Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: Campesinos Unidos, Inc.
DATE: May 24, 1995
Docket No. A-94-181
Decision No. 1518
DECISION
Campesinos Unidos, Inc. (CUI) requested a hearing on a
proposal by the Administration for Children and Families
(ACF) to deny refunding for CUI's Migrant Head Start
program. ACF's denial was based on on-site reviews that
found that CUI had failed to comply in more than one year
with 70 program and fiscal requirements. With respect to
55 of these requirements, CUI raised legal objections,
but no factual disputes. We ruled that the legal
objections had no merit. We then ordered CUI to show
cause why we should not proceed to decision based on the
undisputed findings, which appeared sufficient to justify
denial of refunding. After considering CUI's response to
our order, we conclude that the denial of refunding is
fully justified on each of three separate bases for
denial set out in the applicable regulations.
In particular, the undisputed findings (related to 55
different program requirements) show:
CUI failed to meet requirements regarding the
eligibility and daily attendance of the children it
was serving. As a result, CUI failed to serve the
number of eligible children it was funded to serve,
and to ensure participation of the children who were
served sufficient to meet the child development
goals of Head Start.
CUI failed to meet grants administration
requirements designed to ensure accountability for
federal funds, such as requirements for reconciling
actual to budgeted costs, having an accounting
system reflecting current program requirements, and
allocating costs properly among its various
programs. Most important, CUI failed to have a
system for limiting its administrative costs to the
15% statutory maximum. Thus, there was no assurance
that CUI was applying the proper amount of funds to
program services for Migrant Head Start children and
their families.
CUI failed to meet performance standards governing
each of the major components of a Head Start
program: educational, health, nutritional, social
services, and parent involvement. Some of these
failures put Head Start children at risk, such as
CUI's failure to have complete medical and dental
records for the children it served and to follow up
when medical or dental screenings indicated
problems.
CUI was notified of each of these deficiencies and
either failed to come into compliance or failed to
maintain compliance, in spite of receiving extensive
training and technical assistance.
In response to the order to show cause, CUI belatedly
sought a further opportunity to identify factual disputes
with respect to the previously undisputed findings, based
on reasons we find wholly unpersuasive.
The Head Start appeals regulations provide for waivers of
procedural requirements only in limited circumstances.
Prompt resolution of disputes is a goal of those
regulations because delay in resolving disputes can cause
instability and lack of continuity in providing quality
services to Head Start children and their families.
No further delay is warranted here, for reasons including
the following:
CUI had already received lengthy extensions of the
time to make a submission stating its grounds for
appeal. Indeed, CUI had almost four months after
receiving a more definite statement of ACF's reasons
for its action to make this submission.
CUI had clear notice that its submission was to
identify factual disputes, relating them to specific
review findings where appropriate, to provide
supporting documentation, and to brief legal issues.
If CUI planned to dispute all of the findings
related to the 55 requirements, this would have been
a substantial part of its grounds for appeal. Yet,
CUI did not timely seek a waiver of the requirement
that it identify factual disputes, nor ultimately
show that its reasons for failing to identify
factual disputes fit the limited circumstances
constituting good cause for a waiver of procedural
requirements.
Contrary to CUI's counsels' assertions, they could
not reasonably postpone identifying factual disputes
based on their view of what was permitted under
common rules of civil procedure. The Head Start
appeals process is circumscribed by the statute and
regulations, and ultimately by directives of the
Board designed to implement the process.
The record reveals a pattern of procedural
maneuvering which appears designed to delay the
proceedings and which calls into question CUI's
counsels' assertions that they acted in good faith.
Thus, we conclude that no additional opportunity for CUI
to identify factual disputes is warranted.
Head Start grantees are entitled to an opportunity for a
full and fair hearing, but may be deemed to have waived
their rights if they fail to follow applicable
procedures. 45 C.F.R. Part 1303, Subpart A; 45 C.F.R.
16.15. Moreover, an evidentiary hearing is required
only where there is a genuine issue of material fact.
Here, the undisputed findings provide a sufficient basis
for the denial of refunding, even assuming CUI would
prevail on the factual issues timely raised. Thus, we
conclude that CUI was provided an opportunity for a full
and fair hearing, consistent with the Head Start Act.
We note that what is at issue before us is not whether
the area of California served by CUI will have a Migrant
Head Start program, but whether CUI should continue to
administer that program. Under the regulations, ACF must
select a replacement grantee that reasonably promises the
most effective and responsible program, and must consider
the extent to which a potential replacement grantee will
continue services to the eligible children who have been
participating in the program. Qualified personnel of the
existing program are also protected. 45 C.F.R.
1302.10 and 1302.11.
Below, we first review in more detail the procedural
history of this case. We then explain why we conclude
that CUI's legal arguments related to the 55 requirements
have no merit and why we decline to provide an additional
waiver of the deadline for CUI's submission identifying
factual disputes. Finally, we present an analysis of the
undisputed noncompliance findings, focusing on those we
consider most significant.
I. Program and procedural background
The Head Start Act, 42 U.S.C. 9831 et seq., establishes
a program to provide developmental services primarily to
low-income preschool children. Some Head Start funds are
set aside to serve migrant children and their families.
Head Start grantees are to provide comprehensive health,
nutritional, educational, social, and other services to
enrolled children and to involve their parents in the
development, conduct, and direction of the program.
Performance standards related to each of these program
components were established in the mid-1970's. Congress
subsequently provided that Head Start projects must be
operated consistent with these standards, and that the
"extent to which such standards have been met shall be
considered in deciding whether to renew" funding. 42
U.S.C. 9846(b). 1/
In addition, grantees are subject to requirements related
to eligibility, enrollment, and attendance of the
children served and to administration of the program,
including fiscal management requirements. ACF must
review each Head Start project at least once during each
3-year period to determine whether the grantee meets
applicable program and fiscal requirements. 42 U.S.C.
9836(c)(2)(A).
Section 646 of the Head Start Act, 42 U.S.C. 9841,
provides that a Head Start grantee must be given
"reasonable notice and opportunity for a full and fair
hearing" if refunding for the grantee's program is
denied. The applicable regulations provide that an
appeal from a denial of refunding must "fully set forth
the grounds for the appeal and be accompanied by all
documentation that the grantee believes is relevant and
supportive of its position." 45 C.F.R. 1303.15(d)(3).
If a grantee fails to timely file an appeal, the grantee
"shall be deemed to have consented to the proposed action
and to have waived all rights of appeal." 45 C.F.R.
1303.7(a). Failure to file any other submission within
the required time is deemed a waiver of the right to file
the submission. 45 C.F.R. 1303.7(b). Procedural
requirements may be waived by the Board if a request for
a waiver is in writing and based on good cause (defined
to exclude "oversight of either a party or its
representative"); extensions are to be granted
"sparingly, as prompt resolution of disputes is a major
goal" of the regulations. 45 C.F.R. 1303.8. In
proposing these stringent requirements, ACF explained
that "prompt resolution of disputes is important for
stability and continuity in providing quality Head Start
services," and allows "all concerned to focus on the
provision of services rather than on the disputes
themselves." 57 Fed. Reg. 3395-3396 (January 29, 1992).
The Head Start procedures are supplemented by the Board's
procedures at 45 C.F.R. Part 16, which give the Board
flexibility to adapt procedures to the needs of a
particular case. See 45 C.F.R. 1303.15(d)(3); 45
C.F.R. 16.4; 16.13. Among other things, the Board has
authority to issue orders, including orders to show
cause, and to dismiss against an appellant for failure to
meet Board requirements. 45 C.F.R. 16.13; 16.15.
Here, CUI's original appeal letter merely requested a
hearing; CUI did not set forth any grounds for appeal or
include any documentation, as required by 45 C.F.R.
1303.15(d)(3). Rather than deeming CUI's failure to
file a complying appeal to be a waiver of CUI's right to
a hearing, the Board interpreted the regulations
liberally in favor of CUI. The Board took into account
that ACF's denial letter had not specifically referred to
the regulatory requirement and that CUI's counsel had
later moved for a dismissal, or, in the alternative, for
a more definite statement of ACF's reasons for the
denial.
CUI's motion to dismiss was based on the position that
ACF had not provided CUI required notice and an
opportunity to correct the 164 deficiencies in complying
with Head Start requirements that ACF had found in its
1994 on-site review. The Board postponed an initial
telephone conference scheduled in the case to permit ACF
to respond to the motion. ACF presented documentation of
earlier reviews, performed in 1990 and 1991, which had
also found noncompliance with numerous Head Start
requirements. ACF also provided documentation describing
extensive training and technical assistance ACF said it
provided to CUI prior to the 1994 review to assist CUI to
come into compliance. In the conference, ACF asserted
that CUI had been given adequate notice and opportunity
to correct many of the deficiencies, giving specific
examples of requirements which ACF found that CUI had not
met both in 1994 and in an earlier review.
The Board denied CUI's motion to dismiss at that time.
The Board pointed out that the regulations on which CUI
had relied for its motion applied only to failure to meet
Head Start performance standards and that ACF had made a
preliminary showing that an opportunity to correct had
been given to CUI. The Board noted that ACF's denial was
also based on CUI's alleged failure to meet requirements
not subject to the performance standards regulations--
namely, eligibility and financial requirements. Since
ACF had not yet specifically identified all of the areas
of alleged noncompliance found in more than one review
and since CUI had not had an opportunity to respond fully
to ACF's allegations, the Board reserved final ruling on
CUI's motion to dismiss.
To assist CUI in identifying which of the numerous
findings in ACF reviews were the findings on which ACF
was relying for its denial, the Board set procedures
requiring ACF to identify those findings more
specifically, as well as the regulations on which they
were based, to submit supporting documentation, and to
identify the witnesses it would present at a hearing.
CUI was then to respond to ACF's submission. The
response was to include "[i]dentification of any issue of
material fact CUI is raising (relating each issue to
particular findings on which ACF is relying for its
denial, where appropriate)" and "[d]ocumentation and any
other exhibits on which CUI is relying for its position."
Confirmation of September 22 teleconference at 4-5.
Thus, one purpose of this submission was to have CUI
fulfill the requirements which CUI should have met in its
initial appeal. The procedures set contemplated further
prehearing submissions only if necessary because of
information obtained through later discovery.
The Board extended the deadline for ACF's submission
twice (to November 28), first, because the serious
illness of ACF's original counsel required ACF to appoint
new counsel, and, second, because ACF needed time to
respond to an extensive discovery request submitted by
CUI. ACF ultimately made a timely submission on November
28, 1994. CUI was given corresponding extensions and one
additional extension that made CUI's submission due on
January 13, 1995. Instead of submitting its response,
CUI moved on that date for a 45-day stay, to permit CUI
to pursue a court action seeking transfer of this case to
an administrative law judge (a motion the court denied on
March 17, 1995). See Meriden Community Action Agency v.
Shalala, Civ. No. 94-1910 (D.D.C. March 17, 1995). The
Board declined to stay the case, but extended the
deadline for CUI's submission to March 20. 2/ Since this
gave CUI substantially more additional time than the 45
days it had requested in its motion for a stay (and
essentially a period of four months after ACF's
submission), the Board noted that the "Board would not
anticipate granting a further extension, absent
extraordinary circumstances." February 9, 1995 ruling at
7. The Board twice denied a further extension, requested
by CUI primarily to accommodate a one-week vacation
planned by one of the three counsel appearing for CUI.
CUI's submission of March 20 raised factual disputes with
respect to only 15 of the 70 requirements with which CUI
was found out of compliance in two or more of ACF's
reviews. CUI did not then request, nor had it earlier
requested, a waiver of the requirement that it identify
with specificity the factual findings in dispute. 3/
Instead, CUI moved to strike the findings of
noncompliance related to the remaining 55 requirements.
CUI incorporated by reference the arguments made in
support of its earlier motion to dismiss, and argued that
only areas in which ACF had found noncompliance in all
three of the on-site performance reviews ACF had
conducted would constitute "continuous" noncompliance
which could form a basis for the denial. CUI did not
specifically address either ACF's showing regarding the
opportunity and assistance given to CUI to correct
deficiencies found in earlier reviews, nor the Board's
stated rationale for why the motion to dismiss did not
appear to have merit. The Board denied the motion to
strike for reasons reiterated and expanded upon in
section II. below.
The Board further issued an order explaining why it
appeared that a denial of refunding was justified based
on the fact that CUI had not timely disputed the
noncompliance findings related to 55 Head Start
requirements. 4/ The order directed CUI to show cause,
in an in-person conference scheduled for April 7, 1995,
why the Board should not proceed to decision on that
basis.
CUI's response was essentially to provide an additional
argument about why its motion to strike should have been
granted, to argue that ACF had "unclean hands," and to
question the Board's impartiality. Also, for the first
time, CUI requested a waiver of the deadline set. CUI
argued that its counsel had assumed in good faith that
they could proceed according to their view of what
"fundamental rules of civil procedure" permitted and that
CUI should not be sanctioned for any erroneous
assumptions of counsel. These responses have no merit,
for reasons stated in sections II. and III. below.
CUI did not present any reason (other than reasons in
support of its motion to strike) why the noncompliance
findings related to the 55 requirements would not be
sufficient to justify the denial of refunding. Indeed,
CUI indicated that, if the Board were to "find for ACF on
the 55 [areas of alleged noncompliance] . . . it would be
impossible to ask to prevail in that case." Tr. at 7.
ACF asserted that the undisputed findings were sufficient
to justify the denial of refunding and that the Board
should proceed to decision on that basis.
We agree with ACF. To proceed to an evidentiary hearing
on the 15 disputed areas would be a waste of resources
and would delay resolution of who will provide services
to needy migrant children in CUI's service area. CUI has
been provided more than a reasonable opportunity for such
a hearing on all the factual findings and has, by its own
actions, waived any right to an evidentiary hearing with
respect to the 55 requirements. Moreover, since findings
related to those 55 requirements are sufficient to
justify ACF's proposed action, the 15 areas where CUI did
timely raise disputes of fact become immaterial. Even
assuming that CUI could show that it complied with the 15
requirements, CUI could not prevail in this proceeding.
A requirement for an evidentiary hearing is not
contravened by a summary disposition if there are no
genuine issues of material fact. See, e.g., Travers v.
Shalala, 20 F.3d 993, 998 (9th Cir. 1994). 5/
We consider it within our authority under the applicable
regulations either to dismiss CUI's appeal or to uphold
summarily ACF's denial of refunding based on CUI's
failure either to timely dispute the findings related to
55 requirements or to state any persuasive reason why
these findings would not justify the denial of refunding.
See 45 C.F.R. 16.13; 16.14; 45 C.F.R. Part 1303,
Subpart A. 6/ We determined, however, that it would be
more appropriate to proceed to decision on the undisputed
findings. In section IV. below, we address generally the
major findings related to the 55 requirements and explain
why they justify the denial. 7/
II. CUI's legal arguments on the 55 requirements have no
merit.
In its motion to dismiss, CUI alleged that it did not
receive a copy of the written report of ACF's 1994 on-
site review until July 29, 1994, the date on which CUI
received the denial letter. CUI argued that ACF's
failure to provide CUI an opportunity to respond to the
report violated ACF regulations. Specifically, CUI cited
45 C.F.R. 1304.1-5(b), 1304.1-5(c), and 1304.1-
5(e). 8/ CUI said that ACF never provided CUI an
opportunity to respond to the report, much less 90 days
to cure the alleged performance standard violations. CUI
also argued that the policy behind the review requirement
(referred to as an "OSPRI" review because ACF uses an
"On-Site Program Review Instrument") further supported
dismissal. CUI cited the conference report on amendments
to the Head Start Act creating the review requirement,
which indicated that the conferees expected ACF to "work
with individual grantees to correct deficiencies."
Motion to dismiss at 3.
ACF alleged that it had given CUI the required
opportunity to correct deficiencies in meeting
performance standards and also alleged that it had
provided on-site visits, training, and technical
assistance to CUI to assist it in correcting
deficiencies. ACF gave examples of 1994 OSPRI findings
that it said related to findings in an earlier review.
In declining to grant CUI's motion to dismiss, the Board
pointed out 1) that it appeared ACF was "relying on other
bases for the denial in addition to alleged failure to
meet performance standards and that the regulations on
which CUI relied in its motion relate only to performance
standards"; and 2) that ACF had made "at least a facial
showing that CUI had had an opportunity to correct
findings of noncompliance with performance standards made
in earlier reviews and that the 1994 OSPRI had found that
CUI still was not complying in spite of an opportunity to
correct."
In its March 20 submission, CUI did not--
Specifically renew its allegation that it did not
have the required opportunity to correct
deficiencies in meeting performance standards
(except with respect to a few items found out of
compliance in all three years where CUI says the
reasons given were different in different years);
Specifically dispute ACF's allegations regarding the
on-site visits, training, and technical assistance
provided to CUI; 9/ or
Cite to any requirement that ACF provide an
opportunity for corrective action with respect to
violations of regulatory requirements other than
performance standards.
Instead, CUI pointed out that ACF's determination letter
claimed that CUI had "consistently, continuously, and
pervasively failed to comply with the Head Start
Performance Standards." CUI then argued:
In this appeal, ACF has taken the position that any
OSPRI items which were found to be out of compliance
in 1994 and either 1990 or 1991 constitute
continuing non-compliances and therefore a basis for
the denial of refunding. . . . Under ACF's theory,
therefore, if a program standard is found to be out
of compliance in 1990, in compliance in 1991 and
then out of compliance in 1994, CUI has
"continuously" failed to comply with that standard.
ACF's position also applies to program standards
which did not even exist during the 1990 and 1991
OSPRIs such as some of the health component
standards and all of the disability standards. In
such a case, alleged non-compliances existed only in
1994. Moreover, in the case of the fiscal
component, ACF indicates that no determination of
compliance was made in 1990 because the CUI's fiscal
manager was absent the day of the OSPRI and records
were unavailable yet numerous item[s] were still
found to be in continuing non-compliance.
ACF's position is clearly nonsensical. ACF has
offered no authority or reason to support its
position that CUI need only have been out of
compliance for two out of three years to find it in
continuing noncompliance. Contrary to ACF's
interpretation, continuing means continuing, not an
interruption in time as long as four years in some
instances. Indeed Webster's dictionary defines
continuous as "marked by uninterrupted extension in
space, time, or sequence." . . . Distorting the
Commissioner's determination to terminate funding in
such a way without any basis is highly prejudicial
to CUI. For purposes of this appeal, the term
continuing should be given its common meaning. Any
OSPRI items which were not out of compliance for
each of the three years at issue should be stricken
as not continuous non-compliances.
We do not find these arguments persuasive. ACF's general
characterization, in the denial letter (issued by the
Associate Commissioner, Head Start Bureau, and not by the
Commissioner as CUI suggested), of the nature of CUI's
aggregate failings as consistent, continuous, and
pervasive does not establish a standard for individual
noncompliance findings. CUI cited no legal basis for the
Board to conclude that noncompliance findings must each
meet that description in order to support a denial of
refunding. The regulatory bases for denial of refunding
contain no such standard. 45 C.F.R. 1303.15(c),
incorporating 1303.14(b). 10/
The performance standard regulations simply require a 90-
day opportunity for corrective action on deficiencies in
meeting performance standards. 45 C.F.R. 1304.1-5(b).
The Head Start Act does provide that the "results of a
review conducted under [42 U.S.C. 9836(c)] shall not be
sufficient alone for the purpose of determining whether
to continue, or to discontinue, providing funds to a
particular Head Start agency." 42 U.S.C. 9836(c)(4).
The conference report on this provision, relied on by CUI
in its motion to dismiss, explains this provision by
stating that "the conferees expect the Secretary to work
with the individual grantees to correct deficiencies."
H.R. Conf. Rep. No. 101-86, 101st Cong., 2nd Sess. 5,
reprinted in 1990 U.S. Code Cong. and Admin. News 1981,
1985. Here, however, there are undisputed allegations
and evidence that ACF did work with CUI to correct its
deficiencies before denying refunding, by providing on-
site visits, technical assistance, and training.
The requirements on which ACF made findings of
noncompliance here include requirements which are not
performance standards, such as eligibility, enrollment,
and fiscal requirements. CUI did not timely raise any
issue of fact regarding ACF's findings of noncompliance
with these requirements. 11/ Yet, these requirements
may be separate bases for denial of refunding under 45
C.F.R. 1303.14.
The statutory requirement that "a review" may not be a
basis for denial is not violated by ACF's reliance on
findings of noncompliance made in two out of three
reviews. 12/ Even if we agreed with CUI that an
intervening finding of compliance mattered, however, this
would not be determinative. CUI cited no persuasive
reason why requirements with which CUI was found out of
compliance in 1991 and 1994 (with no intermediate finding
of compliance) would not provide a basis for denial of
refunding. The statute contemplates that full reviews
might be conducted only once during each three-year
period. 42 U.S.C. 9836(c)(2). Arguably, the
intervening period gave CUI more time to take corrective
action than it would have had if the reviews were only a
year apart.
The Board provided the above analysis to CUI with the
order to show cause. CUI's response was to claim that it
had made its motion to strike based on the Board's ruling
(which CUI erroneously refers to as a "decision") in an
appeal of a Head Start termination, filed by Home
Education Livelihood Program (HELP), assigned Board
Docket No. A-95-54. CUI had not raised the HELP ruling
in its motion to strike, however, and even in its
response to the order did not specifically state how the
HELP ruling supported CUI's position in this case. 13/
In the HELP ruling, the Board dismissed findings of
noncompliance with performance standards where the Board
found that "the facts supporting the finding of non-
compliance in the 1994 OSPRI [were] too dissimilar from
the facts supporting the finding in the 1991 OSPRI to
have given HELP adequate notice and an opportunity to
correct" the deficiencies. HELP ruling of February 2,
1995, at 6-7. Here, CUI did not identify any specific
findings in earlier OSPRIs that were so dissimilar to
findings in the 1994 OSPRI as to raise a question as to
whether CUI had an opportunity to correct. Nor did CUI
argue with respect to any of the 55 requirements that
they were not sufficiently clear to give CUI notice of
what CUI had to do to comply. 14/ While CUI's motion to
strike refers to some requirements not in existence prior
to 1992 (such as disability standards), these
requirements were not included in the ones on which ACF
relied in its November 28 submission. Moreover, the lack
of any findings on fiscal requirements in 1990 is
irrelevant since ACF relied here only on fiscal findings
made in later years.
In sum, we reaffirm our conclusion that CUI's motions
have no merit.
III. CUI did not show good cause for a waiver of the
requirement that it identify factual disputes.
In its response to the order to show cause, CUI argued
that its response to ACF's November 28 submission was
"made in complete good faith." CUI April 6, 1995 letter
at 6. CUI said: "Where CUI had a legitimate legal
argument which would otherwise resolve a factual issue,
which it did based on the Board's decision in HELP, it
was CUI's understanding that it was to assert that
argument rather than raise a slew of factual arguments."
Id. CUI argued that "the Board should be aware of its
own precedent, and the fact that this was not a frivolous
motion." Tr. at 9. CUI further argued that it is "just
common civil procedure to . . . file a demurrer, or a
motion to dismiss, or a motion . . . to strike, or
whatever, in lieu of a factual finding." Tr. at 9.
According to CUI, it believed it would make no sense to
spend money responding to issues that might be struck and
that applying common sense was perfectly appropriate.
CUI said that the "Board reserved judgment on our motion
to dismiss [so] it was an open issue." Tr. at 16.
Finally, CUI argued that, if its counsel was mistaken in
relying on fundamental principles of civil procedure, the
Board should not sanction CUI for the mistakes of counsel
but should instead give CUI an opportunity to now address
the 55 requirements. 15/
CUI did not assert that it met the limitations at
45 C.F.R. 1303.8 on what constitutes good cause for a
waiver of procedural requirements.
We conclude that CUI did not show good cause for a
waiver. Moreover, we are not persuaded by CUI's
protestations that its submission was "made in complete
good faith," for the following reasons:
The Board's order clearly required CUI to identify
specifically any factual disputes, to provide
supporting documentation, and to brief any legal
issues. That order was within the Board's authority
under the applicable regulations, and in effect
extended the time for CUI to meet the regulatory
requirement that CUI state its grounds and provide
supporting documentation.
The Board had informed the parties that it
contemplated supplemental submissions only to the
extent they were warranted by discovery obtained
after the submissions were due. 16/
CUI could not reasonably have relied on common rules
of civil procedure. The Head Start appeals process
is circumscribed by the statute and regulations, and
ultimately by directives of the Board designed to
implement that process. Moreover, we did not find
credible the assertions of CUI's counsel that they
did in fact rely on rules of civil procedure.
Contrary to what CUI argued in response to the order
to show cause, CUI's motion to strike was not based
on the Board's precedent in HELP; CUI did not cite
the HELP ruling until after the Board had denied the
motion to strike and, as discussed above, CUI's
later reliance on that ruling was general and
misplaced.
CUI also misrepresented the status of its motion to
dismiss. While the Board reserved final ruling on
that motion, the Board provided a preliminary
analysis based on which it denied the motion at the
time of the initial conference in this case. See
Confirmation of September 22, 1994 teleconference.
In context, it was clear that the analysis was
preliminary only because it was based on allegations
by ACF to which CUI had not yet had a full
opportunity to respond. CUI was given an
opportunity to respond to those allegations in its
March 20 submission and did not do so. Thus, CUI
could hardly expect the Board to change that
analysis. Moreover, CUI's motion to dismiss was
based on an alleged lack of a required opportunity
to take corrective action after the 1994 program
review, not on the ground that noncompliance must be
continuous to support a denial of refunding.
CUI (which is receiving funding pending its appeal)
has engaged in a pattern of procedural maneuvering
in this case which, in our opinion (based on a
collective 45 years of hearing appeals), has been
designed to delay these proceedings and to avoid
joining issue on the merits. 17/ CUI has also
repeatedly misrepresented statements or actions by
the Board or by ACF. While some of this may be
attributable to CUI's counsel, rather than to CUI,
the Head Start regulations inform grantees that
oversight of counsel does not constitute good cause
for a waiver and that the consequences can be
serious if regulatory or Board requirements are not
met.
Providing CUI a further extension (on top of the
extension it was given from January 13 to March 20)
to complete its submission would not be consistent
with the Head Start hearing regulations. As set out
above, those regulations were designed to promote
prompt resolution of disputes and do not in our view
provide for a waiver based on an alleged
"misunderstanding" by counsel that it could follow
fundamental principles of civil procedure rather
than the procedures set by the Board in accordance
with the applicable regulations. Granting such an
extension under the circumstances here would invite
delay and manipulation of the process.
The primary concern in the Head Start program is not
any particular grantee, no matter how long that
grantee has operated a program. 18/ In our view,
the intended beneficiaries of the program--migrant
children and their families--are at great risk of
not receiving the services to which they are
entitled, if this proceeding is further delayed.
Accordingly, we decline to grant CUI a further extension
of time to comply with the requirements that it identify
disputed facts and provide supporting documentation.
IV. A denial of refunding is justified based on the
undisputed findings.
In this section, we first set out undisputed facts
regarding ACF's reviews and the training and technical
assistance it provided to CUI between those reviews. We
then present some general discussion of why we conclude
that the undisputed findings provide an ample basis for
the denial of refunding, and why we do not strike
findings where less than all three of CUI's Migrant Head
Start centers were found out of compliance. Finally, we
discuss the findings related to eligibility and
enrollment requirements, fiscal requirements, and
performance standards, focusing on the most important
findings.
A. ACF's reviews
In response to CUI's assertions that CUI had not been
given an opportunity to correct deficiencies in its
program, ACF asserted that many of the noncompliance
findings it made in 1994 related to requirements with
which CUI had been found out of compliance in previous
on-site reviews. ACF had submitted copies of its review
documents, including summary reports and copies of OSPRIs
(On-Site Program Review Instruments), which it asserted
were previously provided to CUI. ACF also asserted that
it had provided extensive training and technical
assistance to CUI between the 1990 review and the 1994
review, and submitted documents listing this training and
technical assistance. ACF Exs. B, C. CUI's submission
in response to ACF's more definite statement was supposed
to include identification of any issue of material fact
related to ACF's allegations on the on-site visits,
training, and technical assistance provided to CUI.
Confirmation of September 22 teleconference at 4. CUI
did not timely identify any dispute of fact regarding the
reviews conducted or the training and technical
assistance provided.
ACF's documents show the following. In February 1990,
ACF conducted an On-Site Program Review of CUI's Migrant
Head Start program. By letter dated March 12, 1990, ACF
notified CUI that the review team had found CUI's program
out of compliance in all component areas. ACF Ex. F. In
March 1991, ACF conducted a follow-up visit to assess
CUI's progress since the February 1990 review. By letter
dated April 16, 1991, ACF informed CUI of the follow-up
review findings:
As stated in the general comment section of this
report, we find the fiscal and program process to be
a serious and continuing problem with Campesinos
Unidos. Please be aware that failure to correct the
identified deficiencies in a timely manner may
result in this agency taking more serious action to
ensure that the goals and requirements of the Head
Start Program are satisfied.
ACF Ex. G at 2.
After both the 1990 and 1991 reviews, CUI submitted
detailed corrective action plans. CUI Exs. 13, 15, 17,
18, 19.
With respect to the findings of the 1991 fiscal report,
ACF conducted another review in 1992, which found that
CUI had not fully corrected the deficiencies previously
found. ACF Ex. S.
In March 1994, ACF conducted another On-Site Program
Review of CUI's Migrant Head Start program, which found
CUI out of compliance with 164 program and fiscal
requirements. In the July 28, 1994 denial of refunding,
ACF informed CUI:
The OSPRI report for the March, 1994 visit documents
that Campesinos Unidos Migrant Head Start program
still fails to meet the program and fiscal
requirements established for Head Start grantee
performance.
CUI's notice of appeal, attachment (att.) at 1.
ACF's denial letter stated that CUI had demonstrated
"significant and sustained" noncompliance with the terms
and conditions of its Migrant Head Start grant and "has
failed to: (1) meet the Performance standards for
operation of a Migrant Head Start Program; (2) [comply]
with eligibility requirements and limitations on
enrollment; (3) abide by terms and conditions of its
award of financial assistance or other applicable laws,
regulations, Federal requirements and policies." Id. at
3.
In its more definite statement, ACF cited four separate
bases for its decision, set out in paragraphs at 45
C.F.R. 1303.14(b), applicable where a grantee:
(4) has failed to meet the performance standards
for operation of Head Start programs;
(5) has violated enrollment or eligibility rules;
(6) has failed to comply with the Head Start grants
administration requirements;
(9) has failed to abide by any other terms and
conditions of its award of financial
assistance, or any other applicable laws,
regulations, or other Federal or State
requirements or policies.
See 45 C.F.R. 1303.15(c).
B. General comments and conclusions
Of the many deficiencies found in CUI's Head Start
program, CUI did not timely dispute ACF's findings
related to 55 different program requirements, represented
by 55 different "items" listed on the 1994 OSPRI and by
corresponding items or findings in one of the earlier
reviews. See ACF Ex. Q. The 1994 OSPRI summarizing
findings for all three centers shows CUI out of
compliance with the 55 items, but individual OSPRIs with
findings for each of CUI's three Migrant Head Start
centers indicate that not all of the centers were out of
compliance with respect to all 55 requirements. CUI
argued, with respect to the findings it did dispute, that
we should strike findings if ACF had not found
noncompliance at all three centers. We provided an
opportunity to the parties to address this issue further
in the April 7, 1995 conference.
ACF argued:
By failing to comply with the standard at even one
center in a given year, CUI has failed to meet the
needs of a significant portion of children and
families it serves. ACF has funded CUI to provide
appropriate services to children and their families
at all three centers.
Tr. at 56. 19/ CUI responded that it is "appropriate"
that "all the centers should be out of compliance." Tr.
at 59.
We agree with ACF. CUI did not cite to anything in the
applicable regulations which limits denials of refunding
to noncompliance findings related to all of a grantee's
centers. Carried to its logical conclusion, CUI's
position would prevent ACF from acting against a multi-
center program which maintained compliance at only one
center, no matter how egregious the violations at other
centers or how many children were affected. CUI did not
support its position by any analysis of the relevant
statutory and regulatory provisions, and we conclude that
it would be inconsistent with Congressional intent for us
to adopt such a position.
CUI argued, however, that a Head Start regional director
had testified that virtually no Head Start program
complies with all regulations, that there were too many
requirements, and that ACF was acting arbitrarily if it
was saying that one failure to meet requirements was a
basis for ending a program. Tr. at 60.
This is not a situation, however, where ACF's action was
taken on the basis of one or only a few instances of
noncompliance, or of noncompliance at only one of CUI's
centers. The undisputed findings show numerous instances
of noncompliance with performance standards or other
requirements at each of CUI's three Head Start centers,
as well as findings that affect CUI's administration of
the program as a whole and its accountability for federal
funds.
The undisputed findings establish the following separate
bases for denial of refunding: CUI violated eligibility
and enrollment requirements; CUI failed to meet Head
Start grants administration requirements; and CUI failed
to meet Head Start performance standards. 45 C.F.R.
1303.14(b)(5), (6), and (4). In each of these areas,
CUI's noncompliance was material. Factors which we
considered in determining materiality include the extent
of the noncompliance, the nature of the noncompliance
(including how it relates to program objectives), and the
undisputed fact that noncompliance was found in more than
one review, even though CUI was provided extensive
training and technical assistance. We do not imply,
however, that each of these factors must be present for
the noncompliance to be material.
We also note that the undisputed findings show
noncompliance with some requirements specifically set out
in the Head Start Act and with some that are related to
fiscal reporting. Failures to meet such requirements are
listed as separate bases for denial of refunding. See 45
C.F.R 1303.14(b)(3) and (7). This provides further
support for our conclusion that the action of denying
refunding is justified based on the undisputed findings.
We focus our discussion below only on the most serious
deficiencies, setting out the relevant requirements and
the findings of noncompliance that were made during the
March 1994 review and in an earlier review. 20/ We
include, where appropriate, a brief discussion of how the
relevant Head Start requirements relate to important
program objectives.
C. Eligibility and Enrollment Requirements. 21/
Part 1305 of the Head Start regulations sets out
eligibility requirements, recruitment procedures,
selection process, limitations for enrollment, and
attendance requirements. As originally published on
April 7, 1978, Part 1305 contained only eligibility and
certain enrollment requirements. 43 Fed. Reg. 14,936.
The general Head Start policies related to enrollment and
attendance (including requirements for average daily
attendance) were first published in 1976 and then were
revised on November 2, 1979. 44 Fed. Reg. 63,478; see
ACF Ex. AD. Amendments to Part 1305 published on October
9, 1992, essentially incorporated the 1979 policies into
the codified regulation, with no substantive change that
is relevant here. 57 Fed. Reg. 46,718; ACF Ex. W. Thus,
we refer in this section to the 1992 version of Part
1305.
At least 90% of the children enrolled in Head Start must
be from low-income families. 45 C.F.R. 1305.4(b); 42
U.S.C. 9840. A Head Start program must establish
procedures which, among other things, assure that
eligible children enter the program as vacancies occur.
45 C.F.R. 1305.6(d). The minimum average daily
attendance which is considered acceptable is 85%. Head
Start programs are required to maintain records on
average daily attendance (ADA), and when the monthly ADA
falls below 85%, the causes of absenteeism must be
analyzed to determine if action is required, such as
initiating family support procedures. 45 C.F.R.
1305.8. In some circumstances where chronic
absenteeism persists, the child's slot must be considered
an enrollment vacancy. 45 C.F.R. 1305.8(c).
In 1994, the reviewers found that CUI did not comply with
the requirement that at least 90% of the enrolled
children were from low-income families. ACF Ex. H at
Eligibility, Recruitment, Selection, Enrollment, and
Attendance 76, OSPRI Item 168. In the 1990 review, the
reviewers found that CUI was out of compliance with the
same regulatory requirement. ACF Ex. V at Part B, Head
Start Review Supplement - Administration at 31 and 35,
OSPRI Items 12 and 46.
The reviewers also found in 1994 that records, from CUI's
monthly reports for the period October 1993 to February
1994, showed that the monthly ADA for CUI's Head Start
program was 75%. ACF Ex. H at 8. The reviewers found
that CUI failed to comply with the requirement that a
Head Start program assure that eligible children enter
the program as vacancies occur, and the requirement that
an analysis of absenteeism be performed when the monthly
ADA dropped below 85%. ACF Ex. H at Eligibility,
Recruitment, Selection, Enrollment, and Attendance 79 and
81, OSPRI Items 174 and 178.
In the 1990 review, the reviewers found that CUI was out
of compliance with the requirement for recruitment of
eligible children, and the requirement for the analysis
of absenteeism. ACF Tab V, Part B, Head Start Review
Supplement - Administration at 31 and 35, OSPRI Items 12
and 46, and OSPRI Item 13; ACF Ex. AD, at S-30-317-1-40,
A3. 22/
These requirements serve important program purposes. The
enrollment and attendance policies were designed to
ensure that program enrollment is consistent with
available resources and that resources are effectively
utilized and to ensure that children participate fully in
the program consistent with sound child development
practice. 44 Fed. Reg. 63,478; ACF Ex. AD. Grantees
were notified that failure to meet these requirements may
result in a denial of refunding. Id. at S-30-317-1-20;
45 C.F.R. 1305.10 (1992-94). Failure to meet the
requirements, as well as the limitations on overincome
children, meant that CUI was not serving the number of
eligible children it was funded to serve, and was not
ensuring that the children it did serve were fully
participating, so that their child development needs
could be met.
D. Fiscal Requirements 23/
The Head Start Act provides that the costs of developing
and administering a Head Start program may not exceed 15%
of the total costs of such program. 42 U.S.C. 9839(b).
This limit is implemented by the regulation at 45 C.F.R.
1301.32. Development and administrative costs are
defined at 45 C.F.R. 1301.2.
The Head Start regulations also provide that Head Start
grantees are bound by regulations on the Administration
of Grants found at 45 C.F.R. Part 74. 24/ 45 C.F.R.
1301.10(a). Head Start grantees are to have written
procedures for determining the allowability, allocability
and reasonableness of costs, in accordance with
applicable cost principles and the terms of the grant.
45 C.F.R. 74.61(f). The cost principles for non-profit
organizations are set out in Office of Management and
Budget Circular A-122, incorporated by reference into 45
C.F.R. 74.174, and explain the concepts of
reasonableness and allocability of costs.
Grantees must also provide for accurate, current, and
complete disclosure of the financial results of each
project or program. 45 C.F.R. 74.61. Grantees must
maintain accounting records which adequately identify the
application of funds to grant-supported activities, must
maintain internal controls, and must compare actual to
budgeted costs. 45 C.F.R. 74.61 (b), (c), and (d).
As the Board has previously recognized, the relationship
between a Head Start grantee and ACF requires that ACF be
able to rely upon the grantee to have systems in place to
assure that federal funds are used efficiently and only
for their intended purpose. Moreover, under the statute
and regulations, a Head Start grantee has an affirmative
obligation to provide documentation to show that funds
were used only for purposes for which they were awarded.
Rural Day Care Association of Northeastern Carolina, DAB
No. 1489, at 8, 16.
In 1994, the reviewers found many deficiencies in CUI's
fiscal operation. The reviewers found that CUI did not
have a financial management system in place that ensures
timely, accurate, current, and complete disclosure of
financial matters. ACF Ex. H at Administration/
Financial/Property Management 112, OSPRI Item 218. 25/
The reviewers found that CUI failed to compare budgeted
costs to actual costs in a timely manner. ACF Ex. H at
Administration/Financial/Property Management 113, OSPRI
Item 220. The reviewers found that CUI failed to have
adequate controls in place to assure that Head Start
funds were not being used for other program costs. ACF
Ex. H at Administration/Financial/Property Management
113, OSPRI Item 224. The reviewers found that CUI failed
to comply with the requirement that costs be necessary
and of benefit to the Migrant Head Start program. ACF
Ex. H at Administration/ Financial/Property Management
115, OSPRI Item 227. 26/
Finally, the reviewers found that CUI failed to comply
with the requirement that administrative and development
costs not exceed 15% of CUI's total costs. ACF Ex. H at
Administration/Financial/Property Management 116, OSPRI
Item 234. In fact, the reviewers noted that in 1993 the
percent of indirect costs CUI was charging to its Migrant
Head Start grant exceeded 15%, and that if some of the
amount for indirect costs had not been deobligated at the
end of the year, CUI would have exceeded the 15% limit by
$35,000. Id.
Previously, ACF had found the same problems. ACF
detailed CUI's problems in Attachment 1 to the Monitoring
Report on the 1991 review and in a "Grants Management
Letter" issued by the Chief of the Discretionary Grants
Management Branch on March 29, 1991. ACF Ex. G, att. 1;
ACF Ex. AC. ACF found that CUI failed to develop
individual center budgets or account for funds on a
center by center basis, and that the administration
failed generally to compare budgeted costs to actual
costs, particularly travel costs. ACF Ex. AC at 1-2.
ACF commented that this resulted in program managers not
having necessary information to manage the program
properly. Id. at 2. ACF had also found that CUI had no
procedures in place to determine if the 15% limit on
administrative costs was being met. ACF Ex. G, att. 1,
at 5. ACF had attached to the Monitoring Report a copy
of a 1983 issuance providing guidance on how to comply
with the 15% limit. ACF Ex. G, att. B to att. 1.
In addition, ACF submitted reviewer's notes that related
to an April 1992 follow-up visit, which assessed CUI's
compliance since the March 1991 review. ACF found the
same fiscal problems as stated above. ACF Ex. S at
unnumbered pages 9-14. These notes indicate that the
problems were caused in part by the fact that CUI had
used an accounting procedures manual developed in 1978,
which did not reflect current requirements (especially
those relating to the Migrant Head Start program), and
that CUI was slow in making progress in converting to a
computerized and updated system as previous reviewers had
recommended. Id; ACF Ex. AC at 1-3; ACF Ex. H at 6.
These problems are serious, particularly the failure to
have a system for ensuring that the 15% limit on
administrative costs is not exceeded and that the Migrant
Head Start program is not charged for the costs of other
programs. Without these safeguards in place, there was
no assurance that the full amount of funds awarded for
direct services to migrant children and their families
were actually being expended for that purpose.
E. Performance Standards
Performance standards for Head Start have been in effect
since the mid-70's. When they were first promulgated,
the preamble to the final rule explained that the
standards had been developed based on seven years
experience with the program, had been field tested, and
were considered reasonable and attainable. 40 Fed. Reg.
27,562 (June 30, 1975). Head Start grantees are provided
detailed guidance on how to meet the standards. ACF Ex.
J.
The 1994 review found CUI's Migrant Head Start program to
be significantly out of compliance with critical program
performance standards. These same deficiencies also had
been found in the February 1990 review or the March 1991
review, or both. We discuss in this section the
undisputed findings related to performance standards for
various program components.
1. Education component 27/
The performance standards of the education component of
the Head Start program are found at 45 C.F.R. Part 1304,
Subpart B. While the Head Start regulations are worded
to specify what a grantee must have a plan for meeting
various performance standards, the plan is not itself the
test of compliance with the performance standards. The
regulations contemplate that the grantee both develop and
implement the plan, in order to meet the performance
standards. See 45 C.F.R. 1304.1-4 and 1304.1-5.
Generally, the education component is designed to ensure
that children enrolled in the program are provided with a
learning environment which will help them develop
socially, intellectually, physically, and emotionally
toward the overall goal of social competence. 45 C.F.R.
1304.2-1(a).
In the 1994 review, the reviewers found that CUI failed
to comply with the 1304.2-2(b)(1)(iii) requirement to
provide a supportive and emotional climate to help each
child build ethnic pride, develop a positive self-
concept, enhance individual strengths, and develop
facility in social relationships. ACF Ex. H at Education
1, OSPRI Item 2. Moreover, ACF found that CUI failed
this item to a greater degree than it did in the 1990
review. Id.; ACF Ex. V at Education 6, OSPRI Item 7.
Further, in 1994, the reviewers found that CUI failed to
comply with the 1304.2-2(b)(2)(ii) and (iv)
requirements for developing the children's intellectual
skills by promoting language understanding and use, by
providing time for children to talk to each other and to
adults, and by encouraging children to organize their
experiences and understand concepts. ACF Ex. H at
Education 5, OSPRI Items 6 and 8. Reviewers commented
that they observed high levels of solitary play,
wandering, frenzied behavior, minimal conversation, and
that the children appeared tense. Id. The 1990 review
also found CUI in noncompliance with the requirement at
1304.2-2(b)(2)(ii). ACF Ex. V at Part B, Head Start
Review Supplement at Education 2. The 1991 review found
CUI in noncompliance with the requirement at 1304.2-
2(b)(2)(iv). ACF Ex. H, Education 5, OSPRI Item 8.
Finally, in the 1994 review, the reviewers found that CUI
did not comply with the requirements of 1304.2-
2(b)(3)(i) for promoting physical growth of the children.
This requires providing adequate indoor and outdoor
space, materials, equipment, and time for children to use
large and small muscles to increase their physical
skills. The reviewers commented:
Due to the large number of children in small
facilities, and poorly arranged ones, the physical
development of the children was discouraged.
Children were rotated in one center because of the
overcrowding.
ACF Ex. H at Education 6, OSPRI Item 10. The 1990 review
also found CUI in noncompliance with 1304.2-2(b)(3)(i).
ACF Ex. V at Part B, Head Start Review Supplement at
Education 3.
2. Health Component 28/
The performance standards for the health component of the
Head Start program are found at 45 C.F.R. Part 1304,
Subpart C. Head Start emphasizes the importance of early
identification of health problems. Many preschool
children from low-income families have never seen a
doctor or a dentist prior to entering the program. The
objective is to provide a comprehensive health services
program to assist the child's development. See 45 C.F.R.
1304.3-1(a). Given that migrant workers move
frequently, it is especially important that a Migrant
Head Start program supply the required dental and medical
needs of the children. See ACF Ex. AE.
In 1994, the reviewers found that, among other things,
CUI failed to provide documentation to show that it
complied with (1) the 1304.3-2 requirement for a Health
Services Advisory Committee consisting of particular
types of members; and (2) the 1304.3-5(a) requirements
for maintaining medical records for each child that
evidenced screening results, follow-up treatment for
medical problems, and immunizations, and dental records
for each child that evidenced follow-up treatment. ACF
Ex. H at Health 23, Health-Medical 24, and Health-Dental
30, OSPRI Items 39, 40, and 49. The 1991 review found
that CUI failed the same regulatory requirements. ACF
Ex. G at Health 19, Health-Medical 20, and Health-Dental
23, OSPRI Items 38, 39, and 46.
3. Mental Health component 29/
The mental health component program standards are
designed to ensure that children are assisted in
participating in the program through services which are
intended to enhance emotional, social and cognitive
development. 45 C.F.R. 1304.3-7(a). The standards are
designed to provide for prevention and early intervention
in problems which can affect a child's development. 45
C.F.R. 1304.3-7(d).
The program performance standards require that a mental
health professional be available to the Head Start
program, on at least a consultation basis, to provide
certain services to the staff, parents, and children of
the program. 45 C.F.R. 1304.3-8(a). The performance
standards also require that the mental health plan
provide for certain actions, including coordination of
the mental health component with the education component,
and regular group meetings of parents and program staff.
45 C.F.R. 1304.3-8(b).
In 1994, ACF found that CUI did not comply with the
1304.3-8(b)(3) and (b)(5) requirements to provide
coordination with education services and to hold regular
group meetings of parents and program staff. The
reviewer stated that interviews and paperwork confirmed
that there was no documentation demonstrating
consultation or coordination between the education and
health components. ACF Ex. H at Mental Health 39-40,
OSPRI Items 83 and 85. The 1991 review found that CUI
failed the same regulatory requirements. ACF Ex. G, att.
2 at Health-Mental 30 and 31, OSPRI Items 79 and 81.
4. Nutrition component 30/
The performance standards of the nutrition component of
the program provide that nutritional needs of enrolled
children must be identified and that children will be
provided with certain meals and snacks throughout the
day. Meals and snacks are designed to provide an
adequate quantity and variety of foods, taking into
consideration the needs of the children. See 45 C.F.R.
1304.3-10. Like other component plans, the nutrition
plan is to be reviewed and updated annually. 45 C.F.R.
1304.1-4.
The program is to gather information about community
nutrition problems. 45 C.F.R. 1304.3-10(a)(3). A
nutritionist must be available to the program for either
full-time or periodic and regular supervision of the meal
program. 45 C.F.R. 1304.3-10(g).
In 1994, ACF found that CUI did not comply with the
1304.3-10(a)(3) requirement for a community needs
assessment about major community nutrition problems, or
with the 1304.3-10(g) requirement that nutrition
services be directed or supervised by a qualified
nutritionist. ACF Ex. H at Health-Nutrition 42 and 50,
OSPRI Items 92 and 115. Specifically, with regard to the
supervision of nutrition services, the reviewer commented
that "upon interviewing the nutritionist, there is not
sufficient time on the contract to allow her to comply
with the performance standard or has there been proper
direction from the central office." Id. at 50.
The 1991 review found that CUI failed the requirement for
a needs assessment. ACF Ex. G at Health-Nutrition 32,
OSPRI Item 88. The 1990 review found that CUI failed the
requirement for direction or supervision of nutrition
services by a qualified nutritionist. ACF Ex. V at
Nutrition 19, OSPRI Item 22.
5. Social Services component 31/
The social services component is designed to ensure a
recruitment process within the community which seeks to
enroll eligible children regardless of race, sex, creed,
color, national origin, or handicap. In addition, it is
designed to assist the families of enrolled children in
improving their quality of life within the community and
to involve the parents in actively participating in the
Head Start center. It is also designed to familiarize
Head Start families with community resources which are
available to them and to work with the community to
determine what unmet needs exist. See 45 C.F.R.
1304.4-1.
The social services component objectives are to be
carried out through a social services component plan,
which is to be annually reviewed and updated. 45 C.F.R.
1304.1-4. The plan is a) to provide for the
recruitment of children, including handicapped children;
b) to provide families with, or refer families for,
counseling, assistance, crisis intervention, and
necessary community services; c) to follow-up with
families to assure that needed assistance was provided;
d) to be an advocate for Head Start families within the
community; e) to contact parents of children whose
attendance is irregular or whose absences are extended;
and f) to work with other community service agencies to
develop programs to meet the social service needs of Head
Start families. 45 C.F.R. 1304.4-2.
In 1994, ACF found that CUI, among other things, did not
provide documentation to comply with (1) the 1304.1-4
requirement for a written social services plan; and (2)
the 1304.4-2(a)(3) and (b)(5) requirements for
providing or referring families for appropriate
counseling, and for preparing and making available a
community resource list to Head Start staff and families.
ACF Ex. H at Social Services 53 and 57, OSPRI Items 118,
120, and 131. The 1990 review found that CUI failed the
same regulatory requirements. ACF Ex. V at Part B, Head
Start Review Supplement at Social Services 21 and 22.
Specifically, in 1990, with regard to the community
resource list, the reviewer stated, in relevant part:
Not enough access and availability for the parents.
The agency has a community resource list but the
list is not given to the parents and it needs to be
translated into spanish for the parents use.
Id. at 22. We note that failure to comply with the
social services plan requirements may have contributed to
CUI's failure to serve only eligible individuals and to
ensure full participation of the eligible children it did
serve.
6. Parent Involvement component 32/
The parent involvement component of Head Start is
designed to recognize the critical role that parents play
in the development of their children. The performance
standards are designed to recognize parents as
responsible guardians and the primary educators of their
children, as well as contributors to the Head Start
program and local community. The standards provide
opportunities for parents to participate in the program
as employees, volunteers, or observers; to directly
participate in Head Start decision-making; to participate
in activities they have helped to develop; and to work
with their own and other children in the program. 45
C.F.R. 1304.5-1. The parent participation policy of
Head Start is set out in the Head Start Policy Manual.
See 45 C.F.R. 1304.5-2 and Part 1304, Appendix B.
In 1994, ACF found that CUI, among other things, did not
comply with (1) 1304.1-4 requirement for a written
parent involvement plan, annually updated or revised;
(2) the 1304.5-1(c)(3) requirement for program
activities that the parents helped to develop; (3) the
1304.5-1(c) requirement to provide parents an
opportunity to work with their children in their own home
in connection with the staff of the center; (4) the
1304.5-3(a) requirement to provide opportunities for
parents which help to develop skills, self-confidence,
and a sense of independence in fostering an environment
where their children can develop to their full potential;
(5) the 1304.5-3(c) requirement for providing
opportunities for parents to involve them in providing
educational and developmental activities for children in
the home and in the community; and (6) the 1304.5-4(a)
requirement for two-way communication between staff and
parents about the program and its services and other
relevant information. ACF Ex. H at Parent Involvement
59, 60, 62, and 64, OSPRI Items 133, 134, 136, 139, 141
and 147.
The 1990 review found that CUI failed to have an updated
parent involvement plan. ACF Ex. V at Part B, Head Start
Review Supplement at Parent Involvement 24. Further, the
1990 review found that CUI failed to comply with (1) the
requirement to provide program activities that the
parents helped to develop, ACF Ex. V at Part A, Parent
Involvement 25, OSPRI Item 31; (2) the requirement for
parent involvement in working with their children in
their own home in connection with the center staff, ACF
Ex. V at Part A, Parent Involvement 24, OSPRI Item 29;
(3) the requirement to provide opportunities to help
parents develop skills and self-confidence, ACF Ex. V at
Part A, Parent Involvement 27, OSPRI Item 33; and (4) the
requirement to provide two-way communication between
staff and parents, ACF Ex. V at Part A, Parent
Involvement 27, OSPRI Item 34. Cumulatively, these
findings show a significant failure by CUI to involve
parents in a meaningful way in the Migrant Head Start
program and the development of their children.
In sum, CUI failed to meet a substantial number of
performance standards, some in each of the major
substantive program areas, during more than one review
period. While the extent and nature of the deficiencies
in compliance varied, CUI's failures overall indicate
that many important program objectives were not being
met. CUI was provided notice and an opportunity to
correct its deficiencies, but, in spite of having been
provided training and technical assistance, either failed
to come into compliance or failed to maintain compliance.
Conclusion
For reasons stated above, we conclude that--
denial of refunding of CUI's Migrant Head Start
program is amply justified based on ACF's findings
that CUI did not timely dispute, which provide at
least three separate regulatory bases for the
denial;
CUI's legal arguments regarding the findings it did
not timely dispute have no merit, so we reaffirm our
rulings denying CUI's motions to strike or dismiss
those findings; and
further delay in this case to permit CUI an
additional opportunity to raise factual disputes is
not warranted and would be inconsistent with the
Head Start appeals regulations.
_____________________________
Cecilia Sparks Ford
_____________________________
Donald F. Garrett
_____________________________
Judith A. Ballard
Presiding Board Member
1. This decision cites to the provisions of the Head
Start Act in effect at the time of ACF's review of CUI's
program in March 1994.
2. ACF did not by the time of its November 28
submission issue a final notice with respect to a
potential disallowance of costs CUI had charged to Head
Start funds. The potential disallowance was also part of
the basis for one of the 1994 noncompliance findings. In
view of ACF's delay in reviewing documentation CUI
submitted to ACF, the Board did not require CUI to
address issues regarding the disallowed costs in its
March 20 submission. ACF ultimately issued a final
disallowance notice on February 9, and CUI appealed the
disallowance. The Board determined not to consolidate
the two proceedings, dismissing the disallowed costs as a
basis for the denial of refunding, without objection by
ACF. Tr. at 27-30; Board letter of May 12, 1995.
3. CUI's March 20 submission with respect to the 15
areas of noncompliance CUI did dispute was deficient in
that it did not include all of the supporting
documentation. The Board treated any CUI statement which
could be reasonably viewed as giving reasons why specific
documentation was not included as a request for a waiver
and gave CUI 10 additional days to submit only that
documentation. CUI sought to submit additional
documentation after that deadline had passed. The Board
reserved ruling on whether to admit any additional
documentation related to the disputed findings. The
Board also reserved ruling on numerous other outstanding
motions that the Board needed to resolve only if the
Board did not proceed to decision based on the undisputed
findings.
4. CUI's March 20 submission stated that some of its
proposed witnesses would testify generally "about" CUI's
Migrant Head Start program in those years and its efforts
to come into compliance, or "about" the factual
allegations of the noncompliance findings. It further
states that some witnesses will testify "as to the
factual allegations of the noncompliance findings" in
general program areas. CUI's March 20, 1995 submission
at 19-21. The Board's order noted that these general
descriptions were insufficient to meet the requirement
that CUI identify facts in dispute relating them to
particular items in ACF's review instrument. The order
also noted that, although CUI had stated generally that
two of its witnesses will testify "as to the fiscal
findings," this was not sufficient to identify specific
disputed findings and that, moreover, those findings
relate to requirements for which CUI would have a burden
of providing documentation to support any challenge to
the finding, so testimony alone would not be sufficient
to show compliance.
CUI argued in its April 6 response to the order that the
Board was holding CUI's witness statements to a different
standard than ACF's witness statements. The point,
however, was not that CUI's witness statements were
insufficient to meet the requirement for witness
statements, but that CUI's witness statements were
insufficient to meet the separate requirement for
identifying factual disputes and relating them to
particular review findings.
5. While the Travers decision does not directly
address the Head Start requirement for reasonable notice
and opportunity for a full and fair hearing, it involved
a statutory right to a formal hearing by an
administrative law judge under the Administrative
Procedure Act. See Meriden supra.
6. CUI's failure to comply with Board requirements
has continued after the April 7 conference.
7. In connection with the Board's dismissal of the
cost disallowances as a basis for the denial of
refunding, CUI subsequently argued that the appropriate
action for the Board to take because of deletion of some
findings would be to remand to ACF. This apparently was
based on CUI's view of ACF's decision as a final agency
decision. We had previously explained to CUI why this
view was erroneous under the applicable regulations.
Board's April 5, 1995 Ruling at 12. We see no reason to
remand these proceedings since ACF has clearly stated its
position that the undisputed findings (which do not
include the disallowance findings) are sufficient to
justify the denial of refunding.
8. In its April 6 written response to the Board's
order to show cause, CUI describes its motion to dismiss
as "due to the failure of ACF to follow its own
regulations (and, as CUI later found out, the HHS Grants
Administration Manual) . . . ." CUI's April 6 letter at
3. CUI did not cite to any specific provision of the HHS
Grants Administration Manual. The Grants Administration
Manual issued in 1986 by ACF's predecessor provides
generally for notice and an opportunity to correct
deficiencies prior to a suspension or termination action,
but not prior to a denial of refunding. HDS GAM,
Transmittal No. 86-1, at 10-1.
9. CUI's response submission due March 20 was to
include identification of any factual disputes related to
"specific allegations ACF made in its recent submissions
concerning on-site visits, training, and technical
assistance provided to CUI." Confirmation of September
22, 1994 teleconference. It was also to include
"briefing of any legal issues CUI is raising (relating
these issues to particular findings on which ACF is
relying for its denial, where appropriate) [and] [i]f CUI
takes the position that the concerns identified in its
motion to dismiss have not been sufficiently addressed by
ACF, an explanation of CUI's reasons why the Board should
dismiss part or all of this case." Id.
10. This argument also takes one statement from the
denial letter out of context. ACF's denial letter refers
to many factors for its conclusions, including the large
number of noncompliance items, the failure to take
corrective action even though CUI was given extensive
training and technical assistance, and the seriousness of
all of the items out of compliance. Moreover, ACF
considered CUI's noncompliance with 70 requirements
(including the 55 undisputed ones) to be "on a continuing
basis." ACF's November 28, 1994 More Particularized
Statement at 1.
11. The Board did not require CUI to provide its
evidence and argument by March 20 on one of the fiscal
requirements (identified as OSPRI Item 218) to the extent
the reasons for that finding overlapped with ACF's
potential disallowance findings. See Board's March 2,
1995 Preliminary Ruling at 4.
12. The statute read as a whole clearly indicates
that Congress expected Head Start grantees to comply with
program and fiscal requirements and ACF to deny refunding
for grantees who failed to do so.
13. CUI had previously been told that it should
include its complete arguments with any motion. See,
e.g., Confirmation of September 22 teleconference at 4-5;
December 22, 1994 letter at 2. Moreover, the Board's
initial order in this case required that "[i]f CUI takes
the position that the concerns identified in its motion
to dismiss have not been sufficiently addressed by ACF,
[CUI should include] an explanation of CUI's reasons why
the Board should dismiss part or all of this case."
Confirmation of September 22, 1994 teleconference.
14. CUI argued in its April 6 letter that ACF's claim
of continual noncompliance is supported only by charts
showing OSPRI items out of compliance in more than one
year and that the Board should have found this inadequate
because ACF did not provide a factual analysis of each
OSPRI item. CUI alleged that the Board never analyzed
ACF's statement despite its "vagaries" and this showed
that the Board was applying a different standard to ACF
than to CUI. CUI's April 6 1995 letter at 5. Since ACF
had already provided its review reports and instruments
to CUI, the Board's initial order required only that ACF
identify, with respect to Head Start performance
standards, which of the 1994 OSPRI findings ACF alleged
showed continuing noncompliance. ACF's charts were
sufficient to do this, and ACF provided explanations and
analyses in addition to the charts. Moreover, the Board
did analyze ACF's response and, in an order issued
December 22, 1994 required ACF to clarify a few points
before CUI's response was due. Allowing ACF to correct
these minor deficiencies in its submission is not
inconsistent with what we do here. First, CUI's due date
for its submission was being delayed to permit it to
receive documents the Board was ordering ACF to produce,
and the time needed for ACF to clarify a few matters
would not lead to any delay comparable to that if we
permitted CUI to supplement its response. Second, the
Board has more limited authority with respect to what
actions it can take if a respondent such as ACF fails to
meet requirements. See 45 C.F.R. 16.15. This reflects
the fact that the Board's process is part of this
Department's decisionmaking process.
We also note that CUI's claims in its March 20 submission
and April 6 letter that ACF's November 28 submission was
inadequate are not timely and--like many of CUI's
assertions--are not fully borne out by an examination of
the record.
15. CUI also argued that ACF had "unclean hands,"
listing alleged actions of ACF that CUI said showed this.
CUI's April 6, 1995 response to the order to show cause
at 2-3. First, even if ACF had "unclean hands," this
would not provide a basis for us to hold for CUI here.
Second, the actions described appear at least in part to
be within ACF's authority, such as its authority to
designate CUI as a high risk grantee and impose special
conditions.
16. Before CUI's submission was due, CUI obtained
extensive document discovery from ACF. See Board's
December 22, 1994 order. ACF withheld some documents
based on privilege claims (later releasing some of them),
and the Board required ACF to submit these documents for
in camera inspection. Nothing in those withheld
documents would provide a basis for a different result
here. In its March 20 submission, CUI renewed a request
for depositions. (A previous, more narrow request had
been denied.) While this submission provided some
specific reasons why CUI needed depositions to contest
the noncompliance findings that CUI did dispute, CUI did
not provide any specific reasons why depositions were
needed to contest the noncompliance findings related to
the 55 requirements. The general reasons CUI did give
were to receive clarification of ACF's findings. CUI did
not adequately explain why it could not have obtained
this information through the interrogatories ACF had
previously agreed to and CUI had rejected, or from the
documents previously provided such as the review reports
and instruments and reviewers' notes. (Indeed, parts of
CUI's submission indicate that it had not carefully read
the documents provided by ACF.) Moreover, the 55
requirements at issue here involve matters that should be
within CUI's knowledge, and to show compliance with
certain key requirements, CUI should have had particular
documents in its possession.
In the April 7 conference, CUI for the first time said
that it needed to depose some of its former employees
because it suspected that those employees had secretly
acted in concert with the approval of ACF to sabotage
CUI's program. Tr. at 44-47. CUI did not provide any
substantiation for this allegation, nor had it previously
offered testimony to support such allegations. ACF said
that it was not relying on statements made by these
individuals to support its findings, and these
individuals were not included in ACF's witness list. Tr.
at 47; ACF's November 28, 1994 submission at 19-21.
CUI's allegations are too late and too vague and
unsupported to show that such depositions are needed, and
it is highly unlikely that such depositions would lead to
information showing that CUI had complied with the 55
program requirements, particularly with respect to the
documentation requirements.
17. The Board has not detailed above all of the
motions and other actions taken by CUI in this case
because to do so would make this decision unduly lengthy.
We have counted over 20 separate motions or requests made
by CUI. We are not implying that none of these have
merit--some appear frivolous, but some we have granted in
whole or in part. Rather, it is the pattern and timing
of the motions, the piecemeal way in which CUI has made
its arguments, the numerous misstatements by CUI
regarding what ACF or the Board said or what the record
said, and CUI's handling of the case as a whole that led
us to conclude that CUI has sought to delay the
proceedings.
18. We note in any event that CUI operates a regular
Head Start program as well as a Migrant Head Start
program. The record suggests that CUI has not operated
the Migrant program for 20 years, as CUI's argument
suggested.
19.
ACF also pointed out that CUI had made mistakes in
identifying findings that CUI said related to only one
center. Tr. at 56-58. The record confirms this. We
note that the award documents submitted by ACF indicate
that CUI was funded to serve between 248 and 308 children
in each of the program years from 1990 to 1994. ACF Exs.
D and AB.
20.
ACF provided 1994 OSPRIs for each of the three centers
operated by CUI and one summary OSPRI that encompassed
the overall findings. The comments we quote are from the
OSPRI providing the overall findings. The earlier
reviews were performed using an earlier review instrument
and some supplemental materials, and the 1992 fiscal
follow-up is recorded only in the reviewers' notes
(although those notes indicate that the findings were
discussed with CUI and CUI did not challenge this). The
findings which we do not specifically discuss are
included in lists in footnotes for each section or
subsection, according to the OSPRI Item numbers from the
1994 review. Corresponding findings from the earlier
reviews are listed in ACF's chart at ACF Exhibit Q.
21.
The undisputed findings relevant here are related to
1994 OSPRI Items 168, 173, 174 and 178, and earlier
findings as listed in ACF Ex. Q.
22. In the 1991 review, ACF for some reason did not
determine whether CUI was meeting the ADA requirements.
See Ex. I at 14.
23.
In 1994, the fiscal component of the OSPRI was
comprised of administration, financial and property
management items. While we refer to these requirements
here as "fiscal requirements," these requirements are
also considered "grants administration" requirements.
The undisputed findings relevant here are related to 1994
OSPRI Items 218, 220, 227, 230, 233, and 234, and earlier
findings as listed in ACF Ex. Q.
24. Part 74 was amended after ACF conducted its 1994
review. 59 Fed. Reg. 43,754 (August 25, 1994). We cite
here to Part 74 provisions as in effect during the
relevant periods.
25. Although the reasons given for this conclusion
included findings that overlap the cost disallowances
being addressed in a separate proceeding, ACF also noted
that there was a "prior year deficit exclusive of
disallowance" and a "lack of timely statements." Id.
Moreover, findings supporting other related conclusions
would also support this conclusion. Thus, even assuming
the cost disallowances were not properly taken, the
undisputed findings support a conclusion that CUI did not
have a complying financial management system in place.
26.
ACF also cited 45 C.F.R. 1302.32 and Office of
Management and Budget Circular A-122, Attachment A,
Paragraph A.4., as requirements underlying this OSPRI
item.
27.
The undisputed findings relevant here are related to
1994 OSPRI Items 2, 3, 4, 5, 6, 8, 10, 12, 18, 21, 35,
36, and 37, and earlier findings as listed in ACF Ex. Q.
28.
The undisputed findings relevant here are related to
1994 OSPRI Items 39, 40, 44, 49, 56, 57, and 69, and
earlier findings as listed in ACF Ex. Q.
29.
The undisputed findings relevant here are related to
1994 OSPRI Items 83 and 85, and earlier findings as
listed in ACF Ex. Q.
30.
The undisputed findings relevant here are related to
1994 OSPRI Items 92, 109, 110, 111, and 115, and earlier
findings as listed in ACF Ex. Q.
31.
The undisputed findings relevant here are related to
1994 OSPRI Items 118, 120, 124, and 131, and earlier
findings as listed in ACF Ex. Q.
32.
The undisputed findings relevant here are related to
1994 OSPRI Items 133, 134, 136, 139, 141, 147, 149, and
152, and earlier findings as listed in ACF Ex. Q.