State of North Carolina s21

STATE OF NORTH CAROLINA IN THE OFFICE OF ADMINISTRATIVE HEARINGS COUNTY OF DURHAM 07 DHR 1342

Kids Academy ) Dawanda Bridges ) Petitioner ) ) vs. ) DECISION ) N. C. Department of Health and Human ) Services, Division of Public Health, ) Child and Adult Care Food Program ) Respondent )

THIS MATTER came on for hearing before Beecher R. Gray, Administrative Law Judge, on September 27, 2007, in Raleigh, North Carolina.

APPEARANCES

For Petitioner: Pro se.

For Respondent: Thomas D. Henry Assistant Attorney General

Whether Respondent had sufficient grounds to suspend Petitioner’s participation in the Child and Adult Care Food Program (CACFP), and whether Respondent had sufficient grounds to propose to terminate Petitioner’s CACFP agreement and disqualify Petitioner from future participation in CACFP.

STATUTES AND RULES

7 C.F.R. § 226.1; 7 C.F.R. § 226.2; 7 C.F.R. § 226.6; 7 C.F.R. § 226.10; 7 C.F.R. § 226.15; 10A N.C.A.C. 43J.0101.

EXHIBITS

Respondent’s Exhibits 1 through 15 were admitted into evidence. 2

BASED UPON careful consideration of the sworn testimony of the witnesses presented at the hearing, along with documents and exhibits received and admitted in evidence and the entire record in this proceeding, the Undersigned makes the following Findings of Fact. In making the Findings of Fact, the Undersigned has weighed all the evidence and has assessed the credibility of the witnesses by taking into account the appropriate factors for judging credibility, including but not limited to the demeanor of the witnesses, any interests, bias, or prejudice the witness may have, the opportunity of the witness to see, hear, know, or remember the facts or occurrences about which the witness testified, whether the testimony of the witness is reasonable, and whether the testimony is consistent with all other believable evidence in the case.

FINDINGS OF FACT

1. The parties stipulated on the record that each received notice of hearing by certified mail more than fifteen (15) days prior to the date of hearing and that notice was proper.

2. The Child and Adult Care Food Program (CACFP) is a federally-funded program administered in North Carolina by Respondent, the North Carolina Department of Health and Human Services, Division of Public Health. The purpose of CACFP is to reimburse day care centers or day care homes for providing meals to enrolled participants.

3. Respondent and the United States Department of Agriculture have entered into a federal-state agreement which binds Respondent to comply with CACFP regulations found at 7 C.F.R. Part 226.

4. Petitioner in this case is Kids Academy, a Durham County facility, and its director, DaWanda Bridges. Petitioner operates an independent child care center and has participated in CACFP since 2003.

5. Petitioner signed an agreement (the “Agreement”) with Respondent and received approval from Respondent on November 2, 2006 to operate CACFP at its center for program year 2006-2007. The Agreement outlines the responsibilities of institutions that participate in CACFP.

6. Under provision I.J.5, the Agreement states that Petitioner agreed to “Accept final financial and administrative responsibility for management of a proper, efficient, and effective food service.”

7. Under provision I.J.11, the Agreement states that Petitioner agreed to “Maintain the following records . . . (o) Daily records listing the number of enrolled participants in attendance, the number of meals served by type to enrolled participants, and menus. {Meals claimed cannot exceed the lesser of daily attendance, enrollment, or the number of meals served} . . . (v) Monthly attendance records of all enrolled participants for each month meals are claimed.” 3

8. Annual “Summary Reports” prepared and maintained by Respondent indicate that, in fiscal year 2006, Petitioner demonstrated a pattern of claiming reimbursement for the same number of meals served within particular months. For July 2006, Petitioner claimed reimbursement for 756 breakfasts, 756 lunches, and 756 snacks. For August 2006, Petitioner claimed reimbursement for 849 breakfasts, 849 lunches, and 849 snacks. For September 2006, Petitioner claimed reimbursement for 766 breakfasts, 766 lunches, and 766 snacks.

9. Respondent’s annual “Summary Reports” indicate that, in fiscal year 2007, Petitioner continued to request reimbursement for identical numbers of meals within particular months. For October 2006, Petitioner claimed reimbursement for 809 breakfasts, 809 lunches, and 809 snacks. For November 2006, Petitioner claimed reimbursement for 753 breakfasts and 753 snacks. For January 2007, Petitioner claimed reimbursement for 708 breakfasts and 708 snacks. For February 2007, Petitioner claimed 739 breakfasts and 739 snacks. For March 2007, Petitioner claimed 821 breakfasts and 821 snacks. For April 2007, Petitioner claimed 684 breakfasts and 684 snacks. For May 2007, Petitioner claimed 811 breakfasts and 811 snacks.

10. Arnette Cowan, supervisor of CACFP for Respondent, testified that when there is a lack of variation in the number of meals that are claimed for reimbursement, the agency describes such a pattern as “block claiming.” Ms. Cowan testified that block claiming is not a per se violation of the program, but that a pattern of block claiming may prompt the agency to further investigate an institution’s CACFP operations and recordkeeping.

11. On June 18, 2007, Respondent sent staff to Petitioner’s center to conduct an unannounced review of Petitioner’s records. Farzi Katkhordeh, one of Respondent’s CACFP consultants, met with a representative of Petitioner’s center. DaWanda Bridges, the director of Petitioner’s center, was not on site at that time. The records sought by Ms. Katkhordeh were also not available for review.

12. Petitioner was instructed to make the records available for review the following day, June 19, 2007. On June 19, 2007, Ms. Katkhordeh returned to Petitioner’s center and obtained copies of the desired records.

13. After obtaining the records, Ms. Katkhordeh compared Petitioner’s attendance records with the numbers of meals that Petitioner had been claiming for reimbursement during the months of October 2006, November 2006, December 2006, April 2007, and May 2007. By comparing the attendance sheets with Petitioner’s “CACFP Daily Meal Count Record For Children,” Ms. Katkhordeh noticed that, on many days within the months at issue, Petitioner was claiming greater numbers of served meals than the number of children actually reflected as present on Petitioner’s attendance records.

14. In a letter dated July 6, 2007 and delivered to Petitioner on July 9, 2007, Ms. Katkhordeh communicated her findings to Petitioner. In addition to finding that Petitioner was claiming meals in excess of attendance, Ms. Katkhordeh found other problems with Petitioner’s operation of CACFP, such as missing or incomplete enrollment documentation and 4 menu-related problems. Ms. Katkhordeh’s letter also informed Petitioner that a number of meals, for which Petitioner had already received reimbursement, were not validly claimed and therefore would be “disallowed.” Attached to Ms. Katkhordeh’s letter were disallowance forms which show the number of disallowed meals and the amount of money that Respondent sought to recover from Petitioner.

15. Ms. Katkhordeh prepared a table summarizing her findings concerning the disparity between Petitioner’s attendance sheets and reported meal counts. For every day in the month of October 2006, Ms. Katkhordeh’s table reflects that Petitioner’s reported meal count was higher than the number of children reported on the attendance sheets. In total, the table shows that Petitioner claimed 134 more breakfasts, 182 more lunches, and 134 more snacks than the number of children in attendance.

16. During the hearing before the Undersigned, Petitioner admitted that the claims for October 2006 were false.

17. As shown by Ms. Katkhordeh’s table, the lack of consistency between Petitioner’s attendance sheets and reported meals counts continued throughout the remaining months at issue. According to Ms. Katkhordeh’s table, on some days Petitioner underreported the number of meals served. However, on many days during November 2006, December 2006, April 2007, and May 2007, Petitioner overreported the number of meals served. Only on very few days would Petitioner’s attendance sheets accurately match her reported meal counts.

18. After creating the table summarizing her findings, Ms. Katkhordeh made some revisions to her initial findings and corrected the dollar amounts owed to Respondent by Petitioner. Ms. Katkhordeh communicated her revisions to Petitioner by letter dated July 27, 2007. After the revisions, Petitioner still owed Respondent money based on Ms. Katkhordeh’s findings, although not all of the meal disallowances were due to the discrepancy with Petitioner’s attendance records. After the revisions, Ms. Katkhordeh still reached a conclusion that Petitioner’s attendance records did not justify reported meal counts.

19. In a letter dated July 2, 2007 and delivered to Petitioner on July 9, 2007, Respondent issued a Notice of Serious Deficiency, informing Petitioner of Respondent’s determination that Petitioner had submitted false claims for reimbursement and that as a result Petitioner was deemed to be “seriously deficient” in its operation of CACFP. The letter stated: “We have also determined that DaWanda Bridges is responsible for the serious deficiencies in the operation of the CACFP since, as owner of Kids Academy, you either knew or should have known of the failure of Kids Academy to comply with CACFP regulatory requirements.” The letter further stated that Petitioner was required to take the corrective action of submitting documentation “to prove that the participants claimed for reimbursement for the months of October 2006, November 2006, December 2006, April 2007 and May 2007 were in attendance and served a meal.” 5

20. In the same letter dated July 2, 2007 and delivered to Petitioner on July 9, 2007, Respondent informed Petitioner that Respondent was proposing to suspend Petitioner’s CACFP participation based on “the risk to CACFP funds posed by the submission of a false or fraudulent claim.” The notice of proposed suspension also informed Petitioner that Petitioner could request a review of the proposed suspension by contacting Becky Sellers-Reeves, the Suspension Review Official.

21. On July 16, 2007, Becky Sellers-Reeves, the Suspension Review Official, received Petitioner’s request for an administrative review of Respondent’s proposal to suspend Petitioner. Both Petitioner and Respondent submitted written materials to be considered by Ms. Sellers- Reeves on the issue of the proposed suspension.

22. Following her review of the written materials submitted by both Petitioner and Respondent, Ms. Sellers-Reeves issued a “Final Administrative Decision,” dated August 6, 2007, which affirmed Respondent’s proposal to suspend Petitioner’s CACFP participation. The Final Administrative Decision contains the following conclusion: “Claims submitted by Petitioner, as reported in the foregoing, were not supported by the available records as required by the regulations. As such, the claims cited in this issue must be considered to be false. Therefore, the undersigned finds that the State agency’s action to propose suspension of Petitioner’s participation in the CACFP was correct and in accordance with 7 CRF [sic] § 226.6.”

23. By letter dated August 9, 2007 and delivered to Petitioner on August 13, 2007, Respondent gave Notice of Proposed Termination and Disqualification to Petitioner. The Notice of Proposed Termination and Disqualification stated that the required corrective action set forth in the July 2nd Serious Deficiency letter went unfulfilled: “The documentation submitted by Kids Academy did not prove that the participants claimed for reimbursement for the months of October 2006, November 2006, December 2006, April 2007 and May 2007 were in attendance and served a meal.”

24. By letter dated August 9, 2007 and delivered to Petitioner on August 13, 2007, Respondent gave Notice of Suspension to Petitioner, thereby suspending Petitioner from CACFP effective August 9, 2007.

25. On August 22, 2007, Petitioner filed a Petition for a Contested Case Hearing with the Office of Administrative Hearings.

26. At the hearing before the Undersigned, DaWanda Bridges testified that she keeps two sets of attendance records at her center. According to Ms. Bridges, one set of attendance records is kept in the office, while another set is maintained with the teachers in their respective classrooms. Ms. Bridges testified that when the agency staff asked to see records, Petitioner’s representative mistakenly provided only the attendance records from the office and overlooked the teachers’ attendance records. Ms. Bridges testified that the teachers’ records are the accurate attendance records and that she relies on the teachers’ records (not the ones from the office). 6

27. While admitting that the October 2006 claims were false, Ms. Bridges testified that one of her cooks was responsible for the recordkeeping problems during October 2006.

28. Ms. Bridges’ testimony that her center maintains two sets of attendance records lacks credibility. Petitioner never produced the set of allegedly “true” attendance records either during the June 2007 review by agency staff or during the July 2007 suspension review proceeding. The allegedly “true” records only materialized after the suspension review. Petitioner’s belated attempt to present the “true” attendance records is unconvincing.

BASED UPON the foregoing Findings of Fact, the Undersigned makes the following:

CONCLUSIONS OF LAW

1. The Office of Administrative Hearings has personal and subject matter jurisdiction of this contested case. The parties received proper notice of the hearing in the matter. To the extent that the Findings of Fact contain Conclusions of Law, or that the Conclusions of Law are Findings of Fact, they should be so considered without regard to the given labels.

2. The North Carolina Department of Health and Human Services, Division of Public Health, Women’s and Children’s Health Section, Nutrition Services Branch, is authorized to administer CACFP in the State of North Carolina. The regulations for the operation of CACFP are contained within 7 C.F.R. Part 226. See 7 C.F.R. § 226.1. The North Carolina Department of Health and Human Services, within its rules, has incorporated by reference 7 C.F.R. Part 226 along with all subsequent amendments and editions. See N.C. Admin. Code tit. 10A, r. 43J.0101.

3. “[C]ontrolling case law places the burden of proof on the petitioner in an administrative contested case proceeding to prove that he is entitled to relief from an agency decision . . . .” Overcash v. N.C. Dep’t of Env’t & Natural Res., __ N.C. App. __, __, 635 S.E.2d 442, 444-45 (2006), disc. review denied, 361 N.C. 220, 642 S.E.2d 445 (2007). Here, the burden of proof rests with Petitioner, Kids Academy and DaWanda Bridges.

4. “Institution means a sponsoring organization, child care center, at-risk afterschool care center, outside-school-hours care center, emergency shelter or adult day care center which enters into an agreement with the State agency to assume final administrative and financial responsibility for Program operations.” 7 C.F.R. § 226.2. Kids Academy is an “institution” as defined in 7 C.F.R. § 226.2.

5. A “responsible principal” is “[a] principal, whether compensated or uncompensated who the State agency or FNS determines to be responsible for an institution’s serious deficiency.” 7 C.F.R. § 226.2. As director/owner of Kids Academy, DaWanda Bridges is a responsible principal. 7

6. As a CACFP institution, Petitioner was required to keep “[d]aily records indicating the number of participants in attendance and . . . the time of service meal counts, by type (breakfast, lunch, supper, and snacks), served to center participants.” 7 C.F.R. § 226.15(e)(4). See also 7 C.F.R. § 226.15(e) (“Each institution shall establish procedures to collect and maintain all program records required under this part, as well as any records required by the State agency.”). Pursuant to Petitioner’s 2006-2007 CACFP Agreement with Respondent, Petitioner was required to maintain “[d]aily records listing the number of enrolled participants in attendance” and “[m]onthly attendance records of all enrolled participants for each month meals are claimed.” The preponderance of the evidence shows that Petitioner had ample notice of its obligation to maintain proper attendance records.

7. In addition, Petitioner was obligated to certify that all claims for reimbursement were correct and supported by available records. See 7 C.F.R. § 226.10 (“In submitting a Claim for Reimbursement, each institution shall certify that the claim is correct and that records are available to support that claim.”).

8. By entering into the Agreement with Respondent, Petitioner agreed to comply with the terms of the Agreement and all applicable federal and state laws, regulations, and policies governing CACFP.

9. Given the discrepancy between Petitioner’s attendance records and the number of meals claimed for reimbursement, Respondent made a reasonable and rational determination that Petitioner submitted false claims for reimbursement. Respondent, moreover, had adequate grounds to declare Petitioner’s CACFP operations to be “seriously deficient” pursuant to the list of “serious deficiencies” set forth in 7 C.F.R. § 226.6(c)(3)(ii). See 7 C.F.R. § 226.6(c)(3)(ii)(F), (H) (noting that “serious deficiencies” include a “[f]ailure to maintain adequate records” and “[c]laiming reimbursement for meals not served to participants”). See also 7 C.F.R. § 226.6(c) (5)(ii) (“The submission of a false or fraudulent claim constitutes a serious deficiency as set forth in paragraph (c)(3)(ii) of this section, which lists serious deficiencies for participating institutions.”).

10. Given that Petitioner did not fulfill the required corrective action (i.e., the submission of documentation proving that participants claimed for reimbursement were actually in attendance and served a meal), Respondent acted properly in issuing a Notice of Proposed Termination and Disqualification to Petitioner. This action was authorized under 7 C.F.R. § 226.6(c)(3)(iii)(C), which provides as follows: “If timely corrective action is not taken to fully and permanently correct the serious deficiency(ies), the State agency must notify the institution's executive director and chairman of the board of directors, and the responsible principals and responsible individuals, that the State agency is proposing to terminate the institution's agreement and to disqualify the institution and the responsible principals and responsible individuals.”

11. Given Respondent’s reasonable determination that Petitioner had submitted false claims, and given the Suspension Review Official’s decision upholding Respondent’s 8 determination, Respondent acted properly in issuing a Notice of Suspension to Petitioner, effective August 9, 2007. The initiation of suspension proceedings against Petitioner was warranted under 7 C.F.R. § 226.6(c)(5)(ii)(A), which provides: “If the State agency determines that an institution has knowingly submitted a false or fraudulent claim, the State agency may initiate action to suspend the institution's participation and must initiate action to terminate the institution’s agreement and initiate action to disqualify the institution and the responsible principals and responsible individuals (in accordance with paragraph (c)(3) of this section).” Once the agency’s proposed suspension has been upheld by a neutral Suspension Review Official, “the State agency must suspend the institution's participation (including all Program payments), effective on the date of the suspension review decision.” 7 C.F.R. §226.6(c)(5)(ii) (D).

12. Accordingly, the preponderance of the evidence shows that the Notice of Proposed Termination and Disqualification and the Notice of Suspension were reasonable, rational, and appropriate actions taken in conformity with governing federal regulations.

13. Respondent used proper procedure and acted as required by law or rule. Respondent did not act arbitrarily or capriciously.

BASED UPON the foregoing Findings of Fact and Conclusions of Law, the Undersigned makes the following:

DECISION

There is sufficient evidence in the record to properly and lawfully support the Conclusions of Law cited above. Based on those conclusions and the facts in this case, it is the decision of the Undersigned that Respondent has not failed to use proper procedure or failed to act lawfully. Respondent did not act arbitrarily or capriciously in issuing a Notice of Proposed Termination and Disqualification and Notice of Suspension to Petitioner.

NOTICE

The agency making the final decision in this contested case is the North Carolina Department of Health and Human Services, Division of Public Health.

The agency is required to give each party an opportunity to file exceptions to this decision issued by the Undersigned, and to present written arguments to those in the agency who will make the final decision. N.C. Gen. Stat. § 150B-36(a).

In accordance with N.C. Gen. Stat. § 150B-36, the agency shall adopt each finding of fact contained in the Administrative Law Judge's decision unless the finding is clearly contrary to the preponderance of the admissible evidence. For each finding of fact not adopted by the agency, the agency shall set forth separately and in detail the reasons for not adopting the finding of fact and the evidence in the record relied upon by the agency in not adopting the finding of fact. For 9 each new finding of fact made by the agency that is not contained in the Administrative Law Judge's decision, the agency shall set forth separately and in detail the evidence in the record relied upon by the agency in making the finding of fact.

The agency shall adopt the decision of the Administrative Law Judge unless the agency demonstrates that the decision of the Administrative Law Judge is clearly contrary to the preponderance of the admissible evidence in the official record.

This the 19th day of October, 2007.

______Beecher R. Gray Administrative Law Judge