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Food Stamp Vendors Face Increased Eligibility Requirements and Oversight Following Implementation of Farm Bill’s SNAP Provisions

The 2014 Farm Bill contains several important provisions which will impact retail stores that participate in the USDA Food and Nutrition Service’s (FNS) Supplemental Nutrition Assistance Program (SNAP).  The key changes for food stamp vendors include an increase in the minimum number of staple food items that stores must carry on a continuous basis, that perishable food items in at least three of the four staple food categories must be available for purchase at all times, that SNAP vendors must now bear all of the costs associated with EBT equipment and an important expansion of record-keeping requirements.  On March 21, 2014, FNS issued a preliminary implementation memorandum which advised that most of the SNAP vendor-related provisions will require further rulemaking.  However, several of the new SNAP vendor provisions, including those related to maintenance of purchase invoices and other program-related recordkeeping, are effective immediately.  FNS also intends to release guidance, questions and answers, and technical assistance documents relating to these statutory changes to SNAP.

Retail food stores that are authorized to participate in SNAP should verify that they are complying with these new requirements, especially those related to minimum staple food items and the increased recordkeeping requirements.  SNAP vendors may also be interested in FNS’s establishment of pilot programs for use of online and mobile technologies for redemption of food stamps.  Finally, the Farm Bill provides FNS with an additional $15 million in immediate funding and up to $5 million in additional annual funding for use in combatting trafficking by SNAP vendors and beneficiaries.  Given increased scrutiny in the media and on Capitol Hill regarding trafficking of food stamps by small retailers, SNAP vendors should verify that they have an effective written compliance policy and must conduct adequate and frequent employee training programs.  Proof of written compliance policies and training programs are prerequisites for eligibility for a civil monetary penalty in lieu of permanent disqualification in the event the store is accused of trafficking due to a rogue employee’s sale of food stamps for cash or ineligible items.  Without evidence of a written compliance policy and training program, FNS’s Administrative Review Branch is likely to permanently disqualify stores from participating in the food stamp program – even if store owners did not participate or benefit from any illegal trafficking activities.

Key SNAP Vendor Provisions in 2014 Farm Bill

Increased Variety of Staple Food Items Must Be Carried To Retain Eligibility

§4002(a) amends the definition of “Retail Food Store” by increasing the minimum number of qualifying varieties of foods which SNAP vendors must offer for sale on a continuous basis in each of the four categories of staple foods to seven (up from three). (The four categories of staple foods are meat, poultry or fish; bread or cereal; vegetables or fruits; and dairy products).  §4002(a) also increases the requirement that SNAP vendors carry perishable foods in at least three of the four staple food categories (up from “at least two”).

Imposition of Costs of EBT POS Equipment on Vendors

§4002(b) directs USDA to require SNAP vendors to pay for 100 percent of the costs of acquiring and implementing EBT point-of-sale equipment and related supplies. This new provision contains limited exemptions applicable largely to non-profits and farmers’ markets.

Increased SNAP Vendor Recordkeeping Requirements

§4002(e) amends 7 U.S.C. §2018(c) by increasing the types of records that SNAP vendors may be required to submit to FNS in order to obtain or maintain their SNAP authorization.  Specifically, FNS is permitted, by regulation, to require SNAP vendor applicants to submit purchase invoices and other “program-related records,” in additional to the previously required “relevant income and sales tax filing documents.”  Regardless of what FNS’s forthcoming proposed regulations will seek, these new requirements will, at a minimum, represent a substantial expansion in the scope of records which retail stores will need to maintain in order to keep their SNAP authorization.  Although Congress did not define “program-related records,” it is possible that FNS could propose to require that SNAP vendors maintain all sales receipts.  Any such proposal can be expected to be strongly opposed by virtually all SNAP vendors, due to compliance costs and anticipated logistical difficulties associated with differentiating between SNAP and cash sales.  At the very least, SNAP vendors should now maintain purchase invoices for at least a three-year period of time based upon the statements of the Farm Bill managers in the Conference Report.

Establishment of Pilot Programs for Acceptance of Mobile and Online Transactions

§4011 requires FNS to explore the feasibility of redeeming SNAP benefits through means other than wired point-of-sale technology. FNS is required to establish demonstration projects for utilization of mobile (cellular/wifi) and online transactions for SNAP redemption.  FNS will submit its final reports on these projects to USDA leadership by July 1, 2016, with a report to Congress no later than January 1, 2017.

Additional Funding to Combat SNAP Vendor and Beneficiary Trafficking

§4029 provides FNS with $15 million in immediate funding that remains available until expended to prevent trafficking by food stamp vendors and beneficiaries.  It also authorizes, subject to appropriations, up to an additional $5 million each year between 2014 and 2018, inclusive.  These funds are intended to supplement FNS’s existing efforts to insure that retail stores and recipients maintain program integrity, with a mandatory focus on data mining and use of other information technologies.  FNS’s efforts are expected to be particularly focused on small SNAP vendors.

Other Provisions

The Farm Bill contains many additional SNAP-related provisions which are not expected to impact most retail stores on a day-to-day basis.  These provisions include the elimination of manual vouchers, except in emergency circumstances; establishment of unique EBT Identification Numbers by entities providing EBT transfer services in order to enhance anti-fraud protections. FNS will promulgate the necessary regulations within two (2) years; preparation of a Feasibility Study and Report regarding SNAP on Indian Reservations; declining to reissue EBT cards to SNAP beneficiaries that make excessive requests for replacement cards; and establishment of a least one pilot project to reduce SNAP fraud in one of the ten largest urban areas in the country.

SNAP vendors should closely adhere to these new statutory requirements and stay abreast of new FNS regulations and guidance that relate to the food stamp program.