[Federal Register Volume 63, Number 125 (Tuesday, June 30, 1998)]
[Proposed Rules]
[Pages 35554-35558]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-17296]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Administration For Children and Families

45 CFR Part 1303

RIN: 0970-AB87


Head Start Program

AGENCY: Administration on Children, Youth and Families (ACYF), 
Administration for Children and Families (ACF), HHS.

ACTION: Notice of Proposed Rulemaking.

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SUMMARY: The Administration on Children, Youth and Families is issuing 
this Notice of Proposed Rulemaking to propose timelines for the 
conducting of administrative hearings on adverse actions taken against 
Head Start grantees and to make additional changes to the regulations 
designed to expedite the appeals process.

DATES: In order to be considered, comments on this proposed rule must 
be received on or before August 31, 1998.

ADDRESSES: Please address comments to the Associate Commissioner, Head 
Start Bureau, Administration on Children, Youth and Families, PO Box 
1182, Washington, DC 20013. Beginning 14 days after close of the 
comment period, comments will be available for public inspection in 
Room 2219, 330 C Street, SW., Washington, DC 20201, Monday through 
Friday between the hours of 9 a.m. and 4 p.m.

FOR FURTHER INFORMATION CONTACT: Jim S. Kolb (202) 205-8580.

SUPPLEMENTARY INFORMATION:

I. Program Purpose

    Head Start is authorized under the Head Start Act (42 U.S.C. 9801 
et seq.). It is a national program providing comprehensive 
developmental services primarily to low-income preschool children, 
primarily age three to the age of compulsory school attendance, and 
their families. To help enrolled children achieve their full potential, 
Head Start programs provide comprehensive health, nutritional, 
educational, social and other services. Additionally, Head Start 
programs are required to provide for the direct participation of the 
parents of enrolled children in the development, conduct, and direction 
of local programs. Parents also receive training and education to 
foster their understanding of and involvement in the development of 
their children. In fiscal year 1996, Head Start served 752,000 children 
through a network of over 2,000 grantees and delegate agencies.
    While Head Start is intended to serve primarily children whose 
families have incomes at or below the poverty line, or who receive 
public assistance, Head Start policy permits up to 10 percent of the 
children in local programs to be from families who do not meet these 
low-income criteria. The Act also requires that a minimum of 10 percent 
of the enrollment opportunities in each program be made available to 
children with disabilities. Such children are expected to participate 
in the full range of Head Start services and activities with their non-
disabled peers and to receive needed special education and related 
services.

II. Summary of the Proposed Regulation

    The authority for this Notice of Proposed Rulemaking (NPRM) is 
section 646 of the Head Start Act (42 U.S.C. 9841), as amended by Pub. 
L. 103-252, Title I of the Human Services Amendments of 1994. ACF 
proposes to make changes to the regulations designed to expedite the 
appeals process and as specifically required by section 646(c) to 
specify a timeline for administrative hearings on adverse actions taken 
against grantees, and a timeline by which the person conducting the 
administrative hearing shall issue a decision based on the hearing. The 
proposed rule implements these requirements.
    Overall, this proposed rule on timelines, including the conforming 
changes to other affected sections of the appeals requirements in part 
1303, will have the effect of saving time and expenses while continuing 
to allow due process to a grantee appealing a proposed termination or 
denial of refunding decision. In the past, a number of appeal 
proceedings have been protracted and costly partly because of the 
absence of statutory or regulatory timelines for holding a

[[Page 35555]]

hearing. Under the proposed timelines, decisions can be rendered in a 
shorter period of time thus allowing quicker removal of a deficient 
grantee. This will help ensure that children and their families receive 
high quality Head Start services from a qualified provider.

III. Section by Section Discussion of the NPRM

Section 1303.14  Appeal by a Grantee from a Termination of Financial 
Assistance

    The proposed rule makes several changes to this section. ACF is 
proposing to revise section 1303.14(c)(1) to state in greater detail 
the information which it must include in letters of termination. Under 
the proposed regulation the Agency will be required to state the legal 
basis for termination, the factual findings on which the termination is 
based, or reference to specific findings in another document that form 
the basis for the termination (such as reference to item numbers in an 
on-site review report or instrument), and citation to any statutory 
provisions, regulations or policy issuances on which the Agency is 
relying for its determination. This change will reduce the need for the 
Agency to supplement its initial notice with additional filings after 
the appeal is filed and thereby streamline and expedite the appeals 
process.
    The Agency is also proposing to amend the regulation to increase 
the amount of time for a grantee to appeal a termination from 10 days 
to 30 days. The change is being made to give grantees more time in 
which to develop their initial appeal submission. More complete 
submissions will allow quicker resolutions of appeals. This increase in 
time to file appeals carries with it more responsibility for filing 
properly, as discussed below.
    The last sentence in Sec. 1303.14(c)(2) is being deleted because 
the standard for content of the request for a hearing will now appear 
in the revised Sec. 1303.14(d).
    The Agency is also proposing new language for Sec. 1303.14(d) which 
requires the grantee to state in more detail the basis of its appeal of 
the termination. This change will reduce the need for the grantees to 
supplement their initial request for a hearing with additional filings 
and thereby streamline and expedite the appeals process. ACF is also 
proposing a change in Sec. 1303.14(c)(5) to make it consistent with the 
new Sec. 1303.14(d). A new Sec. 1303.14(c)(6) is added to provide for 
two sanctions against ACF in the event that a notice of termination is 
deficient.
    If in the judgment of the Departmental Appeals Board a grantee 
fails to comply with these requirements in a substantial manner its 
appeal must be rejected, with prejudice. The burden shall be on a 
grantee to show good cause for any failure to comply with these 
requirements. Workload difficulties shall not normally constitute good 
cause, unless the Departmental Appeals Board determines that 
adjustments cannot be made by the grantee and that the conflicting 
matters reasonably take precedence over the expeditious conduct of the 
appeal. Thus, for example, a grantee must show extenuating 
circumstances for its failure to provide documents in its possession at 
the time of its appeal and to raise arguments or objections that would 
logically be raised or made in light of the notice of termination. If 
the failure is not substantial, the appeal may proceed, but the omitted 
document must be excluded and the omitted argument or objection barred. 
These provisions flow from the purpose of these changes, which is to 
expedite appeals, and in light of the fact that grantees will have 
twenty more days to file their appeals than is the case under current 
regulations. The proposed regulation does provide relief from the 
sanctions under exceptional circumstances, as the Departmental Appeals 
Board may determine in accordance with the regulations. The new 
paragraph on sanctions is (e).
    The current Sec. 1303.14(e) is deleted and a portion of its 
contents revised and added as the last sentence in the new paragraph 
(d)(7) of this section. It would require the grantee to serve notice of 
the appeal and request for a hearing on any delegate agency which would 
be financially affected at the time the grantee files its appeal. 
However, failure to do so would be between the delegate and grantee and 
would not prevent the non-renewal or termination action from 
proceeding. Any remedy would be between the grantee and delegate 
agency.
    The proposed revision of Sec. 1303.14(g) to be redesignated as (i) 
includes a new requirement that delegate agencies, requesting an 
opportunity to participate in a hearing, must do so within 30 days of 
the grantee's request for a hearing. This new requirement is consistent 
with the overall thrust of the proposed provision which is to minimize 
delays and require the parties to eliminate possible sources of delay 
in the proceedings.

Section 1303.15  Appeal by a Grantee From a Denial of Refunding

    ACF is proposing to revise paragraph (b)(2) of this provision to 
give grantees 30 instead of 10 days in which to appeal denial of 
refunding. This proposed change will make this provision consistent 
with revised Sec. 1303.14(c)(2). The additional time will allow 
grantees to provide more complete submissions which will allow quicker 
resolutions of appeals. The proposed revision to paragraph (d) will 
require ACF to state in more detail the basis of the decision to deny 
refunding to a grantee. The additional information in the notice will 
reduce the need for the Agency to supplement its initial notice with 
filing after the appeal is filed and thereby streamline and expedite 
the appeals process. Paragraph (d) also provides for two sanctions 
against ACF in the event that a notice of denial of refunding is 
deficient. The Agency also is proposing to add paragraphs (f), (g) and 
(h) to 45 CFR 1303.15 to make the procedures for appeals of denials of 
refunding consistent with those for termination appeals in 45 CFR 
1303.14.

Section 1303.16  Conduct of Hearing

    The proposed revision would specifically require the parties to use 
prepared written direct testimony. ACF's experience with prepared 
written testimony has shown it is more efficient in terms of clear 
presentation of direct testimony and the reduction of hearing time and 
expense, including the absence of agency staff from their normal 
duties. Direct testimony is the testimony of witnesses in response to 
the questions of the attorney for the party which called them. After a 
witness's direct testimony is presented to the Board, the attorney for 
the opposing party has an opportunity to cross examine, and the 
attorney for the party which called the witness has another opportunity 
to ask additional questions, a process known as ``redirect 
examination.'' Prepared direct testimony by parties eliminates the need 
for live direct testimony at the hearing. However, cross examination 
and redirect examination will be live at the hearing. This permits the 
presiding member to assess witness credibility through direct 
observation. Use of prepared written direct testimony by the parties 
can result in a significant reduction in the amount of time needed for 
a hearing and the cost of compiling transcripts of hearings. Based on 
it own experience, ACF believes this approach will contribute to 
streamlining the Head Start appeals process. Changes also are proposed 
in the wording of 45 CFR 1303.16(e) to make it consistent with the

[[Page 35556]]

proposed changes in 45 CFR 1303.14(e) and (g).

Section 1303.17  Time for hearing and decision

    This proposed rule implements section 646(c) of the Head Start Act, 
which directs the Secretary to specify timelines for commencing 
hearings and rendering decisions.
    The Head Start Act and implementing regulations in 45 CFR part 1303 
seek to strike a balance between the need to ensure that all Head Start 
programs are of high quality and are responsive to the families they 
serve, on the one hand, and protection of existing grantees from 
arbitrary or baseless adverse actions, on the other. Assuring that all 
Head Start programs provide quality services is a goal of the 
Department and the Congress, as reflected in the report of the Advisory 
Committee on Head Start Quality and Expansion and the amendments made 
to the Head Start Act by Title I of the Human Services Amendments of 
1994. Those amendments added section 641A of the Act (42 U.S.C. 9836A) 
which, in subsection (d), sets out in detail the actions which must be 
taken with respect to a grantee which has been found, during an on-site 
review, to have quality deficiencies. This subsection directs the 
Secretary to require programs to correct all identified deficiencies 
either immediately or within one year of notification by the Department 
of the deficiencies under an approved Quality Improvement Plan. The 
Department must initiate proceedings to terminate the Head Start grant 
of any agency which does not correct all identified deficiencies within 
the prescribed time frames. Grantees which wish to appeal a proposed 
termination may do so to the Department of Health and Human Services 
Departmental Appeals Board.
    The proposed rule requires that any hearing of an appeal by a 
grantee from a notice of suspension, termination or denial of refunding 
must be commenced no later than 120 days from the date the grantee's 
appeal is received by the Departmental Appeals Board. The final 
decision in an appeal, whether or not there is a hearing, must be 
rendered not later than 60 days after the close of the proceedings, 
including submission of the briefs and the holding of oral argument, if 
allowed or required by the Departmental Appeals Board.
    Currently, there are no timelines for the hearings or the decisions 
on appeals by grantees. The proposed timelines will ensure an 
expeditious and more predictable review process, allow sufficient time 
for consideration of the case, and protect the grantees' statutory 
right to the opportunity for a full and fair hearing.

IV. Impact Analysis

Executive Order 12866

    Executive Order 12866 requires that regulations be drafted to 
ensure that they are consistent with the priorities and principles set 
forth in the Executive Order. The Department has determined that this 
rule is consistent with these priorities and principles. This Notice of 
Proposed Rulemaking implements the statutory requirement for Head Start 
grantee appeals to be heard and decided within certain, defined time 
frames.

Regulatory Flexibility Act of 1980

    The Regulatory Flexibility Act (5 U.S.C. CH. 6) requires the 
Federal government to anticipate and reduce the impact of rules and 
paperwork requirements on small businesses. For each rule with a 
``significant economic impact on a substantial number of small 
entities'' an analysis must be prepared describing the rule's impact on 
small entities. Small entities are defined by the Act to include small 
businesses, small non-profit organizations and small governmental 
entities. While these regulations would affect small entities, they 
would not affect a substantial number. For this reason, the Secretary 
certifies that this rule will not have a significant impact on 
substantial numbers of small entities.

Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995, Pub. L. 104-13, all 
Departments are required to submit to the Office of Management and 
Budget (OMB) for review and approval any reporting or record-keeping 
requirement inherent in a proposed or final rule. This NPRM does not 
contain any information collection or record-keeping requirements.

List of Subjects in 45 CFR Part 1303

    Administrative practice and procedure, Education of the 
disadvantaged, Grant--programs-social programs, Reporting and 
recordkeeping requirements.

(Catalog of Domestic Assistance Program Number 93.600, Project Head 
Start)

    Dated: December 24, 1997.
Olivia A. Golden,
Assistant Secretary for Children and Families.

    Approved: March 20, 1998.
Donna E. Shalala,
Secretary.
    For the reasons set forth in the Preamble, 45 CFR part 1303 is 
proposed to be amended to read as follows:

PART 1303--APPEAL PROCEDURES FOR HEAD START GRANTEES AND CURRENT OR 
PROSPECTIVE DELEGATE AGENCIES

    1. The authority citation for part 1303 continues to read as 
follows:

    Authority: 42 U.S.C. 9801 et seq.

    2. Section 1303.14 is amended by revising paragraphs (c)(1), (2) 
and (5); removing paragraph (e); redesignating paragraphs (d) and (f) 
through (j) as paragraphs (f) through (r); adding new paragraphs 
(c)(6), (d) and (e); and revising the newly redesignated paragraph (i) 
to read as follows:


Sec. 1303.14  Appeal by a grantee from a termination of financial 
assistance.

* * * * *
    (c) A notice of termination shall set forth:
    (1) The legal basis for the termination under paragraph (b) of this 
section, the factual findings on which the termination is based or 
reference to specific findings in another document that form the basis 
for the termination (such as reference to item numbers in an on-site 
review report or instrument), and citation to any statutory provisions, 
regulations or policy issuances on which ACF is relying for its 
determination.
    (2) The fact that the termination may be appealed within 30 days to 
the Departmental Appeals Board (with a copy of the appeal sent to the 
responsible HHS official and the Commissioner, ACYF) and that such 
appeal shall be governed by 45 CFR part 16, except as otherwise 
provided in the Head Start appeals regulations, and that any grantee 
that requests a hearing, shall be afforded one, as mandated by 42. 
U.S.C. 9841.
* * * * *
    (5) That the grantee's notice of appeal and request for hearing 
must meet the requirements set forth in paragraph (d) of this section.
    (6) That a failure by the responsible HHS official to meet the 
requirements of this paragraph may result in the dismissal of the 
termination action without prejudice, or the remand of that action for 
the purpose of reissuing it with the necessary corrections.

[[Page 35557]]

    (d) A grantee's notice of appeal and request for hearing must:
    (1) Be in writing;
    (2) Specifically identify what factual findings are disputed;
    (3) Identify any legal issues raised, including relevant citations;
    (4) Include an original and two copies of each document the grantee 
believes is relevant and supportive of its position (unless the grantee 
has obtained permission from the Departmental Appeals Board to submit 
fewer copies);
    (5) Include any request for specifically identified documents the 
grantee wishes to obtain from ACF, a statement of the relevance of the 
requested documents, and a statement that the grantee has attempted 
informally to obtain the documents from ACF and was unable to do so;
    (6) Include a statement on whether the grantee is requesting a 
hearing; and
    (7) Be filed with the Departmental Appeals Board and be served on 
the ACF official who issued the termination notice. The grantee must 
serve notice of the appeal and any request for a hearing on any 
delegate agency which would be financially affected at the time the 
grantee files its appeal.
    (e) The Departmental Appeals Board sanctions with respect to a 
grantee's notice of appeal and request for hearing are as follows:
    (1) If in the judgment of the Departmental Appeals Board a grantee 
has failed to substantially comply with the provisions of the preceding 
paragraphs of this section, its appeal must be dismissed with 
prejudice.
    (2) If the Departmental Appeals Board concludes that the grantees's 
failures are not substantial, but are confined to a few specific 
instances, it shall bar the submittal of an omitted document, or 
preclude the raising of an argument or objection not timely raised in 
the appeal, or deny a request for a document or other ``discovery'' 
request not timely made.
    (3) The sanctions set forth in paragraphs (e) (1) and (2) of this 
section shall not apply if the Departmental Appeals Board determines 
that a grantee has shown good cause for its failures to comply with the 
relevant requirements. Delays in obtaining representation shall not 
constitute good cause. Matters within the control of its agents and 
attorneys shall be deemed to be within the control of the grantee.
* * * * *
    (i) If the responsible HHS official initiated termination 
proceedings because of the activities of a delegate agency, that 
delegate agency may participate in the hearing as a matter of right. 
Any other delegate agency, person, agency or organization that wishes 
to participate in the hearing may request permission to do so from the 
presiding officer of the hearing. Any request for participation, 
including a request by a delegate agency, must be filed within 30 days 
of the grantee's notice of appeal and request for hearing.
* * * * *
    3. Section 1303.15 is amended by revising paragraphs (b)(2) and (d) 
(1) and adding new paragraphs (d)(4), (f), (g) and (h) to read as 
follows:


Sec. 1303.15  Appeal by a grantee from a denial of refunding.

* * * * *
    (b) * * *
    (2) Any such appeals must be filed within 30 days after the grantee 
receives notice of the decision to deny refunding.
* * * * *
    (d) * * *
    (1) The legal basis for the denial of refunding under paragraph (a) 
of this section, the factual findings on which the denial of refunding 
is based or references to specific findings in another document that 
form the basis for the denial of refunding (such as reference to item 
numbers in an on-site review report or instrument), and citation to any 
statutory provisions, regulations or policy issuances on which ACF is 
relying for its determination.
* * * * *
    (4) A statement that failure by the responsible HHS official to 
meet the requirements of this paragraph may result in the dismissal of 
the denial of refunding action without prejudice, or the remand of that 
action for the purpose of reissuing it with the necessary corrections.
* * * * *
    (f) If the responsible HHS official has initiated denial of 
refunding proceedings because of the activities of a delegate agency, 
that delegate agency may participate in the hearing as a matter of 
right. Any other delegate agency, person, agency or organization that 
wishes to participate in the hearing may request permission to do so 
from the presiding officer of the hearing. Such participation shall 
not, without the consent of ACYF and the grantees, alter the time 
limitations for the delivery of papers or other procedures set forth in 
this section.
    (g) Paragraphs (j), (k), and (l) of 45 CFR 1303.14 shall apply to 
appeals of denials of refunding.
    (h) The Departmental Appeals Board sanctions with respect to a 
grantee's appeal of denial of refunding are as follows:
    (1) If in the judgment of the Departmental Appeals Board a grantee 
has failed to substantially comply with the provisions of the preceding 
paragraphs of this section, its appeal must be dismissed with 
prejudice.
    (2) If the Departmental Appeals Board concludes that the grantees's 
failures are not substantial, but are confined to a few specific 
instances, it shall bar the submittal of an omitted document, or 
preclude the raising of an argument or objection not timely raised in 
the appeal, or a document or other ``discovery'' request not timely 
made.
    (3) The sanctions set forth in paragraphs (h) (1) and (2) of this 
section shall not apply if the Departmental Appeals Board determines 
that a grantee has shown good cause for its failures to comply with the 
relevant requirements. Delays in obtaining representation shall not 
constitute good cause. Matters within the control of its agents and 
attorneys shall be deemed to be within the control of the grantee.
    4. Section 1303.16 is amended by redesignating paragraphs (d) 
through (g) as paragraphs (e) through (h); adding a new paragraph (d); 
and revising newly redesignated paragraph (f) to read as follows:


Sec. 1303.16  Conduct of hearing.

* * * * *
    (d) Prepared written direct testimony will be used in appeals under 
this part in lieu of oral direct testimony. When prepared written 
direct testimony is submitted by the parties, witnesses must be 
available at the hearing for cross-examination and redirect 
examination. If a party can show substantial hardship in using prepared 
written direct testimony, the Departmental Appeals Board may exempt it 
from the requirement. However, such hardship must be more than 
difficulty in doing so, and it must be shown with respect to each 
witness.
* * * * *
    (f) Any person or organization that wishes to participate in a 
proceeding may apply for permission to do so from the presiding 
officer. This application, which must be made within 30 days of the 
grantee's notice of appeal and request for hearing in the case of the 
appeal of termination or denial of refunding, and as soon as possible 
after the notice of suspension has been received by the grantee, shall 
state the applicant's interest in the proceeding, the evidence or 
arguments the applicant intends to contribute, and the necessity for 
the introduction of such evidence or arguments.
    5. Section 1303.17 is added to read as follows:

[[Page 35558]]

Sec. 1303.17  Time for hearing and decision.

    (a) Any hearing of an appeal by a grantee from a notice of 
suspension, termination or denial of refunding must be commenced no 
later than 120 days from the date the grantee's appeal is received by 
the Departmental Appeals Board. The final decision in an appeal whether 
or not there is a hearing must be rendered not later than 60 days after 
the close of the proceedings, including submission of the briefs and 
oral argument, if allowed or required by the Departmental Appeals 
Board, and completion of final transcripts and any other applicable 
corrections to them.
    (b) All hearings will be conducted expeditiously and without undue 
delay or postponement.
    (c) The time periods established in paragraph (a) of this section 
may be extended if:
    (1) The parties jointly request a stay to engage in settlement 
negotiations;
    (2) Either party requests summary disposition; or
    (3) The Departmental Appeals Board determines that the Board is 
unable to hold a hearing or render its decision within the specified 
time period for reasons beyond the control of either party or the 
Board.

[FR Doc. 98-17296 Filed 6-29-98; 8:45 am]
BILLING CODE 4184-01-P