[Federal Register Volume 59, Number 48 (Friday, March 11, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-5568]


[[Page Unknown]]

[Federal Register: March 11, 1994]


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DEPARTMENT OF AGRICULTURE
7 CFR Part 248

RIN 0584-AB43

 

WIC Farmers' Market Nutrition Program

AGENCY: Food and Nutrition Service, USDA.

ACTION: Interim rule.

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SUMMARY: This interim rule implements the mandates of the WIC Farmers' 
Market Nutrition Act of 1992, enacted on July 2, 1992, which 
establishes the WIC Farmers' Market Nutrition Program (FMNP or 
Program). The purposes of the FMNP are to provide resources to women, 
infants, and children who are nutritionally at risk, in the form of 
fresh, nutritious, unprepared foods (such as fruits and vegetables) 
from farmers' markets; to expand the awareness and use of farmers' 
markets; and, to increase sales at such markets.
    In accordance with the WIC Farmers' Market Nutrition Act of 1992, 
this rulemaking establishes the requirements for the operation and 
management of the FMNP. In addition to the requirements of the Act, 
these rules were developed based on the results of the Farmers' Market 
Coupon Demonstration Project.

EFFECTIVE DATES: March 11, 1994, except for Secs. 248.4, 248.9, 
248.10(a), 248.10(b), 248.10(e), 248.10(f), 248.11, 248.14(h), 
248.17(b)(2)(ii), and 248.18(b) which contain information collection 
requirements which are not effective until approved by OMB. When 
approval is received, the agency will publish a notice in the Federal 
Register announcing the effective date.
    To be assured of consideration, comments on this rule must be 
received on or before July 11, 1994.

ADDRESSES: Comments may be mailed to Barbara Hallman, Chief, Policy and 
Program Development Branch, Supplemental Food Programs Division, Food 
and Nutrition Service, USDA, 3101 Park Center Drive, room 540, 
Alexandria, Virginia, 22302, (703) 305-2730. All written submissions 
will be available for public inspection at this address during regular 
business hours (8:30 a.m. to 5 p.m.) Monday through Friday.

FOR FURTHER INFORMATION CONTACT: Barbara Hallman or Debra Whitford, 
Supplemental Food Programs Division, Food and Nutrition Service, USDA, 
3101 Park Center Drive, room 540, Alexandria, Virginia 22302, (703) 
305-2730.

SUPPLEMENTARY INFORMATION:

Classification

Executive Order 12866

    This interim rule is issued in conformance with Executive Order 
12866. It has been designated ``not significant'' and did not require 
clearance by the Office of Management and Budget.

Executive Order 12372

    This program is subject to Executive Order 12372, which requires 
intergovernmental consultation with State and local officials (7 CFR 
part 3015, subpart V, and final rule-related notice published June 24, 
1983 (48 FR 29114)).

Executive Order 12778

    This rule has been reviewed under Executive Order 12778, Civil 
Justice Reform. This rule is intended to have preemptive effect with 
respect to any State or local laws, regulations or policies which 
conflict with its provisions or which would otherwise impede its full 
implementation. This rule is not intended to have retroactive effect 
unless so specified in the ``Effective Date'' paragraph of this 
preamble. Prior to any judicial challenge to the provisions of this 
rule or the application of its provisions, all applicable 
administrative procedures must be exhausted. In the WIC Farmers' Market 
Nutrition Program, the administrative procedures are as follows: (1) 
Local agencies, farmers, and farmers' markets--State agency hearing 
procedures issued pursuant to 7 CFR 248.16; (2) applicants and 
participants--State agency hearing procedures issued pursuant to 7 CFR 
248.16; and (3) sanctions against State agencies (but not claims for 
repayment assessed against a State agency) pursuant to 7 CFR 248.17--
administrative appeal in accordance with 7 CFR 248.19; and (4) 
procurement by State or local agencies--administrative appeal to the 
extent required by 7 CFR 3016.36.

Regulatory Flexibility Act

    The Department has also reviewed this rule in relation to the 
requirements of the Regulatory Flexibility Act of 1980 (Pub. L. 96-354, 
94 Stat. 1164, September 19, 1980). The Administrator of the Food and 
Nutrition Service has certified that this interim rule does not have a 
significant economic impact on a substantial number of small entities. 
Participating farmers and farmers' markets will be affected by the FMNP 
requirements and increased sales generated by FMNP participants. In 
addition, participating State and local agencies will be affected by 
FMNP administration requirements.

Paperwork Reduction Act

    The reporting requirements established by this rulemaking in 
Sec. 248.23 have been reviewed by the Office of Management and Budget, 
in accordance with the Paperwork Reduction Act of 1980 (44 U.S.C. 
3507). The reporting and recordkeeping requirements established by this 
rulemaking in Secs. 248.4, 248.9, 248.10(a), 248.10(b), 248.10(e), 
248.10(f), 248.11, 248.14(h), 248.17(b)(2)(ii), 248.18(b), and 
248.23(b) are pending review by the Office of Management and Budget. 

                              Estimated Annual Reporting and Recordkeeping Burden                               
----------------------------------------------------------------------------------------------------------------
                                                   Annual No. of      Annual      Average burden   Annual burden
             Section of regulations                 respondents     frequency      per response       hours     
----------------------------------------------------------------------------------------------------------------
 Reporting:                                       ..............  ..............  ..............  ..............
    248.4.......................................              11               1           50             550   
    248.10(a) (2) & (3).........................             500               1            2           1,000   
    248.10(b)...................................             250               1            2             500   
    248.10(e)...................................              50               1           10             500   
    248.14(h)...................................              11               1            1              11   
    248.17(b)(2)(ii)............................               2               1           20              40   
    248.18(b)...................................              11               1           15             165   
    248.23(b)...................................              11               2            6.5          143    
                                                 ---------------------------------------------------------------
    Total.......................................             511  ..............  ..............       6,802    
                                                 ===============================================================
Recordkeeping:                                                                                                  
    248.9.......................................              11               1            1              11   
    248.10(e)...................................              50               1            1              50   
    248.10(f)...................................              11               1            5              55   
    248.11......................................              11               1           12            132    
                                                 ---------------------------------------------------------------
    Total.......................................              61               1  ..............          289.75
                                                 ===============================================================
        Total Reporting & Recordkeeping Burden..  ..............  ..............  ..............        7,091.75
----------------------------------------------------------------------------------------------------------------

    This interim rule implements legislative mandates of Public Law 
102-314, which was enacted on July 2, 1992, and became effective 
retroactive to October 1, 1991. Because the FMNP is already operating 
in several States, further delay of these rules for notice and comment 
would serve no useful purpose. Accordingly, the Administrator of the 
Food and Nutrition Service has certified that it is unnecessary and 
contrary to the public interest to have prior opportunity for comment. 
For the same reasons, the Administrator has found that it would be 
impracticable and contrary to the public interest to delay the 
effective date of this interim rule. Accordingly, it is effective upon 
publication. The Department believes, however, that the rule may be 
improved by public comment. Therefore, comments are being solicited on 
this rule until July 11, 1994. All comments received will be analyzed, 
and any appropriate changes in the rule will be incorporated in the 
subsequent publication of a final rule.

Background

Demonstration Projects

    Section 501 of the Hunger Prevention Act of 1988 (Pub. L. 100-435), 
enacted on September 19, 1988, amended the Child Nutrition Act of 1966 
(CNA), 42 U.S.C. 1771 et. seq., to add a new subsection 17(m) which 
authorized up to 10 Farmers' Market Coupon Demonstration Projects 
(demonstration projects) for a 3-year period. The purpose of the 
demonstration projects was twofold: (1) To provide fresh, nutritious, 
unprepared foods (such as fruits and vegetables) from farmers' markets 
to persons at nutritional risk, and (2) to expand the awareness and use 
of farmers' markets.
    Under the authority of Public Law 100-435, participants in the 
Special Supplemental Food Program for Women, Infants, and Children 
(WIC) in selected areas of Connecticut, Iowa, Maryland, Massachusetts, 
Michigan, New York, Pennsylvania, Texas, Vermont, and Washington were 
provided coupons that could be redeemed for fresh fruits and vegetables 
at authorized farmers' markets, in addition to their regular WIC 
benefits. The 10 States were selected through a competitive grant 
application process which was based on criteria set forth in the law as 
well as additional criteria developed by the Department to ensure 
accountability and to maximize benefits for farmers and recipients.
    Basic features of the initial demonstration projects included: (1) 
Only persons currently participating in the WIC Program (excluding 
infants 4 months of age or younger) were eligible for Federal benefits 
under the demonstration projects.
    (2) States could impose other eligibility requirements or 
priorities for receiving coupons as they saw appropriate (e.g., most 
States limited distribution to specific geographic areas, and some gave 
priority to pregnant or breastfeeding women).
    (3) The annual value of the Federal share of the benefit could not 
be less than $10 or more than $20. If the coupon face value exceeded 
the purchase price, farmers were not allowed to give change.
    (4) Most recipients received some form of nutrition education 
explaining how to buy and prepare fresh fruits and vegetables.
    (5) The State grantees were required to provide matching funds for 
the demonstration project in an amount equal to not less than 30 
percent of the total cost of the demonstration project in the State. 
The match could be satisfied by contributions to similar projects 
operating in the State.
    (6) State grantees were allowed to use up to 12 percent of project 
funds for administration.
    (7) Each year the availability of demonstration project grant money 
was subject to the Federal appropriations process. For Fiscal Year 
1989, up to $2 million for demonstration project grants was 
appropriated. The Fiscal Year 1990 appropriation was also up to $2 
million. The Fiscal Year 1991 appropriation was increased to $2.75 
million, providing some expansion over the Fiscal Year 1990 
appropriation.
    (8) Although authorization for the demonstration projects expired 
at the end of Fiscal Year 1991, as part of the Rural Development, 
Agriculture, and Related Agency Appropriations Act for Fiscal Year 1992 
(Pub. L. 102-142), Congress appropriated up to $3 million to carry on 
the projects. As a result, on January 6, 1992, the Food and Nutrition 
Service (FNS) announced grant levels totaling $3 million to State 
grantees to carry out the demonstration projects another year, through 
Fiscal Year 1992.

Evaluation

    Public Law 100-435 also amended section 17(m)(9)(A) of the CNA to 
mandate an evaluation of the demonstration projects, which was 
conducted in two phases. Phase One examined the general management and 
accountability of the demonstration projects during their first season 
in 1989. It was found that they were generally well-run, particularly 
in the areas of accountability, benefit delivery, and overall project 
management. Phase Two of the evaluation process assessed the impact of 
the demonstration projects and their effectiveness in accomplishing the 
legislative goals. Surveys were also completed to obtain information on 
the food consumption and purchasing patterns of demonstration project 
coupon recipients, and on sales and food purchases at participating 
farmers' markets as compared to control groups. Findings from Phase Two 
suggested that the demonstration projects may have had a modest 
positive effect on farmers' incomes, and on the consumption of fruits 
and vegetables by the surveyed women who received demonstration project 
coupons. In addition it was found that participating farmers and WIC 
recipients strongly supported the demonstration projects. The results 
of both phases of the evaluation were submitted in a report to Congress 
in April 1991.

WIC Farmers' Market Nutrition Program

History

    Based largely on the success of the demonstration projects, Public 
Law 102-314 amended section 17(m) of the CNA (42 U.S.C. 1786(m)) to 
authorize the FMNP as an independent program. Amended section 17(m)(1) 
instructs the Secretary to award grants to States that submit State 
Plans for the establishment or maintenance of programs designed to 
provide recipients of assistance through the WIC Program, or those who 
are on a waiting list to receive WIC benefits, with coupons that may be 
exchanged for fresh, nutritious, unprepared foods at farmers' markets. 
In order to be eligible for grants, the State Plan must first be 
approved by the Secretary. Pursuant to section 17(m)(2) of the CNA, the 
Chief Executive Officer of the State or Indian Tribal Organization 
(i.e., the Governor or Principal Chief) shall designate the appropriate 
State agency or agencies to administer the FMNP in conjunction with the 
appropriate nonprofit organizations, and shall ensure coordination 
among the appropriate agencies and organizations.

Difference Between Demonstration Project and Program

    The newly created FMNP is very similar to the demonstration 
projects which operated for 4 years. For example, the annual Federal 
value of the coupons issued to FMNP recipients is still restricted to 
not less than $10 and not more than $20 per recipient per year, and 
each State agency administering the FMNP must provide matching funds in 
an amount equal to not less than 30 percent of the total cost of the 
program's operation and administration. However, five significant 
differences are also included in the authorizing legislation: (1) 
Persons who are on a waiting list for WIC Program participation, as 
well as current WIC participants, may receive FMNP coupons;
    (2) The State agency cap for administrative funds to operate the 
FMNP has been increased to 15 percent of the total amount of program 
funds, and the Department may permit up to an additional 2 percent, 
upon a showing by the State agency of financial need.
    (3) During the first year for which a State receives assistance, a 
State shall be permitted to use not more than 2 percent of the total 
program funds for administration of the FMNP in addition to the 15 
percent already established;
    (4) A State agency may use not more than 5 percent of its current 
year funds during a subsequent fiscal year or to cover expenses 
incurred during the prior fiscal year; and
    (5) There is no longer a 10-state limit on the number of State 
agencies that can administer the Program.

States With Demonstration Projects

    Section 17(m)(6)(A) of the CNA effectively authorizes the State 
agencies that have operated demonstration projects to continue under 
the new FMNP, by stipulating that each State which received Federal 
funding in a fiscal year ending before October 1, 1991 (i.e., before 
Fiscal Year 1992) shall receive benefits under the new FMNP, provided 
that the State agency complies with the requirements established by 
Public Law 102-314, as determined by the Secretary. The funding 
distribution formula for new State agencies, State agencies currently 
participating in the demonstration projects, and requirements for 
reallocation will be described in detail in the Distribution of Funds 
section of this Preamble. Because the FMNP will operate as an adjunct 
to WIC and will utilize standard operating procedures of WIC, this 
preamble will only discuss in detail individual provisions of this 
interim rulemaking that are unique to the FMNP.
1. Definitions (Sec. 248.2)
    ``Administrative costs.'' In the FMNP, ``administrative costs'' are 
all allowable costs as defined in Sec. 248.12(b). This includes costs 
for developing, printing and distributing coupons; costs associated 
with managing and monitoring markets; training and authorizing farmers; 
preparing materials for recipients such as coupon guidelines and market 
guides; and providing nutrition education. It does not include the 
value of the coupons themselves.
    ``Compliance buy.'' Participating State agencies have the option to 
conduct compliance buys, which are defined as covert, on-site 
investigations in which a FMNP representative poses as a FMNP recipient 
and transacts one or more FMNP food coupons. Because the busy, informal 
atmosphere of a farmers' market makes it difficult to detect program 
violations, compliance buys can provide an objective measure of whether 
farmers are following FMNP rules such as not providing change, and 
selling only authorized foods to FMNP recipients.
    ``Coupon.'' In order to distinguish them from the negotiable 
financial instruments called ``food instruments'', used in the WIC 
Program, the FMNP will use the term ``coupon'' to identify the 
negotiable financial instrument by which FMNP benefits are transferred. 
Both coupons and checks were used by States as demonstration project 
instruments. Some States used negotiable checks that could be deposited 
at a bank. While the term ``coupon'' will be used exclusively in this 
rulemaking, it should be noted that other terms may be used in some 
States participating in the FMNP.
    ``Demonstration project.'' In 1988, Congress authorized grant 
funding for 3-year demonstration projects in 10 States under which food 
coupons would be issued, in addition to normal food package benefits, 
to WIC recipients for purchases of fresh, nutritious, unprepared foods 
at farmers' markets (Public Law 100-435). The 10 States awarded grants 
to operate projects were Connecticut, Iowa, Maryland, Massachusetts, 
Michigan, New York, Pennsylvania, Texas, Vermont, and Washington. For 
Fiscal Year 1992, Public Law 102-142 allowed for an appropriation of up 
to $3 million dollars to carry on the projects another year through 
1992. This interim rule distinguishes the previously administered 
``demonstration projects'' from the permanent WIC Farmers' Market 
Nutrition Program by using the term FMNP or Program when referring to 
the permanent program.
    ``Eligible foods.'' Under the FMNP, eligible foods are defined as 
fresh, nutritious, unprepared, domestically grown fruits, vegetables 
and herbs for human consumption. Eligible foods may not be processed or 
prepared beyond their natural state except for usual harvesting and 
cleaning processes.
    Section 2 of the WIC Farmers' Market Act of 1992 states that one of 
the purposes of the Act is to provide women, infants and children at 
nutritional risk with ``fresh nutritious unprepared foods (such as 
fruits and vegetables).'' The Department notes that a broad variety of 
foods are available at farmers' markets that are not fresh and 
unprepared, including jams and jellies, baked goods, maple syrup, cider 
and fruit juices, and cheese. Accordingly, such foods are not eligible 
foods for the FMNP.
    Among the remaining food choices which meet the fresh, nutritious 
and unprepared criteria, the Department has decided to limit eligible 
foods to fresh fruits, vegetables and herbs. This is consistent with 
the emphasis on fruits and vegetables contained in section 2 of the 
Act, as noted above, and in section 3 (section 17(m)(8)(D) of the CNA) 
which requires State agencies to report to the Department information 
on the ``change in consumption of fresh fruits and vegetables'' 
resulting from participation in FMNP. As a result, although some foods 
in addition to fruits, vegetables and herbs may be considered ``fresh, 
nutritious, and unprepared,'' they are excluded as eligible foods. 
These include honey, as well as protein foods, such as eggs, raw seeds 
and nuts, meats, fish and seafood. In addition to the fact that it is 
not a fruit or vegetable, the exclusion of honey is also consistent 
with the recommendation by the American Academy of Pediatrics that 
infants under 12 months of age not consume honey due to the risk of 
infant botulism. American Academy of Pediatrics, Pediatric Nutrition 
Handbook, 1993 Edition, (p.17). The Department believes that this 
exclusion is necessary given the FMNP's relationship to the WIC 
Program, and the likelihood that some FMNP participants will be 
infants. The exclusion of the protein foods is consistent with their 
generally high cost relative to the limited annual benefit of the FMNP, 
and the fact that FMNP in most cases will supplement WIC packages which 
already contain significant amounts of protein foods.
    Consistent with the WIC Program, and other food assistance programs 
administered by the Department, the FMNP values its partnership with 
American agriculture and therefore promotes the use of FMNP coupons to 
purchase domestically grown produce at participating farmers' markets. 
Because the Department intends that the FMNP benefit local or State 
farmers, most States participating in the demonstration projects 
prohibited the use of coupons to purchase foods grown outside of the 
State. Two States in the demonstration project defined locally grown to 
include counties outside but adjacent to the State boundary. States may 
want to consider the advantages of establishing ``locally grown'' 
guidelines for the purpose of improving marketing opportunities for 
local farmers.
    ``Farmer.'' Although authorizing legislation refers to 
``producer'', the term ``farmer'' will be used in this rulemaking for 
clarification, to identify an individual authorized to sell produce at 
participating farmers' markets. Individuals who exclusively sell 
produce grown by someone else, such as wholesale distributors, cannot 
be authorized to participate in the FMNP. This is consistent with the 
Department's belief that the FMNP should benefit smaller, local 
farmers.
    ``Farmers' market.'' Pursuant to section 2 of Public Law 102-314, 
one of the purposes of the WIC Farmers' Market Nutrition Act of 1992 is 
to, ``expand the awareness and use of farmers' markets and increase 
sales at such markets''. The Department therefore proposes that 
``farmers' market'' for the FMNP be defined as ``an association of 
local farmers who assemble for the purpose of selling their produce 
directly to consumers.'' In most cases, the Department makes a 
distinction between an established farmers' market (one that has 
community roots, such as a permanent location, and good support from 
non-FMNP sales), and a farmstand. A farmstand is a location at which an 
individual farmer sells his or her produce directly to consumers. A 
farmstand set up near a WIC clinic would not be eligible to 
participate. Since WIC participants cannot rely on the continued 
existence of such farmstands, they do little to promote the sustained 
patronage of farmers' markets. In contrast, most eligible farmers' 
markets have a sufficient number of sellers to provide some measure of 
stability, and a wider selection of products so as to create a 
competitive environment, which discourages higher prices. In addition, 
their stable existence increases the likelihood of continued patronage 
by recipients or former recipients, and is more conducive to compliance 
monitoring. It should be noted that farmstands may be authorized in 
those cases where recipient access to farmers' markets is an issue and 
where FNS has granted prior approval. For example, in an urban area 
where recipient access to farmers' markets is limited, a farmstand 
providing locally grown produce and overseen by a nonprofit agency 
could be approved for authorization with the prior consent of FNS.
    ``Household.'' Household under the FMNP has the same definition as 
that of ``family'' defined in Sec. 246.2 of this chapter. Each such 
family shall constitute a separate household for FMNP benefit issuance 
purposes. As permitted by section 17(m)(11)(c) of the CNA, a recipient 
may be either a person or a household, at the State agency's option. 
This distinction is discussed in detail in section 5 of this preamble
    ``Local agency.'' Under the FMNP, a local agency includes any 
nonprofit entity or local government location where recipients are 
issued FMNP coupons or are provided with nutrition education or 
information on other operational aspects of the Program. This may 
include the WIC local agency or any other location authorized by the 
administering State agency to provide the services indicated above to 
recipients.
    ``Matching requirement.'' All participating FMNP States are 
required to provide non-Federal matching funds equal to not less than 
30 percent of the total FMNP cost. The calculation for total FMNP cost 
and minimum State match is as follows:
     Divide the total Federal funds by 0.7. This establishes 
the total FMNP cost including both Federal funds and minimum State 
match from non-Federal sources.
     Multiply the total FMNP cost by 0.3. This establishes the 
required State match based on the Federal funding request.
    The match may be satisfied through State, local or private 
contributions for the FMNP or State, local or private contributions for 
similar farmers' market programs which operate at the same time as the 
FMNP. Similar programs include other farmers' market programs which 
serve women, infants, and children (who need not be WIC participants or 
on the waiting list for WIC), as well as other categories of recipients 
such as, but not limited to, elderly persons.
    ``Nutrition education.'' Nutrition education means individual or 
group education sessions, and the provision of information and 
educational materials, designed to improve health status, achieve 
positive change in dietary habits, and to emphasize relationships 
between nutrition and health, all in keeping with the individual's 
personal, cultural, and socioeconomic preferences.
    ``Recipient.'' Recipient means a person chosen by the State agency 
to receive FMNP benefits. Public Law 102-314 modified the definition of 
eligible persons which was used in the demonstration projects to 
include persons on the waiting list to receive benefits under the WIC 
Program, as well as persons actually participating in WIC. Accordingly, 
this interim rule expands the definition of those eligible to 
participate (Sec. 248.6(a)) to include the following, individually or 
in combination: Women, infants over four months of age, or children who 
receive assistance under the WIC Program, or are on the waiting list to 
receive benefits under the WIC Program. As permitted by section 
17(m)(11)(c) of the CNA, a recipient may be either a person or a 
household, at the State agency's option. This distinction is discussed 
in detail in section 5 of this preamble.
    As set forth in Sec. 248.6 of this interim rule, State agencies may 
impose other eligibility requirements or priorities for receiving FMNP 
coupons as may be necessary. For instance, most States limit 
distribution to specific geographic areas, and some give priority to 
pregnant or breastfeeding women. States may preclude WIC ``waiting 
list'' persons on the basis of their potentially lower priority status. 
State agencies must identify in their State Plan the groups/categories 
of WIC or WIC waiting list participants to whom FMNP coupons will be 
issued or restricted. Based on the Department's Evaluation Report of 
the demonstration projects conducted in 1989, most States distributed 
coupons to all categories of eligible WIC participants. Approximately 
two-thirds of the coupons were distributed to infants and children 
participating in WIC, with the remaining one-third distributed to 
women. Three States focused their distribution efforts more heavily on 
women participating in WIC because they were considered to be at 
highest risk nutritionally.
    ``Similar programs.'' Similar programs means other farmers' market 
projects or programs which serve women, infants and children, as well 
as other categories of recipients, such as, but not limited to, elderly 
persons. Based on language in section 3 of Public Law 102-314, amending 
sections 17(m)(6)(F) (i) and (ii) of the CNA, in selecting States to 
participate in the FMNP, the Secretary shall give favorable 
consideration to States that have prior experience operating similar 
programs.
    ``State agency.'' Section 3 of Public Law 102-314 amends section 
17(m)(2)(A) of the CNA to state that the Chief Executive Officer of the 
State shall designate the appropriate State agency or agencies to 
administer the FMNP in conjunction with the appropriate nonprofit 
organizations. State agency means the agriculture department, the 
health department or comparable agency; an appropriate Indian agency as 
specified in Sec. 248.2.
    ``State Plan.'' ``State Plan'' means a plan of FMNP operation and 
administration that describes the manner in which the State agency 
intends to implement and operate all aspects of the Program within its 
jurisdiction in accordance with Sec. 248.4 of this regulation. Prior to 
the receipt of Federal funds to operate the FMNP, a State agency 
(including those that participated in the demonstration projects), must 
submit for approval a State Plan of Operation each November 15, for 
operation in the next fiscal year. New FMNP State agencies will be 
selected competitively based on State Plans submitted to and approved 
by the Food and Nutrition Service and the specific ranking criteria set 
forth in section 17(m)(6)(F) of the CNA and Sec. 248.5 of the 
regulations.
2. Administration (Sec. 248.3)
    FNS is responsible for the administration of the FMNP within the 
Department, and will provide assistance to State agencies and evaluate 
all levels of Program operations to ensure that the goals of the 
Program are effectively and efficiently achieved. The Supplemental Food 
Programs Division and the FNS Regional offices are responsible for 
administration within FNS. Each State agency is responsible for the 
effective and efficient administration of the FMNP within that State, 
and shall provide guidance to cooperating WIC State and local agencies 
on all aspects of FMNP operations. State FMNP contacts are to 
communicate with the designated FMNP contacts in the appropriate FNS 
Regional office regarding FMNP operations.
    The grant funds will be provided to the administering State agency 
or agencies designated by the Chief Executive Officer of the State or 
Indian Tribal Organization. A State agency may be the agriculture 
department, the health department or comparable agency; an Indian 
tribe, band or group recognized by the Department of the Interior; an 
intertribal council or group which is an authorized representative of 
Indian tribes, bands or groups recognized by the Department of the 
Interior and which has an ongoing relationship with such tribes, bands 
or groups for other purposes and has contracted with them to administer 
the Program; or the appropriate area office of the Indian Health 
Service of the Department of Health and Human Services.
    The Chief Executive Officer of the State shall ensure coordination 
between the agency designated to administer the FMNP, and the WIC State 
agency if different, by requiring that a written agreement is entered 
into by the two agencies. Because eligibility for the FMNP is limited 
to WIC participants or persons on the waiting list for WIC services, 
thorough coordination between agencies is necessary for the successful 
operation of the Program. In order to further ensure successful 
operation, State agencies shall ensure that there are sufficient staff 
available to administer an efficient and effective Program and shall 
provide an outline of administrative staff and job descriptions for 
staff whose salaries will be provided from FMNP funds. An increase in 
administrative funding (compared with the demonstration projects) to 15 
percent (see Sec. 248.14(g) of this rulemaking) will aid the staffing 
and general administrative process as well.
3. State Plan Provisions (Sec. 248.4)
    In establishing the FMNP as a permanent program, Congress 
established basic standards and requirements for its operation. 
Pursuant to section 17(m)(6)(D)(i) of the CNA, each State agency that 
desires to receive an FMNP grant, including State agencies previously 
participating in the demonstration projects, must submit a State Plan 
for approval by the Department. Section 248.4 requires submission of 
State Plans by November 15 of each year.
    The State plan process replaces the grant application process that 
was used for the demonstration projects. Sections 17(m)(6)(D) (ii) and 
(iii) of the CNA require that each State Plan submitted to the 
Secretary contain the following:
     The estimated cost of the FMNP;
     The estimated number of individuals to be served by the 
FMNP;
     A description of the State's plan for complying with the 
requirements of section 17(m)(5) of the CNA; and
     The criteria developed by the State with respect to 
authorization of farmers to participate in the FMNP. Such criteria 
shall require any authorized farmer to sell fresh, nutritious, 
unprepared fruits, vegetables or herbs to recipients, in exchange for 
coupons.
    A complete listing of State Plan requirements is contained in 
Sec. 248.4.
4. Selection of State Agencies (Sec. 248.5)
    Pursuant to section 3 of Public Law 102-314, each State agency that 
received assistance under the demonstration projects in a fiscal year 
prior to October 1, 1991, and which complies with matching requirements 
for funding and other program requirements as determined by the 
Department, shall receive assistance under the FMNP. New State agencies 
wishing to participate in the FMNP will have their State plans approved 
and ranked based on objective criteria consistent with the requirements 
established in section 17(m)(6)(F) of the CNA as set forth in 
Sec. 248.5.
5. Recipient Eligibility (Sec. 248.6)
    Individuals who are eligible to receive Federal benefits under the 
FMNP are WIC participants, excluding infants four months of age or 
younger, or individuals on the waiting list to receive WIC benefits. 
Infants under four months of age are excluded from eligibility in the 
FMNP based on the recommendation of the American Academy of Pediatrics 
that such infants are not able to consume solids due to the level of 
development of their gastrointestinal tract. State agencies have the 
option to prioritize WIC participants who will receive FMNP benefits. 
For example, a State agency may choose to provide benefits to all 
eligible pregnant and breastfeeding women. Section 248.2 defines 
recipient as a person chosen by the State agency to receive benefits 
under the FMNP. This definition permits State agencies to allocate the 
quantity of benefits on a household basis, meaning that the household 
could receive fewer benefits as a unit than it otherwise would if 
benefits were allocated to individual household members. For example, 
in a household where four members of that household are categorically 
eligible, the State may choose to allocate benefits on the basis of 
fewer than four eligibles. A State agency making the decision to issue 
benefits on a household basis would be choosing to spread fewer 
benefits among more recipients. State agencies that chose this option 
in the demonstration projects have argued that by bringing in more 
recipients, they addressed expanding the awareness and use of farmers' 
markets for a greater number of households, consistent with one of the 
mandated purposes of the FMNP set forth in section (2) of Public Law 
102-314. A State agency allocating benefits on a household basis shall 
not issue more benefits to a household than it otherwise would if 
benefits were allocated to individual recipients within the household. 
For those State agencies issuing FMNP benefits on a household basis, 
each family as defined in Sec. 246.2 of the WIC Program regulations 
shall constitute a separate household. For example, if two pregnant 
women (and their children) are living together and WIC has identified 
them all as one family (a single economic unit with one participant 
identification), then they should all be classified as one household in 
the FMNP, if the State agency is allocating benefits on a household 
basis. Likewise, if WIC has identified the two pregnant women (and 
their children) as two families (two economic units with two 
participant identifications), then they should be classified as two 
households in the FMNP. State agencies making the decision to issue 
benefits by household must do so on a Statewide basis. That is, the 
same State agency may not simultaneously issue benefits on both an 
individual and household basis. Recognizing that the food benefit has 
been issued to certain high-risk individuals to address nutritional 
needs, it is not intended that food benefits from the FMNP be shared 
with non-FMNP recipients residing in the FMNP recipient household.
    If a State agency elects to issue benefits on a household basis, 
data concerning number and type of recipients must still be provided as 
required by section 17(m)(8)(A) of the CNA.
6. Nondiscrimination (Sec. 248.7)
    Because racial and ethnic participation data (as required by title 
VI of the Civil Rights Act of 1964) are collected at the time women, 
infants, and children are certified for participation in the WIC 
Program, the Department has determined that the WIC data collection 
effort is sufficient to fulfill the racial/ethnic data collection 
requirement for the FMNP. Therefore, no additional data collection is 
required.
7. Recipient Benefits (Sec. 248.8)
    While this interim rule defines eligible foods as fresh, 
nutritious, unprepared fruits, vegetables and herbs, States must 
specifically identify in their State plans, which of these foods may be 
purchased (Sec. 248.4(a)(10)(vi)). The value of the Federal benefits 
received by any recipient under the FMNP may not be less than $10 per 
year or more than $20 per year. Most States participating in the 
demonstration projects found that the most practical distribution of 
coupons for the FMNP is in booklets made up of $1 and $2 denominations. 
If the FMNP coupon face value exceeds the purchase price of produce, 
farmers are prohibited from giving cash change to recipients. Instead, 
this difference may be made up by providing recipients with extra 
eligible foods in the approximate value of the difference.
    In the interest of enhancing local revenues, the Department 
recognizes a State agency's option in allowing only locally grown 
produce, as defined by the State agency, to be purchased by FMNP coupon 
recipients. Since States are required to match 30 percent of the total 
cost of the FMNP with State or non-Federal contributions, some States 
may consider this an attractive option for ensuring that FMNP benefits 
remain in the State. State agencies also have the option to define what 
they consider to be ``locally grown''. For instance, some State 
agencies for various reasons, such as availability of an adequate 
volume and variety of produce, may consider produce grown in adjacent 
States as locally grown. At the same time, other State agencies may 
define locally grown to be produce grown within the State boundaries.
8. Nutrition Education (Sec. 248.9)
    Because most FMNP recipients are also WIC participants, in most 
cases relevant nutrition education will be delivered to FMNP recipients 
by WIC nutritionists at WIC clinics. The Department views the FMNP as 
an excellent opportunity to reinforce messages delivered to WIC 
participants on the benefits of consuming fresh fruits and vegetables. 
When the consumption of fruits and vegetables is included as part of 
the regular nutrition education lesson provided by the WIC clinic to 
WIC participants who are also FMNP recipients, this may be deemed to 
have fulfilled the nutrition education requirement for the FMNP. The 
WIC clinic may not seek reimbursement from the administering FMNP State 
agency for this service since it is an ongoing and vital component of 
the WIC Program. In these situations, the administering FMNP State 
agency shall include the provision of nutrition education by the WIC 
clinic as part of the cooperative agreement with WIC agencies required 
by Sec. 248.3(e) and Sec. 248.9 of these regulations.
    If in specific situations FMNP recipients do not receive relevant 
nutrition education at WIC clinics, the administering State agency is 
responsible for arranging alternative methods for the provision of 
relevant nutrition education, which is an allowable cost under the 
FMNP. At the option of the FMNP State agency, the nutrition education 
provided by WIC to recipients may be supplemented by additional FMNP 
nutrition education. The additional FMNP enhancement may be considered 
an allowable administrative cost of the FMNP State agency. Provision of 
such nutrition education enhancements and reinforcements would be 
legitimate justification for the additional 2 percent administrative 
funds that are available upon approval by the Department. In addition, 
the administering FMNP State agency is responsible for providing 
information to recipients on the use of FMNP coupons and the purpose of 
the program as required by Sec. 248.4(a)(9)(iii). The costs of 
providing this information must be provided by the FMNP and not the WIC 
agencies which may be performing this service for the FMNP.
    Section 17(m)(8)(D) of the CNA requires the Secretary to collect 
from each State that receives a grant under the FMNP, information 
relating to, when practicable, the impact of the FMNP on the 
nutritional status of recipients by determining the change in 
consumption of fresh fruits and vegetables by FMNP coupon recipients. 
Because of this requirement, State agencies shall develop minimally 
burdensome procedures such as surveys to assess the impact on the 
nutritional status of FMNP recipients by obtaining information on the 
change in their consumption of fresh fruits and vegetables. This 
nutritional information shall be submitted as an addendum to the State 
Plan as set forth in Sec. 248.4(a)(15), at such a date specified by the 
Secretary. Coordination with the WIC Program will reduce costs and 
minimize duplication of effort on this data collection element.
    Section 17(m)(8)(E) of the CNA requires that States receiving a 
grant under the FMNP submit information on the effects of the FMNP on 
the use of farmers' markets and the marketing of agricultural products 
at such markets and when practicable, the effects of the FMNP on 
recipients' awareness regarding farmers' markets. Pursuant to 
Sec. 248.4(a) (16) and (17) of these interim regulations, State 
agencies shall submit in their State Plans the methods they will use to 
assess this information and shall submit the actual information as an 
addendum to the State Plan at such a date specified by the Secretary.
9. Coupon and Market Management (Sec. 248.10)
    The State agency is responsible for the fiscal management of, and 
accountability for farmers/farmers' markets. Farmers' markets are 
authorized by the State agency which may administer the FMNP directly 
or through a sub-agency such as a farmers' market association. Each 
State agency may authorize individual farmers, farmers' markets or 
both. When the State agency authorizes farmers' markets, the farmers' 
markets may authorize the farmers within the market to accept FMNP 
coupons. The demonstration projects revealed that market managers often 
play an important role in the day-to-day management of the FMNP, such 
as in the receipt of coupon batches from farmers and the reimbursement 
to farmers. According to the demonstration project's evaluation report, 
the strongest markets appeared to be those where the market manager had 
an active role in farmer training, compliance monitoring, reimbursing 
farmers, and redeeming coupons. Farmers at these markets were more 
likely to have a sound understanding of the demonstration project, and 
to comply strictly with guidelines. In contrast, where the market 
manager's role in the demonstration projects was limited, there was 
usually greater misunderstanding among participating farmers about 
demonstration project operations. Demonstration project participation 
was typically lower at markets with only nominal market manager 
involvement.
    Monitoring techniques varied widely from State to State for the 
demonstration projects. All States met the grant requirement to visit 
every authorized market at least once during operations, and peer 
monitoring was common and effective in most market settings. Peer 
monitoring is a system in which farmers watch what their neighbors are 
doing, and make complaints to the market manager about suspected 
infractions in an effort to prevent competitors from getting an unfair 
advantage. State agencies have broad discretion in developing systems 
for FMNP coupon and market management. They should keep in mind, 
however, that it is the State agency that is ultimately responsible for 
the fiscal management of, and accountability for farmers and farmers' 
markets. The State agency is responsible for establishing the number 
of, and criteria for, the authorization of farmers and/or farmers' 
markets as provided by section 17(m)(6)(D)(iii) of the CNA and 
Sec. 248.10(a) of these regulations. Because the Department believes 
that the FMNP is intended to help small, local farmers, State agencies 
may limit the foods eligible for purchase under the FMNP to those 
locally grown, as defined by the State. To further support this 
objective, individuals who exclusively sell produce grown by someone 
else (such as wholesale distributors), are not eligible to participate 
in the FMNP. This requirement does not apply to individuals which an 
authorized farmer may have employed to sell his produce at the farmers' 
market or to individuals hired by a nonprofit organization to sell 
produce at urban farmstands on behalf of local farmers.
    When FMNP coupon reimbursement is delegated to farmers' market 
managers or farmers' market associations or non-profit organizations, 
State agencies may establish appropriate bonding procedures for 
farmers' market managers, associations or non-profit organizations. The 
State agency may determine the best procedure to put in place for 
bonding. Costs of such bonding are not reimbursable administrative 
expenses. Additional criteria and requirements for authorizing farmers 
and farmers markets are identified in Sec. 248.10 of this interim rule.
    Section 248.10(b) of this interim rule outlines the contents of the 
farmers' market agreement. These agreements may be between the State 
agency and an authorized farmer or an authorized farmers' market, and 
shall be no more than 3 years in duration. Among its provisions, the 
agreement shall require that a farmer or farmers' market shall not 
issue cash change for purchases that are in an amount less than the 
value of the FMNP coupon(s). Since it is recommended that FMNP coupons 
be in $1 or $2 denominations, the difference between the purchase price 
and the value of the coupon should be less than $2. The Department, 
therefore, encourages farmers to adjust for any difference by adding 
more produce to the purchase.
    Pursuant to Sec. 248.10(d), State agencies shall conduct annual 
training for farmers and farmers' market managers. State agencies have 
discretion in determining the method used for training purposes. 
Training shall include, at a minimum, dissemination of information 
concerning eligible foods, and proper FMNP coupon redemption 
procedures, including deadlines for submission of coupons for payment. 
Other points which must be covered in training include the following:
     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;
     Civil rights compliance guidelines;
     Guidelines for storing FMNP coupons safely; and
     Guidelines for cancelling FMNP coupons, such as punching 
holes or rubber stamping.
    Although these regulations permit State agency discretion in 
determining the method of annual training, the State agency is required 
to conduct a documented on-site visit prior to, or at the time of 
authorization, which shall include at a minimum, information concerning 
eligible foods and proper coupon redemption procedures. For example, in 
a State with a 3-year agreement, a State agency may conduct an in-
person training prior to or at the time of authorization, and if 
reauthorization is granted three years later, conduct another in-person 
training at least once during the next 3-year grant agreement period. 
Other less comprehensive forms of training such as information handouts 
may be more appropriate for State agencies in the second or third years 
of operation for a grant agreement.
    State agencies are required to conduct on-site monitoring visits to 
at least 10 percent of authorized farmers, starting with the highest 
risk farmers and working down, and 10 percent of farmers' markets, 
starting with the highest risk farmers' markets and working down. 
Mandatory high risk indicators are a proportionately high volume of 
FMNP coupons redeemed within a farmers' market (as compared to other 
farmers within the market or within the State) and recipient 
complaints. Participating State agencies have the option to conduct 
compliance buys and the Department encourages such activity when 
practicable. A State agency may be required to conduct compliance buys 
as a follow-up measure when a farmer/farmers' market in a State is 
found to be out of compliance during an FNS management evaluation.
    Compliance activity can provide an objective measure of whether 
farmer training is adequate and whether farmers are following FMNP 
rules such as not providing change, selling only authorized foods to 
FMNP recipients, and ensuring participation only by authorized farmers. 
In addition to this, compliance buys can induce compliance and provide 
a justification for sanctions and removal of non-complying farmers.
    As set forth in Sec. 248.10(h), the State agency shall identify the 
disposition of all FMNP coupons as validly redeemed, lost or stolen, 
expired, or not matching issuance records. This identification shall be 
determined on a one-to-one reconciliation basis. Validly redeemed 
coupons are those that are issued to an authorized recipient and 
redeemed by an authorized farmers' market/farmer before the expiration 
date. Coupons that are redeemed but cannot be traced to an authorized 
recipient or authorized farmer will be subject to claims action in 
accordance with Sec. 248.20 of this interim rule. A State agency has 
the option to replace lost, stolen, or damaged coupons, and must 
describe its system for doing so in the State Plan. A State agency 
shall use uniform FMNP coupons within its jurisdiction, which must 
include at a minimum, the following information as required by 
Sec. 248.10(h)(3):
     The last date by which the recipient can use the coupon. 
This date shall be no later than November 30 of each year.
     A date by which the farmer/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 SF-269 financial statements are due to FNS by 
January 30.
     A unique and sequential serial number.
     A denomination (dollar amount).
     For each redeeming farmers' market, a farmer identifier on 
each coupon and market identifier on the cover of the batched coupons. 
For each redeeming farmer, a farmer identifier on each coupon.
    Inclusion of individual farmer identifiers on all FMNP coupons is a 
requirement in the FMNP, in order to trace coupon redemption to an 
authorized farmer, as required by section 17(m)(5)(E)(i) of the CNA. 
States have the option to directly authorize either farmers' markets, 
individual farmers or both. However, if the State directly authorizes 
farmers' markets, and not farmers, an individual farmer identifier must 
be included on the coupon and a farmers' market identifier included on 
the batched set of coupons submitted by the farmers' market manager for 
reimbursement. Those State agencies which have agreements directly with 
farmers and not markets must include individual farmer identifiers on 
each redeemed coupon. This is a change from the demonstration projects 
which required that only a market identifier be included on the coupon. 
A farmer identifier will provide protection for the farmers' market, 
since it is the individual farmer who may be identified and penalized 
for abuse rather than the entire market, if appropriate.
    Each FMNP recipient shall receive instructions on the proper use of 
coupons, including, but not limited to:
     A list of names and addresses of authorized farmers' 
markets and/or authorized farmers at which FMNP coupons may be 
redeemed.
     A description of eligible foods, and the prohibition 
against cash change.
     Notification that they have the right to complain about 
improper farmer/farmers' market practices with regard to FMNP 
responsibilities, and the process for doing so.
10. Financial Management System. (Sec. 248.11)
    The demonstration projects served as an effective model for the 
FMNP in the area of financial management systems. Based on the 
evaluation report conducted for the demonstration projects and 
submitted to Congress in April 1991, good controls were in place to 
account for advanced funds, and effective systems were in place to 
recoup leftover funds. Two States used negotiable checks in lieu of 
coupons, and six States advanced funds to payment intermediaries to pay 
authorized farmers or markets for coupons they had accepted. Payment 
intermediaries included market managers, private banks, and various 
contracted organizations and associations.
    Pursuant to Sec. 248.11(d) of this interim rule, participating 
State agencies must implement procedures which ensure prompt and 
accurate payment of allowable costs, and ensure the allowability and 
allocability of costs in accordance with the cost provisions set forth 
in Sec. 248.11 of this rule, 7 CFR part 3016, and FNS guidelines and 
Instructions.
11. FMNP Costs (Sec. 248.12)
    FMNP costs consist of food and administrative costs. Administrative 
costs are those costs associated with providing benefits and services 
to recipients. Allowable administrative costs include costs associated 
with the provision of nutrition education which meets the requirements 
of Sec. 248.9 of this rule. In addition, other allowable administrative 
costs include, but are not limited to, the costs of administering the 
coupon and market management system, including printing, issuing and 
reconciling coupons; and, authorizing, training and monitoring markets, 
as well as FMNP outreach, recordkeeping and reporting costs.
12. Distribution of Funds (Sec. 248.14)
    As a prerequisite to the receipt of funds, State agencies must 
agree to contribute from non-Federal sources at least 30 percent of the 
total cost of the FMNP, which may also be satisfied from State 
contributions that are made for similar programs which operate during 
the same period as the FMNP. Similar programs include other farmers' 
market projects or programs which serve women, infants, and children, 
as well as other categories of recipients such as, but not limited to, 
elderly persons.
    Section 17(m)(6)(A) of the CNA, subject to certain limitations and 
requirements, provides for authorization of State agencies that 
received assistance under the demonstration projects. It stipulates 
that each State which received Federal funding in a fiscal year ending 
before October 1, 1991 (i.e. before Fiscal Year 1992) shall receive 
benefits under the new FMNP, provided that the State complies with the 
requirements established by the Act, as determined by the Secretary. 
Section (17)(m)(6)(B) mandates that, if sufficient funds are 
appropriated by Congress, no State shall receive less Federal funds 
than it did in the most recent fiscal year in which it received 
assistance, as long as the State continues to provide the requisite 
matching funds.
    If amounts appropriated for any fiscal year for grants under the 
FMNP are not sufficient to maintain prior year funding levels for each 
State authorized under section 17(m)(6)(A) of the CNA, each State's 
grant shall be ratably reduced, except that, if sufficient funds are 
available, each State shall receive at least $50,000 or the amount that 
the State received for the prior fiscal year if that amount is less 
than $50,000.
    Once funds have been set aside to satisfy this requirement, section 
17(m)(6)(G) requires that any remaining funds shall be allocated as 
follows: (1) An amount equal to 45 to 55 percent shall be made 
available to States participating in the FMNP that wish to serve 
additional FMNP recipients, and whose State plan to do so is approved 
by the Department. If this amount is greater than that necessary to 
satisfy approved expansion requests from participating State agencies, 
the unallocated amount shall be made available to State agencies that 
have not participated in the FMNP in the prior fiscal year, and whose 
State Plans have been approved by the Department.
    (2) An amount equal to 45 to 55 percent shall be made available to 
States that have not participated in the FMNP in the prior fiscal year, 
and whose State Plans have been approved by the Department. If this 
amount is greater than that necessary to satisfy the approved State 
Plans for new State agencies, the unallocated amount shall be applied 
toward satisfying any unmet need of States that desire to serve 
additional recipients, and whose State Plans have been approved by the 
Department.
    State agencies must return to FNS any unexpended funds made 
available for a fiscal year, by February 1 of the following fiscal 
year, except that each State agency may retain not more than 5 percent 
of the funds made available to the State agency for the fiscal year to 
reimburse expenses incurred during the preceding fiscal year or to 
reimburse expenses expected to be incurred during the succeeding fiscal 
year. The spend forward or carry back provisions are contained in 
Sec. 248.14(h) of this interim rule. Any funds that remain available 
after satisfying paragraphs (1) and (2) above, shall be reallocated in 
accordance with the appropriate method determined by the Secretary.
    Subject to requirements of section 17(m)(6) described above, the 
Secretary is instructed in section 17(m)(4) to establish a formula for 
determining amounts to be awarded to each State with an approved plan 
according to the number of recipients proposed to participate as 
specified in the State Plan. In determining the amount to be awarded to 
new States, the Secretary is further instructed to rank the State Plans 
according to the following criteria set forth in section 17(m)(6)(F) of 
the CNA. The Secretary shall:
    (1) Favorably consider a State's prior experiences with this or 
similar programs;
    (2) Favorably consider a State's operation of a similar program 
with State or local funds that can present data concerning the value of 
that program;
    (3) Require that if a State receiving funds under the FMNP applies 
the Federal grant to a similar program operated in the previous fiscal 
year with State or local funds, the State shall not reduce the amount 
of such State or local funds previously made available to the similar 
program below the level at which the similar program was funded in the 
year prior to obtaining FMNP funding.
    (4) Give precedence to State Plans that would serve areas in the 
State having--
    (a) The highest concentration of eligible persons;
    (b) The greatest access to farmers' markets;
    (c) A broad geographical area;
    (d) The greatest number of recipients in the broadest geographical 
area within the State; and
    (e) Any other characteristics, as determined appropriate by the 
Secretary, that maximize the availability of benefits to eligible 
persons; and
    (5) Take into consideration the amount of funds available and the 
minimum amount needed by each applicant State to successfully operate 
the FMNP.
    In providing funds to serve additional recipients in a State that 
received assistance under the FMNP in the previous fiscal year, section 
17(m)(6)(C) of the Act requires the Secretary to consider:
    (1) The availability of any such assistance not spent by the State 
during the FMNP year for which the assistance was received;
    (2) Documentation that justifies the need for an increase in 
participation; and
    (3) Demonstrated ability to satisfactorily operate the existing 
FMNP.
    The Secretary will review State agency requests for expansion funds 
on a case-by-case basis in the evaluation process as set forth in 
Sec. 248.14(e). The Secretary shall consider if State agencies 
requesting expansion funds have demonstrated their ability to spend at 
least 80 percent of their prior year food grant (exclusive of the 5 
percent carry forward). In those instances where State agencies are 
requesting funds for expansion but have excessive unspent funds, as 
determined by the Secretary, during the FMNP year for which the 
assistance was received, the State agency may still be eligible for 
expansion funds if the Secretary determines there was good cause for 
the excessive unspent funds, such as severe weather conditions and 
other factors such as unanticipated decreases in participant caseload 
in the WIC Program.
    Administrative funds are limited by section 17(m)(5)(F) of the Act 
and cannot exceed 15 percent, (or 17 percent for a State's first year 
of operation or in approved cases thereafter), of the total FMNP funds. 
This is consistent with House report No. 102-540(I), page 192, 
accompanying Public Law 102-314, which states that the 15-percent 
administrative cost allowance is designed to more realistically reflect 
the costs of administering the FMNP than the 12 percent permitted under 
the demonstration projects. Section 17(m)(5)(F) of the CNA also allows 
for an additional 2-percent allowance for a State's first year of 
operation (i.e. in Fiscal Year 1993, States which did not operate a 
demonstration project prior to October 1, 1992), to cover start-up 
costs such as determining which local WIC sites will be utilized; 
recruiting farmers to participate in the program; preparing contracts 
for farmers and local WIC providers; developing a data processing 
system for redemption and reconciliation of food coupons; designing 
program training and informational materials; and planning program 
implementation and coordination of responsibilities between State 
agriculture and health departments.
    Section 17(m)(5)(F)(ii) of the Act states that after the first 
fiscal year of operation, upon a showing by the State of financial 
need, the Secretary may permit the State to use up to an additional 2 
percent of the total FMNP funds for administration. In determining 
financial need, the Secretary shall take into consideration the State 
agency's unique circumstances and proposed enhancements to its 
operations. Examples of FMNP enhancements are upgraded nutritional 
education and instructional materials, automation of coupon issuance, 
and micro-encoding checks. As set forth in Sec. 248.14(g)(3), State 
agencies wishing to request the additional 2 percent administration 
allowance must submit written justification to FNS for approval as part 
of the annual State Plan. Such requests must be resubmitted each year, 
since approval of the additional 2 percent allowance one year does not 
mean that the additional amount will be granted in subsequent years.
    It is up to the State agency to determine what mix of funds 
(Federal, State, or both) will be used for the administrative portion, 
as long as the administrative funds do not exceed 15 (or 17, where 
approved) percent of the total of Federal and State funds allocated. 
This means that a State agency can choose to utilize some of the 
Federal funds allocated for administrative costs or it can use all of 
the Federal funds for food costs. The following example illustrates two 
options available to State agencies to provide flexibility regarding 
administrative funds within the 30 percent matching requirement:

------------------------------------------------------------------------
                                         Total    Food    Administration
------------------------------------------------------------------------
Federal Dollars Allocated.............      $70   $59.50         $10.50 
Minimum State Match...................       30    25.50           4.50 
                                       ---------------------------------
      Total FMNP Cost.................      100    85.00          15.00 
                                       =================================
Option:                                                                 
    Federal Dollars...................       70    70.00           0.00 
    Minimum State Match...............       30    15.00          15.00 
                                       ---------------------------------
      Total FMNP Cost.................      100    85.00          15.00 
------------------------------------------------------------------------

    In summary, a State agency may not use more than 15 (or 17) percent 
of the total (Federal and State) amount of funds for administrative 
costs. If a State agency provides funds in excess of the 30 percent 
matching requirement, the limit on the use of funds for administration 
shall not apply to the funds contributed above the matching 
requirement.

List of Subjects in 7 CFR Part 248

    Food assistance programs, Food donations, Grant programs, Social 
programs, Infants and children, maternal and child health, Nutrition 
education, Public assistance programs, WIC, Women.
    Accordingly, 7 CFR part 248 is added to read as follows:

PART 248--WIC Farmers' Market Nutrition Program (FMNP)

Subpart A--General

Sec.
248.1  General purpose and scope.
248.2  Definitions.
248.3  Administration.

Subpart B--State Agency Eligibility

248.4  State Plan.
248.5  Selection of new State agencies.

Subpart C--Recipient Eligibility

248.6  Recipient eligibility.
248.7  Nondiscrimination.

Subpart D--Recipient Benefits

248.8  Level of benefits and eligible foods.
248.9  Nutrition education.

Subpart E--State Agency Provisions

248.10  Coupon and market management.
248.11  Financial management system.
248.12  FMNP costs.
248.13  FMNP income.
248.14  Distribution of funds.
248.15  Closeout procedures.
248.16  Administrative appeal of State agency decisions.

Subpart F--Monitoring and Review of State Agencies

248.17  Management evaluations and reviews.
248.18  Audits.
248.19  Investigations.

Subpart G--Miscellaneous Provisions

248.20  Claims and penalties.
248.21  Procurement and property management.
248.22  Nonprocurement debarment/suspension, drug-free workplace, 
and lobbying restrictions.
248.23  Records and reports.
248.24  Other provisions.
248.25  FMNP information.
248.26  OMB control numbers.

    Authority: 42 U.S.C. 1786.

Subpart A--General


Sec. 248.1  General purpose and scope.

    This part announces regulations under which the Secretary of 
Agriculture shall carry out the WIC Farmers' Market Nutrition Program. 
The dual purposes of the FMNP are: (a) To provide resources in the form 
of fresh, nutritious, unprepared foods (fruits and vegetables) from 
farmers' markets to women, infants, and children who are nutritionally 
at risk and who are participating in the Special Supplemental Food 
Program for Women, Infants and Children (WIC) or are on the waiting 
list for the WIC Program; and
    (b) To expand the awareness, use of and sales at farmers' markets.
    This will be accomplished through payment of cash grants to 
approved State agencies which administer the FMNP and deliver benefits 
at no cost to eligible persons. The FMNP shall be supplementary to the 
food stamp program carried out under the Food Stamp Act of 1977 (7 
U.S.C. 2011 et seq.) and to any other Federal or State program under 
which foods are distributed to needy families in lieu of food stamps.


Sec. 248.2  Definitions.

    For the purpose of this part and all contracts, guidelines, 
instructions, forms and other documents related hereto, the term:
    Administrative costs means those direct and indirect costs, 
exclusive of food costs, as defined in Sec. 248.12(b), which State 
agencies determine to be necessary to support FMNP operations. 
Administrative costs include, but are not limited to, the costs of 
administration, start-up, training, monitoring, auditing, the 
development of and accountability for coupon and market management, 
nutrition education, outreach, eligibility determination, and 
developing, printing, and distributing coupons.
    Compliance buy means a covert, on-site investigation in which a 
FMNP representative poses as a FMNP participant and transacts one or 
more FMNP food coupons.
    Coupon means a coupon, voucher, or other negotiable financial 
instrument by which benefits under the FMNP are transferred to 
recipients.
    Days means calendar days.
    Demonstration project means the Farmers' Market Coupon 
Demonstration Project authorized by section 17(m) of the Child 
Nutrition Act of 1966 (CNA), (42 U.S.C. 1786(m)), as amended by section 
501 of the Hunger Prevention Act of 1988 (Pub. L. 100-435), enacted 
September 19, 1988. Public Law 102-314 authorized the Secretary to 
competitively award, subject to the availability of funds, a 3-year 
grant (which was subsequently extended for an additional year by Public 
Law 102-142) to up to 10 States that submitted applications that were 
approved for the establishment of demonstration projects designed to 
provide WIC participants with coupons that could be exchanged for 
fresh, nutritious, unprepared foods at farmers' markets. Those States 
are: Connecticut, Iowa, Maryland, Massachusetts, Michigan, New York, 
Pennsylvania, Texas, Vermont, and Washington.
    Department means the U.S. Department of Agriculture.
    Eligible foods means fresh, nutritious, unprepared, domestically 
grown fruits, vegetables and herbs for human consumption. Eligible 
foods may not be processed or prepared beyond their natural state 
except for usual harvesting and cleaning processes. Honey, maple syrup, 
cider, nuts, seeds, eggs meat, cheese and seafood are examples of foods 
not eligible for purposes of the FMNP.
    Farmer means an individual authorized to sell produce at 
participating farmers' markets. Individuals who exclusively sell 
produce grown by someone else, such as wholesale distributors, cannot 
be authorized to participate in the FMNP. For purposes of this part, 
the term ``farmer'' shall mean ``producer'' as that term is used in 
section 17(m)(6)(D) of the CNA (42 U.S.C. 1786(m)(6)(D)). A 
participating State agency has the option to authorize individual 
farmers or farmers' markets.
    Farmers' market means an association of local farmers who assemble 
for the purpose of selling their produce directly to consumers. In 
cases where recipient access to farmers' markets is an issue, with 
prior FNS approval this definition may be expanded at the State 
agency's option to include farmstands at which authorized farmers sell 
their produce.
    Farmstand means a location at which a single, individual farmer 
sells his/her produce directly to consumers. This is in contrast to a 
group or association of farmers selling their produce at a farmers' 
market. With prior FNS approval, a State agency may authorize a 
farmstand or a nonprofit organization operating a farmstand to 
participate in the FMNP, where necessary to ensure adequate recipient 
access to farmers' markets.
    Fiscal year means the period of 12 calendar months beginning 
October 1 of any calendar year and ending September 30 of the following 
calendar year.
    FMNP funds means Federal grant funds provided for the FMNP, plus 
the required non-Federal match.
    FNS means the Food and Nutrition Service of the U.S. Department of 
Agriculture.
    Food costs means the cost of eligible supplemental foods.
    Household has the same definition as that of ``family'' defined in 
Sec. 246.2 of this chapter. Each such family shall constitute a 
separate household for FMNP benefit issuance purposes.
    Local agency means any nonprofit entity or local government agency 
which issues FMNP coupons, and provides nutrition education and/or 
information on operational aspects of the FMNP to FMNP recipients.
    Matching requirement means non-Federal cash outlays in an amount 
equal to, but not less than, 30 percent of the total FMNP costs for the 
fiscal year. The match may be satisfied through non-Federal cash 
expenditures for the FMNP or for similar farmers' market programs which 
operate during the same period as the FMNP. Similar programs include 
other farmers' market programs which serve women, infants and children 
(who may or may not be WIC participants or on the waiting list for WIC 
services), as well as other categories of recipients, such as, but not 
limited to, elderly persons.
    Nonprofit agency means a private agency which is exempt from income 
tax under the Internal Revenue Code of 1986, as amended, (26 U.S.C. 1 
et. seq.).
    Nutrition education means individual or group education sessions 
and the provision of information and educational materials designed to 
improve health status, achieve positive change in dietary habits, and 
emphasize relationships between nutrition and health, all in keeping 
with the individual's personal, cultural, and socioeconomic 
preferences.
    OIG means the Department's Office of the Inspector General.
    Program or FMNP means the WIC Farmers' Market Nutrition Program 
authorized by section 17(m) of the CNA (42 U.S.C. 1786(m)), as amended 
by Public Law 102-314, the WIC Farmers' Market Nutrition Act of 1992, 
enacted on July 2, 1992.
    Recipient means a person chosen by the State agency to receive FMNP 
benefits. Such person must be a woman, infant over 4 months of age, or 
child, who receives benefits under the WIC Program or is on the waiting 
list to receive benefits under the WIC Program.
    SFPD means the Supplemental Food Programs Division of the Food and 
Nutrition Service of the U.S. Department of Agriculture.
    Similar programs means other farmers' market projects or programs 
which serve women, infants and children, or other categories of 
recipients, such as, but not limited to, elderly persons.
    State agency means the agriculture department; the health 
department or comparable agency of each State; an Indian tribe, band or 
group recognized by the Department of the Interior; an intertribal 
council or group which is an authorized representative of Indian 
tribes, bands or groups recognized by the Department of the Interior 
and which has an ongoing relationship with such tribes, bands or groups 
for other purposes and has contracted with them to administer the 
Program; or the appropriate area office of the Indian Health Service 
(IHS), a division of the Department of Health and Human Services.
    State Plan means a plan of FMNP operation and administration that 
describes the manner in which the State agency intends to implement, 
operate and administer all aspects of the FMNP within its jurisdiction 
in accordance with Sec. 248.4.
    Total FMNP costs means the sum of all allowable costs incurred for 
FMNP purposes, whether funded from the Federal or the State matching 
share of total FMNP funds.
    Total FMNP funds means the sum of the Federal funds provided to the 
State agency and non-Federal contributions provided by the State agency 
for FMNP purposes.
    WIC means the Special Supplemental Food Program for Women, Infants 
and Children authorized by section 17 of the Child Nutrition Act of 
1966, as amended (42 U.S.C. 1771 et. seq.).


Sec. 248.3  Administration.

    (a) Delegation to FNS. Within the Department, FNS shall act on 
behalf of the Department in the administration of the FMNP. Within FNS, 
SFPD and the FNS Regional Offices are responsible for FMNP 
administration. FNS shall provide assistance to State agencies and 
evaluate all levels of FMNP operations to ensure that the goals of the 
FMNP are achieved in the most effective and efficient manner possible.
    (b) Delegation to State agency. The State agency is responsible for 
the effective and efficient administration of the FMNP in accordance 
with the requirements of this part; the requirements of the 
Department's regulations governing nondiscrimination (7 CFR parts 15, 
15a and 15b), administration of grants (7 CFR part 3016), 
nonprocurement debarment/suspension (7 CFR part 3017), drug-free 
workplace (7 CFR part 3017), and lobbying (7 CFR part 3018); and, 
Office of Management and Budget Circular A-130, FNS guidelines, and 
Instructions issued under the FNS Directives Management System. The 
State agency shall provide guidance to cooperating WIC State and local 
agencies on all aspects of FMNP operations. Pursuant to section 
17(m)(2) of the CNA, State agencies may operate the FMNP locally 
through nonprofit organizations or local government entities and must 
ensure coordination among the appropriate agencies and organizations.
    (c) Agreement and State Plan. Each State agency desiring to 
administer the FMNP shall annually submit a State Plan and enter into a 
written agreement with the Department for administration of the Program 
in the jurisdiction of the State agency in accordance with the 
provisions of this part.
    (d) State agency ineligibility. A State agency shall be ineligible 
to participate in the FMNP if State or local sales tax is collected on 
Program food purchases in the area in which it administers the Program, 
except that, if sales tax is collected on Program food purchases by 
sovereign Indian entities which are not State agencies, the State 
agency shall remain eligible so long as any farmers' markets collecting 
such tax are disqualified.
    (e) Coordination with WIC agency. The Chief Executive Officer of 
the State shall ensure coordination between the designated 
administering State agency and the WIC State agency, if different, by 
ensuring that the two agencies enter into a written agreement. Such 
coordination between agencies is necessary for the successful operation 
of the FMNP, because WIC participants or persons on the waiting list 
for WIC services are the only persons eligible to receive Federal 
benefits under the FMNP. The written agreement shall delineate the 
responsibilities of each agency, describe any compensation for 
services, and shall be signed by the designated representative of each 
agency. This agreement shall be submitted each year along with the 
State Plan.
    (f) State staffing standards. Each State agency shall ensure that 
sufficient staff is available to efficiently and effectively administer 
the FMNP. This shall include, but not be limited to, sufficient staff 
to provide nutrition education in coordination with the WIC Program, 
coupon and market management, fiscal reporting, monitoring, and 
training. The State agency shall provide an outline of administrative 
staff and job descriptions for staff whose salaries will be paid from 
program funds in their State Plans.

Subpart B--State Agency Eligibility


Sec. 248.4  State Plan.

    (a) Requirements. By November 15 of each year, each applying or 
participating State agency shall submit to FNS for approval a State 
Plan for the following year as a prerequisite to receiving funds under 
this section. The State Plan shall be signed by the State designated 
official responsible for ensuring that the Program is operated in 
accordance with the State Plan. FNS will provide written approval or 
denial of a completed State Plan or amendment within 30 days. Portions 
of the State Plan which do not change annually need not be resubmitted. 
However, the State agency shall provide the title of the sections that 
remain unchanged, as well as the year of the last Plan in which the 
sections were submitted. At a minimum, the Plan must address the 
following areas in sufficient detail to demonstrate the State agency's 
ability to meet the requirements of the FMNP: (1) A copy of the 
agreement between the designated administering State agency and the WIC 
State agency, if different, for services such as nutrition education, 
and documentation of coordinated efforts as required in Sec. 248.3(e), 
as well as copies of agreements with agencies other than the WIC State 
agency.
    (2) Estimated number of recipients for the fiscal year, and 
proposed months of operation.
    (3) Estimated cost of the FMNP, including a minimum amount 
necessary to operate the FMNP.
    (4) Description of how the Program will achieve its dual purposes 
of providing a nutritional benefit to WIC (or waiting list) 
participants and expanding the awareness and use of farmers' markets.
    (5) Outline of administrative staff and job descriptions.
    (6) Detailed description of the recordkeeping system including, but 
not limited to, the system for maintaining records pertaining to 
financial operations, coupon issuance and redemption, and FMNP 
participation.
    (7) Detailed description of the financial management system, 
including, but not limited to documentation of how the State will meet 
the matching requirement and procedures for obligating funds.
    (8) Detailed description of the service area including: (i) The 
number and addresses of participating markets and area WIC clinics 
including a map outlining the service area and proximity of markets to 
clinics; and
    (ii) Estimated number of WIC participants and persons on the WIC 
waiting list that will receive FMNP coupons.
    (9) Description of the coupon issuance system including: (i) How 
the State agency will target areas with highest concentrations of 
eligible persons and greatest access to farmers' markets within the 
broadest possible geographic area;
    (ii) Annual benefit amount per recipient;
    (iii) Method for instructing recipients on the proper use of FMNP 
coupons and the purpose of the FMNP; and
    (iv) Method for ensuring that FMNP coupons are only issued to 
eligible recipients.
    (10) Detailed description of the coupon and farmers' market 
management system including: (i) criteria for authorizing farmers' 
markets;
    (ii) Procedures for training farmers and market managers, at 
authorization, and annually thereafter;
    (iii) Procedures for monitoring farmers' markets;
    (iv) Description of system for identifying high risk farmers and 
farmers' markets and procedures for sanctioning farmers and farmers' 
markets;
    (v) Facsimile of the FMNP coupon;
    (vi) Identification of the fresh, nutritious, unprepared fruits, 
vegetables, and herbs which are eligible for purchase under the 
Program;
    (vii) Description of FMNP coupon replacement policy;
    (viii) Procedures for handling recipient and farmer/farmers' market 
complaints.
    (11) Detailed description of the FMNP coupon redemption process 
including:
    (i) Procedures for ensuring the secure transportation and storage 
of FMNP coupons;
    (ii) System for identifying and reconciling FMNP coupons;
    (iii) Timeframes for FMNP coupon redemption by recipients; 
submission for payment by markets, and payment by the State agency;
    (12) System for ensuring that FMNP coupons are redeemed only by 
authorized farmers/farmers' markets and only for eligible foods.
    (13) System for identifying FMNP coupons which are redeemed or 
submitted for payment outside valid dates or by unauthorized farmers/
farmers' markets.
    (14) A copy of the written agreement to be used between the State 
agency and authorized farmers/farmers' markets. In those States which 
authorize farmers' markets, but not individual farmers, this agreement 
shall specify in detail the role of and procedures to be used by 
farmers' markets for monitoring and sanctioning farmers, and the 
appropriate procedures to be used by a farmer to appeal a sanction or 
disqualification imposed by a farmers' market.
    (15) When practicable, information on the impact on the nutritional 
status of recipients by determining the change in their consumption of 
fresh fruits and vegetables. This information shall be submitted as an 
addendum to the State Plan and shall be submitted at such a date 
specified by the Secretary.
    (16) The method the State agency will use to assess the effects of 
the FMNP on the use of farmers' markets, the marketing of agricultural 
products, and when practicable the effects of the FMNP on recipients' 
awareness regarding farmers' markets.
    (17) Information on the effects of the FMNP on the use of farmers' 
markets and marketing of agricultural products at such markets and when 
practicable, the effects of the FMNP on recipients' awareness regarding 
farmers' markets. This information shall be submitted as an addendum to 
the State Plan and shall be submitted at such a date specified by the 
Secretary.
    (18) A description of the procedures the State agency will use to 
comply with the civil rights requirements described in Sec. 248.7(a), 
including the processing of discrimination complaints.
    (19) State agencies which have not previously participated in the 
FMNP, shall provide the following additional information: (i) A 
statement assuring that if the State agency receives Federal funds, as 
specified under Sec. 248.14 to operate the FMNP, and applies those 
funds to similar programs operated in the previous fiscal year with 
State or local funds, the amount of State and local funds that were 
available to similar programs in the fiscal year preceding the first 
year of operation shall not be reduced. The State agency shall include 
data in the State Plan showing that it did not reduce the amount of 
State and local funds available to the similar program in the preceding 
fiscal year.
    (ii) A capability statement which includes a summary description of 
any prior experience with farmers' market projects or programs, 
including information and data describing the attributes of such 
projects or programs.
    (20) For States making expansion requests, documentation which 
meets the following requirements: (i) Justifies the need for an 
increase in participation;
    (ii) Demonstrates the State agency's ability to satisfactorily 
operate the existing FMNP;
    (iii) Identifies the management capabilities of the State to 
expand.
    (b) Amendments. At any time after approval, the State agency may 
amend the State Plan to reflect changes. The State agency shall submit 
the amendments to FNS for approval. The amendments shall be signed by 
the State designated official responsible for ensuring that the FMNP is 
operated in accordance with the State Plan.
    (c) Retention of copy. A copy of the approved State Plan shall be 
kept on file at the State agency for public inspection.


Sec. 248.5  Selection of new State agencies.

    In selecting new State agencies, the Department shall rank State 
Plans submitted in accordance with Sec. 248.4, using the following 
criteria in making this ranking: (a) Prior experience of the State with 
the demonstration project or similar farmers' market programs;
    (b) Prior operation, by the State of a similar program with State 
or local funds and ability to present data concerning the beneficial 
attributes of such program;
    (c) Emphasis on service to areas in the State that have: (1) The 
highest concentration of eligible persons;
    (2) The greatest access to farmers' markets;
    (3) Broad geographic areas;
    (4) The greatest number of recipients in the broadest geographical 
area within the State; and
    (5) Any other characteristics the Department determines that 
maximize the availability of benefits to eligible persons.
    (d) Consideration of the amount of funds necessary to successfully 
operate the FMNP in the State compared with other States and with the 
total amount of funds available to the FMNP.
    (e) Approval of a State Plan does not equate to an obligation on 
the part of the Secretary to fund the FMNP within that State.

Subpart C--Recipient Eligibility


Sec. 248.6  Recipient eligibility.

    (a) Eligibility for certification. Individuals who are eligible to 
receive Federal benefits under the FMNP are those, excluding infants 4 
months of age or younger, who are currently receiving benefits under 
WIC or who are on the waiting list to receive benefits from WIC.
    (b) Limitations on certification. If necessary to limit the number 
of recipients, State agencies may impose additional eligibility 
requirements, such as limiting participant certification to certain 
geographic areas, or to high priority WIC participants such as pregnant 
and breastfeeding women. States may also preclude groups of low 
priority persons, such as persons on the waiting list for WIC. Each 
State agency must specifically identify these limitations on 
certification in its State Plan.
    (c) Recipient or household benefit allocation. On a Statewide 
basis, State agencies shall elect to allocate and issue benefits either 
to recipients or households. A State agency allocating benefits on a 
household basis shall not issue more benefits to a household than it 
otherwise would if benefits were allocated to individual recipients 
within the household. For those State agencies issuing FMNP benefits on 
a household basis, each family as defined in Sec. 246.2 of this chapter 
shall constitute a separate household. Foods provided, regardless of 
method of issuance, are intended for the sole benefit of FMNP 
recipients and are not intended to be shared with other non-
participating household members. If a State agency issues benefits on a 
household basis, data concerning number and type of recipients must 
still be provided as required by Sec. 248.23(b). Recipients shall 
receive FMNP benefits free of charge.


Sec. 248.7  Nondiscrimination.

    (a) Civil rights requirements. The State agency 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 applicable FNS Instructions to ensure that no person shall, 
on the grounds of race, color, national origin, age, sex or handicap, 
be excluded from participation, be denied benefits, or be otherwise 
subjected to discrimination, under the FMNP. Because racial and ethnic 
participation data (as required by title VI of the Civil Rights Act of 
1964) are collected at the time women, infants, and children are 
certified for participation in the WIC Program, the Department has 
determined that the WIC data collection effort is sufficient to fulfill 
the racial/ethnic data collection requirement for the FMNP. Therefore, 
no additional data collection is required. Compliance with 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, and regulations and instructions issued 
thereunder shall include, but not be limited to: (1) Notification to 
the public of the nondiscrimination policy and complaint rights of 
recipients and potentially eligible persons, which may be satisfied 
through the Department's required nondiscrimination statement on 
brochures and publications;
    (2) Review and monitoring activity to ensure FMNP compliance with 
the nondiscrimination laws and regulations;
    (3) Establishment of grievance procedures for handling recipient 
complaints based on sex and handicap.
    (b) Complaints. Persons seeking to file discrimination complaints 
may file them either with the Secretary of Agriculture, or the 
Director, Office of Equal Opportunity, USDA, Washington, DC 20250 or 
with the office established by the State agency to handle 
discrimination grievances or complaints. All complaints received by 
State agencies which allege discrimination based on race, color, 
national origin, or age shall be referred to the Secretary of 
Agriculture or the Director of the Office of Equal Opportunity, USDA. A 
State agency may process complaints which allege discrimination based 
on sex or handicap if grievance procedures are in place.

Subpart D--Recipient Benefits


Sec. 248.8  Level of benefits and eligible foods.

    (a) General. State agencies shall identify in the State Plan the 
fresh, nutritious, unprepared fruits, vegetables and herbs which are 
eligible for purchase under the FMNP. Honey, maple syrup, cider, nuts 
and seeds, eggs, cheese, meat and seafood are not eligible foods for 
purposes of the FMNP. State agencies may limit the eligible foods to 
those that are locally grown, as defined by the State.
    (b) The value of the Federal benefits received. The value of the 
Federal share of the FMNP benefits received by each recipient, or by 
each family within a household in those States which elect to issue 
benefits on a household basis under Sec. 248.6(c) may not be less than 
$10 per year or more than $20 per year.


Sec. 248.9  Nutrition education.

    (a) Goals. Nutrition education shall emphasize the relationship of 
proper nutrition to the total concept of good health, including the 
importance of consuming fresh fruits and vegetables.
    (b) Requirement. The State agency shall integrate nutrition 
education into FMNP operations and may satisfy nutrition education 
requirements through coordination with other agencies within the State. 
Such other agencies may include the WIC Program which routinely offers 
nutrition education to participants and which may wish to use the 
opportunity of the FMNP to reinforce nutrition messages. State agencies 
wishing to coordinate nutrition education with WIC shall enter into a 
written cooperative agreement with WIC agencies to offer nutrition 
education relevant to the use and nutritional value of foods available 
to FMNP recipients. In cases where relevant WIC nutrition education 
sessions are used to meet this requirement, reimbursement to the WIC 
local agency shall not be permitted. In cases where FMNP recipients are 
not receiving relevant nutrition education from the WIC Program, the 
State agency shall arrange alternative methods for the provision of 
such nutrition education which is an allowable cost under the FMNP.

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 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 conduct a documented on-site visit prior 
to, or at the time of, authorization of a farmers' market or individual 
farmer. The on-site visit shall include at a minimum, provision of 
information concerning eligible foods and proper FMNP coupon redemption 
procedures.
    (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 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. State agencies have discretion in 
determining the method used for training purposes. At a minimum, 
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 
beginning with 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, and recipient 
complaints. 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.
    (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. Reviews of FMNP practices at the WIC 
local agency may be included in the overall WIC local agency review 
conducted by the WIC State agency.
    (f) Control of FMNP coupons. (1) The State agency shall control and 
provide 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, 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.


Sec. 248.11  Financial management system.

    (a) Disclosure of expenditures. The State agency shall maintain a 
financial management system which provides accurate, current and 
complete disclosure of the financial status of the FMNP. This shall 
include an accounting for all property and other assets and all FMNP 
funds received and expended each fiscal year.
    (b) Internal controls. The State agency shall maintain effective 
controls over and accountability for all FMNP funds. The State agency 
must have effective internal controls to ensure that expenditures 
financed with FMNP funds are authorized and properly chargeable to the 
FMNP.
    (c) Record of expenditures. The State agency shall maintain records 
which adequately identify the source and use of funds expended for FMNP 
activities. These records shall contain, but are not limited to, 
information pertaining to authorization, receipt of funds, obligations, 
unobligated balances, assets, liabilities, outlays, and income.
    (d) Payment of costs. The State agency shall implement procedures 
which ensure prompt and accurate payment of allowable costs, and ensure 
the allowability and allocability of costs in accordance with the cost 
principles and standard provisions of this part, 7 CFR part 3016, and 
FNS guidelines and Instructions.
    (e) Identification of obligated funds. The State agency shall 
implement procedures which accurately identify obligated FMNP funds at 
the time the obligations are made.
    (f) Resolution of audit findings. The State agency shall implement 
procedures which ensure timely and appropriate resolution of claims and 
other matters resulting from audit findings and recommendations.
    (g) Reconciliation of food instruments. The State agency shall 
reconcile FMNP coupons in accordance with Sec. 248.10(f).
    (h) Transfer of cash. The State agency shall establish the timing 
and amounts of its cash draws against its Letter of Credit in 
accordance with 31 CFR part 205.


Sec. 248.12  FMNP costs.

    (a) General.--(1) Composition of allowable costs. In general, a 
cost item will be deemed allowable if it is reasonable and necessary 
for FMNP purposes and otherwise satisfies allowability criteria set 
forth in 7 CFR 3016.22 and this part. FMNP purposes include the 
administration and operation of the FMNP. Program costs supported by 
State matching contributions must meet the same criteria for 
allowability as costs supported by Federal funds. Allowable FMNP costs 
may be classified as follows:
    (i) Food costs and administrative costs. Food costs are the costs 
of food benefits provided to FMNP recipients. Administrative costs are 
the costs associated with providing FMNP benefits and services to 
recipients and generally administering the FMNP. Specific examples of 
allowable administrative costs are listed in paragraph (b) of this 
section. Except as provided in Sec. 248.14(g) of this part, a State 
agency's administrative costs under the FMNP may not exceed 15 percent 
of its total FMNP costs. Any costs incurred for food and/or 
administration above the Federal grant level will be the State agency's 
responsibility.
    (ii) Direct and indirect costs. Direct costs are food and 
administrative costs incurred specifically for the FMNP. Indirect costs 
are administrative costs that benefit multiple programs or activities, 
and cannot be identified to any one without effort disproportionate to 
the results achieved. In accordance with the provisions of 7 CFR part 
3015, a claim for reimbursement of indirect costs shall be supported by 
an approved allocation plan for the determination of such costs. An 
indirect cost rate developed through such an allocation plan may not be 
applied to a base that includes food costs.
    (2) Costs allowable with prior approval. A State or local agency 
must obtain prior approval in accordance with 7 CFR 3016.22 before 
charging to the FMNP any capital expenditures and other cost items 
designated by 7 CFR 3016.22 as requiring such approval.
    (3) Unallowable costs. Costs that are not reasonable and necessary 
for FMNP purposes, or that do not otherwise satisfy the cost principles 
of 7 CFR 3016.22, are unallowable. Notwithstanding any other provision 
of part 3016 or this part, the cost of constructing or operating a 
farmers' market is unallowable. Unallowable costs may never be claimed 
for Federal reimbursement or counted toward the State matching 
requirement.
    (b) Specified allowable administrative costs. Allowable 
administrative costs include the following: (1) The costs associated 
with the provision of nutrition education which meets the requirements 
of Sec. 248.9 of this part.
    (2) The costs of FMNP coupon issuance, or recipient education 
covering proper coupon redemption procedures.
    (3) The cost of outreach services.
    (4) The costs associated with the food delivery process, such as 
printing FMNP coupons, processing redeemed coupons, and training market 
managers on the food delivery system.
    (5) The cost of monitoring and reviewing Program operations.
    (6) The cost of FMNP training.
    (7) The cost of required reporting and recordkeeping.


Sec. 248.13  FMNP income.

    Program income means gross income the State agency earns from grant 
supported activities. It includes fees for services performed and 
receipts from the use or rental of real or personal property acquired 
with Federal grant funds, but does not include proceeds from the 
disposition of such property. The State agency shall retain Program 
income earned during the agreement period and use it for Program 
purposes in accordance with the addition method described in 7 CFR 
3016.25(g)(2). Fines, penalties or assessments paid by local agencies 
or farmers/farmers' markets are also deemed to be FMNP income. The 
State agency shall ensure that the sources and applications of Program 
income are fully documented.


Sec. 248.14  Distribution of funds.

    (a) Conditions for receipt of Federal funds.--(1) Matching of 
funds--(i) Match amount. As a prerequisite to the receipt of Federal 
funds, a State agency must agree to contribute from non-Federal sources 
at least 30 percent of its total FMNP cost. The State agency may 
contribute more than this minimum amount. Non-federal contributions for 
similar programs as defined in Sec. 248.2 may satisfy the State 
matching requirement. If a State receiving funds under the FMNP applies 
the Federal grant to a similar program operated in the previous fiscal 
year solely with State or local funds, the State shall not reduce in 
any fiscal year the amount of State or local funds made available to 
the similar program below the level at which the similar program was 
funded in the year prior to obtaining FMNP funding.
    (ii) Sources of matching contributions. A State agency may count 
any form of cash contribution authorized by 7 CFR 3016.24(a)(1) toward 
the State matching requirement.
    (iii) Failure to match. A State agency's failure to meet the State 
matching requirement will result in the establishment of a claim for 
the amount of Federal grant funds not matched. The matching requirement 
will be considered satisfied if State or other non-Federal matching 
contributions reported on the final closeout report required by 
Sec. 248.15(a) of this part amount to at least 30 percent of the total 
FMNP costs.
    (2) State Plan and agreement. A State agency shall have its State 
Plan approved and shall execute an agreement with the Department in 
accordance with Sec. 248.3(c) of this part.
    (b) Distribution of FMNP funds to previously participating State 
agencies. Provided that sufficient FMNP funds are available, each State 
agency that participated in the FMNP in the previous year or in the 
case of Fiscal Year 1993 operations, in a demonstration project, shall 
receive not less than the amount of funds the State agency received in 
the most recent fiscal year in which it received funding, if it 
otherwise complies with the requirements established in this part.
    (c) Ratable reduction. If amounts appropriated for any fiscal year 
for grants under the FMNP are not sufficient to pay to each previously 
participating State agency at least an amount as identified in 
paragraph (b) of this section, each State agency's grant shall be 
ratably reduced, except that, if sufficient funds are available, each 
State agency shall receive at least $50,000 or the amount that the 
State agency received for the prior fiscal year if that amount is less 
than $50,000.
    (d) Expansion of participating State agencies and establishment of 
new State agencies. Any FMNP funds remaining for allocation after 
meeting the requirements of paragraph (b) of this section shall be 
allocated in the following manner: (1) An amount not less than 45 
percent and not more than 55 percent of the remaining funds shall be 
made available to State agencies already participating in the FMNP that 
wish to serve additional recipients. If this amount is greater than 
that necessary to satisfy all State plans approved for additional 
recipients, the unallocated amount shall be applied toward satisfying 
any unmet need in paragraph (d)(2) of this section.
    (2) An amount not less than 45 percent and not more than 55 percent 
of the remaining funds shall be made available to State agencies that 
have not participated in the FMNP in the prior fiscal year. If this 
amount is greater than that necessary to satisfy the approved State 
Plans for new States, the unallocated amount shall be applied toward 
satisfying any unmet need in paragraph (d)(1) of this section. The 
Department reserves the right not to fund every State agency with an 
approved State Plan.
    (3) In any fiscal year, any FMNP funds that remain unallocated 
after satisfying the requirements of paragraphs (d) (1) and (2) of this 
section, shall be reallocated in accordance with paragraph (j) of this 
section.
    (e) Expansion for current State agencies. In providing funds to 
serve additional recipients in State agencies that participated in the 
FMNP in the previous fiscal year, the Department shall consider on a 
case-by-case basis, the following: (1) Whether a State agency utilized 
at least 80 percent of its prior year food grant (exclusive of the 5 
percent carry forward). States that did not spend at least 80 percent 
of their prior year food grant (exclusive of the 5 percent carry 
forward), may still be eligible for expansion funding if, in the 
judgment of the Department, good cause existed which was beyond the 
management control of the State, such as severe weather conditions, or 
unanticipated decreases in participant caseload in the WIC Program.
    (2) Documentation that justifies the need for an increase in 
participation. This documentation must be set forth in the State Plan 
as outlined in Sec. 248.4(a)(20).
    (3) Demonstrated ability to satisfactorily operate the existing 
FMNP. Supporting documentation must be set forth in the State Plan as 
outlined in Sec. 248.4(a)(20).
    (4) Documentation that identifies the management capabilities of 
the State to expand. This documentation must be set forth in the State 
Plan as outlined in Sec. 248.4(a)(20).
    (f) Funding of new State agencies. Funds will be awarded to new 
State agencies in accordance with Sec. 248.5.
    (g) Administrative funding. A State agency may convert 
administrative funds into food funds, but may not convert food funds 
into administrative funds. The State agency may determine what mix of 
funds (Federal, State, or both) will be used for the administrative 
portion. A State agency shall have available for administrative costs 
an amount not greater than 15 percent of total FMNP funds, except that: 
(1) a State agency shall be authorized to use up to an additional 2 
percent of total FMNP funds for administrative costs incurred during 
the first year in which it receives a grant under this part. The 
additional 2 percent is intended to cover start up costs to new States 
such as, but not limited to: (i) Determining which local WIC sites will 
be utilized;
    (ii) Recruiting and authorizing farmers/farmers' markets to 
participate in the FMNP;
    (iii) Preparing contracts for farmers/farmers' markets and local 
WIC providers;
    (iv) Developing a data processing system for redemption and 
reconciliation of FMNP coupons;
    (v) Designing program training and informational materials;
    (vi) Conducting FMNP training; and
    (vii) Coordinating FMNP implementation responsibilities between 
designated administering agencies.
    (2) After the first year in which a State agency receives a grant 
under this part, and upon showing by the State agency of financial 
need, the Secretary may permit the State agency to use up to an 
additional 2 percent of the total of FMNP funds toward FMNP 
administration. In determining financial need, the Secretary shall take 
into consideration any circumstances unique to the State agency, and 
any proposed enhancements to its operations.
    (3) State agencies wishing to request the additional 2 percent 
administration allowance in paragraph (g)(2) of this section must 
submit written justification to FNS for approval as part of the annual 
State Plan. Approvals, if granted, are only valid for one year.
    (4) A State agency's failure to effectively and efficiently manage 
the FMNP within the 15 percent administrative allowance shall not be an 
appropriate justification for authorizing the additional 2 percent 
increase in administrative funding.
    (5) The 15 percent administrative cost limitation, and the 
provisions of paragraphs (g)(1) and (2) of this section shall not apply 
to any funds that a State agency may contribute in excess of its 
minimum matching requirement. A State agency may use any non-Federal 
contributions over the 30 percent matching requirement for food and/or 
administrative costs.
    (h) Transfer of funds. A State agency may use not more than 5 
percent of the Federal FMNP funds made available for the fiscal year to 
reimburse expenses incurred by the FMNP during a preceding fiscal year, 
or to reimburse expenses expected to be incurred by the FMNP during the 
succeeding fiscal year. The State agency shall provide such 
justification for its request to carry forward or spend back funds 
under this paragraph as FNS may require.
    (i) Recovery of unused funds. State agencies shall return to FNS 
any unexpended funds made available for a fiscal year, by February 1 of 
the following fiscal year, except as provided in paragraph (h) of this 
section.
    (j) Reallocation of funds. Any funds recovered under paragraphs 
(d)(3) and (i) of this section will be reallocated in accordance with 
the appropriate method determined by FNS.


Sec. 248.15  Closeout procedures.

    (a) General. State agencies shall submit to FNS a final closeout 
report for the fiscal year on a form prescribed by FNS on a date 
specified by FNS.
    (b) Grant closeout procedures. When grants to State agencies are 
terminated, the following procedures shall be performed in accordance 
with 7 CFR part 3016.
    (1) FNS may disqualify a State agency's participation under the 
FMNP, in whole or in part, or take such remedies as may be appropriate, 
whenever FNS determines that the State agency failed to comply with the 
conditions prescribed in this part, in its Federal-State Agreement, or 
in FNS guidelines and instructions. FNS will promptly notify the State 
agency in writing of the disqualification together with the effective 
date.
    (2) FNS may disqualify the State agency or restrict its 
participation in the FMNP when both parties agree that continuation 
under the FMNP would not produce beneficial results commensurate with 
the further expenditure of funds.
    (3) Upon termination of a grant, the affected agency shall not 
incur new obligations after the effective date of the disqualification, 
and shall cancel as many outstanding obligations as possible. FNS will 
allow full credit to the State agency for the Federal share of the 
noncancellable obligations properly incurred by the State agency prior 
to disqualification, and the State agency shall do the same for 
farmers/farmers' markets.
    (4) A grant closeout shall not affect the retention period for, or 
Federal rights of access to, FMNP records as specified in 
Sec. 248.24(b) and (c). The closeout of a grant does not affect the 
responsibilities of the State agency regarding property or with respect 
to any FMNP income for which the State agency is still accountable.
    (5) A final audit is not a required part of the grant closeout and 
should not be needed unless there are problems with the grant that 
require attention. If FNS considers a final audit to be necessary, it 
shall so inform OIG. OIG will be responsible for ensuring that 
necessary final audits are performed and for any necessary coordination 
with other Federal cognizant audit agencies or State or local auditors. 
Audits performed in accordance with Sec. 248.18 may serve as final 
audits providing such audits meet the needs of requesting agencies. If 
the grant is closed out without an audit, FNS reserves the right to 
disallow and recover an appropriate amount after fully considering any 
recommended disallowances resulting from an audit which may be 
conducted later.


Sec. 248.16  Administrative appeal of State agency decisions.

    (a) Requirements. The State agency shall provide a hearing 
procedure whereby recipients, local agencies and farmers/farmers' 
markets adversely affected by certain actions of the State agency may 
appeal those actions. A recipient may appeal disqualification/
suspension of FMNP benefits. A local agency may appeal an action of the 
State agency disqualifying it from participating in the FMNP. A farmer/
farmers' market may appeal an action of the State agency denying its 
application to participate, imposing a sanction, or disqualifying it 
from participating in the FMNP. Expiration of a contract or agreement 
shall not be subject to appeal.
    (b) Postponement pending decision. An adverse action may, at the 
State agency's option, be postponed until a decision in the appeal is 
rendered.
    (1) In a case where an adverse action affects a local agency or 
farmer/farmers' market, a postponement is appropriate where the State 
agency finds that recipients would be unduly inconvenienced by the 
adverse action. In addition, the State agency may determine other 
relevant criteria to be considered in deciding whether or not to 
postpone an adverse action.
    (2) In a case where a recipient appeals the termination of 
benefits, that recipient shall continue to receive FMNP benefits until 
the hearing official reaches a decision or the expiration of the 
current FMNP season, whichever occurs first. Applicants who are denied 
benefits may appeal the denial, but shall not receive benefits while 
awaiting the decision.
    (c) Procedure. The State agency hearing procedure shall at a 
minimum provide the recipient, local agency or farmer/farmers' market 
with the following:
    (1) Written notification of the adverse action, the cause(s) for 
the action, and the effective date of the action, including the State 
agency's determination of whether the action shall be postponed under 
paragraph (b) of this section if it is appealed, and the opportunity 
for a hearing. Such notification shall be provided within a reasonable 
timeframe established by the State agency and in advance of the 
effective date of the action.
    (2) The opportunity to appeal the action within the time specified 
by the State agency in its notification of adverse action.
    (3) Adequate advance notice of the time and place of the hearing to 
provide all parties involved sufficient time to prepare for the 
hearing.
    (4) The opportunity to present its case and at least one 
opportunity to reschedule the hearing date upon specific request. The 
State agency may set standards on how many hearing dates can be 
scheduled, provided that a minimum of two hearing dates is allowed.
    (5) The opportunity to confront and cross-examine adverse 
witnesses.
    (6) The opportunity to be represented by counsel, or in the case of 
a recipient appeal, by a representative designated by the recipient, if 
desired.
    (7) The opportunity to review the case record prior to the hearing.
    (8) An impartial decision maker, whose decision as to the validity 
of the State agency's action shall rest solely on the evidence 
presented at the hearing and the statutory and regulatory provisions 
governing the FMNP. The basis for the decision shall be stated in 
writing, although it need not amount to a full opinion or contain 
formal findings of fact and conclusions of law.
    (9) Written notification of the decision in the appeal, within 60 
days from the date of receipt of the request for a hearing by the State 
agency.
    (d) Continuing responsibilities. Appealing an adverse action does 
not relieve a farmer/farmers' market or local agency permitted to 
continue in the FMNP while its appeal is pending, from responsibility 
for continued compliance with the terms of the written agreement or 
contract with the State agency.
    (e) Judicial review. If a State level decision is rendered against 
the recipient, local agency or farmer/farmers' market and the appellant 
expresses an interest in pursuing a further review of the decision, the 
State agency shall explain any further State level review of the 
decision and any available State level rehearing process. If neither is 
available or both have been exhausted, the State agency shall explain 
the right to pursue judicial review of the decision.
    (f) Additional appeals procedures for State agencies which 
authorize farmers' markets and not individual farmers. A State agency 
which authorizes farmers' markets and not individual farmers shall 
establish procedures to be used when a farmer seeks to appeal an action 
of a farmers' market denying the farmer's application to participate, 
or sanctioning or disqualifying the farmer. The procedures shall be set 
forth in the State Plan and in the agreements entered by the State 
agency and the farmers' market and the farmers' market and the farmer.

Subpart F--Monitoring and Review of State Agencies


Sec. 248.17  Management evaluations and reviews.

    (a) General. FNS and each State agency shall establish a management 
evaluation system in order to assess the accomplishment of FMNP 
objectives as provided under these regulations, the State Plan, and the 
written agreement with the Department. FNS will provide assistance to 
State agencies in discharging this responsibility, and will establish 
standards and procedures to determine how well the objectives of this 
part are being accomplished, and implement sanction procedures as 
warranted by State FMNP performance.
    (b) Responsibilities of FNS. FNS shall establish evaluation 
procedures to determine whether State agencies carry out the purposes 
and provisions of this part, the State Plan, and the written agreement 
with the Department. As a part of the evaluation procedure, FNS shall 
review audits to ensure that the FMNP has been included in audit 
examinations at a reasonable frequency. These evaluations shall also 
include a review of each local agency, and on-site reviews of selected 
farmers/farmers' markets. These evaluations will measure the State 
agency's progress toward meeting the objectives outlined in its State 
Plan and the State agency's compliance with these regulations.
    (1) If FNS determines that the State agency has failed, without 
good cause, to demonstrate efficient and effective administration of 
its FMNP or has failed to comply with the requirements contained in 
this section or the State Plan, FNS may withhold an amount up to 100 
percent of the State agency's administrative grant.
    (2) Sanctions imposed upon a State agency by FNS in accordance with 
this section (but not claims for repayment assessed against a State 
agency) may be appealed in accordance with the procedures established 
in Sec. 248.20. Before carrying out any sanction against a State 
agency, the following procedures will be followed: (i) FNS will notify 
the chief departmental officer of the administering agency in writing 
of the deficiencies found and of FNS' intention to withhold 
administrative funds unless an acceptable corrective action plan is 
submitted by the State agency to FNS within 45 days after mailing of 
notification.
    (ii) The State agency shall develop a corrective action plan, 
including timeframes for implementation to address the deficiencies and 
prevent their future recurrence.
    (iii) If the corrective action plan is acceptable, FNS will notify 
the chief departmental officer of the administering agency in writing 
within 30 days of receipt of the plan. The letter will advise the State 
agency of the sanctions to be imposed if the corrective action plan is 
not implemented according to the schedule set forth in the approved 
plan.
    (iv) Upon notification from the State agency that corrective action 
has been taken, FNS will assess such action, and, if necessary, perform 
a follow-up review to determine if the noted deficiencies have been 
corrected. FNS will then advise the State agency of whether the actions 
taken are in compliance with the corrective action plan, and whether 
the deficiency is resolved or further corrective action is needed. 
Compliance buys can be required if during FNS management evaluations by 
regional offices, a State agency is found to be out of compliance with 
its responsibility to monitor and review farmers/farmers' markets.
    (v) If an acceptable corrective action plan is not submitted within 
45 days, or if corrective action is not completed according to the 
schedule established in the corrective action plan, FNS may withhold 
the award of FMNP administrative funds. If the 45-day warning period 
ends in the fourth quarter of a fiscal year, FNS may elect not to 
withhold funds until the next fiscal year. FNS will notify the chief 
departmental officer of the administering State agency.
    (vi) If compliance is achieved before the end of the fiscal year in 
which the FMNP administrative funds are withheld, the funds withheld 
may be restored to the State agency. FNS is not required to restore 
funds withheld beyond the end of the fiscal year for which the funds 
were initially awarded.
    (c) Responsibilities of State agencies. The State agency is 
responsible for meeting the following requirements: (1) The State 
agency shall establish evaluation and review procedures and document 
the results of such procedures. The procedures shall include, but are 
not limited to: (i) Annual monitoring reviews of participating farmers/
farmers' markets, including on-site reviews of a minimum of 10 percent 
of farmers and 10 percent of farmers' markets, starting with the 
highest risk farmers and farmers' markets and working down. More 
frequent reviews may be performed as the State agency deems necessary.
    (ii) Conducting monitoring reviews of all local agencies within the 
State agency's jurisdiction at least once every 2 years. Monitoring of 
local agencies shall encompass, but not be limited to, evaluation of 
management, accountability, certification, nutrition education, 
financial management systems, and coupon management systems.
    (iii) Instituting the necessary follow-up procedures to correct 
identified problem areas.
    (2) On its own initiative or when required by FNS, the State agency 
shall provide special reports on FMNP activities, and take positive 
action to correct deficiencies in FMNP operations.


Sec. 248.18  Audits.

    (a) Federal access to information. The Secretary, the Comptroller 
General of the United States, or any of their duly authorized 
representatives, or duly authorized State auditors shall have access to 
any books, documents, papers, and records of the State agency and their 
contractors, for the purpose of making surveys, audits, examinations, 
excerpts, and transcripts.
    (b) State agency response. The State agency may take exception to 
particular audit findings and recommendations. The State agency shall 
submit a response or statement to FNS as to the action taken or planned 
regarding the findings. A proposed corrective action plan developed and 
submitted by the State agency shall include specific time frames for 
its implementation and for completion of the correction of deficiencies 
and problems leading to the deficiencies.
    (c) Corrective action. FNS shall determine whether FMNP 
deficiencies identified in an audit have been adequately corrected. If 
additional corrective action is necessary, FNS shall schedule a follow-
up review, allowing a reasonable time for such corrective action to be 
taken.
    (d) State sponsored audits. State and local agencies shall conduct 
independent audits in accordance with 7 CFR part 3015, 3016.26 or part 
3051, as applicable. A State or local agency may elect to obtain either 
an organization-wide audit or an audit of the Program if it qualifies 
to make such an election under applicable regulations.


Sec. 248.19  Investigations.

    (a) Authority. The Department may make an investigation of any 
allegation of noncompliance with this part and FNS guidelines and 
instructions. The investigation may include, where appropriate, a 
review of pertinent practices and policies of any State and local 
agency, the circumstances under which the possible noncompliance with 
this part occurred, and other factors relevant to a determination as to 
whether the State and local agency has failed to comply with the 
requirements of this part.
    (b) Confidentiality. No State or local agency, recipient, or other 
person shall intimidate, threaten, coerce, or discriminate against any 
individual for the purpose of interfering with any right or privilege 
under this part because that person has made a complaint or formal 
allegation, or has testified, assisted, or participated in any manner 
in an investigation, proceeding, or hearing under this part. The 
identity of every complainant shall be kept confidential except to the 
extent necessary to carry out the purposes of this part, including the 
conducting of any investigation, hearing, or judicial proceeding.

Subpart G--Miscellaneous Provisions


Sec. 248.20  Claims and penalties.

    (a) Claims against State agencies. (1) If FNS determines through a 
review of the State agency's reports, program or financial analysis, 
monitoring, audit, or otherwise, that any FMNP funds provided to a 
State agency for food or administrative purposes were, through State 
agency negligence or fraud, misused or otherwise diverted from FMNP 
purposes, a formal claim will be assessed by FNS against the State 
agency. The State agency shall pay promptly to FNS a sum equal to the 
amount of the administrative funds or the value of coupons so misused 
or diverted.
    (2) If FNS determines that any part of the FMNP funds received by a 
State agency; or coupons, were lost as a result of theft, embezzlement, 
or unexplained causes, the State agency shall, on demand by FNS, pay to 
FNS a sum equal to the amount of the money or the value of the FMNP 
coupons so lost.
    (3) The State agency shall have full opportunity to submit 
evidence, explanation or information concerning alleged instances of 
noncompliance or diversion before a final determination is made in such 
cases.
    (4) FNS is authorized to establish claims against a State agency 
for unreconciled FMNP coupons. When a State agency can demonstrate that 
all reasonable management efforts have been devoted to reconciliation 
and 99 percent or more of the FMNP coupons issued have been accounted 
for by the reconciliation process, FNS may determine that the 
reconciliation process has been completed to satisfaction.
    (b) Interest charge on claims against State agencies. If an 
agreement cannot be reached with the State agency for payment of its 
debts or for offset of debts on its current Letter of Credit within 30 
days from the date of the first demand letter from FNS, FNS will assess 
an interest (late) charge against the State agency. Interest accrual 
shall begin on the 31st day after the date of the first demand letter, 
bill or claim, and shall be computed monthly on any unpaid balance as 
long as the debt exists. From a source other than the FMNP, the State 
agency shall provide the funds necessary to maintain FMNP operations at 
the grant level authorized by FNS.
    (c) Penalties. In accordance with section 12(g) of the National 
School Lunch Act, whoever embezzles, willfully misapplies, steals or 
obtains by fraud any funds, assets or property provided under section 
17 of the Child Nutrition Act of 1966, as amended, whether received 
directly or indirectly from USDA, or whoever receives, conceals or 
retains such funds, assets or property for his or her own interest, 
knowing such funds, assets or property have been embezzled, willfully 
misapplied, stolen, or obtained by fraud shall, if such funds, assets 
or property are of the value of $100 or more, be fined not more than 
$10,000 or imprisoned not more than five years, or both, or if such 
funds, assets or property are of a value of less than $100, shall be 
fined not more than $1,000 or imprisoned for not more than one year, or 
both.


Sec. 248.21  Procurement and property management.

    (a) Requirements. State agencies shall comply with the requirements 
of 7 CFR part 3016 for procurement of supplies, equipment and other 
services with FMNP funds. These requirements are adopted by FNS to 
ensure that such materials and services are obtained for the FMNP in an 
effective manner and in compliance with the provisions of applicable 
law and executive orders.
    (b) Contractual responsibilities. The standards contained in 7 CFR 
part 3016 do not relieve the State agency of the responsibilities 
arising under its contracts. The State agency is the responsible 
authority, without recourse to FNS, regarding the settlement and 
satisfaction of all contractual and administrative issues arising out 
of procurements entered into in connection with the FMNP. This 
includes, but is not limited to, disputes, claims, protests of award, 
source evaluation, or other matters of a contractual nature. Matters 
concerning violation of law are to be referred to such local, State or 
Federal authority as may have proper jurisdiction.
    (c) State regulations. The State agency may use its own procurement 
regulations which reflect applicable State and local regulations, 
provided that procurements made with FMNP funds adhere to the standards 
set forth in 7 CFR part 3016.
    (d) Property acquired with program funds. State and local agencies 
shall observe the standards prescribed in 7 CFR part 3016 in their 
utilization and disposition of real property and equipment acquired in 
whole or in part with FMNP funds.


Sec. 248.22  Nonprocurement debarment/suspension, drug-free workplace, 
and lobbying restrictions.

    The State agency shall ensure compliance with the requirements of 
the Department's regulations governing nonprocurement debarment/
suspension (7 CFR part 3017), drug-free workplace (7 CFR part 3017), 
and the Department's regulations governing restrictions on lobbying (7 
CFR part 3018), where applicable.


Sec. 248.23  Records and reports.

    (a) Recordkeeping requirements. Each State agency shall maintain 
full and complete records concerning FMNP operations. Such records 
shall comply with 7 CFR part 3016 and the following requirements: (1) 
Records shall include, but not be limited to, information pertaining to 
financial operations, FMNP coupon issuance and redemption, equipment 
purchases and inventory, nutrition education, and civil rights 
procedures.
    (2) All records shall be retained for a minimum of 3 years 
following the date of submission of the final expenditure report for 
the period to which the report pertains. If any litigation, claim, 
negotiation, audit or other action involving the records has been 
started before the end of the 3-year period, the records shall be kept 
until all issues are resolved, or until the end of the regular 3-year 
period, whichever is later. If FNS deems any of the FMNP records to be 
of historical interest, it may require the State agency to forward such 
records to FNS whenever the State agency is disposing of them.
    (3) Records for nonexpendable property acquired in whole or in part 
with FMNP funds shall be retained for three years after its final 
disposition.
    (4) All records shall be available during normal business hours for 
representatives of the Department of the Comptroller General of the 
United States to inspect, audit, and copy. Any reports resulting from 
such examinations shall not divulge names of individuals.
    (b) Financial and recipient reports. State agencies shall submit 
financial and FMNP performance data on a yearly basis as specified by 
FNS and required by section 17(m)(8) of the CNA. Such information shall 
include, but shall not be limited to:
    (1) Number and type of recipients (Federal and non-Federal).
    (2) Value of coupons issued.
    (3) Value of coupons redeemed.
    (c) Source documentation. To be acceptable for audit purposes, all 
financial and FMNP performance reports shall be traceable to source 
documentation.
    (d) Certification of reports. Financial and FMNP reports shall be 
certified as to their completeness and accuracy by the person given 
that responsibility by the State agency.
    (e) Use of reports. FNS will use State agency reports to measure 
progress in achieving objectives set forth in the State Plan, and this 
part, or other State agency performance plans. If it is determined, 
through review of State agency reports, FMNP or financial analysis, or 
an audit, that a State agency is not meeting the objectives set forth 
in its State Plan, FNS may request additional information including, 
but not limited to, reasons for failure to achieve these objectives.


Sec. 248.24  Other provisions.

    (a) No aid reduction. The value of benefits or assistance available 
under the FMNP shall not be considered as income or resources of 
recipients or their families for any purpose under Federal, State, or 
local laws, including, but not limited to, laws relating to taxation, 
welfare and public assistance programs. Section 17(m)(7)(B) of the CNA 
provides that any programs for which a grant is received under this 
subsection shall be supplementary to the food stamp program carried out 
under the Food Stamp Act of 1977 as amended (7 U.S.C. 2011 et seq.) and 
to any other Federal or State program under which foods are distributed 
to needy families in lieu of food stamps.
    (b) Statistical information. FNS reserves the right to use 
information obtained under the FMNP in a summary, statistical or other 
form which does not identify particular individuals.
    (c) Confidentiality. The State agency shall restrict the use or 
disclosure of information obtained from FMNP applicants and recipients 
to persons directly connected with the administration or enforcement of 
the WIC Program or the FMNP, including persons investigating or 
prosecuting violations in the WIC Program or FMNP under Federal, State 
or local authority.


Sec. 248.25  FMNP information.

    Any person who wishes information, assistance, records or other 
public material shall request such information from the State agency, 
or from the FNS Regional Office serving the appropriate State as listed 
below:
    (a) Connecticut, Maine, Massachusetts, New Hampshire, New York, 
Rhode Island, Vermont: U.S. Department of Agriculture, FNS, Northeast 
Region, 10 Causeway Street, room 501, Boston, Massachusetts 02222-1068.
    (b) Delaware, District of Columbia, Maryland, New Jersey, 
Pennsylvania, Puerto Rico, Virginia, Virgin Islands, West Virginia: 
U.S. Department of Agriculture, FNS, Mid-Atlantic Region, Mercer 
Corporate Park, 300 Corporate Boulevard, Robbinsville, New Jersey, 
08691-1598.
    (c) Alabama, Florida, Georgia, Kentucky, Mississippi, North 
Carolina, South Carolina, Tennessee: U.S. Department of Agriculture, 
FNS, Southeast Region, 77 Forsyth Street, SW., suite 112, Atlanta, 
Georgia 30303.
    (d) Illinois, Indiana, Michigan, Minnesota, Ohio, Wisconsin: U.S. 
Department of Agriculture, FNS, Midwest Region, 77 West Jackson 
Boulevard--20th floor, Chicago, Illinois 60604-3507.
    (e) Arkansas, Louisiana, New Mexico, Oklahoma, Texas: U.S. 
Department of Agriculture, FNS, Southwest Region, 1100 Commerce Street, 
room 5-C-30, Dallas, Texas 75242.
    (f) Colorado, Iowa, Kansas, Missouri, Montana, Nebraska, North 
Dakota, South Dakota, Utah, Wyoming: U.S. Department of Agriculture, 
FNS, Mountain Plains Region, 1244 Speer Boulevard, suite 903, Denver, 
Colorado 80204.
    (g) Alaska, American Samoa, Arizona, California, Guam, Hawaii, 
Idaho, Nevada, Oregon, Trust Territory of the Pacific Islands, the 
Northern Mariana Islands, Washington: U.S. Department of Agriculture, 
FNS, Western Region, 550 Kearny Street, room 400, San Francisco, 
California 94108.


Sec. 248.26  OMB control number.

    The collecting of information requirements of Sec. 248.23(b) have 
been approved by the Office of Management and Budget and assigned OMB 
control number 0584-0477. The collecting of information requirements in 
Secs. 248.4, 248.9, 248.10(a), 248.10(b), 248.10(e), 248.10(f), 248.11, 
248.14(h), 248.17(b)(2)(ii), and 248.18(b) are pending approval by the 
Office of Management and Budget.

    Dated: March 2, 1994.
William E. Ludwig,
Administrator, Food and Nutrition Service.
[FR Doc. 94-5568 Filed 3-10-94; 8:45 am]
BILLING CODE 3410-30-U