Ala. Admin. Code r. 420-10-2-.05

Current through Register Vol. 42, No. 7, April 30, 2024

Section 420-10-2-.05 - Vendor Management

(1)General. The Department through the Alabama WIC Program provides special supplemental food to its participants through a retail purchase delivery system. Some special infant formulas are exceptions to this; these infant formulas are provided by direct distribution at the local WIC clinics. The retail purchase delivery system allows a WIC participant to redeem food instruments or Electronic Benefits Transfer (EBT)e-WIC cards for special supplemental food at authorized vendors. The State WIC Office issues blank stock food instrument paper or e-WIC cards to each clinic. The clinics produce a computer printed or manual food instrument or issue an e-WIC card. Each food instrument or e-WIC card has a unique sequential identifying number. Clinic staff issue benefits to WIC participants for the purchase of authorized foods. The participant may redeem the food instrument or e-WIC card only at authorized WIC vendors. In accordance with the terms of the Alabama WIC Vendor Contract, the vendor deposits food instruments at its bank. The food instruments are then processed through the Alabama WIC Program's contract bank for payment to the vendor. Vendors that use e-WIC shall have their bank account credited with payments for completed EBT transactions. e-WIC card reimbursement occurs through electronic transfer. Authorized WIC vendors shall not be reimbursed for food instruments, cash value vouchers, or e-WIC transactions that are not properly transacted at their store.

(2)Vendor Applicants.

(a) Vendors who wish to participate in the Alabama WIC Program shall submit a completed Vendor Application Packet. Vendors can obtain an application packet at all local WIC clinics and on the Department's website. During a contract renewal year the Alabama WIC Program will not accept applications from June 1 to September 30.

(b) If a vendor's application is denied, the vendor may reapply 90 days after service of the notice of denial. A vendor may not submit more than two applications in a 12-month period.

(c) The Department may, in its discretion, waive any of the vendor criteria for participation outlined in 420-10-2-.05(3) in order to ensure adequate participant access to WIC Program benefits. Adequate participant access exists if another authorized WIC vendor is located within ten miles and no geographic barriers or other conditions make participant access unreasonably difficult.

(d) Out of state vendors will not receive approval unless needed for adequate participant access. Participant access determinations in regards to out of state vendors is at the discretion of the Department.

(3)Vendor Criteria for Participation. Vendor applicants and authorized vendors shall comply with the criteria for participation at all times. The Department may reassess any authorized vendor at anytime during the vendor contract period using the criteria for participation in effect at the time of the reassessment. The Department shall terminate a vendor who violates any criteria for participation.

(a)Square Footage of Retail Space. The vendor shall have a minimum of 3,000 square feet of continuous retail space exclusively devoted to food sales. Square footage areas that are not continuous retail food sales areas open to the public and are used for other purposes that are irrelevant to the purpose of the Alabama WIC Program will not be considered as a part of the minimum square footage requirement. Retail space does not include office space, storage areas, or restrooms.

(b)Retail Grocery Requirements. The vendor shall be a business whose primary purpose is to be a retail grocer. Retail grocery does not include the following: gas stations, specialty stores, liquor stores, home delivery groceries, bait shops, etc. All vendors shall have a recognized grocery department in a stationary location that is a separate and distinct area. The vendor, on any given day of operation, shall offer for sale and normally display a variety of different types of staple foods in addition to Alabama WIC Program approved foods. The vendor shall be open for business to customers at least eight hours per day and six days per week.

(c)Food Sales. At least 60 percent of a vendor's total sales must be in staple foods, with the exception of vendors whose square footage exceeds 10,000 square feet. This requirement allows a WIC participant to purchase a variety of foods for home preparation and consumption, as recommended by the United States Department of Agriculture MyPlate dietary guidance.

1. Staple food groups include meat, poultry, fish, breads, cereal, vegetables, fruit, and dairy products. A portion of the vendor's total staple foods must include perishable foods that are either frozen staple food items; or fresh, un-refrigerated or refrigerated staple food items that will spoil or suffer significant deterioration in quality within two to three weeks.

2. Staple foods do not include accessory foods such as coffee; tea; cocoa; soda; non-carbonated drinks such as sports drinks, punches, and flavored waters; candy; chips; condiments; spices; hot foods; or foods ready to go or made to take out, like prepared sandwiches or salads.

(d)Health Department Food Permit. The vendor shall have a current Food Establishment Permit issued by a local health department or a state inspection certificate, as approved by the Alabama WIC Program.

(e)Minimum Stock of WIC-Approved Foods. The vendor must have and maintain the minimum required stock of WIC-approved foods. Items outside the manufacturer's expiration date will not be counted as part of the minimum required stock. Vendors cannot use another store's brand items as part of the minimum stock requirements.

(f)Competitive Pricing.

1. The competitive price determination for individual food items or a combination of food items will be computed by peer group using the most recent shelf prices submitted by authorized vendors. Vendors whose prices for individual WIC approved food items or a combination of WIC approved food items that fall within two standard deviations of the mean are cost competitive.

2. In analyzing prices for an individual food item or a combination of food items, the Department shall ensure that the distribution is not skewed by outliers or sample size. If a food item price is skewed by outliers or sample size, the Department, in its discretion, may use an alternative statistical principle to establish the maximum reimbursement level for that food item.

3. The Department shall reassess the maximum reimbursement level of individual food items at least twice a year.

4. The Department may make price adjustments to the purchase price on food instruments or e-WIC food items submitted by the vendor for redemption or seek recoupment of excess payments made to the vendor in order to ensure compliance with allowable reimbursement levels applicable to the vendor. A vendor's failure to remain price competitive is cause for termination of the vendor contract, even if the actual payments made to the vendor are within the maximum reimbursement amount.

(g)Disqualification from Supplemental Nutrition Assistance Program (SNAP) or WIC. A vendor applicant or authorized vendor may not currently be disqualified from a SNAP or WIC Program in any state and may not currently be paying a SNAP civil money penalty unless the civil money penalty is due to inadequate participant access.

(h)Business Integrity. Unless the Department determines that the denial of a vendor applicant would result in inadequate participant access, the Department may not authorize a vendor applicant if during the last six years the vendor applicant or any of the vendor applicant's current owners, officers, or managers have been convicted of or have had a civil judgment entered against them for any activity indicating a lack of business integrity. Activities indicating a lack of business integrity include, but are not limited to, fraud, antitrust violations, embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, receiving stolen property, making false claims, or obstruction of justice.

(i)50 Percent Criterion.

1. Vendors that derive more than 50 percent of their annual food sales revenue from WIC transactions and/or redemptions and new vendor applicants expected to meet this criterion based upon assessments conducted by the Department are defined as above-50-percent vendors.

2. A vendor applicant may not participate in the WIC vendor program if the vendor applicant is expected to be an above-50-percent vendor. The foregoing also applies to a new location of a currently authorized vendor.

3. If the new vendor applicant indicates that less than 50 percent of the vendor's annual food sales revenue will be derived from WIC food instruments, the Department shall conduct an assessment, using the chart in Appendix A of these rules, to determine whether the vendor applicant may be authorized. The Department shall not authorize a vendor applicant who is expected to derive more than 50 percent of annual food sales revenue from WIC transactions and/or redemptions.

4. The Department shall assess the status of a new vendor within six months after authorization to determine whether or not the vendor is an above-50-percent vendor. If WIC transactions and/or redemptions for the period evaluated are more than 50 percent of the vendor's total food sales, the vendor is an above-50-percent vendor, and the Department shall terminate the vendor contract and disqualify the vendor from participating in the Alabama WIC Program.

5. The Department may assess the status of a currently authorized vendor, as necessary, to determine whether the vendor meets the above-50-percent criterion. If WIC transactions and/or redemptions for the period evaluated are more than 50 percent of the vendor's total food sales, the vendor is an above-50-percent vendor. If, based upon an annual assessment of sales data, a vendor becomes an above-50-percent vendor, the Department shall terminate the vendor contract and disqualify the vendor from participating in the Alabama WIC Program.

(j)Infant Formula Purchase Requirement. The vendor shall purchase formula solely from entities approved by the Department. The Department maintains a list of approved entities.

1. The Department does not allow vendors to purchase contract infant formula from other program vendors.

2. In the event of an investigation, only purchase invoices from those permitted suppliers will be considered as legitimate.

3. Vendors must retain invoices, receipts, copies of purchase orders, and any other proofs of purchase for all WIC supplemental foods, including infant formula. The program may also require vendors to supply the program with written permission to confirm their infant formula purchase history with suppliers.

4. This purchase documentation must be prepared entirely by the seller or be on the seller's business letterhead. At a minimum, this documentation shall include: the name of the seller; the date of purchase and the date the authorized vendor received the WIC supplemental food at the store if different from the date of purchase; and a description of each WIC supplemental food item purchased, including brand name, unit size, type or form, and quantity.

5. Failure to retain and provide this purchase documentation upon request may lead to disqualification from the WIC Program.

(k)Supplemental Nutrition Assistance Program (SNAP).

The vendor shall be an authorized United States Department of Agriculture SNAP retailer.

(l)EBT Capability. Upon statewide implementation vendor applicants must have the capability to accept WIC benefits through the use of EBT.

(4)Vendor Compliance. The Department is responsible for ensuring that vendors comply with state and federal WIC Program requirements. Vendors shall make any and all records pertinent to the vendor contract available for review including records of purchases of WIC items for resale, Food Instruments, and Cash Value Vouchers upon request by the Department. These records must include the information described in 420-10-2-.05(3)(j)3. Methods of ensuring compliance include:

(a)Vendor Monitoring. Representatives of the Department may conduct unannounced monitoring visits any time that the vendor is open for business. All records pertinent to this monitoring visit must be available for review upon request of the Department's representative.

(b)Compliance Buys. Compliance buys are covert investigations conducted by the Department.

(c)Inventory Audits. An inventory audit is the examination of food invoices or other proofs of purchase to determine whether a vendor has purchased sufficient quantities of supplemental foods to provide participants the quantities specified on the vendor's redeemed food instruments or e-WIC transactions during a given time period.

(d)Recoupment of Funds. The Department must recoup funds for price adjustments and overcharges.

(e)Vendor Sanctions. The Department shall impose the following vendor sanctions:

1.Category VIII - Mandatory Permanent Disqualification.

(i) Convicted of trafficking in food instruments or cash-value vouchers or selling firearms, ammunition, explosives, or controlled substances as defined in Section 102 of the Controlled Substances Act (21 U.S.C. § 802) in exchange for food instruments or cash-value vouchers.

(ii) Permanent disqualification from the Supplemental Nutrition Assistance Program.

2.Category VII - Mandatory Disqualification for Six Years.

(i) One incidence of buying or selling food instruments for cash (trafficking).

(ii) One incidence of selling firearms, ammunition, explosives, or controlled substances, as defined in 21 U.S.C. § 802, in exchange for food instruments or cash-value vouchers.

3.Category VI - Mandatory Disqualification for Three Years.

(i) One incidence of the sale of alcohol, alcoholic beverages, or tobacco products in exchange for food instruments or cash-value vouchers.

(ii) A pattern of claiming reimbursement for the sale of an amount of a specific WIC food item that exceeds the vendor's documented inventory of that WIC food item for a specific period of time.

(iii) A pattern of vendor overcharges.

(iv) A pattern of receiving, transacting, or redeeming food instruments or cash-value vouchers outside of authorized channels, including the use of an unauthorized vendor or an unauthorized person.

(v) A pattern of charging for supplemental food(s) not received by the participant.

(vi) A pattern of providing credit or non-food items, other than alcohol, alcohol beverages, tobacco products, cash, firearms, ammunition, explosives, or controlled substances, as defined in 21 U.S.C. § 802, in exchange for food instruments or cash-value vouchers.

4.Category V - Mandatory Disqualification for One Year.

(i) A pattern of providing unauthorized food items in exchange for food instruments or cash-value vouchers, including charging for supplemental foods provided in excess of those listed on the food instrument.

5.Category IV - Warning on First Offense; On Second or Subsequent Offense, Disqualification for One Year.

(i) Entering false information on a food instrument or cash-value voucher.

(ii) Requiring a participant to make a cash purchase in order to redeem a food instrument, cash-value voucher, or conduct an e-WIC transaction.

(iii) Failure to scan and enter all Universal Product Codes (UPCs), directly from the product being sold into the redemption system.

(iv) Using a "scan book" or similar device in which a UPC label(s) in such book or other device are used in place of scanning the UPC directly from the product being sold.

(v) Failure to comply with the e-WIC operating rules, standards, and technical requirements established in the current Operating Rules and the Technical Implementation Guide (TIG).

(vi) Holding or possessing a participant's e-WIC card for any purpose by the vendor, its employee, or agents.

(vii) Accepting e-WIC card(s)in the promise of providing foods at a future date or at a different location.

(viii) Attempting to seek restitution from a participant for a food instrument or cash-value voucher returned not paid or for a rejected e-WIC transaction.

(ix) Contacting a WIC participant regarding an improperly processed food instrument or cash-value voucher or a rejected e-WIC transaction.

(x) Transacting and/or redeeming e-WIC transactions outside of normal operating hours, as reported to the WIC Program.

(xi) Purchasing infant formula from a source not approved by the Alabama WIC Program.

6.Category III - Warning on First Offense; On Second Offense, $400.00 Fine and Vendor Submits a Written Corrective Action Plan and Attends Mandatory Training as Defined by the Department; On Third or Subsequent Offense, Disqualification for 12 Months.

(i) Failure to properly process a food instrument or cash-value voucher, including but not limited to, not checking a participant's WIC ID card, requiring participants to sign a food instrument or cash-value voucher before first entering the purchase amount, failing to obtain a signature at the time of the WIC transaction, failing to conduct signature comparison, or accepting a food instrument or cash-value voucher outside of the valid dates to use.

(ii) Store personnel requesting and/or entering a WIC Participant's e-WIC Personal Identification Number (PIN).

(iii) Failure to mark the price of a WIC-approved food on the shelf or on the item.

(iv) Stocking a WIC-approved food item outside of the manufacturer's expiration date.

(v) Issuing a rain-check, IOU, or store credit when unable to fill a WIC food instrument or cash-value voucher.

(vi) Failure to provide the quantity or type of infant formula specified on the food instrument.

(vii) Requiring a separate check-out lane for WIC participants.

(viii) Failure to offer a WIC participant any courtesy offered to other customers, including but not limited to, a buy one get one promotional opportunity or the use of a store loyalty card, manufacturer and/or store coupon.

(ix) Threatening or abusing, either verbally or physically, a WIC participant or WIC personnel in the conduct of official WIC business.

7.Category II - Warning on First Offense; On Second Offense, $300.00 Fine and Vendor Submits a Written Corrective Action Plan and Attends Mandatory Training as Defined by the Department; On Third or Subsequent Offense, Disqualification for Nine Months.

(i) Failure to submit a vendor price survey within the specified time frame.

(ii) Requiring an additional form of identification from a person who has signed the WIC ID folder.

(iii) Requiring an additional form of identification, besides the Personal Identification Number (PIN), in order to process an e-WIC transaction.

(iv) Allowing the purchase of a WIC food item in an unauthorized container size.

8.Category I - Warning on First Offense; On Second Offense, $200.00 Fine and Vendor Submits a Written Corrective Action Plan and Attends Mandatory Training as Defined by the Department; On Third or Subsequent Offense, Disqualification for Six Months.

(i) Allowing the exchange of a WIC food item obtained with food instruments, cash value vouchers, or e-WIC cards other than items that are defective, spoiled, or outside their sell/use date at time of redemption.

(ii) Allowing a refund for a returned WIC food item obtained with food instruments, cash value vouchers, or e-WIC cards.

(iii) Requiring the purchase of a specific brand if more than one WIC-approved food brand is available and allowed by the State WIC Program.

(iv) Failure to provide a WIC participant a cash register receipt.

(v) Failure to provide employee training on WIC procedures.

(vi) Failure to provide a WIC participant an itemized cash register receipt with each e-WIC transaction.

(vii) Failure to provide required training of store personnel on how to process e-WIC transactions.

(viii) Making or keeping a record of a participant's name or WIC identification number after the e-WIC card is transacted by or on behalf of a participant for which payment has been denied by the WIC Program.

(ix) Requiring a WIC participant to purchase all items in the participant's e-WIC account.

(x) Improper use of the WIC service mark, WIC logo, or letters "W", "I","C".

(xi) Charging sales tax on WIC foods.

(f)Pattern. A pattern for the purpose of determining the vendor sanction for a violation of paragraph (4) (e) 3. (ii) of this rule can be established during a single review if a vendor's records indicate that, for a two month audit period, the vendor's redemptions for a specific food item exceeds its documented inventory. For the purpose of determining other vendor sanctions in paragraphs (4) (e) (1) through (4), a pattern is defined as committing the same violation two or more times during a compliance buy investigation that consists of at least three buys.

(g)Second Mandatory Sanction. When a vendor, who previously has been assessed a sanction for any of the violations in Category V through Category VIII, receives sanctions for any of these violations, the Department shall double the second sanction. Civil money penalties may only be doubled up to the limits allowed under 7 CFR § 246.12.

(h)Subsequent Mandatory Sanctions. When a vendor, who previously has been assessed two or more sanctions for any of the violations listed in Category V through Category VIII, receives sanctions for any of these violations, the Department shall double the third sanction and all subsequent sanctions. The Department may not impose civil money penalties in lieu of disqualification for third and subsequent sanctions for violations listed in Category V through VIII.

(i)Timeframe for State Sanctions. If a vendor receives a warning for a first offense found in Category I through Category IV, the vendor will receive a monetary penalty or disqualification for a second or subsequent offense that occurs within two years of the notice of the first violation.

(j)Participant Access and Civil Money Penalty.

1. Prior to disqualifying a vendor for a Supplemental Nutrition Assistance Program disqualification or any violations listed in paragraphs (5) (e)(2) through (4) of this Rule, the Department shall determine if the disqualification would result in inadequate participant access. If the Department determines that disqualification of a vendor would result in inadequate participant access, the Department shall impose a civil money penalty, calculated in accordance with 7 CFR § 246.12, in lieu of disqualification. However, the Department may not impose a civil penalty in lieu of disqualification for third or subsequent sanctions for violations of paragraphs (4)(e)(2) through (4) of this rule.

2. The Department shall determine there is inadequate participant access if geographic barriers or other conditions make participant access unreasonably difficult and no authorized WIC vendors are located within 10 miles of the violative vendor.

(k)Notification of Violations.

1. The Department shall notify a vendor in writing if an investigation reveals an initial violation for which a pattern of violations must be established in order to impose a sanction, before another such violation is documented, unless the Department determines that notifying the vendor would compromise the investigation.

2. In determining whether an initial notice would compromise the investigation, the Department may consider factors, including but not limited to, the severity of the initial violation, the compliance history of the vendor, whether the vendor has been determined to be high-risk vendor consistent with 7 CFR § 246.12(j)(3), and whether the notice could compromise a covert investigation, such as a compliance buy investigation that involves an investigative agent posing as a WIC participant and transacting WIC food instruments.

3. The Department shall document the basis for determining that such written notice would compromise the investigation in the vendor's file.

4. Notice is not required for violations involving a vendor's transactions and/or redemptions exceeding its documented inventory. Additionally, notice is not required for WIC vendor disqualifications or the imposition of civil money penalties based on Supplemental Nutrition Assistance Program sanctions or for violations that only require one incidence before a sanction is imposed.

Ala. Admin. Code r. 420-10-2-.05

New Rule: Filed October 24, 1995; effective November 28, 1995. Repealed and New Rule: Filed October 20, 1999; effective November 24, 1999. Amended: Filed May 16, 2002; effective June 20, 2002. Repealed and New Rule: Filed November 20, 2003; effective December 25, 2003. Repealed and New Rule: Filed August 20, 2004; effective September 24, 2004. Amended: Filed September 21, 2005; effective October 26, 2005. Amended: Filed February 17, 2006; effective March 24, 2006. Amended: Filed November 8, 2006; effective December 13, 2006. Amended: Filed February 20, 2008; effective March 26, 2008. Amended: Filed September 17, 2010; effective October 22, 2010. Amended: Filed May 17, 2013; effective June 20, 2013.

Adopted by Alabama Administrative Monthly Volume XXXVI, Issue No. 07, April 30, 2018, eff. 5/28/2018.

Authors: James M. Richard; Wendy S. Blackmon; Dana Driscoll; Greg Locklier; Carolyn Battle; Stacey Neumann

Statutory Authority:Code of Ala. 1975, §§ 22-2-2(6), 22-12C-2 and 3; CFR §§246.12 and 246.18.