[Code of Federal Regulations]
[Title 7 Volume 4]
[Revised as of January 1, 2001]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR248.10]

[Page 392-396]
 
                          TITLE 7--AGRICULTURE
 
    CHAPTER II--FOOD AND NUTRITION SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 248--WIC FARMERS' MARKET NUTRITION PROGRAM (FMNP)--Table of Contents
 
                   Subpart E--State Agency Provisions
 
Sec. 248.10  Coupon and market management.


    (a) General. This section sets forth State agency responsibilities 
regarding the authorization of farmers/farmers' markets. The State 
agency is responsible for the fiscal management of, and accountability 
for FMNP-related activities for farmers/farmers' markets. Each State 
agency may decide whether to authorize farmers individually, farmers' 
markets, or both farmers and farmers' markets. All contracts or 
agreements entered into by the State agency for the management or 
operation of farmers/farmers' markets shall conform with the 
requirements of 7 CFR part 3016, Uniform Administrative Requirements for 
Grants and Cooperative Agreements to State and Local Governments.
    (1) Only farmers' markets authorized by the State agency may redeem 
FMNP coupons. Only farmers authorized by the State agency or that have a 
valid agreement with an authorized farmers' market, may redeem coupons.
    (2) The State agency shall establish criteria for the authorization 
of individual farmers and/or farmers' markets. Any authorized farmer/
farmers' market must agree to sell recipients only those foods 
identified as eligible by the State agency, in exchange for FMNP 
coupons. Individuals who exclusively sell produce grown by someone else, 
such as wholesale distributors, cannot be authorized to participate in 
the FMNP, except individuals employed by a farmer otherwise qualified 
under these regulations, or individuals hired by a nonprofit 
organization to sell produce at urban farmstands on behalf of local 
farmers.
    (3) The State agency shall ensure that an appropriate number of 
farmers/farmers' markets are authorized for adequate recipient 
convenience and access in the area(s) proposed to be served and for 
effective management of the farmers/farmers' markets by the State 
agency. The State agency may establish criteria to limit the number of 
authorized farmers/farmers' markets.
    (4) The State agency shall ensure that face-to-face training is 
conducted prior to start up of the first year of FMNP participation of a 
farmers' market and individual farmer. The face-to-face training shall 
include at a minimum those items listed in paragraph (d) of this 
section.
    (5) Authorized farmers shall display a sign stating that they are 
authorized to redeem FMNP coupons.
    (6) Authorized farmers/farmers' markets shall comply with the 
requirements of Title VI of the Civil Rights Act of 1964, title IX of 
the Education Amendments of 1972, section 504 of the Rehabilitation Act 
of 1973, the Age Discrimination Act of 1975, Department of Agriculture 
regulations on nondiscrimination (7 CFR parts 15, 15a and 15b), and FNS 
Instructions as outlined in Sec. 248.7.
    (7) The State agency shall ensure that there is no conflict of 
interest between the State or local agency and any participating farmer/
farmers' market.
    (b) Farmers' market agreements. The State agency shall ensure that 
all participating farmers' markets enter into written agreements with 
the State agency. State agencies which authorize individual farmers 
shall also enter into written agreements with the individual farmers. 
The agreement shall be signed by a representative who has legal 
authority to obligate the farmers/farmers' market. Agreements shall 
include a description of sanctions for noncompliance with FMNP 
requirements and shall contain at a minimum, the following 
specifications, although the

[[Page 393]]

State agency may determine the exact wording to be used:
    (1) The farmer/farmers' market shall:
    (i) Provide such information as the State agency may require for its 
periodic reports to FNS;
    (ii) Assure that FMNP coupons are redeemed only for eligible foods;
    (iii) Provide eligible foods at the current price or less than the 
current price charged to other customers;
    (iv) Accept FMNP coupons within the dates of their validity and 
submit such coupons for payment within the allowable time period 
established by the State agency;
    (v) In accordance with a procedure established by the State agency, 
mark each transacted coupon with a farmer identifier. In those cases 
where the agreement is between the State agency and the farmer, each 
transacted FMNP coupon shall contain a farmer identifier and shall be 
batched for reimbursement under that identifier. In those cases where 
the agreement is between the State agency and the farmers' market, each 
transacted FMNP coupon shall contain a farmer identifier and be batched 
for reimbursement under a farmers' market identifier.
    (vi) Accept training on FMNP procedures and provide training to 
farmers and any employees with FMNP responsibilities on such procedures;
    (vii) Agree to be monitored for compliance with FMNP requirements, 
including both overt and covert monitoring;
    (viii) Be accountable for actions of farmers or employees in the 
provision of foods and related activities;
    (ix) Pay the State agency for any coupons transacted in violation of 
this agreement;
    (x) Offer FMNP recipients the same courtesies as other customers;
    (xi) Comply with the nondiscrimination provisions of USDA 
regulations as provided in Sec. 248.7; and
    (xii) Notify the State agency if any farmer or farmers' market 
ceases operation prior to the end of the authorization period.
    (2) The farmers' market/farmer shall not:
    (i) Collect sales tax on FMNP coupon purchases;
    (ii) Seek restitution from FMNP recipients for coupons not paid by 
the State agency;
    (iii) Issue cash change for purchases that are in an amount less 
than the value of the FMNP coupon(s).
    (3) Neither the State agency nor the farmer/farmers' market has an 
obligation to renew the agreement. Either the State agency or the 
farmer/farmers' market may terminate the agreement for cause after 
providing advance written notification.
    (4) The State agency may deny payment to the farmer/farmers' market 
for improperly redeemed FMNP coupons and may demand refunds for payments 
already made on improperly redeemed coupons.
    (5) The State agency may disqualify a farmer/farmers' market for 
FMNP abuse. The farmer/farmers' market has the right to appeal a denial 
of an application to participate, a disqualification, or a FMNP sanction 
by the State agency. Expiration of a contract or agreement with a 
farmer/farmers' market, and claims actions under Sec. 248.20, are not 
appealable.
    (6) A farmer or farmers' market which commits fraud or engages in 
other illegal activity is liable to prosecution under applicable 
Federal, State or local laws.
    (7) Agreements may not exceed 3 years.
    (c) Farmer agreements for State agencies which do not authorize 
farmers. Those State agencies which authorize farmers' markets but not 
individual farmers shall require authorized farmers' markets to enter 
into a written agreement with each farmer within the market that is 
participating in FMNP. The State agency shall set forth the required 
terms for the agreement and provide a sample agreement which may be 
used.
    (d) Annual training for farmers/farmers' market managers. State 
agencies shall conduct annual training for farmers/farmers' market 
managers participating in the FMNP. The State agency shall conduct a 
face-to-face training for all farmers and farmers' market managers who 
have never previously participated in the program prior to their 
commencing participation in the FMNP. After a farmer/farmers' market

[[Page 394]]

manager's first year of FMNP operation, State agencies have discretion 
in determining the method used for annual training purposes. At a 
minimum, annual training shall include instruction emphasizing:
    (1) Eligible food choices;
    (2) Proper FMNP coupon redemption procedures, including deadlines 
for submission of coupons for payment;
    (3) Equitable treatment of FMNP recipients, including the 
availability of produce to FMNP recipients that is of the same quality 
and cost as that sold to other customers;
    (4) Civil rights compliance and guidelines;
    (5) Guidelines for storing FMNP coupons safely; and
    (6) Guidelines for cancelling FMNP coupons, such as punching holes 
or rubber stamping.
    (e) Monitoring and review of farmers/farmers' markets and local 
agencies. The State agency shall be responsible for the monitoring of 
farmers/farmers' markets, and local agencies within its jurisdiction. 
This shall include developing a system for identifying high risk 
farmers/farmers' markets and ensuring on-site monitoring, conducting 
further investigation, and sanctioning of such farmers/farmers' markets 
as appropriate.
    (1) Where coupon reimbursement responsibilities are delegated to 
farmers' market managers, farmers' market associations, or nonprofit 
organizations, the State agency may establish bonding requirements for 
these entities. Costs of such bonding are not reimbursable 
administrative expenses.
    (2) Each State agency shall rank participating farmers and farmers' 
markets by risk factors, and shall conduct annual, on-site monitoring of 
at least 10 percent of farmers and 10 percent of farmers' markets which 
shall include those farmers and markets identified as being the highest-
risk. Mandatory high-risk indicators are a proportionately high volume 
of FMNP coupons redeemed by a farmer as compared to other farmers within 
the farmers' market and within the State, recipient complaints, and 
farmers and farmers' markets in their first year of FMNP operation. 
States are encouraged to formally establish other high risk indicators 
for identifying potential problems. If additional high risk indicators 
are established, they shall be set forth in the farmers/farmers' market 
agreement and in the State Plan. If application of the high-risk 
indicators results in fewer than 10 percent of farmers and farmers' 
markets as high-risk, the State agency shall randomly select additional 
farmers and farmers' markets to be monitored in order to meet the 10 
percent minimum. The high-risk indicators listed above generally apply 
to a State agency already participating in the FMNP. A State agency 
participating in the FMNP for the first time shall, in lieu of applying 
the high-risk indicators, randomly select 10 percent of its 
participating farmers and 10 percent of its participating farmers' 
markets for monitoring visits.
    (3) The following shall be documented for all on-site farmers and 
farmers' markets monitoring visits, at a minimum: Names of both farmer/
farmers' market and reviewer; date of review; nature of problem(s) 
detected or the observation that the farmer/farmers' market appears to 
be in compliance with FMNP requirements; record of interviews with 
recipients, market managers and/or farmers; and signature of the 
reviewer. Reviewers are not required to notify the farmer/farmers' 
market of the monitoring visit during, or immediately after the visit. 
The State agency shall do so after a reasonable delay when necessary to 
protect the identity of the reviewer(s) or the integrity of the 
investigation. After the farmer/farmers' market has been informed of any 
deficiencies detected by the monitoring visit, and instances where the 
farmer/farmers' market will be permitted to continue participation, the 
farmer/farmers' market shall provide plans as to how the deficiencies 
will be corrected.
    (4) At least every 2 years, the State agency shall review all local 
agencies within its jurisdiction. WIC State agency reviews of WIC local 
agencies, which include reviews of FMNP practices, may contribute to 
meeting the requirement that all local agencies be reviewed once every 2 
years.
    (f) Control of FMNP coupons. (1) The State agency shall control and 
provide

[[Page 395]]

accountability for the receipt and issuance of FMNP coupons.
    (2) The State agency shall ensure that there is secure 
transportation and storage of unissued FMNP coupons.
    (3) The State agency shall design and implement a system of review 
of FMNP coupons to detect errors. At a minimum, the errors the system 
must detect are a missing recipient signature, a missing farmer and/or 
market identification, and redemption by a farmer outside of the valid 
date. The State agency shall implement procedures to reduce the number 
of errors in transactions, where possible.
    (g) Payment to farmers/farmers' markets. The State agency shall 
ensure that farmers/ farmers' markets are promptly paid for food costs.
    (h) Reconciliation of FMNP coupons. The State agency shall identify 
the disposition of all FMNP coupons as validly redeemed, lost or stolen, 
expired, or not matching issuance records. Validly redeemed FMNP coupons 
are those that are issued to a valid recipient and redeemed by an 
authorized farmers/farmers' market within valid dates. FMNP coupons that 
were redeemed but cannot be traced to a valid recipient or authorized 
farmer/farmers' market shall be subject to claims action in accordance 
with Sec. 248.20. (1) If the State agency elects to replace lost, stolen 
or damaged FMNP coupons, it must describe its system for doing so in the 
State Plan.
    (2) The State agency shall use uniform FMNP coupons within its 
jurisdiction.
    (3) FMNP coupons must include, at a minimum, the following 
information:
    (i) The last date by which the recipient may use the coupon. This 
date shall be no later than November 30 of each year.
    (ii) A date by which the farmer or farmers' market must submit the 
coupon for payment. When establishing this date, State agencies shall 
take into consideration the date financial statements are due to the 
FNS, and allow time for the corresponding coupon reconciliation that 
must be done by the State agency prior to submission of financial 
statements. Currently, financial statements are due to FNS by January 
30.
    (iii) A unique and sequential serial number.
    (iv) A denomination (dollar amount).
    (v) A farmer identifier for the redeeming farmer when agreements are 
between the State agency and the farmer.
    (vi) In those instances where State agencies have agreements with 
farmers' markets, there must be a farmer identifier on each coupon and a 
market identifier on the cover of coupons which are batched by the 
market manager for reimbursement.
    (i) Instructions to recipients. Each recipient shall receive 
instructions on the proper use and redemption of the FMNP coupons, 
including, but not limited to: (1) A list of names and addresses of 
authorized farmers/farmers' markets at which FMNP coupons may be 
redeemed.
    (2) A description of eligible foods and the prohibition against cash 
change.
    (3) An explanation of their right to complain about improper farmer/
farmers' market practices with regard to FMNP responsibilities and the 
process for doing so.
    (j) Recipients and farmer/farmers' market complaints. The State 
agency shall have procedures which document the handling of complaints 
by recipients and farmers/farmers' markets. Complaints of civil rights 
discrimination shall be handled in accordance with Sec. 248.7(b).
    (k) Recipients and farmer/farmers' market sanctions. The State 
agency shall establish policies which determine the type and level of 
sanctions to be applied against recipients and farmers/farmers' markets, 
based upon the severity and nature of the FMNP violations observed, and 
such other factors as the State agency determines appropriate, such as 
whether repeated offenses have occurred over a period of time. Farmers/
farmers' markets may be sanctioned, disqualified, or both, when 
appropriate. Sanctions may include fines for improper FMNP coupon 
redemption procedures and the penalties outlined in Sec. 248.20, in case 
of deliberate fraud. In those instances where compliance purchases are 
conducted,

[[Page 396]]

the results of covert compliance purchases can be a basis for farmer/
farmers' market sanctions. A farmer/farmers' market committing fraud or 
other unlawful activities is liable to prosecution under applicable 
Federal, State or local laws. State agency policies shall ensure that a 
farmer that is disqualified from the FMNP at one market shall not 
participate in the FMNP at any other farmers' market in the State's 
jurisdiction during the disqualification period.

[59 FR 11517, Mar. 11, 1994, as amended at 60 FR 49746, Sept. 27, 1995]