New Food Stamp Card Problems Revealed

By AP

HOUSTON (AP) - Since its debut last year, the Lone Star card has been praised by state officials for being a plastic replacement for food stamps.

But a new look reveals that the card actually has been plagued with problems and that its provider was recently fined $345,000 for slip-ups earlier this year.

The Houston Chronicle reported in Sunday editions about the other side of the Lone Star Card, the nation's first grand-scale system of issuing welfare benefits through a proveate technology company.

The problems began as soon as the card, which resembles a credit card, began replacing food stamps at the grocery store.

The first foul-up involved a telephone help line for retailers and customers. That system was so bad that the Texas Department of Human Services cut off payment to the card's provider - Transactive Corp. - for three months.

Transactive is a subsidiary of the controversial lottery operator GTECH Corp.

The start-up last year was marred by several system shutdowns and technical glitches that made it impossible to process Lone Star sales electronically. Several grocers complained of lost sales and customers went home with less food as a result.

Grocers could ring up $50 with handwritten vouchers, but only if they got approval via the help line. If they couldn't get through, they could ring up sales of no more than $25.

Complaints rolled in. Among them:

- A grocer in Midland said he tried all day to get through the help line. "He stated the phone rings and rings - he literally let it ring over 100 times - and no one picks it up," a report said.

- A San Antonio retailer tried for five months to get a Lone Star terminal installed. He called four times, seeking the equipment. He was told it was on the way. It never arrived.

- The Department of Human Services complained of several breaches of the contract terms, including Transactive report that were habitually late, inaccurate and sometimes incomprehensible.

"This was an extremely ambitious project," said Bob Ambrosino, DHS' director for the project. "The complexity, the size and the time frame all added to the risk."

But the company says the program is working.

"Certainly there has been problems that have developed during the implementation of this system," said Marc Palazzo, spokesman for Transactive. "This is a new system. In a project of this size those issues are to be expected. I think the program is working, and that is the bottom line."

Since awarding the seven-year, $224 million contract, DHS officials have documented more than $7 million in fines they could have assessed because of contractor mistakes, but didn't.

Ambrosino said his contract management team chose instead to hold the possibility of penalties over Transactive as an incentive to improve while the system was relatively new.

He also said his agency withheld $6 million in payments to the company during the statewide start-up as an alternative to actual fines. As the company made improvements, DHS reinstated the held-up payments in early 1996.

However, last week, after inquiries from the Houston Chronicle, DHS decided to fine Transactive $345,300 for foul-ups that occurred in May, June and July.

Assessing the damages had been recommended as early as Oct. 8 in an internal memo to Ambrosino from Hank Dembosky, the agency's Lone Star contract manager.

Nearly half of the fine stems from an AT&T network failure on July 11, a problem that set off a chain of negative reactions.

Retailers had to process Lone Star sales manually, but couldn't get quick enough authorizations, resulting in lost sales and "associated inconveniences."

The fine included $60,000 for slower system response times than the federal government requires, a failure that has occurred every month since the Lone Star card went statewide.

Additionally, there is a penalty of $135,300 for late or inaccurate reports.

Meanwhile, Transactive reported "significant" losses for the fiscal year ending in February and predicted more losses to come in the current fiscal year.

There has been talk of expanding the card program to include unemployment insurance, child support collections and other government payments.