DOP Consolidated Human Services Agency, Inc.

DOP Consolidated Human Services Agency, Inc. (DOP) appealed a September 28, 1998 decision by the Administration for Children and Families (ACF) terminating DOP's Head Start grant pursuant to 45 C.F.R. § 1303.14. ACF's decision was based on the results of an On-Site Program Review in January 1997 and a follow-up review in May 1998, which determined that DOP had failed to correct areas of non-compliance relating to the provision of education, health, dental, and nutrition services to children enrolled in the Head Start program.

DOP appealed the termination on the grounds that it had corrected the areas of non-compliance subsequent to the May 1988 follow-up review. On November 9, 1998, ACF moved for dismissal of the appeal on the grounds that DOP failed to either file its appeal within the 10-day appeal period specified in the regulations or allege that the deficiencies on which ACF's decision to terminate were based had been timely corrected. DOP then moved for waiver of the 10-day deadline and requested a reasonable time to prepare an appeal which would include a full statement of the grounds for relief and supporting documentation.

For the reasons explained below, we find that DOP's appeal as a matter of law failed to allege any basis for reversing ACF's termination decision, and that the applicable deadline to provide a full statement of the grounds for the appeal may not be waived. Accordingly, we conclude that disposition without further proceedings is appropriate, and that the termination of DOP's Head Start grant is warranted.

Background

DOP, located in Jacksonville, North Carolina, provides Head Start services to approximately 560 children at several locations. DOP employs over 30 teachers and has received at least five million dollars in federal Head Start funds since April 1, 1997.

ACF conducted a comprehensive On-Site Program Review (OSPR) of DOP's Head Start program during January 27-30, 1997, and identified 56 items of non-compliance with the Head Start regulations in the operation of DOP's Head Start program. ACF reported that these items related to inadequate management oversight, lack of services to children, and failure to follow appropriate fiscal policies, and asserted that they materially impacted on DOP's ability to deliver Head Start services. ACF detailed the findings in an On-Site Program Review Instrument (OSPRI) provided to DOP via a March 24, 1997 letter which DOP received on April 2, 1997. The letter stated that ACF would issue a letter stating its intent to terminate DOP's Head Start grant if DOP failed to correct the deficiencies within one year. In a revised Quality Improvement Plan (QIP) submitted on May 30, 1997 and approved by ACF on June 4, 1997, DOP proposed to eliminate the deficiency items and bring its Head Start program into compliance by October 1, 1997.

ACF conducted a follow-up OSPR during May 4-8, 1998, and determined that DOP had failed to correct 19 of the 56 items of non-compliance identified in the original OSPRI report. ACF reported that DOP continued to be noncompliant in areas relating to the provision of education, health, dental, and nutrition services to children, and that DOP had employed unqualified teachers and housed children in overcrowded and unsafe conditions.⁽¹⁾ ACF issued a report on June 19, 1998, indicating that DOP had failed to correct the 19 items of non-compliance and that ACF intended to begin termination proceedings. ACF Motion to Dismiss at 4. Thereafter, in a letter dated September 28, 1998, ACF informed DOP that its designation as a Head Start agency would be terminated unless DOP appealed within 10 days after receipt of the letter.

DOP appealed the termination in an undated letter received by the Board on October 19, 1998, which stated that all of the non-compliance items cited in the follow-up OSPRI report had been corrected "since May 8, 1998." DOP enclosed documentation which, it said, showed that the items of non-compliance had been corrected "shortly after the review." DOP Appeal at 3. DOP blamed its failure to timely correct the deficiencies on its former Head Start Director and on its former Director of Operations, who were both fired in May 1998, after ACF's follow-up review. DOP reported that the former Head Start Director had falsely assured the DOP Executive Director that the deficiency items were either corrected or in the process of being corrected, and that DOP staff were coerced into silence regarding the nature of the program.

ACF then moved to dismiss the appeal on the grounds that it was untimely and failed to set forth any basis for an appeal. DOP, represented by new counsel, opposed ACF's motion. Again, DOP did not dispute the deficiency findings resulting from ACF's follow-up review. DOP described the QIP's October 1, 1997 compliance date as unachievable and unrealistic, although "self-inflicted," and admitted that "[i]f the staff had performed perfectly, they could not have made the OSPRI date." DOP Response to Motion to Dismiss at 5. DOP asserted that it was currently in full compliance, moved for waiver of the 10-day appeal deadline, and requested a "reasonable time from the ruling on this motion" to prepare an appeal which would include a full statement of the grounds for relief and supporting documentation.⁽²⁾ DOP Motion to Waive Requirements at 2. DOP stated that the attorney who had "hurriedly" prepared the notice of appeal was a DOP Board member who had not been acting in his capacity as an attorney, and argued that the time provided for the appeal was inconsistent with due process standards. DOP further argued that significant obstacles to meeting the one-year period for correction of deficiencies had been created by mismanagement on the part of the former Head Start director, and it delineated some of the difficulties it said it faced in providing services to disadvantaged children, such as local governments described as indifferent to the constituent population and hostile to the Head Start program.

After ACF filed a reply brief in support of its motion, DOP requested and received permission to submit a final response, which was faxed to the Board on February 4, 1999. In that final response, DOP's third submission since receiving the notice of termination, DOP asserted, for the first time in these proceedings, that it had achieved "substantial compliance" or some measure of "de jure or de facto" compliance with the Head Start program requirements within the maximum one-year time period provided in the regulations, while acknowledging that there were "gray areas" in its compliance. DOP Final Submission at 3. DOP argued that its two terminated Head Start officials were responsible for DOP's failure to demonstrate to ACF that the deficiencies had been corrected within the statutory one-year outer limit that may be provided in an approved QIP. DOP stated that documentation that would have demonstrated compliance was given to the former Head Start Director but was never entered into DOP's data systems and was found in her office after her dismissal. DOP also reported that after the two directors were fired, documentation "under the noses of replacement staff" was overlooked. DOP Final Submission at 3-4. According to DOP, after the firing of the two directors, DOP staff members reported the discovery of boxes of information concerning Head Start children, which was subsequently entered into DOP's data systems. DOP Final Submission, Exs. 2, 3, 22-24. DOP also argued that when it prepared its appeal, it questioned employees who were unfamiliar with the Head Start program, as did ACF when conducting its review. In addition, DOP complained that during the OSPR, staff were questioned by ACF "without the benefit of legal counsel." DOP Final Submission at 3.

Overview of Applicable Law

The Head Start program is designed to deliver comprehensive health, educational, nutritional, social and other services to economically disadvantaged children and their families. See 42 U.S.C. § 9831. ACF provides funds to grantees to serve as Head Start agencies within designated communities and periodically reviews their performance in meeting program and fiscal requirements. See generally 42 U.S.C. §§ 9836, 9836a.

ACF has promulgated program performance standards covering the education, health (including medical, dental, mental health and nutrition), social services, and parent involvement component areas of Head Start. See 45 C.F.R. Parts 1304 and 1308. Each grantee is required to develop, with the advice and concurrence of its parent policy council, a written plan to implement the performance standards for each component area, and to update it at least annually. 45 C.F.R. § 1304.51(a)(2); see former 45 C.F.R. § 1304.1-4.

The regulations provide that ACF may terminate financial assistance to a Head Start grantee when, among other reasons, the grantee has failed to meet the performance standards for the operation of Head Start programs, or has failed to comply with the Head Start grants administration requirements or the requirements of the Head Start Act. 45 C.F.R. § 1303.14(b). When an ACF review identifies program deficiencies, ACF may require the grantee to correct the deficiencies pursuant to a QIP approved by ACF, within a time period that may not exceed one year from the date that the grantee received official notification of the deficiencies to be corrected. 45 C.F.R. § 1304.60. ACF may terminate a Head Start grant when the grantee fails to timely correct one or more program deficiencies. 45 C.F.R. § 1303.14(b)(4). If a Head Start grantee fails to correct a deficiency, either immediately or within the time frame specified in the approved QIP, the responsible HHS official will issue a letter of termination or denial of refunding. 45 C.F.R. § 1304.60.⁽³⁾

Grantees receiving notices of termination may appeal to the Departmental Appeals Board within ten days after the sending of the notice of termination. 45 C.F.R. § 1303.14(c)(5). The appeal must be "in writing and must fully set forth the grounds for the appeal and be accompanied by all of the documentation that the grantee believes is relevant and supportive of its position." 45 C.F.R. § 1303.14(c)(2).

In prior cases involving Head Start terminations or the denial of refunding, the Board has held that once presented with a prima facie case, a grantee must present evidence sufficient to challenge ACF's case or risk disposition of its appeal without a hearing. See, e.g., Springfield Action Commission, Inc., DAB No. 1547, at 4-5 (1995). A grantee always bears the burden to demonstrate that it has operated its federally funded program in compliance with the terms and conditions of its grant and the applicable regulations. See, e.g., Lake County Economic Opportunity Council, Inc., DAB No. 1580, at 5 (1996); Meriden Community Action Agency, Inc., DAB No. 1501, at 41 (1994); Rural Day Care Association of Northeastern North Carolina, DAB No. 1489, at 8, 16 (1994); see also 45 C.F.R. § 74.21(b)(2). Moreover, a grantee is clearly in a better position to establish that it did comply with applicable requirements than ACF is to establish that it did not. Therefore, the Board has held that the ultimate burden of persuasion is on the grantee to show that it was in compliance with program standards.

An appeal of the termination of Head Start funding must "fully set forth the grounds for the appeal and be accompanied by all of the documentation that the grantee believes is relevant and supportive of its position." 45 C.F.R. § 1304.14(c)(2). DOP did not dispute the deficiency findings cited by ACF as grounds for termination, or ACF's conclusion that DOP materially failed to meet the Head Start program performance standards. Instead, as grounds for its appeal, DOP initially alleged only that the deficiencies had been corrected subsequent to ACF's follow-up review ending May 8, 1998, beyond the October 1, 1997 deadline for compliance that DOP agreed to in its QIP and more than one year after DOP was notified of the deficiencies.

The allegation of later compliance provides no basis for the Board to find that termination is not warranted, as a grantee's allegation that it came into compliance with performance standards or other requirements after the time provided for correction ended is not relevant to a determination of whether denial of refunding or termination is warranted. Community Action of Greene County, Inc., DAB No. 1674 (1998). The Board has held that evidence of efforts to improve program operations after the follow-up to the initial on-site review was irrelevant to a termination hearing. Lake County Economic Opportunity Council, Inc. at 14; see Springfield Action Commission, Inc. at 13; Meriden Community Action Agency, Inc. at 6-7. Thus, the documentation DOP provided with its appeal, which DOP initially said showed that the items of non-compliance had been corrected after ACF's May 1998 follow-up review, is not relevant.

In prior appeals of Head Start terminations, the Board has granted motions for summary disposition and held that termination was warranted, without holding hearings on the merits, where the grantees failed to allege that testimony at a hearing would address any disputed facts the resolution of which was necessary to decide the case. See Community Action of Greene County, Inc.; Mansfield-Richland-Morrow Total Operation Against Poverty, Inc., DAB No. 1671 (1998); Springfield Action Commission, Inc. Moreover, the Board has held that while Head Start grantees are entitled to an opportunity for a full and fair hearing, they may be deemed to have waived their rights if they fail to follow applicable procedures. See Campesinos Unidos, Inc., DAB No. 1518 (1995), citing 45 C.F.R. Part 1303, Subpart A; 45 C.F.R. § 16.15. Once ACF has set forth legally adequate reasons to support a denial of refunding or termination, and has provided sufficient specificity for the grantee to respond to the substance of individual findings, the regulations require the grantee to respond.

Here, DOP's appeal failed to make any allegations that could provide a basis for the Board to find that termination is not warranted. DOP initially stated only that all of the non-compliance items cited in the OSPRI report had been corrected since the May 1998 follow-up review. DOP thus acknowledged the existence of the deficiencies as of the May 1998 follow-up review, beyond the one-year maximum period for correction that ACF is permitted to authorize in a QIP, which, in this case, ended on April 2, 1998, one year after DOP received the initial notice of deficiencies. DOP did not challenge ACF's deficiency findings, or ACF's determination that the deficiencies materially impacted on DOP's ability to deliver Head Start services. After ACF moved to dismiss the appeal, DOP again did not dispute the bases for termination found by ACF or allege any grounds for finding that termination is not warranted other than later compliance. Instead, DOP described the obstacles that allegedly prevented it from attaining compliance until after the May 1998 follow-up review. DOP Response to Motion to Dismiss. DOP thus did not suggest any basis for its appeal that is legally sufficient to find that termination is not warranted.

The new arguments DOP presented in its last submission also provide no grounds to find that termination is not warranted, as DOP still did not allege that it could show in a hearing that ACF's follow-up OSPR findings were erroneous. DOP alleged only that it had achieved "substantial compliance" with the Head Start program requirements within a one-year period. As noted above, section 1304.60(f) provides for termination based on the failure to timely correct any deficiency. The regulations thus contemplate full compliance with program performance requirements, and DOP's general allegation of substantial compliance is on its face legally insufficient to show that termination is not warranted.

Moreover, the supporting materials DOP enclosed with its third submission include 26 affidavits from 17 current and former DOP employees prepared in February 1999 which confirm that deficiencies remained uncorrected as of the time of ACF's May 1998 follow-up OSPR. For example, for three of the 19 areas of non-compliance identified in ACF's May 1998 review, regarding improper scheduling of meals, excessive classroom enrollment, and the failure of teachers to have proper credentials (items 10, 14, and 15 in the September 28, 1998 termination letter), the affidavits did not deny the deficiency findings, and instead offered explanations of problems that gave rise to the deficiencies. DOP Final Response, Exs. 7, 26 - 29; see former 45 C.F.R. § 1304.3-10(b)(6), and 45 C.F.R. §§ 1306.21, 1306.32(12). In response to two other findings, that DOP failed to provide information to parents regarding their children's nutritional status or to inform parents of the nature and uses of data collected concerning their children (items 8 and 12), DOP cited affidavits in which DOP staff described their duties as of February 1999. Exs. 16, 18-21; see former 45 C.F.R. §§ 1304.3-5(e), 1304.3-10(e)(2). These statements do not contradict in any way ACF's findings that the deficiencies existed at the time of its follow-up review in May 1998. DOP still failed to allege compliance with the Head Start program performance standards and has thus failed to show why further proceedings in this appeal would be warranted.

In its third submission, DOP attributed ACF's deficiency findings (and DOP's prior admission that those findings were correct) to misplaced documentation which, it asserted, would have demonstrated compliance. However, DOP's inability to produce that documentation at the time of the follow-up OSPR undermines even DOP's current position that it was in substantial compliance with the applicable requirements within the one-year period. For example, the first two deficiency findings in the termination letter (items 1 and 2) related to requirements that grantees establish and maintain individual health records for each child. See former 45 C.F.R. § 1304.3-5(a). Another of the deficiency items (item 7) was based on DOP's failure to produce records showing that parents received follow-up medical information for their children; this finding was based on a requirement that parents be given a summary of the child's health record which includes information on immunization and follow-up treatment. See former 42 C.F.R. § 1304.3-5(c). DOP's admitted inability to produce records cannot be excused as a mere technical defect. In a case where a grantee argued that failure to adequately maintain and properly document medical records is excusable if services are not compromised, the Board observed that children may be endangered by the failure to properly maintain medical records because the records are an essential part of ensuring that the children get the preventative and remedial care they need and are not subjected to repeat unnecessary tests and immunizations. Mansfield-Richland-Morrow Total Operation Against Poverty, Inc. DOP's admission that it could not locate relevant records at the time of the follow-up OSPR supports ACF's findings that deficiencies remained uncorrected when it completed its follow-up review.

We also do not find plausible DOP's assertion that it was unaware when it filed its first two submissions in this case that it had actually achieved substantial compliance by the one-year outer limit, owing to the actions of the two terminated Head Start managers, misplaced records, and other problems. DOP requested the resignation of the two employees in letters dated May 8, 1998, shortly after ACF's follow-up review, and the two employees were terminated effective May 22, 1998, pursuant to a Policy Council vote on May 19. The documents were allegedly discovered shortly thereafter. Yet, DOP did not assert until February 1999 that it had achieved substantial compliance within one year, after its repeated concessions that deficiencies were not corrected until after ACF's follow-up OSPR in May 1998, after the end of the one-year period. If substantial compliance had actually been achieved, DOP had ample time prior to ACF's issuance of the September 28, 1998 termination letter to accurately assess the status of its Head Start program so that it could file an appeal which set forth its grounds for challenging the termination, as required by the regulations. DOP's current argument that it was unaware of the meaning of documentation months after its discovery and could not accurately assess the status of its Head Start program because it was unable to identify the persons in its organization who were familiar with the Head Start program's daily operation is not tenable in light of its previous, repeated concessions that the deficiencies were not corrected until after completion of the May 1998 review.⁽⁴⁾

The misconduct of the former Head Start managers cannot excuse DOP's failure to file an appeal of ACF's decision to terminate that alleged compliance within the relevant time period. The responsibility for the quality of the staff rests squarely on the Head Start grantee, especially in light of a grantee's obligation under the Head Start Act to adopt rules that "assure that only persons capable of discharging their duties with competence and integrity are employed." 42 U.S.C. § 9839(a)(2); Rural Day Care Association of Northeastern North Carolina. Thus, DOP must as a grantee ultimately bear responsibility for the actions of the terminated employees. Similarly, DOP's new claim that in preparing the appeal it questioned staff unfamiliar with the Head Start program does not excuse DOP's failure to file an appeal that alleged timely correction of deficiencies. DOP as an organization that receives federal funds is responsible for the administration of its Head Start program, and should, at minimum, be presumed to be capable of determining which of its employees is familiar with the operations of its own programs. DOP has presented no plausible explanation of why it could not at least have alleged compliance in its appeal, had timely compliance actually been achieved. Finally, DOP's point that its staff was not represented by counsel during ACF's follow-up review has no bearing on our disposition of this matter. DOP has not brought to our attention any provision in the regulations which would suggest that a Head Start grantee's staff must be represented by counsel during ACF's substantive program reviews.

Moreover, there is no basis to grant DOP a waiver of the requirement that it timely file an appeal which fully sets forth the grounds for contesting the termination. 45 C.F.R. § 1303.14(c)(2). DOP effectively sought such a waiver in its response to ACF's motion to dismiss submitted to the Board on December 16, 1998, when it requested additional time to prepare a full statement of the grounds of its appeal.⁽⁵⁾

The regulations provide a limited time frame for appealing a Head Start termination: an appeal must be filed within 10 days of the termination and must "fully set forth the grounds for the appeal and be accompanied by all of the documentation that the grantee believes is relevant and supportive of its position." 45 C.F.R. § 1303.14(c)(2). Section 1303.8 permits waiver of "procedural" requirements relating to the conduct of hearings only for "good cause," consisting of the following grounds:

(1) Litigation dates cannot be changed;
(2) Personal emergencies pertaining to the health of a person involved in and essential to the proceeding or to a member of that person's immediate family, spouse, parents, or siblings;
(3) The complexity of the case is such that preparation of the necessary documents cannot reasonably be expected to be completed within the standard time frames;
(4) Other matters beyond the control of the party requesting the waiver, such as strikes and natural disasters.

45 C.F.R. § 1303.8. The waiver regulation also cautions that under no circumstances may "good cause" consist of a failure to meet a deadline due to the oversight of either a party or its representative. Moreover, the waiver requirements in this section may not themselves be waived. 45 C.F.R. § 1303.8(g).

DOP did not specifically argue why any of the grounds for a waiver would apply. The complexity of the case would not have prevented DOP from at least asserting compliance in its appeal. ACF notified DOP in a report issued on June 19, 1998, that DOP had failed to correct the 19 items of non-compliance identified in the follow-up review, and that ACF intended to begin termination proceedings. As noted above, DOP had ample time prior to issuance of the termination letter to accurately assess its Head Start program and determine if substantial compliance had actually been achieved, as it now alleges. DOP's claimed failure to apprehend the true state of its Head Start program would not qualify as a matter beyond DOP's control, because, as discussed above, DOP as the Head Start grantee must bear responsibility for the operation of its Head Start program, including the competency of its staff and adherence to record-keeping requirements. If anything, the failure to allege compliance timely was, according to the version of events now posited by DOP, due to oversight, that is, DOP's failure to examine documentation and interview its staff to gain an understanding of the state of its compliance efforts. Oversight is excluded from the grounds for good cause for a waiver. There is thus no grounds for the Board to grant DOP's request for additional time to submit a further appeal.

Based on the above analysis, we conclude that disposition of this appeal without further proceedings is appropriate. We do not decide lightly that DOP does not have a right to develop further the grounds for its appeal by providing additional briefing, documentation, and possibly testimony at an evidentiary hearing. However, DOP has failed to allege any grounds for an appeal that could provide a basis for the Board to find that termination is not warranted. DOP's appeal did not dispute ACF's determinations that DOP's Head Start program was deficient as of the May 1998 follow-up review and that the deficiencies materially impacted on DOP's ability to deliver Head Start services. DOP's recent argument that it substantially complied with the Head Start program requirements within one year after receiving notice of the deficiencies concedes some of ACF's OSPR deficiency findings, is contradicted by its own evidence, and does not adequately rebut DOP's prior admissions of ACF's deficiency findings. DOP thus failed to meet its burden of alleging legally sufficient grounds to challenge ACF's case. See, e.g., Springfield Action Commission at 5. As such, no further proceedings in this appeal are warranted, and we deny DOP's request to submit further argument or documentation.

It is important to stress that the decision to terminate does not mean that the children for whom the federal government paid DOP to provide Head Start services will now be deprived of those services. Under the regulations, ACF must select a replacement grantee based on the extent to which the replacement grant applicant demonstrates the most effective Head Start program, and must also consider the extent to which those applicants will provide for "continuation of services" to the children who have been participating and to the target areas that have been served and for "continued employment . . . of the qualified personnel of the existing program." 45 C.F.R. §§ 1302.10 and 1302.11. See Rural Day Care Association of Northeastern North Carolina.

1. These are the sort of deficiencies that the Board has in the past found to be serious enough to support termination of a Head Start grant. See, e.g., Community Action of Greene County, Inc., DAB No. 1674 (1998); Mansfield-Richland-Morrow Total Operation Against Poverty, Inc., DAB No. 1671 (1998); Home Education Livelihood Program, Inc., DAB No. 1598 (1996); Lake County Economic Opportunity Council, Inc., DAB No. 1580 (1996); Springfield Action Commission, Inc., DAB No. 1547 (1995).

2. ACF's motion to dismiss the appeal as untimely was based on DOP's failure to file its appeal within 10 days of the date of the notice of termination, as required by the regulations. 45 C.F.R. § 1303.14(c). However, the termination letter stated that DOP could submit its appeal within 10 days after its receipt of the letter. ACF later withdrew the time computation issue as a basis for its motion to dismiss.

3. The requirements of section 1304 were reorganized and rewritten in a final rule published on November 5, 1996 and became effective January 1, 1998. 61 Fed. Reg. 57,186. The current version retains many of the previous substantive requirements. Because the termination letter indicates that the Head Start grant that ACF seeks to terminate began April 1, 1998, the citations here regarding the QIP and termination process are from the current version. The previous section 1304 required that grantees correct program deficiencies within 90 days of notice from ACF. This time period could be extended to a maximum of one year only with respect to specific deficiencies, or if the grantee could not come into compliance within 90 days because of lack of funds and outside community resources. 45 C.F.R. § 1304.1-5.

4. DOP did not dispute the statements in ACF's termination letter that, during the May 1998 follow up review, DOP representatives reviewed the deficiency findings and agreed that the non-compliance items existed as of the time of the review. This is consistent with DOP's admission, in its appeal to the Board and its first response to ACF's motion to dismiss, that compliance had not been achieved until after the May 1998 review.

5. As noted earlier, ACF's motion for dismissal was based partly on DOP's failure to submit its appeal within 10 days of the date the termination letter was sent, the time period specified in the regulations. 45 C.F.R. § 1303.14(c).  ACF withdrew the time computation issue after DOP noted that the termination letter provided that DOP could appeal within 10 days after it was received. Although DOP's initial appeal submission was thus timely, it did not dispute ACF's OSPR deficiency findings, and DOP did not allege the current basis for its appeal, that it corrected the deficiencies prior to ACF's follow-up OSPR in May 1998, until its third appeal submission, which was submitted to the Board on February 4, 1999. By withdrawing the time computation issue as a ground for dismissal ACF did not concede that DOP had an indefinite time during Board proceedings to prepare a full statement of the grounds for its appeal.