Fort Belknap Community Council, DAB No. 1153 (1990)

Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Appellate Division

SUBJECT: Fort Belknap Community
DATE: May 9, 1990
Council Docket No. 89-237
Audit Control No. CIN-A-08-89-06459
Decision No. 1153

DECISION

The Fort Belknap Community Council (Grantee) appealed a determination by
the Office of Human Development Services (Agency) disallowing $7,160 of
Grantee's Head Start grant for the program year ending September 30,
1988. The disallowance was based on an audit finding that only 88.2% of
the Grantee's enrollees were from low-income families. The Agency found
that the Grantee had not complied with 45 C.F.R. 1305.4 (1987), which
requires that at least 90% of each Head Start program's enrollees be
from low-income families. The disallowance was reduced to $3,978 on the
basis of additional documentation submitted by the Grantee, from which
the Agency concluded that 89% of the Grantee's enrollees were from
low-income families. The disallowance amount was computed by
multiplying the funds awarded for the program year ($397,761) by 1%, the
excess percentage of funds spent for ineligible children. As explained
below, we sustain the disallowance of $3,978.

Applicable Authority

Section 9840(a)(1) of 42 U.S.C. provides that the Secretary of the
Department of Health and Human Services (Department) shall by regulation
prescribe eligibility criteria for the Head Start program, and that such
criteria may provide that programs may include the participation of
families which do not meet the low- income criteria "to a reasonable
extent."

Under the program regulations, "a reasonable extent" means that no more
than 10% of the children participating in the program may come from
families that do not meet the low-income criteria. 45 C.F.R. 1305.4.

Head Start grantees are required by 45 C.F.R. 1305.7 to determine the
financial eligibility of prospective enrollees before allowing their
participation; the Grantee must verify the income, through examination,
of any of the following: Individual Income Tax Forms 1040, W-2 forms,
pay stubs, pay envelopes, written statements from employers, or
documentation showing current status as recipients of public assistance.
See also 45 C.F.R. 1305.6(a). Children remain eligible for
participation through the enrollment year of their eligibility
determination, and for the immediately succeeding enrollment year. 45
C.F.R. 1305.6(b).

Background

Based on an audit report for the program year ending September 30, 1988,
the Agency found that, out of the 136 children served, the grantee
provided services to 16 children whose families did not meet the
low-income requirements. Consequently, the Agency determined that the
Grantee served an excessive number of ineligible children under its Head
Start program in violation of 45 C.F.R. 1305.4.

The Grantee provided additional income documentation on two children.
The Agency accepted the documentation regarding one child and reduced
the disallowance to $3,978. The Agency did not accept the income
documentation for the other child. Therefore, the Agency indicated that
the Grantee still did not meet the requirement that 90% of the children
served by the program be from families meeting the low-income
requirements.

Analysis

The Grantee did not dispute that the legal requirements for the Head
Start program mandate that at least 90% of the children enrolled in the
Head Start program be from low-income families. Rather, the Grantee
claimed that it provided documentation for the one child still in
dispute which proved that the income of the child's family was within
the low-income guidelines established by the Department.

Consequently, the sole issue before us is whether the documentation
presented established that the child's family met the income
requirements for the year of enrollment and, therefore, that 90% of the
children in the program were from low-income families.

The Agency reviewed the additional documentation submitted for the child
and determined it was insufficient to establish that the child was
eligible for the year of enrollment. We agree.

This child was initially enrolled in Head Start in October 1986 for the
program year ending September 30, 1987. By regulation, his family's
income eligibility was required to be established in this first year of
the child's enrollment, and he would remain eligible for the immediately
succeeding year (the program year ending September 30, 1988), which was
the year the agency audited. 45 C.F.R. 1305.6(a) and (b). In 1986, the
income limit for a family of five was $12,880. The Grantee presented an
United States Department of Agriculture (U.S.D.A.) family income
information statement for this child, filled out at the time of
enrollment, which indicated monthly income of $880 for the child's
father and $600 for the child's mother, amounting to a yearly income of
approximately $17,000. Exhibit (Ex.) I. This document had a handwritten
note saying, "Income changed. See attached." No attachments, however,
were presented in these proceedings other than a pay check stub for one
pay period for nine hours worked for the mother; therefore, there was no
explanation contemporaneous with the time the statement was filled out
to indicate how and to what extent the income had changed.

The Grantee contended that the information given by the mother
indicating her monthly wages as $600 a month represented employment that
was only briefly held by the mother. The mother stated in an affidavit
prepared for this appeal that the job lasted less than one month.
Affidavit of Melanie Hawley (Ex. J.). The mother also stated that the
family's records for 1986 may have been accidentally "thrown in the
fire" by their child and that she could not provide further
documentation for 1986. Affidavit of Melanie Hawley. As a result, the
Grantee claimed that there was no documentation verifying this family's
income for the enrollment year.

The Grantee presented instead copies of 1985 W-2 statements for this
family. Ex. H. The mother stated in her affidavit:

7. That the amount [$10,852.50] set forth in the W-2 statement
for the year 1985 . . . constitutes all income received by
their family that calendar year.

8. That affiant and her husband have earned similar amounts in
succeeding years, and believes that the income represented in
the W-2 statements for 1985 is a true and accurate
representation of their income for the years when the
eligibility of [the child] was determined.

Affidavit of Melanie Hawley, Ex. J.

These statements, however, and the 1985 W-2 forms are insufficient to
establish the family's low-income eligibility for 1986 as required by 45
C.F.R. 1305.6. The regulations specifically require that the Grantee
verify family income before determining that a child is eligible. 45
C.F.R. 1305.7. Verification of income "shall include examination" of
any of the following kinds of documents: Individual Income Tax Forms
1040, W-2 forms, pay stubs, pay envelopes, and written statements from
employers. The Grantee must sign and maintain a statement identifying
which documents were examined and stating that the child is eligible.
There is no indication that the Grantee ever verified the income
information for 1986 as required. 1/ Rather, the only documentation the
Grantee presented for 1986 was the U.S.D.A. family income information
statement which indicated income exceeding the low-income limits. The
attached pay stub is not identified to that year, nor does it clearly
indicate what the mother's monthly income was.

Furthermore, the U.S.D.A. document casts considerable doubt on whether
the income of the child's family for 1986 met the low-income limits,
since it identified income substantially in excess of that limit.
Consequently, the affidavit of Melanie Hawley, the mother, is
insufficient in and of itself to establish that the family's income was
within the low-income limits without any of the previously mentioned
documentation relating to the year 1986. The 1985 W-2 forms submitted
by the Grantee relate only to the family's income for 1985. While the
mother stated that she and her husband earned similar amounts in
succeeding years to 1985, the Grantee did not present W-2 forms for the
family for the year 1986 or 1987 to support this statement, nor ask that
the mother state in her affidavit the names of the employers for whom
she and her husband worked during 1986, and their approximate wages for
that year.

The Grantee has acknowledged the difficulty it has had in securing
documentation from the family and with the loss of some of their
documents. There was, however, no explanation given why other methods
could not have been employed for securing the required information. For
example, the family could have been requested to write the Internal
Revenue Service for copies of their 1986 Individual Income Tax Form
1040.

More importantly, the record presented indicates that the Grantee
apparently failed in the first instance to verify the family's income
for 1986 as required by 45 C.F.R 1305.7. The subsequent documentation
and the affidavit proffered in these proceedings simply do not establish
that this family met the low-income limits for the year of enrollment.
Therefore, the Grantee did not meet the requirement that 90% of the
children enrolled in its program be from low-income families.

Conclusion

For the foregoing reasons, we uphold the disallowance of $3,978.

_____________________________ Judith A.
Ballard

_____________________________ Norval (John)
D. Settle

_____________________________ Alexander G.
Teitz Presiding Board Member

1. The Grantee did not present the Grantee's Income Verification
Documentation Form for this child, although such a form was presented
with the documentation for the other child who the Agency determined was
in fact eligible. See Ex. D. The form indicates that an employee of
the Grantee has verified the income documentation of a child's family.
The form also contains a checklist of the different documentation
specified in the regulation which should be verified by the Head Start
grantee, and provides that an employee first check off which one or more
of the documentation was reviewed, and then sign the form to verify that
the review was performed. Ex.