paid--in 
these states. The unit of measure in our data was the value of a 
redeemed food voucher, and the data consisted of values for more than 
100 million vouchers. 

Using these data, we could determine the actual number of food vouchers 
redeemed at WIC-only and regular WIC vendors for each of the three 
states, as well as the average value of all food vouchers redeemed at 
WIC-only and regular WIC vendors in each state. For example, figure 12 
depicts the information available on three representative food vouchers 
and how we combined the values for these individual vouchers (e.g., 
$17.95, $13.07, and $12.55) to determine the average value of all 
vouchers redeemed (e.g., $14.52). We did this for all vouchers for WIC- 
only and regular WIC vendors in California, Texas, and Florida. 

Figure 12: Example of the Average Value of Food Vouchers Redeemed by a 
WIC-Only Vendor: 

[See PDF for image] 

Source: GAO analysis. 

[End of figure] 

Even though we were able to calculate the average value of all redeemed 
food vouchers for WIC-only and regular WIC vendors, we were not able to 
determine whether prices for individual food items were higher at WIC- 
only vendors than at regular WIC vendors. In order to answer that type 
of detailed question, we would have needed additional information that 
was not available because of the way data are collected by the states. 
Specifically, we would have needed the price of the individual food 
items listed on the voucher and the quantity of each food item 
purchased, in addition to the total redeemed value. Figure 13 shows 
hypothetical vouchers from two vendors that include the type of 
information that would have been needed for such an analysis. It 
specifies that 2 gallons of milk were purchased at $3.57 per gallon for 
a total expenditure of $7.14. However, the data files we received did 
not contain either the price or the quantity purchased for individual 
vouchers. 

Figure 13: Example of Hypothetical Vouchers Specifying Price and 
Quantity: 

[See PDF for image] 

Source: GAO analysis. 

[End of figure] 

Without information on the quantity and price of the items on food 
vouchers, WIC participants would not know the value of the items they 
received and could not be price sensitive. WIC agencies would also not 
be able to determine the prices of the items they redeemed or whether 
participants received the total quantity of products specified on the 
voucher. Without this information, it is difficult to know why average 
redemption values differ. 

Figure 13 illustrates why it is important to know the quantity actually 
redeemed by the participant. For example, as shown in voucher 1 in the 
figure, the participant received the full quantity of food specified on 
the voucher. The average value of all items is $17.95. In voucher 2, 
the average value of the voucher at $14.00 is less expensive. The 
participant, however, did not buy eggs or cheese and did not receive 
the full quantity of food specified on the voucher. If the voucher 
represents a prescription designed to fulfill shortfalls in the 
participant's nutritional needs, the partial fulfillment suggests that 
although the average value of voucher 2 is less than in voucher 1, the 
actual delivery of the food has not been achieved. 

Voucher 2 in figure 13 also demonstrates why it is necessary to know 
the price of individual items on the voucher. Without this information, 
it is not possible to know whether the prices at one vendor are higher 
than prices at another vendor. In voucher 2, the total value of the 
voucher is less than in voucher 1, yet the price charged for a gallon 
of milk is significantly higher. Use of the average value of the 
voucher of $14.00 clearly does not prove that prices at the second 
vendor are less than prices at the first vendor with the higher average 
value of $17.95. 

In addition, it is important to collect the actual price of the sales 
transaction--collected at the point of sale--rather than a shelf price. 
This is because the price listed on the shelf may not be the actual 
price of the transaction. For example, if milk is being sold as a loss 
leader at the vendor represented by voucher 1, it is possible that the 
price on the shelf is actually $7.00 per gallon even though the price 
on the voucher is $3.57 per gallon. 

We also would have needed information on such things as the size and 
location of stores to further determine why prices and average values 
may have varied between WIC-only and regular WIC vendors in the states. 

The model: 

To answer the questions presented in these two scenarios, we used the 
following equation for the sum of WIC-only and regular WIC retail 
vendor food expenditures: 

1) (program food expenditures for WIC-only vendors) + (program food 
expenditures for regular WIC vendors) = total WIC program food 
expenditures, or: 

2) q(w) x(w) + q(r)x(r) = F(04): 

Where, 

q(w) x(w) = program food expenditures for WIC-only vendors where: 

q(w)= number of vouchers redeemed by WIC-only vendors: 

x(w) = average value of vouchers redeemed by WIC-only vendors: 

q(r)x(r) = program food expenditures for regular WIC vendors where: 

q(r) = number of vouchers redeemed by regular WIC vendors: 

x(r)= average value of vouchers redeemed by regular WIC vendors: 

F(04) = total WIC program food expenditures for fiscal year 2004: 

Table 6 shows the actual data for 2004 for California and can be used 
to demonstrate the application of the model. The number of vouchers 
redeemed by WIC-only vendors (qw) equaled 28,866,000, the average value 
of vouchers redeemed (xw ) equaled $13.15.[Footnote 37] Conversely, the 
number of vouchers redeemed by regular WIC vendors (qr) equaled 
40,745,000, the average value of vouchers redeemed (xr) equaled $12.28. 
Total WIC program food expenditures for California for fiscal year 2004 
(F04 ) equaled $880,096,000. These data can be used in the formula to 
obtain the following: 

3) (28,866,000* $13.15) + (40,745,000 * $12.28) = $880,096,000[Footnote 
38] 

Table 6: Example of Application of Model to Actual Data for California: 

California: 2004 Actual; 
WIC-only vendors: Number of vouchers redeemed: (Thousands) 28,866; 
WIC-only vendors: Average value of food vouchers redeemed: $13.15; 
Regular WIC vendors: Number of vouchers redeemed: (Thousands) 40,745; 
Regular WIC vendors: Average value of food vouchers redeemed: $12.28;  
Total: Total number of food vouchers redeemed: (Thousands)69,611; 
Total: Total WIC program food expenditures: 880,096. 

Source: GAO analysis of California WIC state agency redemption data for 
2004. 

[End of Table] 

Scenario 1: 

In the first scenario, we wanted to see how participation would change 
in California, Texas, and Florida in 2004 if the number of vouchers 
redeemed at WIC-only vendors increased while holding total WIC program 
food expenditures constant at 2004 levels. We did this by increasing 
the number of vouchers redeemed at WIC-only vendors in the states in 
2004 by a hypothetical 10, 20, 30, 50, and 100 percent. Because we 
increased the number of food vouchers redeemed at WIC-only vendors, and 
do not allow total WIC program food expenditures to increase, the total 
number of vouchers for WIC-only and regular WIC vendors that can be 
issued depends, in part, on whether the average value of redeemed 
vouchers is higher for WIC-only vendors. If the average value is 
higher, fewer food vouchers could be issued under this scenario and 
thus fewer participants could be served. This would be reflected in our 
scenario by a reduction in the number of vouchers redeemed by regular 
WIC vendors. We calculated this change in the number of vouchers 
redeemed by regular WIC vendors by using equation 2a, which is equation 
2 transformed.[Footnote 39] We calculated the number of vouchers that 
would have been redeemed at regular WIC vendors qr for each 
hypothetical increase. All else was held constant at 2004 levels. 

2a.) q(r) = ((F(04) - q(w) x(w)/)/x(r) ): 

We then used these new quantities calculated for WIC-only and regular 
WIC vendors under each of the hypothetical increases to determine the 
program food expenditures for each of the vendors. Examples of the 
scenario results for California are presented in table 7. In the case 
of a 100 percent increase in WIC-only vendor redemptions, we increased 
the number of WIC-only redemptions from the actual value in 2004-- 
28,866,000 by a hypothetical 100 percent to 57,732,000. The resulting 
number of redemptions for regular WIC vendors, as calculated in formula 
2a, decreased from the 2004 value of 40,745,000 to 9,827,000. All else-
-the average value of redeemed vouchers for WIC-only ($13.15) and 
regular WIC vendors ($12.28), as well as total WIC program food 
expenditures ($880,096,000)--is held constant. 

Table 7: Example of Calculation of WIC-Only and Regular WIC Vendors' 
Number and Average Value of Food Vouchers for California: 

California: 100% increase; 
WIC-only vendors: Number of food vouchers redeemed: (Thousands) 57,732; 
WIC-only vendors: Average value of food vouchers redeemed: $13.15; 
Regular WIC vendors: Number of food vouchers redeemed: (Thousands) 
9,827; 
Regular WIC vendors: Average value of food vouchers redeemed: $12.28; 
Total: Total number of food vouchers redeemed: (Thousands) 67,560; 
Total: Total WIC program food expenditures: $880,096. 

Source: GAO analysis of California WIC state agency redemption data for 
2004. 

[End of table] 

This decline in the number of vouchers redeemed at regular WIC vendors 
results from the restriction in the analysis of keeping total WIC 
program food expenditures constant at 2004 levels. This decline occurs 
because according to our calculations based on all food vouchers for 
the state, the average value of food vouchers redeemed at WIC-only 
vendors is somewhat higher than the average value at regular WIC 
vendors. 

Calculating the Number of Participants: 

We calculated the number of participants who might be affected by the 
change in the scenario. We did this by adding together the number of 
vouchers redeemed at WIC-only and regular WIC vendors in 2004 and under 
each hypothetical increase in the scenario for each of the three 
states. For example, in California, a total of 69,611,000 vouchers were 
redeemed in 2004 (table 6). As shown in table 7, for a doubling in the 
number of vouchers redeemed by WIC-only vendors, we estimated a total 
of 67,560,000 vouchers. 

In the absence of more specific information on participation, we simply 
divided the total number of vouchers redeemed by the average number of 
vouchers redeemed per participant for each of the states. For example, 
in California we estimated 32.69 vouchers per participant.[Footnote 40] 
We used that information to estimate that there were 2,130,000 
participants in 2004, (69,611,000 / 32.69). Conversely, as shown in 
table 8, if the redemptions of vouchers by WIC-only vendors doubled, we 
estimated that 2,067,000 participants (67,559,000 / 32.69) would be 
affected. 

As shown in table 8, in California, the difference between the number 
of participants in 2004 and the estimated number of participants if WIC-
only vendor redemptions increased 100 percent (2,067,000- 2,130,000) 
indicated a decline of 63,000 participants that could be served. In 
California, this represented about 3 percent of the number of 
participants in 2004, ((63,000 / 2,130,000)*100). 

Table 8: Example Calculation of Decline in Number of Participants for 
California: 

California: 2004 actual; 
Total number of vouchers redeemed, all vendors: (Thousands) 69,611; 
Average number of vouchers redeemed per person: (Number) 32.69; 
Number of participants: (Thousands) 2,130. 

California: 100 percent increase in vouchers redeemed at WIC-only 
vendors; 
Total number of vouchers redeemed, all vendors: (Thousands) 67,560; 
Average number of vouchers redeemed per person: (Number) 32.69; 
Number of participants: (Thousands) 2,067. 

California: Decline in vouchers and participants; 
Total number of vouchers redeemed, all vendors: (Thousands) -2,052; 
Average number of vouchers redeemed per person: (Number) 0; 
Number of participants: (Thousands) -63. 

Source: GAO analysis of California WIC state agency redemption data for 
2004. 

Note: Numbers may not add because of rounding. 

[End of table] 

Scenario 2: 

In the second scenario, we wanted to see how expenditures that had been 
held constant in the previous scenario would have to change in order to 
maintain the level of program participation constant at 2004 levels 
when the market share of WIC-only vendors increased. As in the previous 
scenario, we increased the number of redeemed food vouchers for WIC- 
only vendors (qw) by a hypothetical 10, 20, 50, and 100 percent. While 
keeping the total number of vouchers redeemed constant at 2004 levels, 
we again used equation 2a to calculate the number of redeemed vouchers 
for regular WIC vendors (qr). We allowed total expenditures to increase 
(F04). We then looked at the difference between that new level of 
expenditures and 2004 levels and then calculated what that change 
represented as a percentage of 2004 levels. 

Results of the Analysis for Scenario 1: 

The results of the analysis for scenario 1 are presented in the next 
two tables. As shown in table 9, if the number of food vouchers 
redeemed in California at WIC-only vendors doubled, the number would 
increase from 28.8 million to 57.7 million, while the number at regular 
WIC vendors would decline from 40.7 million to 9.8 million. 

Table 9: Results of the Calculation of WIC-Only and Regular WIC 
Vendors' Number and Average Value of Food Vouchers for California, 
Texas, and Florida:  

Actual and scenario increases in vouchers at WIC-only vendors: 
California: 2004 actual; 
WIC-only vendors: Number of food vouchers redeemed: (Thousands) 28,866; 
WIC-only vendors: Average value of food vouchers redeemed: $13.15; 
Regular WIC vendors: Number of food vouchers redeemed: (Thousands) 
40,745; 
Regular WIC vendors: Average value of food vouchers redeemed: $12.28; 
Total WIC program food expenditures: (Thousands) 880,096. 

Actual and scenario increases in vouchers at WIC-only vendors: 
California: 10 % increase; 
WIC-only vendors: Number of food vouchers redeemed: (Thousands) 31,753; 
WIC-only vendors: Average value of food vouchers redeemed: $13.15; 
Regular WIC vendors: Number of food vouchers redeemed: (Thousands) 
37,653; 
Regular WIC vendors: Average value of food vouchers redeemed: 12.28; 
Total WIC program food expenditures: (Thousands) 880,096. 

Actual and scenario increases in vouchers at WIC-only vendors: 
California: 20% increase; 
WIC-only vendors: Number of food vouchers redeemed: (Thousands) 34,639; 
WIC-only vendors: Average value of food vouchers redeemed: 13.15;  
Regular WIC vendors: Number of food vouchers redeemed: (Thousands) 
34,561; 
Regular WIC vendors: Average value of food vouchers redeemed: 12.28; 
Total WIC program food expenditures: (Thousands) 880,096. 

Actual and scenario increases in vouchers at WIC-only vendors: 
California: 30 % increase; 
WIC-only vendors: Number of food vouchers redeemed: (Thousands) 37,526; 
WIC-only vendors: Average value of food vouchers redeemed: 13.15; 
Regular WIC vendors: Number of food vouchers redeemed: (Thousands) 
31,470; 
Regular WIC vendors: Average value of food vouchers redeemed: 12.28; 
Total WIC program food expenditures: (Thousands) 880,096. 

Actual and scenario increases in vouchers at WIC-only vendors: 
California: 50 % increase; 
WIC-only vendors: Number of food vouchers redeemed: (Thousands) 43,299; 
WIC-only vendors: Average value of food vouchers redeemed: 13.15; 
Regular WIC vendors: Number of food vouchers redeemed: (Thousands) 
25,286; 
Regular WIC vendors: Average value of food vouchers redeemed: 12.28; 
Total WIC program food expenditures: (Thousands) 880,096. 

Actual and scenario increases in vouchers at WIC-only vendors: 
California: 100% increase; 
WIC-only vendors: Number of food vouchers redeemed: (Thousands) 57,732; 
WIC-only vendors: Average value of food vouchers redeemed: 13.15; 
Regular WIC vendors: Number of food vouchers redeemed: (Thousands) 
9,827; 
Regular WIC vendors: Average value of food vouchers redeemed: 12.28; 
Total WIC program food expenditures: (Thousands) 880,096. 

Actual and scenario increases in vouchers at WIC-only vendors: Texas: 
2004 actual; 
WIC-only vendors: Number of food vouchers redeemed: 1,808; 
WIC- only vendors: Average value of food vouchers redeemed: 31.55; 
Regular WIC vendors: Number of food vouchers redeemed: 20,988; 
Regular WIC vendors: Average value of food vouchers redeemed: 21.72; 
Total WIC program food expenditures: 512,976. 

Actual and scenario increases in vouchers at WIC-only vendors: Texas: 
10 % increase; 
WIC-only vendors: Number of food vouchers redeemed: 1,989; 
WIC-only vendors: Average value of food vouchers redeemed: 31.55; 
Regular WIC vendors: Number of food vouchers redeemed: 20,726; 
Regular WIC vendors: Average value of food vouchers redeemed: 21.72; 
Total WIC program food expenditures: 512,976. 

Actual and scenario increases in vouchers at WIC-only vendors: Texas: 
20% increase; 
WIC-only vendors: Number of food vouchers redeemed: 2,170; 
WIC-only vendors: Average value of food vouchers redeemed: 31.55;  
Regular WIC vendors: Number of food vouchers redeemed: 20,463; 
Regular WIC vendors: Average value of food vouchers redeemed: 21.72; 
Total WIC program food expenditures: 512,976. 

Actual and scenario increases in vouchers at WIC-only vendors: Texas: 
30 % increase; 
WIC-only vendors: Number of food vouchers redeemed: 2,350; 
WIC-only vendors: Average value of food vouchers redeemed: 31.55; 
Regular WIC vendors: Number of food vouchers redeemed: 20,201; 
Regular WIC vendors: Average value of food vouchers redeemed: 21.72; 
Total WIC program food expenditures: 512,976. 

Actual and scenario increases in vouchers at WIC-only vendors: Texas: 
50 % increase; 
WIC-only vendors: Number of food vouchers redeemed: 2,711; 
WIC-only vendors: Average value of food vouchers redeemed: 31.55;  
Regular WIC vendors: Number of food vouchers redeemed: 19,675; 
Regular WIC vendors: Average value of food vouchers redeemed: 21.72; 
Total WIC program food expenditures: 512,976. 

Actual and scenario increases in vouchers at WIC-only vendors: Texas: 
100% increase; 
WIC-only vendors: Number of food vouchers redeemed: 3,616; 
WIC-only vendors: Average value of food vouchers redeemed: 31.55; 
Regular WIC vendors: Number of food vouchers redeemed: 18,362; 
Regular WIC vendors: Average value of food vouchers redeemed: 21.72; 
Total WIC program food expenditures: 512,976. 

Actual and scenario increases in vouchers at WIC-only vendors: Florida: 
2004 actual; 
WIC-only vendors: Number of food vouchers redeemed: 1,562; 
WIC- only vendors: Average value of food vouchers redeemed: 22.92; 
Regular WIC vendors: Number of food vouchers redeemed: 10,641; 
Regular WIC vendors: Average value of food vouchers redeemed: 18.50; 
Total WIC program food expenditures: 232,709. 

Actual and scenario increases in vouchers at WIC-only vendors: Florida: 
10 % increase; 
WIC-only vendors: Number of food vouchers redeemed: 1,719; 
WIC-only vendors: Average value of food vouchers redeemed: 22.92; 
Regular WIC vendors: Number of food vouchers redeemed: 10,447; 
Regular WIC vendors: Average value of food vouchers redeemed: 18.50; 
Total WIC program food expenditures: 232,709. 

Actual and scenario increases in vouchers at WIC-only vendors: Florida: 
20% increase; 
WIC-only vendors: Number of food vouchers redeemed: 1,875; 
WIC-only vendors: Average value of food vouchers redeemed: 22.92; 
Regular WIC vendors: Number of food vouchers redeemed: 10,254; 
Regular WIC vendors: Average value of food vouchers redeemed: 18.50; 
Total WIC program food expenditures: 232,709. 

Actual and scenario increases in vouchers at WIC-only vendors: Florida: 
30 % increase; 
WIC-only vendors: Number of food vouchers redeemed: 2,031; 
WIC-only vendors: Average value of food vouchers redeemed: 22.92; 
Regular WIC vendors: Number of food vouchers redeemed: 10,060; 
Regular WIC vendors: Average value of food vouchers redeemed: 18.50; 
Total WIC program food expenditures: 232,709. 

Actual and scenario increases in vouchers at WIC-only vendors: Florida: 
50 % increase; 
WIC-only vendors: Number of food vouchers redeemed: 2,343; 
WIC-only vendors: Average value of food vouchers redeemed: 22.92; 
Regular WIC vendors: Number of food vouchers redeemed: 9,673; 
Regular WIC vendors: Average value of food vouchers redeemed: 18.50; 
Total WIC program food expenditures: 232,709. 

Actual and scenario increases in vouchers at WIC-only vendors: Florida: 
100% increase; 
WIC-only vendors: Number of food vouchers redeemed: 3,125; 
WIC-only vendors: Average value of food vouchers redeemed: 22.92; 
Regular WIC vendors: Number of food vouchers redeemed: 8,706; 
Regular WIC vendors: Average value of food vouchers redeemed: 18.50; 
Total WIC program food expenditures: 232,709. 

Source: GAO analysis of California, Texas, and Florida WIC state agency 
redemption data for 2004. 

[End of table] 

WIC-only vendors account for a much smaller share of the WIC market in 
Texas and Florida than in California. In Texas, for example a doubling 
of the WIC-only vendors' market share would result in an increase in 
the number of food vouchers redeemed from 1.8 million to 3.6 million-- 
with the number of food vouchers redeemed at regular WIC vendors 
decreasing from 20.9 million to 18.3 million. 

For Florida, the doubling of WIC-only vendors' market share would 
result in an increase in the number of food vouchers redeemed from 1.6 
million to 3.1 million--with the number of food vouchers redeemed at 
regular WIC vendors decreasing from 10.6 million to 8.7 million. 

In all the states, the average value of vouchers redeemed at WIC-only 
vendors was higher than the average value of vouchers redeemed at 
regular WIC vendors. The value for California was calculated as $13.15, 
while the value for regular WIC was $12.28, with a difference of $0.87 
between the two types of vendors. In Texas, the average value of 
vouchers redeemed at WIC-only vendors was calculated to be $31.55, 
while the value for regular WIC vendors was $21.72--a difference of 
$9.83. In Florida, WIC-only voucher redemptions averaged $22.92 in 
value, while the value for regular WIC was $18.50--a difference of 
$4.42. In addition, according to our analysis, the average value of 
vouchers redeemed at regular WIC vendors was lowest in California, at 
$12.28, followed by Florida at $18.50 and Texas at $21.72. The 
difference in the average value of vouchers redeemed should be treated 
with a great deal of caution. Because we used the average value of all 
food vouchers in our analysis without knowing the price or quantity of 
the individual food items that made up the vouchers, we could not 
determine if the higher average value meant that prices for individual 
food items were higher at WIC-only vendors. As described earlier, the 
data represent the average value of the vouchers, not prices for 
specific food items. These data do not enable us to make price 
comparisons between the two types of vendors. In addition, this 
analysis does not allow us to determine why the average values in 
vouchers redeemed may be higher. To do that, we would need enough data 
on the costs vendors incurred in obtaining the food items as well as an 
understanding of the factors affecting those costs, such as store size, 
store location, marketing conditions and business practices, and any 
other factors affecting food item prices, to identify the factors 
affecting voucher values. 

The results of our calculation of the decline in the number of 
participants due to the increase in WIC-only vendors' market share are 
presented in table 10. The number of redemptions as reported to us by 
each of the states was 33 per participant in California, 16 in Texas, 
and 18 in Florida. The decline in the number of participants ranged 
from less than 1 percent for a 10 percent increase in the number or 
redemptions at WIC-only vendors to about 3 percent for a 100 percent 
increase. 

Table 10: Results of the Calculation of Decline in Number of 
Participants for California, Texas, and Florida: 

Actual and scenario increases in food vouchers at WIC-only vendors: 
California: 2004 actual; 
Total number of vouchers, all vendors: 69,611; 
Average number of vouchers per person: 33; 
Number of participants: 2,130; 
Decline in number of participants: -; 
Decline in number of participants as a percentage of 2004: [Empty]. 

Actual and scenario increases in food vouchers at WIC-only vendors: 
California: 10 % increase; 
Total number of vouchers, all vendors: 69,406; 
Average number of vouchers per person: 33; 
Number of participants: 2,123; 
Decline in number of participants: (Thousands) -6; 
Decline in number of participants as a percentage of 2004: 0.29%. 

Actual and scenario increases in food vouchers at WIC-only vendors: 
California: 20% increase; 
Total number of vouchers, all vendors: 69,201; 
Average number of vouchers per person: 33; 
Number of participants: 2,117; 
Decline in number of participants: (Thousands) -13; 
Decline in number of participants as a percentage of 2004: 0.59%. 

Actual and scenario increases in food vouchers at WIC-only vendors: 
California: 30 % increase; 
Total number of vouchers, all vendors: 68,996; 
Average number of vouchers per person: 33; 
Number of participants: 2,111; 
Decline in number of participants: (Thousands) -19; 
Decline in number of participants as a percentage of 2004: 0.88%. 

Actual and scenario increases in food vouchers at WIC-only vendors: 
California: 50 % increase; 
Total number of vouchers, all vendors: 68,585; 
Average number of vouchers per person: 33; 
Number of participants: 2,098; 
Decline in number of participants: (Thousands) -31; 
Decline in number of participants as a percentage of 2004: 1.47%. 

Actual and scenario increases in food vouchers at WIC-only vendors: 
California: 100% increase; 
Total number of vouchers, all vendors: 67,560; 
Average number of vouchers per person: 33; 
Number of participants: 2,067; 
Decline in number of participants: (Thousands) -63; 
Decline in number of participants as a percentage of 2004: 2.95%. 

Actual and scenario increases in food vouchers at WIC-only vendors: 
Texas: 2004 actual; 
Total number of vouchers, all vendors: 22,796; 
Average number of vouchers per person: 16; 
Number of participants: 1,469; 
Decline in number of participants: -; 
Decline in number of participants as a percentage of 2004: [Empty]. 

Actual and scenario increases in food vouchers at WIC-only vendors: 
Texas: 10 % increase; 
Total number of vouchers, all vendors: 22,715; 
Average number of vouchers per person: 16; 
Number of participants: 1,464; 
Decline in number of participants: (Thousands) -5; 
Decline in number of participants as a percentage of 2004: 0.36%. 

Actual and scenario increases in food vouchers at WIC-only vendors: 
Texas: 20% increase; 
Total number of vouchers, all vendors: 22,633; 
Average number of vouchers per person: 16; 
Number of participants: 1,458; 
Decline in number of participants: (Thousands) -11; 
Decline in number of participants as a percentage of 2004: 0.72%. 

Actual and scenario increases in food vouchers at WIC-only vendors: 
Texas: 30 % increase; 
Total number of vouchers, all vendors: 22,551; 
Average number of vouchers per person: 16; 
Number of participants: 1,453; 
Decline in number of participants: (Thousands) -16; 
Decline in number of participants as a percentage of 2004: 1.08%. 

Actual and scenario increases in food vouchers at WIC-only vendors: 
Texas: 50 % increase; 
Total number of vouchers, all vendors: 22,387; 
Average number of vouchers per person: 16; 
Number of participants: 1,443; 
Decline in number of participants: (Thousands) -26; 
Decline in number of participants as a percentage of 2004: 1.79%. 

Actual and scenario increases in food vouchers at WIC-only vendors: 
100% increase; 
Total number of vouchers, all vendors: 21,978; 
Average number of vouchers per person: 16; 
Number of participants: 1,416; 
Decline in number of participants: (Thousands) -53; 
Decline in number of participants as a percentage of 2004: 3.59%. 

Actual and scenario increases in food vouchers at WIC-only vendors: 
Florida: 2004 actual; 
Total number of vouchers, all vendors: 12,203; 
Average number of vouchers per person: 18; 
Number of participants: 679; 
Decline in number of participants: -; 
Decline in number of participants as a percentage of 2004: [Empty]. 

Actual and scenario increases in food vouchers at WIC-only vendors: 
Florida: 10 % increase; 
Total number of vouchers, all vendors: 12,166; 
Average number of vouchers per person: 18; 
Number of participants: 677; 
Decline in number of participants: (Thousands) -2; 
Decline in number of participants as a percentage of 2004: 0.31%. 

Actual and scenario increases in food vouchers at WIC-only vendors: 
Florida: 20% increase; 
Total number of vouchers, all vendors: 12,129; 
Average number of vouchers per person: 18; 
Number of participants: 675; 
Decline in number of participants: (Thousands) -4; 
Decline in number of participants as a percentage of 2004: 0.61%. 

Actual and scenario increases in food vouchers at WIC-only vendors: 
Florida: 30 % increase; 
Total number of vouchers, all vendors: 12,091; 
Average number of vouchers per person: 18; 
Number of participants: 673; 
Decline in number of participants: (Thousands) -6; 
Decline in number of participants as a percentage of 2004: 0.92%. 

Actual and scenario increases in food vouchers at WIC-only vendors: 
Florida: 50 % increase; 
Total number of vouchers, all vendors: 12,017; 
Average number of vouchers per person: 18; 
Number of participants: 669; 
Decline in number of participants: (Thousands) -10; 
Decline in number of participants as a percentage of 2004: 1.53%. 

Actual and scenario increases in food vouchers at WIC-only vendors: 
Florida: 100% increase; 
Total number of vouchers, all vendors: 11,831; 
Average number of vouchers per person: 18; 
Number of participants: 658; 
Decline in number of participants: (Thousands) -21; 
Decline in number of participants as a percentage of 2004: 3.05%. 

Source: GAO analysis of California, Texas and Florida WIC state agency 
redemption data for 2004. 

[End of table] 

Results of the Analysis for Scenario 2: 

The results of our analysis for scenario 2 are shown in table 11. 
Expenditures for WIC-only vendors in California increased from $380 
million for a 10 percent increase to $759 million for a doubling of 
their market share. Expenditures changed by $2.5 million for the 10 
percent increase to $25 million for a 100 percent increase in WIC-only 
market share. 

Table 11: Results of Allowing Program Food Expenditures to Increase for 
California, Texas, and Florida: 

Actual and scenario increases in vouchers at WIC-only vendors: 
California: 2004 actual; 
Program food expenditures by vendor type: WIC-only vendors: $379,704; 
Program food expenditures by vendor type: Regular WIC vendors: 
$500,392;  
Total program food expenditures: Total food expenditures: $880,096; 
Total program food expenditures: Change in food expenditures under 
scenarios: [Empty]; 
Change in total program food expenditures as a percentage of 2004: 
[Empty]. 

Actual and scenario increases in vouchers at WIC-only vendors: 
California: 10 % increase; 
Program food expenditures by vendor type: WIC-only vendors: $417,674; 
Program food expenditures by vendor type: Regular WIC vendors: 
$464,942; 
Total program food expenditures: Total food expenditures: $882,616; 
Total program food expenditures: Change in food expenditures under 
scenarios: $2,520; 
Change in total program food expenditures as a percentage of 2004: 
0.29%. 

Actual and scenario increases in vouchers at WIC-only vendors: 
California: 20% increase; 
Program food expenditures by vendor type: WIC-only vendors: $455,644; 
Program food expenditures by vendor type: Regular WIC vendors: 
$429,491; 
Total program food expenditures: Total food expenditures: $885,135; 
Total program food expenditures: Change in food expenditures under 
scenarios: $5,039; 
Change in total program food expenditures as a percentage of 2004: 
0.57%. 

Actual and scenario increases in vouchers at WIC-only vendors: 
California: 50 % increase; 
Program food expenditures by vendor type: WIC-only vendors: $569,555; 
Program food expenditures by vendor type: Regular WIC vendors: 
$323,139; 
Total program food expenditures: Total food expenditures: $892,694; 
Total program food expenditures: Change in food expenditures under 
scenarios: $12,598; 
Change in total program food expenditures as a percentage of 2004: 
1.43%. 

Actual and scenario increases in vouchers at WIC-only vendors: 
California: 100% increase; 
Program food expenditures by vendor type: WIC-only vendors: $759,407; 
Program food expenditures by vendor type: Regular WIC vendors: 
$145,885; 
Total program food expenditures: Total food expenditures: $905,292; 
Total program food expenditures: Change in food expenditures under 
scenarios: $25,196; 
Change in total program food expenditures as a percentage of 2004: 
2.86%. 

Actual and scenario increases in vouchers at WIC-only vendors: Texas: 
2004 actual; 
Program food expenditures by vendor type: WIC-only vendors: $57,046; 
Program food expenditures by vendor type: Regular WIC vendors: 
$455,930; 
Total program food expenditures: Total food expenditures: $512,976; 
Total program food expenditures: Change in food expenditures under 
scenarios: [Empty]; 
Change in total program food expenditures as a percentage of 2004: 
[Empty]. 

Actual and scenario increases in vouchers at WIC-only vendors: Texas: 
10 % increase; 
Program food expenditures by vendor type: WIC-only vendors: $62,751; 
Program food expenditures by vendor type: Regular WIC vendors: 
$452,002; 
Total program food expenditures: Total food expenditures: $514,753; 
Total program food expenditures: Change in food expenditures under 
scenarios: $1,777; 
Change in total program food expenditures as a percentage of 2004: 
0.35%. 

Actual and scenario increases in vouchers at WIC-only vendors: Texas: 
20% increase; 
Program food expenditures by vendor type: WIC-only vendors: $68,455; 
Program food expenditures by vendor type: Regular WIC vendors: 
$448,075; 
Total program food expenditures: Total food expenditures: $516,530; 
Total program food expenditures: Change in food expenditures under 
scenarios: $3,554; 
Change in total program food expenditures as a percentage of 2004: 
0.69%. 

Actual and scenario increases in vouchers at WIC-only vendors: Texas: 
50 % increase; 
Program food expenditures by vendor type: WIC-only vendors: $85,569; 
Program food expenditures by vendor type: Regular WIC vendors: 
$436,292;  
Total program food expenditures: Total food expenditures: $521,861; 
Total program food expenditures: Change in food expenditures under 
scenarios: $8,885; 
Change in total program food expenditures as a percentage of 2004: 
1.73%. 

Actual and scenario increases in vouchers at WIC-only vendors: Texas: 
100% increase; 
Program food expenditures by vendor type: WIC-only vendors: $114,092; 
Program food expenditures by vendor type: Regular WIC vendors: 
$416,654; 
Total program food expenditures: Total food expenditures: $530,746; 
Total program food expenditures: Change in food expenditures under 
scenarios: $17,770; 
Change in total program food expenditures as a percentage of 2004: 
3.46%. 

Actual and scenario increases in vouchers at WIC-only vendors: Florida: 
2004 actual; 
Program food expenditures by vendor type: WIC-only vendors: $35,801; 
Program food expenditures by vendor type: Regular WIC vendors: 
$196,907; 
Total program food expenditures: Total food expenditures: $232,709; 
Total program food expenditures: Change in food expenditures under 
scenarios: [Empty]; 
Change in total program food expenditures as a percentage of 2004: 
[Empty]. 

Actual and scenario increases in vouchers at WIC-only vendors: Florida: 
10 % increase; 
Program food expenditures by vendor type: WIC-only vendors: $39,382; 
Program food expenditures by vendor type: Regular WIC vendors: 
$194,016; 
Total program food expenditures: Total food expenditures: $233,398; 
Total program food expenditures: Change in food expenditures under 
scenarios: $689; 
Change in total program food expenditures as a percentage of 2004: 
0.30%. 

Actual and scenario increases in vouchers at WIC-only vendors: Florida: 
20% increase; 
Program food expenditures by vendor type: WIC-only vendors: $42,962; 
Program food expenditures by vendor type: Regular WIC vendors: 
$191,125; 
Total program food expenditures: Total food expenditures: $234,087; 
Total program food expenditures: Change in food expenditures under 
scenarios: $1,378; 
Change in total program food expenditures as a percentage of 2004: 
0.59%. 

Actual and scenario increases in vouchers at WIC-only vendors: Florida: 
50 % increase; 
Program food expenditures by vendor type: WIC-only vendors: $53,702; 
Program food expenditures by vendor type: Regular WIC vendors: 
$182,452; 
Total program food expenditures: Total food expenditures: $236,154; 
Total program food expenditures: Change in food expenditures under 
scenarios: $3,446; 
Change in total program food expenditures as a percentage of 2004: 
1.48%. 

Actual and scenario increases in vouchers at WIC-only vendors: Florida: 
100% increase; 
Program food expenditures by vendor type: WIC-only vendors: $71,603; 
Program food expenditures by vendor type: Regular WIC vendors: 
$167,997; 
Total program food expenditures: Total food expenditures: $239,600; 
Total program food expenditures: Change in food expenditures under 
scenarios: $6,891; 
Change in total program food expenditures as a percentage of 2004: 
2.96%. 

Source: GAO analysis of California, Texas, and Florida WIC state agency 
redemption data for 2004. 

[End of table] 

In Texas, program food expenditures in the scenario increased from $1.8 
million to $17.8 million, while expenditures increased from $689,000 to 
$6.9 million in Florida. In all three states the increase represented 
from less than 1 percent to about 3 percent of 2004 values. 

Limitations: 

The scenarios presented are based on the best data available at the 
time of the analysis. The results, however, are illustrative and leave 
unanswered some fundamental questions, including whether WIC-only 
vendors charge higher prices for food items and if so why the prices 
would be higher and what is the overall effect on total program food 
expenditures and participation. In order to more fully answer these 
questions, we would have to know more about the actual prices and 
quantities of individual food items on the redemption vouchers. Any 
price comparison would have to be for similar products of similar 
quantity and quality. In addition, we would also have to know the 
factors that may be influencing prices. This would include such things 
as the costs for obtaining the product, as well as the difference 
between that cost and price. In addition, even if price differences 
exist, certain factors affecting the store's costs--the size of the 
store, the location of the store, and the general market structure in 
which the store operates--may help explain the price differences. In 
the case of the WIC market, the role of the program itself cannot be 
ignored; for example, that participants are not price sensitive. Thus 
to fully understand the price difference between WIC-only and regular 
WIC vendors, we would need not only additional data but a different 
framework of analysis that would allow us to hold various factors 
constant while changing others. This type of detailed analysis would 
require significant resources to gather the data and, in addition, 
would probably be limited in scale to cover local rather than national 
WIC markets. 

[End of section] 

Appendix II: Number of WIC-Only Vendors, Fiscal Years 1999-2004: 

State: Alabama; 
1999: 0; 
2000: 0; 
2001: 0; 
2002: 3; 
2003: 4; 
2004: 19. 

State: Arkansas; 
1999: 4; 
2000: 4; 
2001: 9; 
2002: 0; 
2003: 0; 
2004: 42. 

State: California; 
1999: 235; 
2000: 303; 
2001: 378; 
2002: 516; 
2003: 653; 
2004: 715. 

State: District of Columbia; 
1999: 0; 
2000: 0; 
2001: 0; 
2002: 1; 
2003: 1; 
2004: 1. 

State: Florida; 
1999: 57; 
2000: 78; 
2001: 90; 
2002: 106; 
2003: 109; 
2004: 109. 

State: Georgia; 
1999: 0; 
2000: 0; 
2001: 0; 
2002: 0; 
2003: 0; 
2004: 22. 

State: Kansas; 
1999: 0; 
2000: 0; 
2001: 0; 
2002: 0; 
2003: 1; 
2004: 3. 

State: Louisiana; 
1999: 4; 
2000: 5; 
2001: 4; 
2002: 6; 
2003: 13; 
2004: 11. 

State: Maryland; 
1999: 0; 
2000: 0; 
2001: 0; 
2002: 1; 
2003: 1; 
2004: 0. 

State: Missouri; 
1999: 0; 
2000: 1; 
2001: 0; 
2002: 0; 
2003: 0; 
2004: 0. 

State: New Mexico; 
1999: 4; 
2000: 4; 
2001: 4; 
2002: 4; 
2003: 4; 
2004: 7. 

State: North Carolina; 
1999: 2; 
2000: 11; 
2001: 18; 
2002: 29; 
2003: 44; 
2004: 72. 

State: Oklahoma; 
1999: 5; 
2000: 6; 
2001: 6; 
2002: 6; 
2003: 6; 
2004: 8. 

State: Oregon; 
1999: 5; 
2000: 7; 
2001: 7; 
2002: 0; 
2003: 0; 
2004: 0. 

State: Tennessee; 
1999: 2; 
2000: 2; 
2001: 2; 
2002: 3; 
2003: 2; 
2004: 1. 

State: Texas; 
1999: 69; 
2000: 89; 
2001: 86; 
2002: 81; 
2003: 116; 
2004: 162. 

State: Utah; 
1999: 2; 
2000: 1; 
2001: 1; 
2002: 1; 
2003: 1; 
2004: 2. 

State: Virginia; 
1999: 5; 
2000: 12; 
2001: 16; 
2002: 22; 
2003: 6; 
2004: 6. 

State: Total WIC-only vendors; 
1999: 394; 
2000: 523; 
2001: 621; 
2002: 779; 
2003: 961; 
2004: 1,180. 

Source: GAO analysis of FNS 1999-2004 TIP data. 

Note: Vendor counts include any vendor in operation at some point 
during the fiscal year. States not listed did not authorize any WIC- 
only vendors at any time during any of the fiscal years listed. 

[End of table] 

[End of section] 

Appendix III: Average Monthly Redemptions per WIC-Only Vendor by State 
in Fiscal Year 2004: 

The figure below shows the average monthly redemptions per WIC-only 
vendor and the number of these vendors in the 15 states (including the 
District of Columbia) with them in fiscal year 2004. 

Figure 14: Average Monthly Redemptions per WIC-Only Vendor by State in 
Fiscal Year 2004: 

[See PDF for image] 

Source: GAO analysis of FNS regional office 2004 TIP files.  

Note: N = number of WIC-only vendors with valid redemption data in 
fiscal year 2004. States are listed from left to right with decreasing 
numbers of WIC-only vendors. 

[End of figure]

[End of section] 

Appendix IV: WIC Vouchers Most Frequently Used at WIC-Only and Regular 
WIC Vendors in California, Texas and Florida: 

The figures below show the most frequently used vouchers for WIC-only 
and WIC regular vendors as well as the state total. We defined "most 
frequently" used as those that accounted for more than 1 percent of the 
total. The figures indicate that both WIC-only and regular vendors are 
redeeming the same type of vouchers. 

Figure 15: Most Frequently Used Vouchers for WIC-Only, Regular and 
State Total for California, 2004: 

[See PDF for image] 

Source: GAO analysis of California WIC state agency redemption data for 
2004. 

[End of figure] 

Figure 16: Most Frequently Used Vouchers for WIC-Only, Regular and 
State Total for Texas, 2004: 

[See PDF for image] 

Source: GAO analysis of Texas WIC state agency redemption data for 
2004. 

[End of figure] 

[This page left blank intentionally.] 

Figure 17: Most Frequently Used Vouchers for WIC-Only, Regular and 
State Total for Florida, 2004: 

[See PDF for Image] 

Source: GAO analysis of Florida WIC state agency redemption data for 
2004. 

[End of Figure] 

[End of section] 

Appendix V: GAO Contacts and Staff Acknowledgments: 

GAO Contact: 

Cynthia M. Fagnoni (202) 512-7215, fagnonic@gao.gov: 

Acknowledgments: 

Kay Brown,(Assistant Director), Sara Edmondson, (AIC), Carol Bray, 
Casey Hanewall, Avani Locke, Luann Moy, Jennifer Popovic, Mark Ramage, 
Tovah Rom, and Dan Schwimer also made significant contributions to this 
report. 

(130464): 

FOOTNOTES 

[1] WIC participants may receive benefits in the form of checks or 
vouchers, also called food instruments by the WIC program. We refer to 
both forms as vouchers for the purposes of this report. 

[2] While the WIC program generally does not require participants to 
pay attention to vendor prices, some WIC state agencies, such as that 
of Texas, for example, require WIC participants to obtain the least 
expensive brand of certain items (e.g., juice) with their voucher. 

[3] The Child Nutrition and WIC Reauthorization Act of 2004, Pub. L. 
No. 108-265 (2004), created a new category of vendors referred to as 
above 50 percent vendors, vendors whose revenue from the sale of WIC 
food is more than half of their annual revenue from food sales, as part 
of an overall cost containment strategy. This new category includes WIC-
only vendors. In this report, we used the definitions established by 
FNS prior to the changes brought by the reauthorization because those 
definitions conform to the redemption data provided by FNS and WIC 
state agencies for our analyses. 

[4] The Child Nutrition and WIC Reauthorization Act of 2004 established 
cost containment provisions that require WIC state agencies to 
implement a vendor peer group system that groups stores according to 
similar characteristics in a way that ensures that all authorized 
vendors are paid competitive prices for WIC food. 

[5] The Consolidated Appropriations Act of 2005, Pub. L. No. 108-447 
(2004). The prohibition applied to those WIC vendors expected to derive 
50 percent or more of their annual revenue from WIC vouchers. This 
prohibition was extended for fiscal year 2006, and the President's 
fiscal year 2007 budget proposal seeks a continuation of this 
prohibition through the fiscal year. 

[6] Vendor types excluded from our analysis include military 
commissaries and pharmacies. See the background section for more 
information on these vendor types. 

[7] Most redemption data from WIC state agencies were reported as 
average monthly redemptions in fiscal year 2004. According to FNS, this 
amount may represent either the average monthly value of WIC vouchers 
over a 3-6 month period or a recent month that accurately reflects a 
vendor's normal redemptions. See appendix I for additional information. 

[8] See the discussion of our data reliability assessment procedures in 
appendix I. 

[9] Because of Hurricane Katrina, Louisiana, one of the states with 
more than 10 WIC-only vendors, was not included. 

[10] The California, Texas, and Florida WIC state agencies periodically 
collect data on WIC vendors' shelf prices, but they do not collect data 
on both the price actually charged and the quantity of each WIC food 
item purchased with each WIC voucher. The California and Texas WIC 
state agencies maintain the shelf price data they collect during vendor 
monitoring visits in paper records and do not enter it into the 
automated management information systems they use to monitor vendors' 
redemption claims. The Florida WIC state agency transfers the shelf 
price data it collects during monitoring visits to an EXCEL spreadsheet 
but does not incorporate these data into the state agency management 
information system. The California WIC state agency also sponsored a 
survey in fiscal year 2003 that collected shelf price data from a 
random sample of the state's WIC vendors, but this survey did not 
collect data on food item purchases. The Texas WIC state agency is 
currently conducting a pilot project for electronic benefits transfer 
(EBT) in selected areas of the state that collects WIC transaction 
data, including the type of food item purchased, the quantity purchased 
and the price paid, and stores it electronically in the EBT system. 
These data may be useful for future research. 

[11] WIC state agencies may also operate other, less prevalent food 
delivery systems, including home food delivery systems, in which 
authorized supplemental foods are delivered to the participant's home, 
and direct distribution food delivery systems, in which participants, 
or their proxies, collect authorized supplemental foods from storage 
facilities operated by the state agency or its local agency. 

[12] The total amount charged for a voucher is monitored and assessed 
for reimbursement by WIC state agencies. 

[13] Food Marketing Institute, Marketing Costs (Washington, D.C.), 
[Hyperlink, http://www.fmi.org/facts_figs/superfact.htm] (downloaded 
March 29, 2006). 

[14] Exempt infant formulas are designed for infants with specific 
medical or dietary problems. Similarly, WIC-eligible medical foods are 
considered medically necessary and are prescribed by a physician when 
conventional foods cannot be consumed by women or children with special 
dietary needs. 

[15] The Child Nutrition and WIC Reauthorization Act of 2004, Pub. L. 
No. 108-265 (2004). 

[16] However, we used the WIC-only vendor definition established by FNS 
prior to the changes brought by the reauthorization because those 
definitions conform to the redemption data provided by FNS and WIC 
state agencies for our analyses. 

[17] 70 Fed. Reg. 71,708 (Nov. 29, 2005). 

[18] National Women, Infants and Children Grocers Association v. Food 
and Nutrition Service, 416 F.Supp. 2d 92 (D.D.C. 2006). 

[19] See the Institute of Medicine, WIC Food Packages: Time for a 
Change, National Academies Press: Washington, D.C., 2006, for more 
information. 

[20] TIP does not record when vendors enter or exit the WIC program, 
and therefore may overstate the number of vendors in operation on any 
particular date. See appendix I for a more detailed explanation of the 
data limitations created by this issue. 

[21] States may have had WIC-only vendors in 1999 that they did not 
report in TIP. As one example, Georgia did not identify WIC-only 
vendors as a separate vendor type until 2004. Appendix II presents the 
number of WIC-only vendors by state for all fiscal years from 1999 
through 2004. 

[22] Because we were unable to calculate the growth of WIC-only 
vendors' redemptions over time, we reported redemptions on an average 
monthly basis in 2004. 

[23] WIC business volume is defined as total redemptions from WIC, for 
the purposes of our report. 

[24] The FNS data we analyzed did not allow us to make determinations 
about these differences. 

[25] See appendix III for the average monthly redemptions per WIC-only 
vendor in fiscal year 2004 for all states with WIC-only vendors. 

[26] Section 203(e)(14) of the law states, "A State agency shall not 
authorize or make payments to a [WIC-only] vendor that provides 
incentive items or other free merchandise, except food or merchandise 
of nominal value (as determined by the Secretary), to program 
participants unless the vendor provides to the State agency proof that 
the vendor obtained the incentive items or merchandise at no cost." 

[27] Under the Child Nutrition and WIC Reauthorization Act of 2004, an 
unknown number of these vendors we call regular WIC vendors will be 
reclassified as 50 percent WIC vendors. As such, they will continue to 
serve some combination of both WIC participants and price-sensitive non-
WIC shoppers. 

[28] Several WIC state agency officials noted that their states limit 
or do not permit WIC vendors to use the WIC acronym for advertising 
purposes. FNS policy states, "WIC State agencies have the discretion to 
authorize WIC vendors to use the acronym 'WIC' and/or the WIC logo for 
the following purposes: 1) to identify the retailer as an authorized 
WIC food vendor; 
and 2) to identify authorized WIC foods by attaching channel strips or 
shelf-talkers stating 'WIC-approved' or 'WIC- eligible' to grocery 
store shelves." 

[29] Our estimates are based on available data for WIC-only and regular 
WIC vendors, excluding pharmacies and commissaries, from 2004 and 
assume that all program characteristics other than those we manipulated 
did not change. See appendix I for additional information on our 
methodology. 

[30] We increased the market share of WIC-only vendors by increasing 
the number of food vouchers redeemed at these stores. (See scenario 1 
analysis in app. I.) 

[31] These data should be treated with caution. A higher average value 
for all food vouchers does not necessarily mean that prices for 
individual food items at WIC-only stores are higher than prices at 
regular WIC stores. Our average value of all food vouchers redeemed is 
the average value of all food vouchers redeemed in particular states, 
by type of vendor. (See app. I.) 

[32] Our scenario analyses assumed that all factors other than those we 
changed, including the difference between WIC-only and regular WIC 
vendors' average food voucher values, remained constant as we increased 
WIC-only vendors' market share. 

[33] The overall number of food vouchers redeemed would remain constant 
as WIC-only vendors' market share increases because the number of 
vouchers redeemed by regular WIC stores would go down. Because our 
estimates do not take into account savings from infant formula rebates, 
the estimated dollar amounts in our scenario analysis do not reflect 
total cost to the program. 

[34] See appendix IV for the range of vouchers in California, Texas, 
and Florida that we analyzed. 

[35] Through fiscal year 2004, WIC state agencies provided data in 
electronic files, using either ASCII or delimited file formats, which 
FNS then converted into a consolidated file. For fiscal year 2005, WIC 
state agencies were able to upload data directly into the FNS database. 

[36] The majority of WIC state agencies provided redemption data over 
an average monthly period in fiscal year 2004. 

[37] For each state, we computed the number of redeemed vouchers as the 
total count of records in each state data file excluding vouchers 
redeemed at commissaries and pharmacies. In addition, we removed, on 
the advice of and in consultation with state representatives, any 
record that appeared to contain an anomaly such as missing an 
instrument ITEM number code, missing a vendor TYPE code, having a 
redeemed amount greater than the maximum allowable amount, or having a 
negative redeemed amount. 

[38] Numbers may not add because of rounding. The total is the result 
of numbers and calculations carried out using more significant digits 
than shown and is accurate. 

[39] Equation 2 is transformed to 2a in the following manner: 

qw xw + qr xr = F04 

qr xr = (F04 - qw xw) 

qr = ((F04 - qw xw)/xr ) 

[40] The number of vouchers per participant is based on the number of 
unique people who redeemed a voucher, that is, people who are counted 
only once even if they came back multiple times. For California, we 
computed the number of participants as a count of all unique 
INDIVIDUAL_ID values. This was defined in the California data 
documentation as a "system generated 11 character identifier unique to 
an individual". The Individual ID can remain constant throughout the 
participant's entire eligibility period with WIC. For Texas, we 
computed the number of participants as a count of all unique CID 
(Unique Number Identifying A Client) values in the file. For Florida, 
we asked the state agency for "the number of unique people who redeemed 
any type of food instrument in FY2004". Florida provided us with an 
"Unduplicated count for FFY04". The number of vouchers per participant 
was computed as the number of vouchers/number of participants. 

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