SUBJECT: Home Education Livelihood Program, Inc.

RULING ON REQUEST FOR RECONSIDERATION

The Administration for Children and Families (ACF) of the Department of Health and Human Services (HHS) moved for reconsideration (ACF Motion) of various findings of fact and conclusions of law in Home Education Livelihood Program, Inc., DAB No. 1598 (1996) (the HELP decision). In the HELP decision, the Board determined that the regulatory criteria were not met for terminating the migrant Head Start grant awarded to HELP.

Specifically, ACF asserted that the HELP decision contained the following errors:

o it reflected apparent changes in the evidentiary standards applicable to termination and denial of refunding cases;
o it failed to sustain a grantee's obligation to document its performance; and
o it misconstrued or failed to apply certain regulations.

The Board has the authority to reconsider a decision it has issued where a party promptly alleges a clear error of fact or law. 45 C.F.R.§ 16.13. For the reasons stated below, we find that ACF has not demonstrated any clear error of fact or law in the HELP decision. Thus, we deny the Motion for Reconsideration. In our analysis of the Motion, we first analyze ACF's position on HELP's witnesses. We then discuss each of the assertions raised in ACF's motion for reconsideration. However, as a preliminary matter, we believe it is important to affirm that it has always been the Board's practice to apply the pertinent laws and regulations, as well as the binding policies of the agency, and not to substitute our own judgment for that of the agency. See 45 C.F.R. § 16.14.

ACF's Position on HELP's Witnesses

Many of ACF's arguments are based on the premise that the Board committed error in giving any weight to the testimony of HELP's witnesses. Rather than demonstrating any clear error of fact or law, ACF seeks to reargue the case by claiming once again that the majority of HELP's witnesses were not disinterested and therefore their testimony should be viewed with suspicion. Throughout its case, ACF urged the Board to consider the impact which a termination would have on HELP's witnesses (who were mostly employees of HELP) and how the proposed termination could influence HELP's witnesses to slant their testimony. In contrast, ACF argued that its witnesses were disinterested because their jobs were not at stake in the outcome of the case and they had no financial incentive to testify untruthfully.

ACF previously made this argument in its post-hearing brief, and the Board considered the potential for self-serving testimony in reaching its decision. However, the fact that the Board as an adjudicator must consider the potential for self-serving testimony does not mean that we must always find all interested witnesses unreliable and all disinterested witnesses reliable. That is the position which ACF essentially continues to urge in this case.

The Board did not find HELP's witnesses to be untruthful despite ACF's persistent urging to the contrary. In fact, the Board found that HELP's witnesses were sincere in demeanor as well as cooperative whether on direct or cross-examination. All witnesses were warned that anyone providing false, fictitious or fraudulent statements could be subject to a fine and/or imprisonment pursuant to 18 U.S.C. § 1001. Most of the testimony of HELP's witnesses was consistent with that of other HELP witnesses (all witnesses except Mr. Reyes were sequestered until after each had testified) and with the documentary evidence in the record. In fact, at times HELP's witnesses made statements which could be interpreted against HELP's interest, which enhanced their credibility. ⁽¹⁾

In contrast, ACF's witnesses gave testimony which was at times unclear, inconsistent, and, in one instance, misleading. ⁽²⁾ The Board did not give much weight to testimony from some of ACF's on-site reviewers, who sometimes marked HELP's program out of compliance because of findings based on interviews with one or two unnamed persons or because they did not see the documentation they expected, without having even spoken to HELP's component coordinators or having asked HELP personnel for the appropriate documentation. Moreover, in one instance, ACF's health and disabilities component reviewer demonstrated blatant carelessness in the accuracy of her testimony by stating that she "observed" a child who was larger than the other children in the classroom and who had some behavioral problems and then later stating (after a HELP witness pointed out that the child had left the program prior to the on-site review) that she never saw the child but only reviewed his records.

Thus, since ACF is only repeating its urging that we reject HELP's witnesses' testimony, we reject ACF's continued reliance on this point as grounds for reconsideration.

I. Evidentiary Standards

According to ACF, the Board failed to uphold its evidentiary standard requiring a party to prove its case by a preponderance of the evidence, as set forth in Lake County Economic Opportunity Council, DAB No. 1580 (1996). We discuss each example cited by ACF separately. As will become evident in our discussion, many of the examples alleged by ACF are not preponderance issues at all, but rather arguments pertaining to the proper application of legal standards. ⁽³⁾

A. Enrollment and Licensed Capacity

ACF contended that the Board failed to apply the preponderance of the evidence standard when the Board found that ACF had not established as a dispositive requirement that a migrant Head Start program must meet its full enrollment during its program year without regard to any other factors. It is undisputed that HELP did not enroll the full number of children it was funded to serve under its grant during the years at issue. In its termination letter, ACF asserted that HELP's failure to have full enrollment constituted a material failure to comply with the terms and conditions of its grant, thus justifying termination under 45 C.F.R. § 1303.14(b).

In considering whether a shortfall in enrollment justifies termination, the Board must judge the evidence in the context of both the applicable ACF program regulation, which requires a grantee to maintain funded enrollment levels, and the applicable HHS grant termination regulation, which restricts termination to instances where a grantee's failing is material. 45 C.F.R. § 1305.7(b); 45 C.F.R. § 74.113(a) (1993). ⁽⁴⁾ It is undisputed that the materiality provision is applicable here. Lake County Economic Opportunity Council, Inc., DAB No. 1580 (1996). Under the facts of this case, we find that HELP's shortfall in enrollment did not constitute a material failure to meet the terms and conditions of its grant because:

o there was ambiguity in how ACF determines whether a program has met its full enrollment;
o under the Head start Act and applicable regulations, any failure to meet a term or condition of a Head Start grant must be material to the grant before it justifies termination;
o as we stated in the HELP decision, ACF continued funding HELP for 404 children in program years 1991 through 1994 even though HELP failed to meet that enrollment level; and
o ACF's policy required notice and technical assistance prior to taking action against a grantee for underenrollment, but HELP was given no notice or assistance here.

ACF disputed that there was any ambiguity in the full enrollment regulation and contended that it established, by a preponderance of the evidence, that full funded enrollment meant that a program must meet its full enrollment at least once during a program year, as opposed to enrolling the full number of children over the entire course of the program year. We confirm our finding that ACF failed to show that this requirement existed with regard to migrant programs and was thus applicable here. As we stated in our decision, ACF produced no regulations, guidelines, or policy statements supporting its interpretation of the enrollment regulation. Moreover, contrary to what ACF represents in its motion, Frank Fuentes, Chief of the Migrant Programs Branch of ACF, was inconsistent in at least three instances with ACF's position that this grant required HELP to have 404 children enrolled on a single day. Tr. II at 130 ("migrant programs are a little bit different in the sense that we allow for children to come and go and so [by] cumulative, we mean number of children served"); Tr. II at 479-480 ("[t]he funded enrollment are the number of children of the slice that are held that the grantee is funded to serve, the number of children that move through sub-slots . . . that's the total [of warm toasty bodies they touch during the year for any length of time]"); see also Tr. II at 378. Thus, we found (and we confirm here) that ACF's criterion for enrollment in migrant Head Start programs was not established as a dispositive standard, and, as we stated, we find it fundamentally unfair to hold HELP to this alleged strict enrollment standard under the facts of this case.

The language of Part 74, read in conjunction with the grantee's Part 1303 right to a hearing, clearly requires that, in order to uphold termination of a grant under the applicable regulations, the Board must examine the impact of any alleged grantee failure on the grant and determine if it compromises the grantee's ability to provide quality Head Start services or otherwise amounts to a material breach of the terms of the grant. In its Motion for Reconsideration, ACF insisted once again that the underenrollment in this case alone constituted a material failure of HELP to comply with the terms and conditions of HELP's grant. Even though the Board held otherwise in the HELP decision and explained the rationale for reaching this conclusion, ACF still has not pointed to any testimony or written policy indicating why, under the circumstances presented here, HELP's failure to be fully enrolled is material.

In the HELP decision, we noted that ACF continued funding HELP for 404 children even though HELP failed to meet that enrollment level for several years. HELP Dec. at 82. ⁽⁵⁾ Moreover, ACF's original Enrollment and Attendance Policies for Head Start, which contained the same requirement in 45 C.F.R. § 1305.7(b) concerning maintenance of an enrollment level equal to funded slots and filling vacancies within 30 days, provided instruction to ACF's predecessor agency that:

o where the agency discovered underenrollment during review of a Head start grantee, it was to give the agency 30 to 60 days to come into compliance with full enrollment requirements;
o the agency was to offer technical assistance to the grantee to increase enrollment;
o if compliance was not obtained, the agency was to reduce grant funds proportionate to the underenrollment at the time of refunding; and
o denial of refunding would be considered on the basis of ineffective use of federal funds where underenrollment was flagrant or continued, but decisions regarding denial of refunding would take into consideration special efforts of the grantee and the technical assistance provided by the agency.

44 Fed. Reg. 63478, 63479 (November 2, 1979). This provision was incorporated into the Head start policy manual at chapter S-30-317-1-20, and remained substantially unchanged throughout the period relevant here.

This policy was reinforced by the Head Start Act Amendments of 1994, which gave Head Start grantees, with respect to deficiencies discovered during on-site reviews, (1) the opportunity to correct the deficiency immediately, or (2) at the discretion of the Secretary of HHS (taking into consideration the seriousness of the deficiency and the time reasonably required to correct it), an opportunity to enter into a quality improvement plan. See Human Services Amendments of 1994, P.L. 103-252 (May 18, 1994), 108 Stat. 623, title I, sec. 108. Termination could then be taken if the grantee does not correct the problem. This provision was applicable to HHS on the date of enactment (May 18, 1994) and its requirements were to be met by grantees by October 1, 1994. Thus, this provision was in effect when the termination letter was issued to HELP in December 1994.

In this case, nothing in the record indicates that HELP had any prior notice whatsoever that ACF considered HELP's duty to maintain enrollment levels to be sufficiently material to warrant termination of HELP's program. HELP was given no opportunity to correct nor was it given any technical assistance from ACF. Neither has ACF cited ineffective use of federal funds as grounds for the action here. The Head Start program has always had a policy of helping grantees come into compliance with regulations, not of terminating them for non-compliance unless the children's health or safety were endangered or federal funds were at risk. See, e.q., 44 Fed. Reg. 63478, 63479 (November 2, 1979); 45 C.F.R. §§ 1302.23 and 1304.1-5. The Board specifically found that neither type of risk existed in this case. E.g., HELP Dec. at 43-45, 92-93, 94-95. Thus, HELP was entitled under both the Head Start Attendance and Enrollment Policies and the 1994 Head Start Act Amendments to sufficient notice and a reasonable opportunity to correct.

In summary, ACF has not clearly articulated standards of enrollment to this Board and has testified inconsistently regarding its enrollment requirements. ACF never justified how HELP's underenrollment was material given the facts of this case. ACF never explained why it pursued an action to terminate despite years of refunding HELP at levels ACF knew HELP had previously failed to reach and despite ACF's overarching policy of giving notice to grantees of problems, working with them to resolve problems, and terminating only as a last resort. Thus, while serious underenrollment in a program might ordinarily constitute a failure to meet the terms and conditions of a Head start grant, we conclude that HELP's underenrollment did not constitute a material failure to comply with the terms and conditions of its grant under the unique circumstances present in this case.

B. Parent Involvement Standards and the Use
of Sign-In Sheets

ACF argued that the Board erred in finding that HELP established by a preponderance of the evidence that it met the parent involvement component standards. ACF alleged that the findings were based solely on the self-serving testimony of some of HELP's witnesses and on "an unsubstantiated conclusion that the use of sign-in sheets at training sessions is unduly burdensome." ACF Motion at 5.

ACF misconstrues the Board's finding. Many of the onsite reviewers' findings, of deficiencies related to whether HELP met the requirement that it train parents on the budgeting process. HELP introduced copies of its Policy council meeting minutes for its meetings in 1992, 1993 and 1994. The minutes provided a list of parents in attendance at each meeting and indicated that budget matters were discussed and training provided at several meetings throughout each of these years. Moreover, HELP introduced agendas for its training in budgeting matters and HELP's Parent Involvement Coordinator credibly testified as to the training she provided. See, qenerally, HELP Dec. at 63-64. ACF presented only a reviewer's notes and testimony concerning an interview with an unnamed parent, while HELP presented minutes of multiple Policy council meetings, training agendas, and credible testimony, all indicating that training was actually provided. The Board concluded that there was no need for separate sign-in sheets since the Policy Council minutes named those in attendance at each meeting where budget training was provided.

C. Monitoring Component

ACF asserted that the Board departed from the preponderance of the evidence standard in what ACF characterized as "a hyper-technical, and fundamentally unfair, application of an evidentiary stipulation." ACF Motion at 7. The stipulation related to the issue of whether HELP had provided documentation showing that it complied with the requirement that it monitor its centers.

ACF appeared to argue here that the Board erred in finding that ACF stipulated that Appellant's Hearing Exhibit 7 ⁽⁶⁾ conclusively established by itself that HELP satisfied the monitoring requirement. ⁽⁷⁾ The Board did not use ACF's stipulation in the manner ACF alleged. The stipulation, as contained verbatim in the transcript, indicates that ACF agreed that it would accept the monitoring documents which were submitted by HELP as a representative sample of the monitoring which HELP did in each component area at each of its centers, provided that HELP's witnesses testified that the samples were in fact representative. Mr. Reyes did testify that the documents were representative, and several of HELP's component coordinators testified as to the monitoring they did at each center. Of course, ACF was entitled to (but did not) argue that the samples which were produced did not satisfy the requirements as expressed in the OSPRI item at issue with regard to the one component area at the one center. If ACF had shown that the samples did not meet the standard, the Board would have found HELP's monitoring in all component areas at each center lacking based on the samples. However, ACF has not explained why the documents which were submitted fail to satisfy the standard or do not show adequate monitoring at the one center in the one component area and thus, given the supporting testimony for other centers and components, cannot be extrapolated to the universe of monitoring documents. ⁽⁸⁾

Thus, the Board found that the sample monitoring documents, together with testimony in the record that these documents were representative, demonstrated a monitoring system sufficient to meet the OSPRI standard for all component areas at each of the five centers. This action did not represent a reversal of the preponderance of the eviqence standard.

D. Education Component

ACF contended that the Board departed from the preponderance of the evidence standard with regard to its findings on the education component deficiencies. In the HELP decision, the Board found that HELP met the requirement that its classroom plans show individualized activities. HELP Dec. at 47-49.

The Board noted that ACF's case on the education component OSPRI item at issue was based, in part, on one written remark on the OSPRI form by the education component reviewer in which she stated that HELP's classroom plans did not reflect individualization at one of the five centers. At the hearing, the education component reviewer testified that she based this remark on the fact that the individual children's files at that center did not reflect any individualizing of activities. However, the reviewer never explained why she marked HELP out of compliance for failure to have individualized activities reflected in classroom plans when it was not the classroom plans but rather the children's individual files she was referring to. See Tr. I at 448-450.

Thus, in determining the requirements for individualization of activities in classroom plans, the Board relied on the written materials in the record describing the distinction between individualization of activities and individualized education plans. HELP Dec. at 49, citing AAF (Education Training Documentation, 5/8/95 Filing) at 1538-1545. (These materials were developed by ACF but were submitted by HELP.) The materials indicated simply that individualization of activities means that activities must be designed in such a way that each child can participate in the activity with the goal of strengthening all areas of development, and that teachers should work at including every child in day-to-day activities and experiences. Many of HELP's classroom plans showed such individualizing. See HELP Dec. at 49, citing AAF (Education, Tab 4) at 321-325. The standard does not specifically state that classroom plans for every activity must show individualizing, and ACF has never stated what it would find reasonable to meet this requirement.

The Board therefore found that ACF failed to establish a standard for what constitutes adequate individualization of activities in classroom plans and failed to show how HELP did not meet that standard. Moreover, based on the discussion of the requirement for individualization of activities found in the written materials in the record, HELP produced classroom plans which appeared to meet the requirement. HELP Dec. at 49.

The lack of individualization of classroom plans was only one of several allegations raised by ACF with regard to the OSPRI item in question, the rest of which we dealt with in the HELP decision. Moreover, ACF's reviewer found that only one out of the five centers' classroom plans failed to meet the individualization of activities standard. Thus, even if we agreed that one center was out of compliance (which we do not), ACF has not explained why this would justify marking the entire OSPRI item out of compliance where the rest of the centers were in compliance and where we found no merit to the rest of the allegations with regard to this OSPRI item. Thus, from several perspectives we do not agree that ACF proved facts sufficient to show that HELP failed to meet the overall standard measured by the OSPRI item.

E. Disabilities Component

ACF argued that the Board departed from the preponderance of the evidence standard when it accepted HELP's testimony and training agendas as proof that it complied with the requirement to provide disabilities training to its staff and rejected ACF's position that sign-in sheets for the individual pre-service training sessions on disabilities were necessary. ACF argued that it was entitled to require separate sign-in sheets for disabilities training sessions if it chose to do so.

We agree with ACF that it may require separate sign-in sheets, but ACF did not argue or present any evidence was an explicit policy that this burdensome exercise requirement and that grantees were on notice of this.

In this case, HELP produced agendas from its pre-service and in-service training which indicated several training sessions on disabilities. HELP's staff testified as to the disabilities training covered. One of HELP's staff members testified that the lead teachers were responsible for training staff members at their centers if they missed any sessions of the training. HELP also produced sign-in sheets from its pre-service training which showed that HELP's Migrant Head Start staff attended that training, and HELP produced two staff evaluations of the pre-service training which specifically referenced the disabilities training which occurred. The Board thus found, by a preponderance of the evidence, that HELP met the requirement that it train staff in working with children with disabilities. HELP Dec. at 56-57.

F. Conclusion

None of ACF's arguments concerning evidentiary standards establish that the Board made a clear error of fact or law in its decision.

II. Grantees' Obliqation to Document

ACF argued that the Board failed to uphold the requirement that the grantee bears the burden of documenting its compliance with applicable statutes and regulations. Specifically, ACF argued that the Board erred in finding that HELP had an agreement with the Las Cruces public schools to accept Head Start children in the event of an overflow, without having a copy of such agreement in the record.

The agreement with the Las Cruces public schools related to two issues in the case. First, if HELP had an agreement with the Las Cruces public schools to house Head Start children, HELP could have a licensed capacity short of the 404 children it was funded to serve (it had such licensing shortage) and still be able to physically serve 404 children at one time at the peak of its season. Second, if HELP had such an agreement with the Las Cruces public schools, HELP would not need to rent the Deming Rainbow Center in order to serve 404 children. Thus, if the Board found that HELP did have an agreement with the Las Cruces public schools, it would support HELP's position on the licensed capacity issue but undermine its position on the necessity of renting the Deming Rainbow Center. On the other hand, if the Board found that HELP did not have an agreement with the Las Cruces public schools, it would undermine HELP's position on the licensed capacity issue but support its position on the necessity of renting the Deming Rainbow Center. ⁽⁹⁾

Mr. Reyes provided unrebutted testimony as to this agreement which the Board found credible. Mr. Reyes testified that, in the event of enrollment in excess of capacity at HELP's Las Cruces facility, the pre-school children would attend Head Start at the public schools while the infants and toddlers would continue to receive services at the Las Cruces center. Because the Board found the testimony credible, it did not ask HELP to produce any written agreement nor did it sua sponte question the witness further regarding such agreement. Following the hearing, ACF then argued that the Board should not find that such an agreement existed even though ACF had every opportunity to request that HELP produce a written agreement or to cross-examine Mr. Reyes as to the details of the agreement. Cross-examination regarding details of a transaction would likely expose a witness's fabrication of that transaction if that was occurring. ⁽¹⁰⁾

The record contains no evidence of any request from ACF to obtain a copy of the asserted agreement from HELP. While HELP did not offer a copy of the agreement into the record, there was no requirement that HELP do so. ACF is confusing a duty to have documents required by statutes, regulations, or other guidelines with a duty to submit each and every document which could possibly be relevant to an issue in a case. And, to reiterate, it might be different if ACF had pursued the matter at the hearing, but ACF did not. Thus, the Board does not find that HELP's failure to submit a copy of a written agreement with the Las Cruces public schools amounts to a documentation failure or a departure from the rule that grantees bear the burden of proving their compliance with specific requirements.

III. Proper Application of Regulations

ACF argued that the Board read into several regulatory provisions certain requirements that do not exist on the face of the provisions. Specifically, ACF argued that the Board erroneously held that, since HELP may have reasonably believed that it had an agreement with the Las Cruces public schools to take additional children in the event of an overflow at its Las Cruces center, HELP did not have to show that it actually had such an agreement (or that it could otherwise care for the full number of children it was funded to serve.) Again, we find that ACF misread the Board's decision. Whatever HELP reasonably believed is not the issue. The Board found that HELP presented unrebutted testimony that it had an agreement with the Las Cruces public schools. ACF made no effort whatsoever to show that such agreement did not exist (see previous discussion).

With regard to eligibility criteria for children entering the program, ACF questioned whether the Board was holding that the regulations allowed a grantee to choose to admit a child where more than half of the family's income comes from non-agricultural sources. ACF argued that the Board erred in holding that HELP reasonably relied on its own interpretation of the regulatory requirement that a family's income must come primarily from agricultural employment in order to qualify for migrant Head Start services.

First, to clarify, it was not necessary for the Board to determine if HELP violated the migrant Head Start program requirements by allegedly having a policy of allowing families to be admitted into the program where more than half of the family's income came from non-agricultural sources. Although one of HELP's witnesses testified that it was HELP's policy to admit families where agricultural employment sources made up less than 50% of the family's income but where the difference was not substantial, none of the children's files introduced by ACF showed evidence of the application of this policy. Moreover, the same witness testified that HELP obtained documentation about the income sources from each family. Thus, evidence of such a policy would have been available to the on-site reviewer.

The record contains the income statements of a few families enrolled in the program, which were selected by ACF's on-site reviewer (from the larger sample he reviewed) because he believed that they violated the eligibility standard. Following our review, we determined that they did not violate the standard (except for the case of one family where the child was dropped immediately from the program upon discovery of an error made by an intern.) HELP Dec. at 84. Thus, despite the testimony of one HELP witness that it was HELP's policy to admit families where eligibility criteria were only close to being met, there was no evidence in the record that any ineligible children were actually admitted by or maintained in HELP's migrant program. Moreover, the witness' statement was not substantiated by the testimony of other HELP witnesses or by the documents in the record.

Rather than holding that a family's income does not have to come primarily from agriculture, the Board concluded that HELP's argued-for interpretation that "primarily from agriculture" simply means that more than 50 percent of the income must come from agricultural work was a reasonable interpretation of the phrase. The Board thus rejected ACF's position that, in order for a child to be eligible for full-day migrant Head Start services, 100 percent of a family's income had to come from agricultural sources or both spouses had to be employed in agricultural work full-time. This interpretation was asserted in ACF's briefs without any citation to official ACF policy statements and was testified to by Mr. Fuentes at the hearing. HELP Dec. at 83; Tr. II at 231-235. The Board found that HELP's position (as presented in a hypothetical), that one spouse could work in agriculture and the other spouse in non-agriculture as long as the majority of the family's income came from the agricultural work, was a reasonable application of the eligibility standard. In our view, HELP's application is clearly within the plain meaning of the words "primarily from agriculture." Moreover, ACF's interpretation conflicts with its requirement that every Head start program (including migrant programs) must have effective parent participation, including "participation in the classroom as paid emplovees, volunteers, or observers." 45 C.F.R. Part 1304, Appendix B (1-3-20), B (emphasis added). If both parents must work full-time in agriculture or 100 percent of the family's income must come from agricultural sources, it would be impossible for a parent to be a paid employee of a Head Start program.

IV. Additional Objections to the HELP Decision

ACF also raised the following objections to the HELP decision:

o ACF argued that the Board erred in finding by a preponderance of the evidence that Luz Rubelcaba, who was formerly known as Luz Deramos, was the staff member who was present at the time of the alleged choking incident. HELP Dec. at 94. It is not clear from the record whether this represents a change in position on the part of ACF. However, even if the Board totally disregards the testimony of Ms. Rubelcaba and assumes that she did not observe the alleged choking incident, our analysis does not change. We concluded that ACF did not present a prima facie case that the child was in any danger or that HELP's staff mishandled the situation. HELP Dec. at 94.

o ACF argued that the Board erred in "finding" that HELP's Executive Director, Ernest Ortega, mortgaged his house in order to provide interim funding to HELP due to the late funding of HELP's program, since there was no testimony or documentation of this mortgage in the record. However, in the HELP decision the Board did not find that Mr. Ortega mortgaged his house in order to provide funding to HELP. HELP Dec. at 82. The HELP decision referenced the possibility that this might have occurred, thus providing the reader with the only information in the record as to how HELP may have managed to continue operations when its funding was 3-1/2 months late. ⁽¹¹⁾ The Board found Mr. Fuentes' position -- that HELP had money left over from the prior period that it could have used and that HELP was not harmed by the late funding because it eventually received full funding -- to be disingenuous, given that ACF had in this proceeding disallowed an alleged HELP expenditure of prior year funds for subsequent year expenses and given that many migrant children HELP had planned to serve had come and gone by the time full funding was approved.

o ACF argued that the Board read into the regulatory provision governing less-than-arms-length transactions an exception that a grantee could be excused from compliance with this requirement if it acted in good faith. See HELP Dec. at 9-14. ACF relied on an aside in a footnote and gave it the import of a new standard, while ignoring the lengthy discussion of the issue in the decision of the factors for determining whether there was a less-than-arms-length transaction. See HELP Dec. at 914. The only point being made in the footnote was that the Board found HELP's actions to change its dealings with RHI to bring itself into compliance with another department's less-than-arm's-length requirements to be evidence that HELP sought to comply with the requirements in good faith. The analysis of the issue would not have changed had the footnote been omitted.

o ACF argued that the Board erred in relying on contracts, billing, and payment records as sufficient documentation that HELP conducted a literacy program. ACF asserted that there was no proof that HELP actually carried out a literacy program. However, for the 1993 literacy program, HELP provided a check that was dated after an invoice from the service provider and which was apparently approved by two HELP employees through the normal accounting process. In addition, HELP's outside accountant provided a letter concerning the 1994-95 program year that listed the check numbers for payments made to service providers, and stated that these payments were for literacy seminars that jointly benefitted the Migrant and Regional Head Start programs, which were therefore each charged one-half the cost. The Board found these documents to be of the type normally sufficient to establish the allowability of the costs, and ACF has not alleged that these documents were fraudulent. Because ACF has submitted no new evidence or argument on this point, we will not discuss it further here.

o ACF argued that the Board failed to apply regulations which require an allocation of costs between categories or programs, pointing specifically to the Board's findings in favor of HELP's allocation of the salaries of its lead teachers as 100 percent programmatic. However, within the context of Head Start, "administrative" costs or activities have a specific meaning which is essentially limited to budgetary and fiscal operations. "Programmatic" costs appear to encompass almost everything else, including classroom costs, transportation, and maintenance of facilities. See 45 C.F.R. § 1301.32 (b & c); ACF Br., Tab 2 (Information Memorandum to all Head Start grantees regarding 15% limit on administrative costs, dated 4/11/83). ACF never indicated in what manner the lead teachers were involved in fiscal or budget matters, and HELP's lead teacher who testified stated that she did not have any role in overseeing budget or fiscal matters. Thus, based on the guidelines developed by ACF, we concluded that all of the lead teachers' time was properly allocated to programmatic costs. HELP Dec. at 33.

o ACF also argued that the Board failed to apply the cost allocation requirements when it determined that Mr. Reyes did not have to allocate his salary between the migrant Head Start, regional Head Start, and food programs. While we did find that Mr. Reyes' contacts with the regional program were "minimal and appropriate," the point we were making is that his contacts were appropriate within his duties as the Migrant Head Start Director. See HELP Dec. at 36. Moreover, ACF did not explain why, if there was indeed evidence found during the review that child nutrition costs were not being properly allocated to the Migrant Head Start program, there is no finding of any violation in HELP's 1994 independent audit report, which states that the independent auditor reviewed whether HELP complied with the requirement in the cost principles for allocation.

o ACF objected to the Board's comment that Mr. Reyes was "at least as qualified" as ACF's education component reviewer to discuss evaluation methods, stating that it undermined the peer review process. ACF Motion at 30. Despite ACF's assertion to the contrary, the Board did not simply weigh each witness' paper credentials or defer to the opinion of the person with the highest educational degree or greatest number of years of experience with Head Start. However, where the Board has a statutory or regulatory obligation to hold a hearing in a case or elects to do so, it must take testimony from and judge the credibility of each witness, as well as his or her competence to discuss a particular subject, where there are disputed issues of material fact. See section 646 of the Head Start Act, 42 U.S.C. § 9841; 45 C.F.R. Part 1303, Subpart A; 45 C.F.R. §§ 16.4 and 16.11. ACF essentially asked the Board to reject all of Mr. Reyes' testimony (unless, of course, it helped ACF's case), despite his impressive credentials, simply because Mr. Reyes was not a disinterested witness. As we have explained above, the Board rejected this approach to judging witness credibility.

o ACF complained that the Board had departed from its past standards of materiality in finding that, while HELP had failed to satisfy the standards embodied in two OSPRI items, these failures did not, either individually or collectively, result in a material failure to comply and therefore justify termination. ACF did not address the Board's discussion of materiality, which was based on the requirement in Part 74 that a grantee's failure to comply be material before termination is justified. ACF did not discuss the effect of the Head Start Act's preference for continuation of grantees, which the Board also cited as requiring a finding of materiality. Finally, ACF did not address the Board's analysis of the materiality of the two requirements HELP failed to meet. See HELP Dec. at 95-97. Because ACF only seeks to reargue points already made and fully considered by the Board in its decision, the Board will not discuss this matter further.

CONCLUSION

For the reasons stated above, the Board finds that ACF has not demonstrated any clear error of fact or law in Home Education ivelihood Proqram, Inc., DAB No. 1598 (1996). Consequently, ACF's Motion for Reconsideration is denied.

Donald F. Garrett

Norval D. (John) Settle

M. Terry Johnson
Presiding Board Member

1. For example, Mr. Reyes testified that HELP's rental of the Deming Rainbow Center was not necessary in order to serve the number of eligible children in the Deming area. Tr. II at 1342. Mr. Reyes also testified that HELP hired personnel with less than ideal qualifications (because of the limited resource pool and the limited work year of its migrant program). Tr. II at 1314.

2. For example, ACF's primary witness on the disallowed costs in several instances did not recall specifically why he disallowed the costs, where he obtained some numbers used in his calculations, and which cost principles were being violated by the disallowed items. In addition, as we discuss later in the decision, ACF's witnesses testified unclearly and inconsistently regarding enrollment and eligibility criteria and individualization of activities in classroom plans.

3. ACF seeks to have the Board apply the preponderance of the evidence standard not only to findings of facts, but also to competing interpretations of legal standards. However, the preponderance of the evidence standard is a standard for weighing competing evidence of facts when more than one possible interpretation of those facts could reasonably be drawn. E.g., Concrete Pipe and Products of California v. Construction Laborers Pension Trust for Southern California, 508 U.S. 602, 113 S.Ct. 2264, 124 L.Ed.2d 539 (1993) (parties agreed that presumption to which preponderance of the evidence standard must overcome applies only to factual determinations, and court must apply regulation requiring court to follow applicable statutes, regulations, agency interpretations, and other pertinent authorities in interpreting the applicable law).

4. This regulation has been amended and redesignated as 45 C.F.R. § 74.62, but continues to require materiality. See 59 Fed. Reg. 43760 (August 25, 1994).

5. In the HELP decision, the Board also noted that HELP's underenrollment was caused by factors beyond the control of HELP. HELP Dec. at 79-82. These factors included the failure of ACF to fund HELP until more than three months into its program year (in both 1993 and 1994) and poor crop conditions resulting in fewer families migrating into HELP's service area (in 1994). Moreover, we found that HELP had made extraordinary efforts to recruit as many eligible children as possible. HELP Dec. at 77, 82. We also noted that, while HELP's enrollment in 1994 was lower than in previous years, HELP had significant funds leftover from its grant award the end of the program year. While none of these factors by themselves would render an underenrollment "immaterial," they do buttress our conclusions based on the ambiguity of ACF's enrollment standard and the problems of notice discussed above.

6. Appellant's Hearing Exhibit 7 consisted of the education coordinator's monitoring reports showing deficiencies and corrective actions needed with regard to individual children at the Anthony Center, as well as lists of children in each classroom and checklists of required documentation.

7. In this section of its motion, ACF also argued that the "randomly selected sample files selected [sic] by the Respondent, numbering approximately 30, overwhelmingly rebutted the three sample files submitted by the Grantee." ACF Motion at 7. Since the stipulation dealt with monitoring documents covering all the children at the Anthony Center, not individual children's files, we are at a loss to understand this part of ACF's argument.

8. ACF argued, in the alternative (primarily through a rebuttal witness), that HELP's monitoring did not meet another criterion of the same OSPRI requirement, which requires that a program's monitoring effectively result in bringing the program into compliance with performance standards. However, in order to conclude that HELP's monitoring failed to result in compliance, the Board would have to agree with ACF that there were many repeat findings of non-compliance. Since the Board overturned a majority of the findings of non-compliance when it issued the HELP decision, the Board rejects ACF's position.

9. ACF apparently misread the HELP decision with regard to this matter. The Board did find Mr. Reyes' testimony credible and found that his statement that HELP did not need to rent the Deming Rainbow Center was essentially an admission against interest. For that reason, the Board upheld the disallowance of the rental costs for the Deming Rainbow Center.

10. ACF also argued that even if HELP had an agreement with the Las Cruces public schools, HELP would not be able to serve 404 children at once because it would have to bus children long distances from the other centers if the migrant children arrived in those communities instead of in Las Cruces. However, as we stated in the HELP decision, there was no evidence of a requirement that HELP be able to accommodate a certain number of children in one area. HELP Dec. at 19. The same problem ACF raises would occur if HELP established a new center within its service area which resulted in it then having the licensed capacity to serve 404 children at once, but the "overflow" of migrant children in a particular year occurred in distant communities where its closer centers were filled to capacity.

11. The suggestion arose when HELP's Counsel asked Mr. Fuentes if anyone had told him that Mr. Ortega mortgaged his house in order to provide temporary funding to HELP. The Board notes that it would be contrary to the Canons of Professional Responsibility for HELP's counsel to suggest in his question that Mr. Ortega mortgaged his house without a good faith basis for this suggestion. Thus, while we did not make a specific finding that such a mortgage took place, we believe that it is likely since attorneys generally do not intentionally make careless statements which could result in sanctions for ethical violations.