FARM DIRECT ALTERNATIVE CURRENCIES – BASIC CONCEPTS

Alternative currencies include any coin, token, certificate, or other money replacement that an organization gives to a consumer that can be used to buy goods from a Vendor.

Farm Direct Alternative Currencies are alternative currencies that can be used to buy food directly from a farmer. Examples of such Alternative Currencies are tokens given to a customer when they swipe their debit or credit card at a farmers’ market Manager Booth,

• tokens given to a customer when they swipe their EBT/SNAP card,
• matching incentives (alternative currencies) given to EBT/SNAP users when they get EBT Tokens,
• food bank farm direct alternative currencies, distributed to consumers when they visit a food bank, but redeemed at a farm store or farmers’ market to buy fresh produce or other groceries, or
• “Healthy Bucks” or other farm direct alternative currencies distributed at a hospital, clinic, youth center (i.e. Boys and Girls Club), schools which can be alternative currencies, distributed to consumers when they visit a food bank, but redeemed at a farm store or farmers’ market to buy fresh produce or other groceries.

Types of alternative currencies that can be used to benefit the public, support farmers and sustainable agriculture, and encourage consumers to buy farm direct are only limited by the imagination. Creating and marketing effective programs can be a very exciting aspect of running any farmers’ market or related enterprise.

A common misperception is that, when a card is swiped on a credit card or EBT machine, it created income for a farmers’ market. This complex topic is discussed in detail in the section on “Generally Accepted Accounting Principles behind using Alternative Currency Liabilities and the Allowance for Doubtful Currencies.” However, the basic concept is as follows.

When a customer swipes a card, it is like they put their money in escrow with the market so it can be turned over to a vendor later. This leads to two specific best practices used by markets: (1) hold all funds relating to alternative currencies distributed to the public, but not yet redeemed by vendors in a separate bank account, much like an attorney’s escrow account, and (2) track the liabilities represented by these outstanding alternative currencies in the financial statements.

Using the above best practices allows a market to (1) assure that they will always have the money available to turn over to the vendors when the alternative currencies are redeemed, and (2) they know how much money needs to be on reserve at any time to accomplish the first objective.

One could theorize that, because all the money from the credit card and EBT machines are deposited directly into the bank account, that a separate bank account will accomplish both objective one and two. However, this does not take into account any merchandise sales, donations, or other income streams that have run through the machines or any other alternative currencies that have been distributed to the public. Furthermore, once a market has been using alternative currencies for more than a year, they may wish to adjust the liabilities for alternative currencies distributed that they do not expect to ever receive back from the public (based on what they feel is reasonable based on expiration dates, policy, and experience). All of these issues affect how much should be held in the so-called “escrow” account, making the tracking of liabilities critical. For more information on tracking liabilities and writing related policies, see “Unspent Farm Direct Alternative Currencies Liability Accounting” and “Unspent Farm Direct Alternative Currencies Liability Policies.”

See Tracking and Accounting for Farm Direct Alternative Currencies for more information.

Though the non-profit Food From Farms no longer exists, the organization existed to provide support to farmers markets and other food sustainability programs. This blog entry has been transferred from their site to ensure their legacy continues, and their work can remain to support farmers markets, farms, and more.