St. Martin, Iberia, Lafayette Community Action Agency, DAB No. 2982 (2019)

DECISION

St. Martin, Iberia, Lafayette Community Action Agency (SMILE, appellant) appeals the decision of the Administration for Children and Families (ACF) to terminate SMILE as a Head Start/Early Head Start grantee.  ACF determined that SMILE failed to timely correct three deficiencies related to incidents of alleged abuse or neglect of children.

ACF determined that SMILE failed to timely correct the deficiencies based entirely on three incidents that occurred before the end of the 30-day period ACF gave SMILE to correct the deficiencies.  SMILE argued, as a matter of law, that ACF could not establish a failure to correct by the end of the 30-day period on that basis.  (SMILE also disputed some of ACF’s factual allegations, argued that the original allegations did not satisfy the definition of deficiency in the applicable statute, and contended that, in any case, it timely corrected the alleged deficiencies.)

As explained below, ACF failed to make its required prima facie showing that SMILE had deficiencies that it did not timely correct because the only evidence it offered related to events before the required correction date.  ACF based its determination that SMILE failed to timely correct its deficiencies entirely on three incidents:  two that occurred during the 30-day period, and another that occurred before ACF even issued its initial notice informing SMILE that it had 30 days in which to correct deficiencies.  ACF did not explain how events during the 30-day corrective action period and before ACF had ever notified SMILE of the deficiencies to correct could be sufficient evidence that SMILE remained noncompliant at the end of the corrective action period.  ACF did not cite any other evidence that SMILE remained noncompliant at the end of the corrective action period.  In short, under the circumstances here, ACF sought to terminate the grantee for repeat deficiencies without allowing it the time for correction set in ACF’s own notice.

Our holding here is limited.  ACF may properly include, as part of its showing that a grantee has not timely corrected its deficiencies, information garnered from the time period prior to the end of the corrective action period.  Here, however, ACF relied

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exclusively on events that occurred either before ACF ever issued its initial notice of deficiencies or during the corrective action period.   

Since ACF failed to make its required prima facie showing that SMILE failed to timely correct deficiencies, the burden in this case did not shift to SMILE to demonstrate that it fully corrected the deficiencies.  We therefore must reverse the termination.

Legal Background

Head Start is a national program to promote school readiness of low-income children by providing health, educational, nutritional, social, and other services to enhance their cognitive, social, and emotional development.  Head Start Act (Act) § 636, 42 U.S.C. § 9831.  Section 641A(a) of the Act, 42 U.S.C. § 9836a(a), directs the Secretary of Health and Human Services (HHS) to establish by regulations standards and minimum requirements for all aspects of Head Start programs, including standards for the conditions of Head Start facilities and for grantees’ administrative and financial management of their Head Start programs.1

The Secretary, through ACF, periodically reviews each Head Start grantee’s program to determine whether it meets program performance standards and requirements.  Act § 641A(c).  ACF will conduct a follow-up review if a Head Start grantee is found to have one or more “deficiencies” or “significant areas of noncompliance.”  Act § 641A(c)(1)(C)(i), (ii).  The Act defines “deficiency” to include, as relevant here, “a systemic or substantial material failure of an agency in an area of performance that the Secretary determines involves,” among other things, “a threat to the health, safety, or civil rights of children or staff,” or “a failure to comply with standards related to early childhood development and health services, family and community partnerships, or program design and management.”  Act § 637(2)(A)(i), (iii).

The Act states that the Secretary may require the grantee Head Start agency to correct any deficiency within either 90 days, or within up to one year pursuant to a quality improvement plan (QIP) approved by ACF, and to correct “immediately” any deficiency that “threatens the health or safety of staff or program participants or poses a threat to the integrity of Federal funds.”  Act § 641A(e)(1)(B).  In practice, ACF affords the grantee up to 30 days to correct such “immediate” deficiencies.  Cmty. Action Agency of Cent. Ala., DAB No. 2797, at 3 (2017) (citing Gulf Coast Cmty. Action Agency, Inc., DAB No. 2670, at 2 (2015)).  The Secretary must “initiate proceedings to terminate the designation

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of the agency [as a Head Start agency] unless the agency corrects the deficiency.”  Act § 641A(e)(1)(C).  The regulation ACF relies on here as ground for the termination, 45 C.F.R. § 1304.5(a)(2)(iii), authorizes termination of financial assistance if the grantee “has failed to timely correct one or more deficiencies as defined in the Act.”  ACF Exhibit (Ex.) 7, at 1 (Termination Notice).

A grantee’s failure to timely correct a single deficiency authorizes ACF to terminate funding.  Act § 641A(e)(1)(C); 45 C.F.R. § 1304.5(a)(2)(iii) (authorizing termination for failure “to timely correct one or more deficiencies”); Avoyelles Progress Action Comm., Inc., DAB No. 2559, at 8 (2014).

A Head Start grantee may appeal a termination to the Board and is entitled to an evidentiary hearing.  Act § 646(a)(3).  The Board has held that it may decide a Head Start termination case on summary judgment without violating a grantee’s right to a hearing if there is no genuine dispute as to any material fact, and the moving party is entitled to judgment as a matter of law.  Leake & Watts Servs., Inc., DAB No. 2910, at 3 (2018); Avoyelles at 3 (citing Camden Cnty. Council on Econ. Opportunity, DAB No. 2116, at 3-4 (2007), aff’d, Camden Cnty. Council on Econ. Opportunity v. U.S. Dep’t of Health & Human Servs., 586 F.3d 992 (D.C. Cir. 2009)).  The Board has also held that it may decide Head Start termination cases on summary judgment on its own motion where there has been no showing of a genuine dispute about any material fact and an evidentiary hearing, therefore, would serve no purpose.  Gulf Coast Cmty. Action Agency, Inc., Order to Show Cause at 2, Docket No. A-15-33 (Mar. 20, 2015)2 (citing Municipality of Santa Isabel, DAB No. 2230 (2009) (summarily upholding termination of Head Start grant where ACF filed motion to dismiss stating that no material fact was in dispute and grantee’s reply did not challenge that assertion and raised only legal issues)).

The burdens of proof in a Head Start grant termination appeal “are well-settled.”  “ACF must make a prima facie showing (that is, proffer evidence sufficient to support a decision in its favor absent contrary evidence) that it has a basis for termination under the relevant regulatory standards.”  Gulf Coast at 3 (citing Friendly Fuld Neighborhood Ctr., Inc., DAB No. 2121, at 3 (2007) (citing First State Cmty. Action Agency, Inc., DAB No. 1877, at 9 (2003)); and Rural Day Care Ass’n of Ne. N.C., DAB No. 1489, at 8 (1994), aff’d, Rural Day Care Ass’n of Ne. N.C. v. Shalala, No. 2:94-CV-40-BO (E.D.N.C. Dec. 19, 1995)); Avoyelles at 2.  “If ACF makes this prima facie showing, the grantee must demonstrate by a preponderance of the evidence that it is in compliance with program standards.”  Gulf Coast at 3.

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Background

1. In March 2017, ACF gave SMILE 30 days to correct three deficiencies based on two incidents of alleged abuse or neglect in December 2015 and January 2016.

ACF conducted an off-site monitoring review of SMILE’s Head Start and Early Head Start programs on January 18, 2017 and issued an “Overview of Findings” on March 7, 2017 (March 2017 Overview; deficiency notice) notifying SMILE it had three deficiencies it had to correct within 30 days.  ACF Ex. 2.  ACF conducted a follow-up review on April 25-27, 2017, and on July 11, 2017 issued a second Overview of Findings (July 2017 Overview) and a Termination Notice.  ACF Exs. 5 (July 2017 Overview), 7 (Termination Notice & July 2017 Overview).

The March 2017 Overview notified SMILE that it had three deficiencies based on two incidents:  (1) on December 1, 2015, a Head Start teacher and a teacher aide made a four-year-old child clean up urine after a bathroom accident; and (2) in January 2016 (precise date not clear), a teacher hit a child in the side and yanked an object from his hand.  ACF Ex. 2, at 5-6.  SMILE reported the two incidents to the Louisiana Department of Education Division of Licensing (DoL) in March 2016, and DoL found three deficiencies under state regulations:  (1) failure to complete paperwork to document the hitting incident; (2) failure to document notifying the parent of the hitting incident; and (3) using prohibited discipline in the December 2015 incident.  ACF Exs. 3, at 61-62; 6, at 56-58.  SMILE fired the two employees involved in the December 2015 incident, and suspended and transferred the teacher involved in the January 2016 incident.  ACF Ex. 6, at 58, 235-41.

The March 2017 Overview found three deficiencies under the following requirements:

1. Head Start Act § 642(c)(l)(E)(iii), requiring that the grantee’s governing body “ensur[e] compliance with Federal laws (including regulations) and applicable State, tribal, and local laws (including regulations).”  ACF found that SMILE staff did not report the two incidents to its governing body, and that SMILE’s board members were not aware of the applicable requirements to report suspected abuse, and were not aware that the state DoL had investigated the incidents and issued a report.  ACF found that the noncompliance was “a deficiency as defined under Sec. 637(2)(A)(iii) of the Head Start Act as a systematic or substantial material failure in the area of performance that the Secretary determines involves a failure to comply with standards related to early childhood development and health services, family and community partnerships, or program design and management.”

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2. 45 C.F.R. § 1302.47(b)(5)(i), “Safety practices,” requiring that a grantee have a “system of management” that “includes policies and practices . . . to ensure child safety” which “must ensure” that all staff “follow appropriate practices to keep children safe during all activities” including “[r]eporting of suspected or known child abuse and neglect, including that staff comply with applicable federal, state, local, and tribal laws.”  ACF found that SMILE did not report the two incidents as required by Louisiana law or regulations, as DoL did not receive a report the incidents until two to three months after they occurred, from an anonymous source other than SMILE; thus, SMILE staff “did not document the incident properly, notify the parent, and immediately report the incident to any stakeholders as required,” and failed to adequately document that it complied with its own procedures for reporting suspected abuse and neglect.  ACF found that the noncompliance “constitutes a deficiency as defined under Sec. 637(2)(A)(iii) of the Head Start Act as a systematic or substantial material failure in the area of performance that the Secretary determines involves a failure to comply with standards related to early childhood development and health services, family and community partnerships, or program design and management.”
3. 45 C.F.R. § 1302.90(c)(l)(ii)(A), (E), (G), “Personnel policies,” “standards of conduct,” requiring that all staff abide by the grantee’s standards of conduct, which must ensure they “do not maltreat or endanger the health or safety of children” including that they not “[u]se corporal punishment [or] [p]hysically abuse a child” or use “toilet learning/training methods that punish, demean, or humiliate a child.”  Based on the two incidents, ACF determined that SMILE “did not ensure all staff used positive methods of child guidance and did not engage in corporal punishment, emotional or physical abuse, and humiliation” and that the noncompliance “constitutes a deficiency under Sec. 637(2)(A)(i) of the Head Start Act as a systematic or substantial material failure in the area of performance that the Secretary determines involves a threat to the health, safety, or civil rights of children and staff.” 

ACF Ex. 2, at 4-6.  The March 2017 Overview gave SMILE a “timeframe for correction” of the three deficiencies of 30 days after receipt, i.e., by April 9, 2017.  SMILE Brief (Br.) at 2 (stating that SMILE received the March 2017 Overview on March 10, 2017); SMILE Ex. A (March 2017 Overview with date-received stamp); ACF Ex. 7, at 1 (Termination Notice stating that “[t]he timeframe expired April 9, 2017”).

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2. ACF found in the July 2017 Overview that SMILE had failed to correct the three deficiencies, based on incidents on or about February 2, March 13, and March 30, 2017.

ACF conducted a follow-up monitoring review of SMILE on April 25-27, 2017, and issued the July 2017 Overview on July 11, 2017.  ACF Ex. 5.  The overview states that SMILE had not corrected the three deficiencies; as the evidence for this conclusion, it cites three incidents on or about February 2, March 13, and March 30, 2017, for which DoL cited SMILE for reporting and abuse/supervision violations:  a teacher associate scratched a child on February 2, 2017; a child was left unsupervised asleep on a cot for approximately 11 minutes on March 13, 2017; and a teacher pinched a child on March 30, 2017.  Id. at 3-7.

For the governing body deficiency (Act § 642(c)(l)(E)(iii)), the July 2017 Overview states that SMILE created new child abuse and neglect reporting policies and procedures, and informed its board of all “reportable incidents,” but was still noncompliant because DoL cited SMILE for reporting violations in the three incidents – not notifying DoL within 24 hours; not immediately notifying a parent of an incident involving their child; and not correctly completing required reporting forms.  For the abuse reporting deficiency (45 C.F.R. § 1302.47(b)(5)(i)), ACF found that SMILE did not meet legal reporting requirements for the three incidents; SMILE did not notify the child’s parent of the child left alone on a cot for 11 minutes until the following day and, in the case of the child pinched by a teacher, SMILE did contact DoL within 24 hours as required but, on the reporting form, failed to list the staff members in the class at the time of the allegation, including the teacher.  For the abuse/corporal punishment deficiency (45 C.F.R. § 1302.90(c)(l)(ii)(A), (E), (G)), the overview cites the February 2, 2017 scratching incident, and the March 30, 2017 pinching incident.3  Id.

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3. ACF terminated SMILE for failure to timely correct deficiencies identified in the March 2017 Overview, based on the occurrence of two incidents during the corrective action period, and one before ACF issued the March 2017 Overview.

ACF’s July 11, 2017 Termination Notice, sent to SMILE with the July 2017 Overview, states that SMILE “failed to timely correct the deficiencies identified during the Office of Head Start Follow Up Review conducted in April 25, 2017” within the “30 day timeframe for correction [that] expired April 9, 2017,” which was “a material failure of the grantee to comply with the terms and conditions of the Head Start grant award” and grounds for termination under 45 C.F.R. § 1304.5(a)(2)(iii) (authorizing termination if the grantee “has failed to timely correct one or more deficiencies as defined in the Act”).4   ACF Ex. 7, at 1.  The notice cites the three incidents (on February 2, March 13, and March 30, 2017) reported in the July 2017 Overview, which the notice describes as incidents “during the corrective action period.”5   Id. at 2.

In contrast to the July 2017 Overview stating that SMILE had not corrected any of the three deficiencies identified in the March 2017 Overview, the Termination Notice states that “[f]rom the follow-up review, it was determined [that] two of the deficiencies had not been corrected,” out of the “three areas of deficiencies”:  the abuse reporting deficiency (§ 1302.47(b)(5)(i)) and the abuse/corporal punishment deficiency (§ 1302.90(c)(l)(ii)(A), (E), (G)).  Id. at 1-2.  The Termination Notice did not identify the governing body deficiency (Act § 642(c)(l)(E)(iii)) as an uncorrected deficiency or as a basis for termination.  ACF on appeal, however, bases the termination on failure to have timely corrected all three deficiencies from the March 2017 Overview and does not explain why the Termination Notice alleged that only two deficiencies were not corrected

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and did not include the governing body deficiency among the uncorrected deficiencies.6 , 7  

SMILE filed a notice of appeal pursuant to 45 C.F.R. Part 16 along with a brief (SMILE Br.), six proposed exhibits (SMILE Exs. A-F), and a list of 10 proposed witnesses (five from ACF), with a one-sentence “subject of testimony” for each.  ACF filed a response brief (ACF Br.) and nine proposed exhibits (ACF Exs. 1-9).8   ACF did not seek to cross-examine any of SMILE’s proposed witnesses and made no reference to SMILE’s request for a hearing.  SMILE filed a reply brief (SMILE Reply) with one proposed exhibit, a January 3, 2018 memorandum from the ACF Office of Head Start to Head Start grantees and delegate agencies, expressing concern that “grantees are reporting minor incidents of suspected abuse that do not require” reporting.9

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Parties’ Arguments

SMILE requests summary disposition to “dismiss the termination as a matter of law because the Termination Notice is premised on incidents that occurred prior to the end of the corrective action period,” contrary to the Head Start regulation ACF cited as the basis for the termination.   SMILE Br. at 1, 7.  The regulation provides that grounds to terminate financial assistance exist if a grantee “failed to timely correct one or more deficiencies as defined [in] the Act.”  45 C.F.R. § 1304.5(a)(2)(iii) (italics added).  SMILE notes that while ACF’s “Deficiency Notice . . . gave SMILE thirty days to correct those deficiencies or until April 9, 2017,” the Termination Notice “explicitly states that ‘SMILE had . . . incidents occur during the corrective action period, thus SMILE did not correct the deficiency,’” and that ACF “neglected to cite conduct after the corrective action period as a basis for termination.”  SMILE Br. at 7 (SMILE’s italics).  SMILE argues that “even taking ACF’s factual allegations as true and legal conclusions to be correct . . . ACF did not allege facts that demonstrate that SMILE failed to timely correct” the deficiencies found in the March 2017 Overview.  Id. at 7-8.  SMILE argues that the Termination Notice thus “does not allege sufficient facts that make a prima facie case warranting termination.”  Id. (SMILE’s italics).

SMILE alternatively argues that “none of the incidents identified as a cause for termination of Head Start funding arise to the statutory definition of a deficiency” as a “systemic” or “substantial material” failure in an area of performance.  SMILE further asserts that it “corrected the alleged deficiencies” by completing “corrective actions to remedy the alleged deficiency findings prior to the end of the thirty-day corrective action period,” pointing to its training of its staff following the initial monitoring review, its use of training and technical assistance provided by the ACF regional office, and its responses to the incidents cited in the overviews and termination notice.  Id. at 1, 9-10, 17; Act § 637(2).

ACF argues it could rely on the three incidents in February and March 2017 as showing that SMILE failed to timely correct the deficiencies because SMILE was required to correct the deficiencies “immediately” upon receipt of the July 2017 Overview and Termination Notice, and that ACF was required to terminate SMILE if it failed to do so immediately.  ACF also argues that its reliance on noncompliance during and before the corrective action period as showing failure to timely correct the deficiencies was a defect in the Termination Notice that can be “cured” during the appeal.  ACF Br. at 1, 11, 18.  We describe ACF’s arguments more fully below in explaining why they do not overcome ACF’s failure to make a prima facie case supporting termination.

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Discussion

I. ACF has shown no basis for citing the February 2, 2017 incident as evidence that SMILE failed to timely correct deficiencies which ACF identified in the March 2017 Overview notifying SMILE that it had deficiencies from 2015 and 2016 it had to correct to avoid termination.

As an initial matter, we conclude that ACF could not rely, as evidence that SMILE failed to timely correct any of the deficiencies, on the incident that occurred on February 2, 2017 (a teacher associate scratching a child on the arm), before ACF notified SMILE, via the March 2017 Overview that SMILE received March 10, 2017, that it had deficiencies that it had to correct within 30 days to avoid termination.10   For ACF to rely on this event as proof of failure to correct, when it actually occurred over a month before ACF informed SMILE that it was a grantee with deficiencies that it had to correct within 30 days, violates provisions in the Act and regulations requiring ACF to provide notice of deficiencies and an opportunity to correct them, and also offends common-sense notions of notice and due process.

The Act requires that the findings of a monitoring review of a Head Start grantee agency –  such as the off-site monitoring review of SMILE that ACF performed on January 18, 2017 – “shall, at a minimum . . . be presented to the [Head Start grantee] agency in a timely, transparent, and uniform manner that conveys information of program strengths and weaknesses and assists with program improvement,” and, if the review finds that the Head Start agency has deficiencies, that ACF also “shall . . . inform the agency of the deficiencies that shall be corrected” and the time periods in which the agency must do so.  Act § 641A(c)(4), (e)(1)(A)-(B).  The applicable regulations similarly require that if ACF “determines that a grantee meets one of the criteria for a deficiency,” it “shall inform the grantee of the deficiency,” after which “[t]he grantee must correct the deficiency . . . as the responsible HHS official determines”; termination is then authorized only if (as relevant here) the grantee “has failed to timely correct” at least one of those deficiencies of which it was given notice and an opportunity to correct.  45 C.F.R. §§ 1304.2(b), 1304.5(a)(2)(iii).  ACF has not complied with these notice requirements, and has not afforded the grantee the opportunity the regulations provides to correct the deficiencies,

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where, as here, it determines that a deficiency has not been corrected based on conduct by the grantee that occurred before ACF even issued its initial notice of a deficiency – notice that ostensibly provided the grantee the opportunity to correct the deficiency.

The Board has held that “[i]t is the Notice of Deficiency that initiates ACF’s termination action and provides the grantee with an opportunity to correct that, if timely and successful, avoids termination,” and that “[t]he deficiency determination does not exist legally, that is, does not authorize initiation of a termination action or trigger a corrective action period, until ACF actually issues the Notice of Deficiency.”  Gulf Coast at 9; see also ACF Br. at 17-18 (citing Gulf Coast and acknowledging that the Board “has noted that on-site review findings take legal effect once ACF communicates the deficiency determination to the grantee in the on-site review overview of findings”).  The Board in Gulf Coast approvingly cited the testimony of an ACF Head Start program specialist “that a grantee ‘is compliant until they receive official notification from the Office of Head Start that they either – have an area of non-compliance, a deficiency or immediate deficiency’” and that “the time period started for their non-compliance or deficiency . . . once they received their notification.”  Gulf Coast at 9; see also, Friendly Fuld Neighborhood Ctr., Inc., Ruling on Motion for Summary Disposition at 7, Docket No. A-07-79 (June 27, 2007) (emphasis added) (attached to Friendly Fuld,DAB No. 2121, and holding that ACF’s delay in issuing a monitoring report “does not harm the grantee since the time frame for correcting the deficiencies starts with receipt of the official notification of deficiencies”).  

Based on the requirements for notice of and the opportunity to correct deficiencies prior to termination, the Board in Norwalk Economic Opportunity Now, Inc., DAB No. 2002 (2005) reversed the termination on summary judgment where it agreed with the appellant Head Start agency that ACF’s notice of deficiencies did not identify the specific measures that ACF later terminated the grantee for failing to have implemented (reconciling bank account balances “for each of its accounts within 30 days of receiving the bank statement”).  Norwalk at 17-20.  The Board held that “the issue here is whether [Norwalk] had adequate and timely notice that if it did not do this for each of its accounts within 30 days of receiving the bank statement, its grant would be terminated.”  Id. at 20 (emphasis added).

ACF here has not identified any notice it gave SMILE, prior to the March 2017 Overview, that it had deficiencies it had to correct to avoid termination, and has not attempted to identify what actions SMILE could have taken upon receipt of that notice on March 10, 2017 that could have corrected any noncompliance to the point of having prevented the incident on February 2, 2017 that had already occurred.  SMILE thus had no “adequate and timely notice” prior to the receipt of the March 2017 Overview that it was a grantee with deficiencies it had to timely correct, or that the occurrence of the February 2, 2017 incident would mean that SMILE had failed to correct deficiencies of which it had not yet been notified.  Norwalk at 20.  Citing the February 2, 2017 incident

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as evidence that SMILE failed to timely correct any of the deficiencies in the March 2017 Overview would render meaningless the requirements of notice and an opportunity to correct that the Act and regulations afford.

ACF relies on the Board’s Gulf Coast decision as support for the theory that deficiencies relating to abuse must be corrected immediately (that is, without regard for the 30-day correction period in the Notice of Deficiency).  ACF Br. at 14.  That reliance is misplaced.  In Gulf Coast, the Board rejected the appellant’s argument that it had already corrected its one deficiency (relating to multiple incidents of hitting and corporal punishment abuse of children by Head Start staff) by the time ACF issued the initial notice of deficiencies requiring correction in 30 days.11   Gulf Coast at 8.  Gulf Coast cited the admissions of ACF officials that they “encouraged Gulf Coast to begin correcting the abuse situation even before the deficiency notice was issued and were aware that Gulf Coast had taken some actions in that direction.”  Id. at 8.  The Board accepted that Gulf Coast was aware of the nature of the deficiency through communications with ACF staff prior to issuance of the initial notice of deficiencies, stating that “Head Start grantees are expected to be aware of problem areas and to immediately take steps to correct them rather than waiting to see if ACF issues a Notice of Deficiency” (the Board also held that “the fact that a grantee takes such steps does not insulate it from a deficiency citation or termination for failure to timely correct that cited deficiency”).  Id. at 10; see also Friendly Fuld Ruling at 7 (rejecting the grantee’s argument that the termination should be reversed because ACF did not issue the initial deficiency notice “promptly,” and stating that “if a grantee becomes aware of any deficiency during the review, ACF’s delay actually gives it more time to correct the deficiency”).  That a grantee should begin taking measures to fix such a problem once it knows about it does not mean that a grantee cannot show that it completed correction by the end of the period set by ACF in the Notice of Deficiency.  Notably, in Gulf Coast, the new findings showing failure to correct occurred after the correction period.  Id. at 5.

The Board’s observations in Gulf Coast and the Friendly Fuld ruling about a grantee’s responsibility to begin to remedy problems it is aware of even prior to receiving formal notice from ACF do not support ACF citing the February 2, 2017 incident as evidence that SMILE failed to timely correct the deficiencies.  ACF does not even allege that its officials informed SMILE of the existence or nature of any deficiencies, or encouraged

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them to begin any corrective measures prior to the February 2nd incident.  ACF has not proffered testimony to that effect (ACF did not identify any witnesses in response to the Board’s acknowledgment letter stating that each party’s brief “should also identify, by name and title (if applicable), any person whose testimony the respondent expects to proffer at an evidentiary hearing and specify the subjects about which that person may testify.”).  We need not, therefore, consider further what relevance, if any, such advice from ACF personnel might have had.12

In sum, ACF’s reliance, as evidence of non-correction, on an incident that occurred before ACF issued the notice of deficiencies effectively deprived SMILE of its opportunity to correct its deficiencies, in violation of the regulations requiring ACF to “inform the grantee of the deficiency” and authorizing termination when “the grantee has failed to timely correct one or more deficiencies.”  45 C.F.R. §§ 1304.2(b), 1304.5(a)(2)(iii).  Reliance on evidence from before the corrective action period began as showing failure to correct a deficiency renders meaningless the provision of the corrective action period.  ACF provided no meaningful argument to the contrary.

As ACF could not properly cite the February 2, 2017 incident to show that SMILE did not timely correct the deficiencies, its case for termination relies on the two incidents that occurred during the 30-day period ACF gave SMILE to correct the deficiencies.  In the next section, we explain why ACF could not properly rely on the two incidents of noncompliance that occurred during the corrective action period.

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II. ACF also could not base its finding that SMILE did not timely correct the deficiencies on the occurrence of two incidents during the period ACF provided for corrective action, without explaining how those incidents showed that SMILE was still noncompliant after the end of the period for correction.

A. The Board has found that termination for failure to correct deficiencies may not be based entirely on evidence from during the corrective action period.

We are not aware of, and ACF has not cited, any cases where, as here, ACF terminated a Head Start grantee for failure to timely correct deficiencies based entirely on noncompliance that occurred during the period ACF provided to correct the deficiencies.13   The issue of events occurring during the correction period has arisen for at least some of the deficiencies in several cases, and the Board has confirmed that a determination that a grantee failed to timely correct deficiencies may not be based on noncompliance during the corrective action period.

In First State Community Action Agency, Inc., the appellant argued that “ACF improperly relied on findings that referred to First State’s lack of compliance during the corrective action period” and that “there is no requirement for a grantee to be in continuous compliance during the corrective action period.”  DAB No. 1877, at 18.  The Board “agree[d] that lack of compliance during the corrective action period in the approved QIP is not a basis for termination” and that the grantee “cannot be cited for having the [Health Coordinator position that it committed to fill] vacant prior to July 30,” the date it specified in its QIP.  Id.  (The Board ultimately found, however, that the grantee “did not even take all of the steps to which it committed in its QIP, and many of the steps it did take were not taken in a timely manner.”  Id. at 19.)

In Norwalk Economic Opportunity Now, Inc., where the Board reversed the termination on summary judgment in part because ACF had not given adequate notice of what actions were required to correct the deficiency (reconciling bank account balances within 30 days), the Board held that, “even if ACF could properly cite [Norwalk] for failure to comply with a standard practice (without making any proffer to show what the standard practice is), we would still find that the ACF findings here do not provide an adequate basis for terminating [Norwalk’s] grant” because “[t]he findings relate to failures during

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the corrective action period.”14 , 15   DAB No. 2002, at 20.

Thus, the Board has “agree[d] that lack of compliance during the corrective action period in the approved QIP” – i.e., the time period ACF has provided for correcting deficiencies – “is not a basis for termination,” and has recognized that “ACF findings . . . do not provide an adequate basis for terminating [the Head Start] grant” if they “relate to failures during the corrective action period.”  First State at 18; Norwalk at 20.  We are aware of no cases that conversely hold or imply that the corrective action period ACF provided to timely correct deficiencies is akin to a trial period during which the grantee must be problem-free or not exhibit any noncompliance with respect to the previously-identified deficiencies.

B. ACF is not precluded from citing information and events from during the corrective action period as part of its overall showing that a grantee did not timely correct deficiencies; here, however, ACF relies entirely on the incidents that occurred during (and before) the corrective action period.

We do not here hold, or establish a rule, that ACF may never cite evidence from during the corrective action period as part of its showing that a grantee did not correct its deficiencies in a timely manner.  Such evidence could conceivably be part of an overall analysis demonstrating that a grantee’s corrective actions were inadequate to cure a deficiency and that the grantee was still noncompliant after the end of the corrective action period.  Here, however, ACF relies only on the two incidents of alleged abuse that took place during the corrective action period (besides the third incident, discussed

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above, that took place before ACF issued its initial deficiency notice).16

That ACF relies on the occurrence of two incidents of alleged abuse during the corrective action period (in addition to the incident before ACF issued the March 2017 Overview) to establish that SMILE failed to correct the deficiencies as of the end of the corrective action period is evident from the absence of any analysis by ACF, other than its reliance on the two incidents, as to why the corrective action measures SMILE reports implementing did not cure the deficiencies. 

SMILE asserts it “timely corrected each alleged deficiency by the end of the corrective action period,” through the following measures:

• “First, SMILE conducted a ‘Total Staff Development Training’ on February 24, 2017 for all staff members which covered Head Start performance standards, including issues pertaining to health and safety.”
• “Second, SMILE took advantage of the training and technical assistance (T/TA) from the Region VI Office to help further strengthen SMILE’s existing policies and procedures in place.  [SMILE Ex. B at 6, 40.]”
• “Third, SMILE appropriately responded to each incident by enforcing those policies and procedures and imposing disciplinary action on staff members who violated those policies and procedures.  See [SMILE Ex. C at 35, 52-58, 90-102, 127-140].”

SMILE Br. at 9-10.  SMILE filed 515 pages of exhibits it describes as “Relevant Training Materials” (SMILE Ex. B) and proposed to call four of its witnesses to testify about its policies, practices and procedures, training, internal investigations, etc., and two ACF witnesses to testify about “ACF T/TA and SMILE’s implementation of suggestions from ACF.”  Id. at 20; SMILE Exhibit List.

Regarding the governing body deficiency, which the Termination Notice did not cite as uncorrected, SMILE cites the July 2017 Overview findings that SMILE had apparently cured issues underlying that deficiency identified in the March 2017 Overview, that staff did not report the incidents to SMILE’s governing board, and that the board chair was not aware of the abuse reporting requirements.  The July 2017 Overview states that “the grantee implemented actions to ensure the Board was informed of all reportable incidents related to child health and safety issues,” as SMILE notes, and further found that SMILE

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“created new child abuse and neglect reporting policies and procedures.”  ACF Ex. 5, at 4.  SMILE argues that it thus “took the necessary corrective actions to ensure that its Board was aware of all reportable incidents and therefore corrected that alleged deficiency.”  SMILE Br. at 10. 

ACF acknowledges that SMILE “implemented corrective actions” and “provided training to its Board and staff regarding reporting child abuse/neglect incidents,” but argues that SMILE’s claims of correction are “without merit.”  ACF Br. at 13.  ACF’s entire argument about the adequacy of SMILE’s corrective actions, however, is that “SMILE presented no evidence to support a finding of full correction with the July 2017 Overview deficiencies or even with the March 2017 Overview deficiencies to avoid termination” and that “[t]here was still lack of governing and oversight that caused failures in reporting and notification and standards of conduct, and that permitted hazardous conditions that affected Head Start children to continue in violation” of the applicable requirements in the Act and regulations.  Id.  ACF does not address the substance or content of SMILE’s corrective actions and has identified no witnesses, such as Head Start program specialists or reviewers, who could explain why the corrective actions were not sufficient to correct the deficiencies.  ACF does not identify any evidence of the alleged “lack of governing and oversight” other than the incident on February 2, 2017, before ACF issued the initial deficiency notice (the March 2017 Overview), and the two incidents during the corrective action period.  ACF cites only those incidents in alleging “failures in reporting and notification” and “hazardous conditions that affected Head Start children.”  It is clear that ACF relies entirely on the three incidents prior to the end of the corrective action period (the first of which occurred before ACF issued the notice of deficiencies) to show that SMILE did not timely correct the deficiencies.  As we discuss next, ACF’s arguments do not justify that reliance.

C. ACF has not shown why it could rely on two incidents that occurred during the 30-day period ACF gave SMILE to correct its deficiencies (or on one incident from before that time period).

In response to SMILE’s argument that ACF could not rely on noncompliance prior to the end of the corrective action period, ACF argues, essentially, that the Act required SMILE to fully correct the deficiencies immediately upon receipt of the July 2017 Overview and Termination Notice, and required ACF to terminate SMILE if it failed to do so immediately, and that ACF’s reliance on events before the end of the corrective action period was a defect or inadequacy in the Termination Notice that ACF can cure during the appeal.  ACF Br. at 1, 9, 11-12, 17-19.  To avoid mischaracterizing ACF’s arguments, which were less than clear, we present them in ACF’s own words below.

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ACF first summarizes its understanding of SMILE’s argument:

SMILE . . . alleges that the Board must dismiss the termination as a matter of law because the termination notice is premised on incidents that occurred prior to the end of the March 2017 Overview corrective action period, and ACF should not be allowed to terminate based on incidents that occurred within the corrective action period. . . . SMILE alleges that ACF should not be allowed to terminate based on new findings first identified in the termination notice, because it would be denied the opportunity to a 30-day corrective action period.  In addition, the Act requires that a grantee have notice and the opportunity to correct any alleged deficiencies before it can form the basis of a termination.

ACF Br. at 17 (citing SMILE Br. at 1, 8-9).  ACF then argues that SMILE had to correct its deficiencies “immediately” upon receipt of the July 2017 Overview:

ACF’s July 2017 Overview identified three areas of uncorrected performance program standard deficiencies. . . .  The Board has noted that on-site review findings take legal effect once ACF communicates the deficiency determination to the grantee in the on-site review overview of findings.  Gulf Coast Cmty. Action Agency, Inc., at 9.  It was the July 2017 Overview findings that initiated ACF’s termination action and only provided SMILE with an opportunity to demonstrate full correction immediately to avoid termination.  Id.  The July 2017 Overview deficiencies required immediate correction under the Act for SMILE to avoid termination because they were determined by ACF to be a threat to the health and safety of Head Start children.  [Citing July 2017 Overview & SMILE incident reports & related documents; Act § 641A(e)(1)(B), (C)]; 45 C.F.R. 1304.5(a)(2)(iii); Philadelphia Hous. Auth., [DAB No. 1977] at 14-15 (2005), aff’d, [Philadelphia Hous. Auth. v. Leavitt,] No. 05-2390, 2006 WL 2990391 [(E.D. Pa. Oct. 17, 2006)].  The record shows that SMILE presented no evidence to support a finding of full correction with the July 2017 Overview deficiencies or even with the March 2017 Overview deficiencies to avoid termination.  

Id. at 18.  Earlier in its brief, ACF argues as above that SMILE was subject to termination because it failed to correct is deficiencies “immediately,” presumably immediately after receipt of the July 2017 Overview, although that is not clear:

ACF was authorized by [Act § 641A(e)(1)(B), (C)] and 45 C.F.R. § 1304.5(a)(2)(iii) to terminate SMILE’s federal funding because it failed to immediately correct the previously identified areas of performance program standards deficiencies that posed hazardous conditions or critical

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threats to the health and safety of Head Start children.  To avoid termination, the Secretary of HHS requires the grantee to correct immediately any deficiency that threatens the health or safety of Head Start children.  [Act § 641A(e)(1)(B), (C)]; 45 C.F.R. 1304.5(a)(2)(iii); Philadelphia Hous. Auth., DAB No. 1977, at 14-15 (2005) . . . .  Because SMILE failed to immediately correct three previously identified areas of performance program standard deficiencies in the March 2017 Overview that constituted hazardous conditions or critical threats to the health and safety of Head Start children, ACF properly terminated SMILE’s federal funding. 

Id. at 11-12.

These arguments do not explain how ACF could rely exclusively on the two incidents during the corrective action period (and the one incident from before ACF issued the notice of deficiencies), to determine that SMILE had not timely corrected its deficiencies.  To the extent ACF intends “immediately” to mean that SMILE was required to correct the deficiencies “immediately” upon receipt of either the March 2017 Overview or the July 2017 Overview, both positions are problematic and do not support upholding the termination, for the following reasons:

First, there is no dispute that by the time ACF issued the July 2017 Overview and the Termination Notice on July 11, 2017, the 30-day period ACF provided SMILE to correct the deficiencies had expired, and ACF was authorized, or required, to terminate SMILE if ACF determined that SMILE had not corrected all previously identified deficiencies by the end of that 30-day period.  ACF’s reference to this undisputed aspect of the law governing Head Start terminations does not explain or even address why ACF could rely exclusively on the occurrence of the two incidents during the 30-day corrective action period (or the one incident from before ACF issued the initial notice of deficiencies), as showing that SMILE did not timely correct its deficiencies.

Second, ACF’s statement that “[t]he July 2017 Overview deficiencies required immediate correction under the Act for SMILE to avoid termination” is misleading to the extent it implies that SMILE had a further opportunity to correct its deficiencies, albeit immediately, upon receipt of that overview.  ACF Br. at 18.  By the time ACF issued the July 2017 Overview (and the Termination Notice) on July 11, 2017, the deadline for SMILE to correct the deficiencies, April 9, 2019, had passed, and SMILE was not entitled to another opportunity to correct them after receiving the July 2017 Overview, even “immediately.”  The July 2017 Overview was an enclosure to the Termination Notice, and neither document offered SMILE the opportunity to avoid termination by correcting the three deficiencies, “immediately” or otherwise.  Nor did ACF afford SMILE the opportunity to submit information showing that SMILE had corrected its deficiencies, or to rebut the findings in the overview and notice; the only opportunity for

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further review was through this appeal to the Board.  ACF Ex. 7, at 4.  Before the Board, moreover, SMILE could not prevail by showing it had corrected the deficiencies immediately upon receipt of the July 2017 Overview and Termination Notice, as ACF’s argument suggests, because the 30-day corrective action period had ended some three months earlier, and the Board has held that later, untimely corrections do not warrant reversal of a termination for failure to timely correct deficiencies.  E.g., Gulf Coast at 2 (“A single deficiency that is not timely corrected is sufficient to warrant termination of funding.”); Babyland Family Servs., Inc., DAB No. 2109, at 20 (2007) (“[L]ater steps to correct deficiencies still outstanding after a grantee has been given an opportunity to correct cannot remove authority from ACF to terminate based on the failure to timely correct.”); 45 C.F.R. § 1304.5(a)(2)(iii) (authorizing termination if the grantee “has failed to timely correct one or more deficiencies”).

ACF’s statement that SMILE presented no evidence to support a finding of “full correction with the July 2017 Overview deficiencies or even with the March 2017 Overview deficiencies to avoid termination,” ACF Br. at 13, 18 (emphasis added), is similarly misleading, for suggesting that the termination is based at least in part on the two new deficiencies first reported in the July 2017 Overview.  Those new deficiencies are not a basis for this termination because the July 2017 Overview identified them as new deficiencies and provided SMILE 30 days to correct them, and ACF has presented no evidence of further reviews that found that SMILE had failed to timely correct the new deficiencies.  ACF Ex. 5, at 3, 7-8.

Third, ACF’s reference to the Act requiring a grantee “to correct immediately any deficiency that threatens the health or safety of Head Start children,” ACF Br. at 11-12, suggests that SMILE was not entitled to a period of 30 days to correct the deficiencies identified in the March 2017 Overview.  The provisions ACF cites, Act § 641A(e)(1)(B), (C), require the Secretary to require the grantee “to correct the deficiency immediately, if the Secretary finds that the deficiency threatens the health or safety of staff or program participants or poses a threat to the integrity of Federal funds” and to terminate “unless the grantee corrects the deficiency.”17   To the extent ACF argues that the requirement to correct certain deficiencies “immediately” – that is, upon receipt of the March 2017 Overview – means that ACF could terminate based on noncompliance during or before the corrective action period, we disagree.

The Board has observed that “[i]n practice, ACF . . . may afford the grantee up to 30 days to correct such ‘immediate’ deficiencies,” i.e., any deficiency that “threatens the health or safety” of Head Start children.  Cmty. Action Agency of Cent. Ala. at 3 (citing Gulf Coast

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at 2).  In Gulf Coast, ACF gave the grantee 30 days to correct its “immediate” deficiency, and in Community Action Agency of Central Alabama, ACF initially provided 10 days to correct immediate deficiencies and extended that to 20 days at the grantee’s request.  Id.; Gulf Coast at 4; see also Pinebelt Ass’n for Cmty. Enhancement, DAB No. 2611, at 4 (2014), and Babyland Family Services, Inc. at 7 (ACF required grantee to correct “immediate” deficiencies within 30 days).  Consistent with that recognized practice, ACF in the March 2017 Overview gave SMILE 30 days to correct its deficiencies.  Thus, whether or not ACF could have required more “immediate” correction in the March 2017 notice is irrelevant where ACF chose to set a 30-day correction period.

We also note that ACF’s assertion that all three deficiencies reported in the March 2017 Overview “involve[d] a threat to the health, safety, or civil rights of children or staff,” ACF Br. at 2, 4-6, is not accurate, as the March 2017 Overview states that only one of the three deficiencies – the abuse/corporal punishment deficiency under § 1302.90(c)(l)(ii)(A, E, G) – involved that threat.  ACF Ex. 2, at 6.  The other two, the overview states, were each a deficiency that “involves a failure to comply with standards related to early childhood development and health services, family and community partnerships, or program design and management,” and there are no findings that those two threatened the health, safety or civil rights of children or staff.  Id. at 4, 5.  Additionally, the March 2017 Overview nowhere describes any of the three deficiencies as “immediate” deficiencies.  Compare Cmty. Action Agency of Cent. Ala. at 3 (initial overview stated that grantee “had three ‘immediate’ deficiencies”); Gulf Coast at 8 (ACF determined that grantee had an “immediate” deficiency based on five substantiated allegations of staff abusing or using corporal punishment).18   ACF has not argued that these determinations in the March 2017 Overview were erroneous or subsequently revised, and has provided no reason to find that SMILE was not entitled to the 30-day corrective action period afforded by the overview.

ACF’s case for termination before the Board demonstrates that it relies entirely on noncompliance during the period it gave SMILE to correct the deficiencies, and before it issued the notice of deficiencies, as showing that SMILE failed to correct the deficiencies and remained noncompliant at the end of the corrective action period.  ACF has not shown how the references in the Act and regulations to immediate deficiencies and immediate corrective action enabled it to disregard its provision of a corrective action period.  ACF has offered no cogent argument as to why it could rely on noncompliance

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during the corrective action period, and before it issued the notice of deficiencies, as demonstrating that SMILE failed to timely correct the deficiencies, authorizing termination.  We conclude that ACF could not rely on the alleged deficiency findings during or before the correction period as themselves the basis for terminating for failure to correct.

D. ACF did not cure its reliance on noncompliance during or before the corrective action period.

ACF also argues that the termination should not be reversed due to being “premised on incidents that occurred prior to the end of the March 2017 Overview corrective action period” because, as ACF notes, “the Board has consistently held in Head Start disallowance appeals that any inadequacies in the determination notice letter can be cured by the agency during the appeal process as long as the appellant has an opportunity to respond.”  ACF Br. at 17, 18 (citing Cmty. Action Agency of Cent. Ala. at 11, and disallowance cases cited therein).  Along this line, ACF argues that “the relief of vacating the termination of grant award because of a defective determination notice, as requested by SMILE, is not supported by the Act or Head Start regulations.”  Id. at 19.  ACF cites the statement in Philadelphia Parent Child Center, Inc., DAB No. 2356, at 4 (2010) (quoting Vanderbilt Univ., DAB No. 903, at 86 (1987)) that “the description of what a final agency decision must include [previously found at former 45 C.F.R. § 74.90(c) (1994)] ‘[is] not intended to provide sanctions for [HHS] Agency noncompliance.’”  Id.  ACF then argues that “SMILE will have an opportunity to submit a reply brief after receiving ACF’s brief” in which ACF would have further clarified its basis for the termination.  Id.

The well-recognized principle those decisions applied is simply that during the appeal, the federal agency may revise the grounds for the determination under appeal, or cite additional evidence in support thereof, as long as the appellant has an adequate opportunity to respond.  That principle does not apply here, however, as ACF did not cure its reliance on noncompliance during and before the corrective action period by either revising the grounds for its determination or offering additional evidence beyond the incidents prior to or during the correction period.

In Central Alabama, the Board held that ACF could raise new allegations in support of its deficiency determinations (relating to the conditions of Head Start facilities) during the appeal because the grantee in that case had sufficient opportunity to respond and develop the record as appropriate.  In Philadelphia Parent Child Center, the Board rejected the appellant grantee’s contention that ACF did not provide timely notice of how it recalculated the disallowance amount during the appeal, because the grantee received additional exhibits supporting the revision during the appeal and (as in Central Alabama) had an adequate opportunity to respond.  The regulation cited in Philadelphia Parent Child Center, former 45 C.F.R. § 74.90(c), simply required the disallowance notice to

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provide “[e]nough information to enable the recipient to understand the issues and the position of the HHS awarding agency,” among other information and language.

In contrast to those cases, ACF here did not raise new allegations or evidence supporting the termination during the appeal, but instead presented legal arguments as to why it could rely on noncompliance during (and before) the corrective action period to determine that SMILE was subsequently noncompliant upon the end of the corrective action period, arguments that we found unavailing above.  We reverse the termination not as a sanction for the failure of the Termination Notice to employ particular language or to provide enough information about the grounds for the termination, but because the grounds for termination advanced in the Termination Notice and by ACF during the appeal do not establish a prima facie showing that SMILE failed to correct the deficiencies and remained noncompliant as of the end of the corrective action period.  Any “defect” supporting reversal of the termination here is not in the Termination Notice, but in the rationale for the termination itself, a rationale that ACF did not revise during the appeal.

There is one aspect of the Termination Notice that ACF did revise on appeal, the notice’s apparent finding that SMILE timely corrected the governing body deficiency (Act § 642(c)(l)(E)(iii)), as the notice identified only the two other deficiencies as uncorrected.  ACF on appeal instead adopts the finding of the July 2017 Overview that the governing body deficiency had not been corrected, although ACF does not explain or address why the Termination Notice did not.  This expansion of the grounds for termination in the Termination Notice to include failure to timely correct the governing body deficiency, however, did not alter or remedy ACF’s improper reliance on noncompliance during and before the corrective action period as showing that SMILE failed to correct the deficiency and remained noncompliant as of the end of the corrective action period.  ACF offered no evidence as to the governing body deficiency beyond the same incidents already discussed.

III. By relying on noncompliance during and before the corrective action period, ACF has not met its burden of making a prima facie showing that it has a basis for termination.

In Head Start termination cases, “[t]he burdens of proof are well-settled:  ACF must make a prima facie showing (that is, proffer evidence sufficient to support a decision in its favor absent contrary evidence) that it has a basis for termination under the relevant standards.”  Avoyelles at 2 (citations omitted); see also Gulf Coast at 3 (citations omitted).  “If ACF makes this prima facie showing, the grantee must demonstrate by a preponderance of the evidence that it is in compliance with program standards.”  Avoyelles at 2.  SMILE argues that the Termination Notice “does not allege sufficient facts that make a prima facie case warranting termination,” in part because ACF relied entirely on alleged noncompliance during (and before) the corrective action period as

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showing that SMILE failed to timely correct the deficiencies identified in the March 2017 Overview and “neglected to cite conduct after the corrective action period as a basis for termination.”  SMILE Br. at 7.  We agree.

Notably, ACF’s burden to make a prima facie showing is not limited to showing only that the grantee had deficiencies that it had to timely correct; the burden applies to its entire case, with ACF having to make a prima facie showing “that it has a basis for termination under the relevant standards,” i.e., that, as relevant here, the grantee had at least one deficiency it failed to timely correct.  Avoyelles at 2 (emphasis added).  The appellant grantee’s well-recognized obligation to show that it timely corrected its deficiencies (e.g., Cmty. Action Agency of Cent. Ala. at 9 (citing Gulf Coast at 3 (citing Friendly Fuld at 3))) thus applies only after ACF makes its prima facie showing that the grantee (1) had at least one deficiency and (2) failed to timely correct a deficiency. 

ACF does not reference its obligation to make a prima facie showing supporting termination, but does argue that “once ACF presented evidence that SMILE’s Board continued its lack of governing and oversight causing failures in reporting and notification, and that permitted hazardous conditions or critical threats that affected Head Start children in violation of” the Act and regulatory requirements, “SMILE bore the burden of showing either there were no deficiencies in the first place or that it timely corrected the deficiencies to the point of being in compliance with the applicable requirements.”  ACF Br. at 15.  ACF also cites the principle that a Head Start grantee, as a recipient of federal grant funds, “always bears the burden to demonstrate that it operated its federally funded program in compliance with the terms and conditions of its grant and the applicable regulations” and “is clearly in a better position to establish that it did comply with applicable requirements than ACF is to establish that it did not; thus the ultimate burden of persuasion is on the grantee to show that it was in compliance with program standards.”  Id. at 14 (citations to Board decisions omitted).

In the context of this proceeding, SMILE’s burden as a grantee to demonstrate compliance does not arise until ACF has made its required prima facie case that SMILE had deficiencies that it did not timely correct.  As discussed above, however, the evidence ACF references relates exclusively to the occurrence of the noncompliance during (and before) the period ACF gave SMILE in which to correct the deficiencies.  By relying solely on what the Board in First State characterized as “lack of compliance during the corrective action period,” ACF denied SMILE the benefit of the full corrective action period it provided SMILE and failed to “proffer evidence sufficient to support a decision in its favor absent contrary evidence.” Gulf Coast at 3, Avoyelles at 2.  ACF thus failed to make its required prima facie showing that SMILE did not timely correct the deficiencies (absent contrary evidence), which would then have placed upon SMILE the burden of showing by evidence that it did timely correct the deficiencies, since ACF relied only on incidents before the end of the correction period.  See ACF Ex. 7, at 2 (Termination

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Notice stating that “SMILE did not correct the deficienc[ies] because it had “incidents occur during the corrective action period”).

As ACF has, under the particular circumstances of this case, failed to make a prima facie showing that SMILE did not timely correct the deficiencies identified in the March 2017 Overview, we reverse the termination.

Conclusion

For the reasons explained above, we reverse the termination of SMILE’s designation and funding as a Head Start/Early Head Start grantee for failure to timely correct the deficiencies reported in the March 2017 Overview.

1. Congress established Head Start through the Head Start Act, Public Law No. 97-35, §§ 635-57 (1981), and subsequent amendments.  The Act is codified at 42 U.S.C. § 9831 et seq.  The current version of the Head Start Act is at http://eclkc.ohs.acf.hhs.gov/hslc/standards/law.  Each section of the Act on that website contains a reference to the corresponding United States Code chapter and section.
• back to note 1
2. The Order to Show Cause is not published.  Therefore, we attach a copy of the Order as an appendix to this Decision.
• back to note 2
3. The July 2017 Overview also identified two new deficiencies that ACF gave SMILE 30 days to correct, and two new “area[s] of noncompliance” that SMILE had 120 days to correct.  The two new deficiencies were under section 1303.90(c)(1)(v) (Personnel policies/Standards of conduct) requiring that grantees “[e]nsure that no child is left alone or unsupervised,” and section 1303.72(a)(3) (Vehicle operation/Safety), requiring grantees to maintain “child rosters and lists of the adults each child is authorized to be released to.”  ACF Ex. 5, at 7.  The former was based on the child who was left alone in a classroom for 11 minutes on March 13, 2017, and the latter on a child being released to an unauthorized adult at the bus stop, or to an authorized adult different than the one expected, on March 31, 2017.  ACF on appeal does not cite or rely on the new deficiencies and areas of noncompliance as grounds for the termination.
• back to note 3
4. Subsequent text in the Termination Notice appears to include, as grounds for termination, the two new deficiencies first alleged in the July 2017 Overview.  Under the heading “Finding[s] Forming the Basis of the Termination,” and the statement “[t]he following area of deficiencies constitutes a continuing uncorrected deficiency,” the notice lists the two new deficiencies, in addition to the deficiencies identified in the March 2017 Overview.  ACF Ex. 7, at 2-3; see also SMILE Br. at 9 (the “Termination Notice inappropriately includes two new findings as grounds for termination.”).  During the appeal, however, ACF clarified that “[t]he basis for the termination is the uncorrected deficiencies from the Overview of Findings Report, dated March 7, 2017 [the March 2017 Overview] and the Follow-up Report issued on July 11, 2017 [the July 2017 Overview].”  Amended Agency’s Resp. to Motion to Compel at 3 (Nov. 21, 2017), E-File Item No. 31.
• back to note 4
5. The Termination Notice’s description of the incidents as occurring “during the corrective action period” is not correct, as the incident on February 2, 2017 occurred before ACF issued the March 2017 Overview.  As we will explain, the corrective action period commenced upon service of the initial notice of deficiencies; i.e., the March 2017 Overview.
• back to note 5
6. We note that the July 2017 Overview found that SMILE had corrected issues that the March 2017 Overview identified as grounds for the governing body deficiency:  that SMILE staff “did not report two child health and safety related incidents to its governing body” and that SMILE’s board chair “was not aware of the reporting requirement related to suspected abuse.”  ACF Ex. 2, at 4.  The July 2017 Overview found that SMILE “implemented actions to ensure [that its] Board was informed of all reportable incidents related to child health and safety issues” and “created new child abuse and neglect reporting policies and procedures.”  ACF Ex. 5, at 4.  We need not, and do not, reach any conclusion as to whether these findings explain why the Termination Notice cited only two, not three, uncorrected deficiencies.
• back to note 6
7. The Termination Notice also alleges a fourth incident not mentioned in the July 2017 Overview – that on March 27, 2017, SMILE notified the ACF Regional Office that a parent reported a child receiving scratches from a teacher on March 23, 2017.  ACF Ex. 7, at 2.  SMILE denies this incident occurred, and states that its records show that the accused teacher was not on duty the day of the alleged incident and that the child had no marks, and that it timely reported the accusation to the DoL, which found the alleged incident did not meet the legal or policy definition of abuse or neglect.  SMILE Br. at 4-5 (citing SMILE Ex. C at 68-75).  ACF on appeal does not cite or mention this alleged incident, which we do not address further, other than to note that the alleged date also fell within the correction period.
• back to note 7
8. The Board has also received, as attachments to party emails on which the Board staff attorney was copied, unredacted copies of ACF Exhibits 1-7.
• back to note 8
9. On July 27, 2017, ACF suspended SMILE as a Head Start grantee on an emergency basis and appointed an interim grantee under 45 C.F.R. § 1304.4 (“Emergency suspension without advance notice”), and, on August 11, 2017, ACF upheld the emergency suspension following an informal meeting with SMILE.  ACF Br. at 14 n.2.  ACF based the emergency suspension on the three uncorrected deficiencies and the new deficiency from the July 2017 Overview about the child allegedly released from the school bus to an unauthorized adult on March 31, 2017.  A United States district court denied SMILE’s ex parte motion for a temporary restraining order against ACF enforcing the suspension on August 1, 2017, and denied SMILE’s motion for a preliminary injunction on August 17, 2017.  ACF Ex. 9, at 7-18.  Under the regulations, the suspension is not a determination for which Board review is available.  45 C.F.R. § 1304.3-.5.  ACF has not suggested that the issues before the Board in this termination appeal and before the court in the suspension litigation are coextensive or that the court action has any bearing on this appeal.
• back to note 9
10. The state DoL, in a February 20, 2017 report, found two deficiencies based on the February 2, 2017 incident:  failure to notify DoL of the incident within 24 hours, and use of a prohibited method of discipline.  SMILE Ex. C at 29-30; ACF Ex. 6, at 79-80.  SMILE argues that it complied with state regulations because they require reporting “within 24 hours of the incident or the next business day,” and because it reported the incident on the “next business day” after receiving notice of the incident.  SMILE Br. at 11 (quoting La. Admin. Code tit. 28, pt. CLXI, § 1103 (available via https://www.doa.la.gov/Pages/osr/lac/LAC-28.aspx, visited Dec. 17, 2019).  SMILE also asserted the scratches occurred accidentally as the teacher was trying to keep the child from falling out of a chair.  Id. at 3.
• back to note 10
11. Gulf Coast sought to show it corrected the original deficiency prior to receiving the initial deficiency notice, in order to argue that the subsequent incident cited in the follow-up survey and termination notice (failure to report a new allegation of abuse) should have been considered a new deficiency that Gulf Coast would have had a new opportunity to correct.  The Board found that Gulf Coast in any event had not shown that it did correct its deficiency prior to ACF’s issuance of the initial deficiency notice.
• back to note 11
12. In this regard, we note that ACF Exhibit 3, 100 unindexed pages of “SMILE’s Disciplinary Action Documents,” contains “interview notes” of meetings that three ACF regional staff held with SMILE officials on January 10, 11 and 12, 2017.  Ex. 3, at 27-40.  ACF cites this exhibit (but not the interview notes) for details of the incident in January 2016 cited in the March 2017 Overview and to support findings in the March 2017 Overview that SMILE’s board members were unaware that the first two incidents resulted in disciplinary actions against staff and were unaware of the reporting requirements.  ACF Br. at 3-5.  The notes of interviews by ACF staff reflect primarily information gathering by ACF and do not show that ACF officials notified SMILE at that time that SMILE had deficiencies it was required to correct to avoid termination.  There is nothing in the record indicating that ACF ever informed SMILE of its deficiencies in time for it to take corrective action that could have prevented the incident on February 2, 2017. 
• back to note 12
13. Nor are we aware of any cases where, as here, ACF based its determination that the grantee failed to timely correct a deficiency on noncompliance from before ACF issued the initial notice of deficiencies.
• back to note 13
14. The Board also pointed out that “ACF offers no explanation for why the corrective actions that [Norwalk] admittedly took pursuant to its QIP were not fully adequate to meet the governing body’s responsibility to ensure that appropriate internal controls were established and implemented,” where “ACF accepted, as sufficient to correct the other identified financial management problems, actions that [Norwalk] took within the corrective action period but did not complete until shortly before the November [follow-up] review.”  Norwalk at 20.
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15. In two other cases where the appellant Head Start grantees argued that ACF could not base terminations on findings from during the corrective action period, the Board found that argument inapplicable or unnecessary to address because the appellant was mistaken about the time period for correction; ACF’s follow-up review did not begin during the corrective action period in one case, as the appellant contended; and ACF withdrew findings where there was confusion about the time it had provided for corrective action.  See Friendly Fuld Ruling at 4, 8-10 (Board did not reach the legal merits of appellant’s argument that “ACF cannot terminate Friendly Fuld’s Head Start grant because ACF erred in conducting a follow-up review prior to the established deadline for corrections”); Camden Cnty. Council on Econ. Opportunity, DAB No. 2116, at 7 n.4 (Board did “not address whether the review would have been invalid if it had begun within the corrective action period”).
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16. In this respect, the substance of a showing that a grantee did not timely correct deficiencies depends on the type and nature of the deficiencies.  Where deficiencies are based on hazardous conditions in Head Start facilities (e.g., as in Community Action Agency of Central Alabama, DAB No. 2797 (2017)), ACF may readily determine, upon the end of the corrective action period, whether the grantee has indeed repaired its facilities and remedied the hazardous conditions.  Other types of deficiencies, such as those manifested by individual acts of neglect or abuse, or by failures of grantee management and administration, may require a more detailed analysis of the grantee’s corrective measures, patterns of events/incidents, and other circumstances.
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17. This section also authorizes the Secretary to require correction “not later than 90 days after the identification of the deficiency” if the Secretary finds “that such a 90-day period is reasonable, in light of the nature and magnitude of the deficiency,” or pursuant to a QIP.
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18. The Board has recognized that a determination by ACF that a grantee has failed to meet the requirement to ensure that staff not engage in corporal punishment “is a determination of an immediate deficiency,” and we do not find here that ACF could not have required correction of the deficiency under 45 C.F.R. § 1302.90(c)(l)(ii)(A, E, G) in a period shorter than the 30 days it gave SMILE.  Gulf Coast at 8.  The failure of the March 2017 Overview to describe any of the deficiencies as “immediate” nevertheless supports our determination that ACF may not deny SMILE the benefit of the full 30-day corrective action period that ACF provided, or terminate based on noncompliance during that time.
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