[Federal Register Volume 65, Number 21 (Tuesday, February 1, 2000)]
[Rules and Regulations]
[Pages 4763-4770]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-2049]


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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:  Final Rule.

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[[Page 4764]]

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

EFFECTIVE DATES:  March 2, 2000.

FOR FURTHER INFORMATION CONTACT:  Douglas Klafehn, Deputy Associate 
Commissioner, Head Start Bureau, Administration on Children, Youth and 
Families, 330 C Street, SW, Washington, DC 20447; (202) 205-8572.

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 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. Also, section 645A of the Head Start Act provides 
authority to fund programs for families with infants and toddlers. 
Programs receiving funds under the authority of this section are 
referred to as Early Head Start programs. 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 1998, Head Start served 823,000 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 Major Provisions of the Final Rule

    The authority for this final rule is section 646 of the Head Start 
Act (42 U.S.C. 9841), as amended by Public Law 103-252, Title I of the 
Human Services Amendments of 1994.
    ACF's changes to the regulations are 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 for conducting the administrative 
hearing and issuing a decision. The final rule implements these 
requirements.
    Overall, the final rule on timelines, including the conforming 
changes to other affected sections of the appeals requirements in part 
1303, will save time and expenses while continuing to allow due process 
to grantees appealing a proposed termination or denial of refunding. 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 hearing. Under the final rule on 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. Rulemaking History

    On June 30, 1998, the Administration on Children, Youth and 
Families (ACYF) published a Notice of Proposed Rulemaking (NPRM) in the 
Federal Register (63 FR 35554) proposing: (1) Timelines for the 
conducting of administrative hearings on adverse actions taken against 
Head Start grantees; and (2) additional changes to the regulations 
designed to expedite the appeals process. Copies of the proposed rule 
were mailed to all Head Start grantees and delegate agencies. 
Interested parties were given 60 days in which to comment. ACYF 
received comments from three Head Start grantees and a private law firm 
interested in Head Start appeals.

IV. Section by Section Discussion of the Comments on the NPRM

    Of the four parties commenting on the NPRM, one was a general 
expression of support for the proposed rule, while the other comments 
were directed at specific sections of the NPRM. Only those sections for 
which comments were made or to which technical changes were made are 
discussed below. The discussion of the sections follows the order of 
the NPRM table of contents and a notation is made wherever the section 
designations have been changed or deleted in the final rule.

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

Section 1303.14(c)

    Comment: One commenter agreed that ACF should provide detailed 
notices of termination of refunding. However, the commenter believes 
that changes to the proposed rule would make it more equitable and 
would help to streamline the appeals process. The comment states that 
implicit in the Head Start Act's requirement for a full and fair 
hearing is a requirement that sanctions are available to the 
Departmental Appeals Board (The Board) for application to either party. 
Accordingly, the significant sanctions for various failures as detailed 
in the NPRM should be equally applicable to ACF. Without such 
uniformity, the commenter stated that the regulations would be in 
violation of the Head Start Act's requirement for a fair hearing 
process.
    Response: Sanctions may be applied to both parties under the 
proposed regulations. It is unclear what additional sanctions the 
commenter wishes imposed on the public if the Federal agency should 
fail to comply with the requirements of the proposed provisions. What 
ACF has proposed are sanctions that would compel the issuance of clear 
statements of the findings and the factual and legal bases for them. We 
believe this is fair to grantees while permitting the removal of poor 
grantees from the program, both of which are within the statutory 
purposes of the program. For these reasons, we have made no changes 
based on this comment.

Section 1303.14 (c)(i)  Notice of Termination

    Comment: One commenter is concerned that the notice requirements 
being imposed upon ACF are not written with the same degree of 
specificity as Sec. 1303.14(d)(1-7) pertaining to the requirements for 
Grantee Notices of Appeal. The commenter believes that ACF should be 
required to submit the termination in writing, submit the findings of 
fact, relevant citations for violations, and notice of right to appeal.
    Response: The current regulations require specific statements about 
proposed actions. The proposed regulations would require specific 
findings of fact and citations of legal and policy provisions 
applicable to the

[[Page 4765]]

proposed action. We believe this is adequate. Moreover, if for any 
reason they are not adequate, the Departmental Appeals Board can 
require greater specificity. We note also that the proposed and 
existing regulations require that termination and denial of refunding 
letters give notice of appeal rights.
    The proposed rule requires that the notice spell out in specific 
terms the legal basis for the termination. The object is to reduce the 
need for the grantee to supplement its initial notice with additional 
filings after the appeal is filed, which will streamline and expedite 
the appeals process. Therefore, for the foregoing reasons, we have not 
changed this section in the final rule.

Sections 1303.14(c)(6) and 1303.15(d)(4)  Sanctions

    Comment: Two commenters are concerned that these sections, though 
they provide sanctions to be levied against ACF, do not provide for a 
timeline upon which ACF is barred from reissuing the termination. The 
commenters state that this section does not offer the deterring effect 
as intended and that it imposes responsibilities upon ACF, but fails to 
provide the enforcement element. However, the sanctions provided in 
Sec. 1303.14(e) against the grantee/delegate are much more punitive 
than those provided against ACF.
    Response: For the reasons stated above in response to the previous 
comment, we believe that the sanctions proposed against ACF in the 
event that a notice of termination is deficient provide a fair remedy. 
Furthermore, it would be inappropriate to penalize the public due to an 
error by the Federal agency. Keeping an unqualified grantee in the 
program would do just that. Providing a corrected notice avoids that 
and gives the grantee all the notice due it. Therefore, we have not 
made any changes.

Section 1303.14(d)(1-5)  Document Production

    Comment: One commenter was particularly concerned that 
Sec. 1303.14(d)(5), which requires the grantee to submit a detailed 
request and justification for the production of documents, is unduly 
burdensome and serves as an effort to impede its ability to address the 
many issues against it in the notice of termination. The commenter 
believes that it should be sufficient that the request for the 
production of documents is relevant to the issues at hand. The 
commenter states that Sec. 1303.14(c)(i) sets forth the requirements 
for the notification of the termination of the grant. It also believes 
that if Sec. 1303.14(c)(i) was specific it would provide the grantee 
sufficient notice and allow the grantee to be more specific in its 
appeal. The commenter believes that as the regulation is now written, 
it should be fair to assume that any request for documents is in 
support of an anticipated defense in the appeal. Therefore, the 
commenter believes it should follow that a grantee/delegate agency 
should be able to request documents that are relevant to the appeal. 
Furthermore, the commenter believes that grantees should not be 
required to lay out their arguments before they are allowed to answer 
the allegations. The commenter believes this regulation as it is now 
written essentially requires that.
    Response: We do not believe these objections are meritorious. 
Current practice and the proposed regulations require specific notice. 
Also, requiring a showing of relevance and reasonable basis for 
believing a document exists is not equivalent to requiring a full 
explanation of a grantee's arguments. Even if it were, the parties have 
to lay out their arguments or positions at the outset anyway. We also 
note the fact that non-renewal and termination actions rarely arise 
overnight. Rather, grantees have been in contact with ACF over the 
specifics of non-compliance deficiencies. Considerable exchange of 
views and information is generally the case.
    Generally, on-site reviews have been conducted and the findings 
shared with the grantee, including the bases for those findings. 
Morever, with respect to documentation, the vast majority of the 
documents are those obtained by ACF from the grantee itself. It has 
been ACF's experience that considerable time is wasted on so-called 
``fishing expeditions'' when blanket requests are filed for documents 
without any objective reason to believe they exist. The purpose of the 
regulation is to avoid those situations.
    There is no desire to deny a party the ability to request and 
obtain relevant documents. There is a desire to avoid unfounded and 
generalized requests that are not based on some reasonable basis to 
believe the documents exist.
    ACF would also note that generally it files all documents in its 
possession that pertain to the case, except those that are privileged. 
It does this even when it does not expect to rely on a particular 
document. The purpose in doing this is to avoid haggling over 
production of documents and to expedite the process. This also helps 
ensure that the Board has the fullest possible picture of the grantee 
and the dispute, and that the documents are available should they 
become relevant to an issue during the course of the proceedings.

Section 1303.14(d)(1-7)

    Comment: One commenter suggests that the rule be clarified to 
indicate whether the grantee's funding will be affected during the 
appeals process and whether the proposed change would supplement the 
existing section or act as a substitute to the current section.
    Response: The NPRM proposes no changes in this regard and current 
regulations provide for continued funding to a grantee during the 
appeals process unless the grant has also been suspended.

Sections 1303.14(d)(e) and 1303.15(h)  Appeal

    Comment: We received two comments on this section. The first 
indicated that the increase in time for a grantee to file an appeal 
from 10 to 30 days is clearly warranted. Nevertheless, the commenter 
believes that the new requirements for the content of the appeal not 
only are unworkable but also are prejudicial to grantees because they 
will force grantees, even more than before, to do a dump of all 
documents in their possession remotely related to their appeal in order 
to ensure that all documents necessary to a grantee's case are 
available at the hearing. The commenter believes that an appropriate 
change to the proposed rule would be to provide for a process similar 
to that already informally employed by the Board-- an initial 
submission of documents followed by a final submission after the 
conclusion of discovery and rulings on preliminary motions. Such a 
process is very common in judicial and administrative proceedings and 
provides the parties a real opportunity to respond to fully developed 
issues.
    Second, the commenter suggests that the requirement that the 
grantee provide all documents that are relevant is also prejudicial in 
that any documents not immediately submitted will be excluded under the 
proposed rules. Thus, to mount an effective defense, a grantee will be 
forced to expend significant sums on attorney time and other costs in 
order to search files for any documents remotely related to the appeal 
and submit them. The commenter argues, therefore, that the result of 
this proposed rule will be to give grantees a Hobson's choice of either 
high costs to file an appeal (costs that are largely not covered by 
Head Start) or exclusion of potentially crucial documents.

[[Page 4766]]

    Response: We have considered the comments objecting to the 
requirement that grantees submit all relevant documents with their 
original appeals. The crux of the objection is that this will force 
grantees to dump all documents that might conceivably be relevant, 
resulting in excessive search time and, presumably, an unduly 
cumbersome record, although the latter point was not raised. We believe 
there is some merit to this comment.
    In response to this comment, we have changed Sec. 1303.14(d) by 
adding a new paragraph (6) and renumbering proposed paragraphs (6) and 
(7) as (7) and (8), respectively. Also, for purposes of clarity, we 
have added a time-frame for ACF's response to the appeal. The new 
paragraph (6) reads as follows:

    Grantees may submit additional documents within 14 days of 
receipt of the documentation submitted by ACF in response to the 
grantee's appeal and submission of documents. The ACF response to 
the appeal and initial submittals of the grantee shall be filed no 
later than 30 days after ACF's receipt of the material. In response 
to such a submittal by the grantee, ACF may submit additional 
documents should it have any, or request discovery in connection 
with the new documents, or both, but must do so within 10 days of 
receipt of the additional filings.

    ACF believes this substantially meets the concerns of the 
commenter, while still providing for expeditious conduct of the appeal. 
It also permits ACF to obtain more information on the new documents if 
it is unfamiliar with them. ACF does not believe any change to 
paragraph (e) of the regulation is necessary as a result of the change. 
The sanctions would apply if a grantee did not submit the documents at 
the outset, or within 14 days of receipt of the ACF initial filing, if 
the conditions for an exception do not exist. Of course, these 
provisions do not mean that all documents submitted by the parties are 
automatically entitled to be admitted into the record. The Board may 
exclude irrelevant documents, or those for which authenticity cannot be 
established, or for other appropriate reasons as the Board determines.

Section 1303.15(d)(4)  Appeal by a Grantee From a Denial of Refunding

    Comment: One commenter objects to 30 days for a grantee to 
initially appeal and suggested 60 days instead, with a possibility of 
one 30-day extension due to extreme unavoidable circumstances. In order 
to make the notice from ACF more useful, the commenter proposes that 
ACF be required to structure its notice of termination or denial of 
refunding in a manner similar to a complaint in Federal court with 
numbered paragraphs containing factual allegations. The commenter 
states that in this way, as in a court of law, a grantee can provide a 
specific response to each factual allegation and between the 
termination notice and the grantee's responses, it will be clear what 
facts, if any, are clearly in dispute.
    The increase in time for a grantee to file an appeal from 10 to 30 
days is clearly warranted. Nevertheless, the commenter believes that 
the new requirements for the content of the notice of appeal not only 
are unworkable but also are prejudicial to grantees.
    Response: The proposed revision to paragraph (d) clarifies the 
existing rule by requiring ACF to state in specific details the legal 
basis of the decision to deny refunding to a grantee. As stated in the 
NPRM, the objective is to reduce the need for the grantee to supplement 
its initial appeal with additional filings and thereby streamline and 
expedite the appeals process.
    The increase in the amount of time to appeal a termination from 10 
to 30 days is being made to give grantees more time in which to develop 
their initial appeal submission, which will allow for quicker 
resolution of appeals. The comment presented by a public agency 
regarding this change states that it is fair and supports the proposed 
change. If more time is needed, it may be requested of the Departmental 
Appeals Board in advance of the due date in accordance with 
Sec. 1303.8. Further, ACF does not believe that using court practice as 
a model is either necessary or desirable. Administrative proceedings 
are generally designed to be less formal and to be expeditious, goals 
not furthered by the suggestion. In view of the foregoing, we did not 
change the rule.

Section 1303.14(h)  Right To Participate in Hearing

    Comment: One commenter believes that the ability of a Head Start 
grantee to participate in the hearing process should not be impacted by 
the fact that they are a delegate agency. The commenter believes 
delegate agencies should be able to participate as a matter of right.
    Response: We do not support this suggestion. First, the appeal 
right by statute is vested in a grantee and not in its delegate 
agencies. Secondly, a grantee may elicit evidence and testimony from 
delegate agencies and their personnel in support of its appeal, if such 
evidence and testimony is available, and present that as part of its 
own case. Thirdly, the proposed regulation does afford a delegate whose 
conduct is the source of grounds for non-renewal or termination the 
right to participate. ACF does not see the need to automatically expand 
the number of parties in a proceeding. Any other party may petition the 
Board to participate under the proposed regulations. It is ACF's intent 
that under those circumstances the Board will apply the tests under 45 
CFR 16.16 in determining the right to participate. One of those 
conditions is that the intervention not cause undue delay. We would 
note that the costs of intervention by a delegate agency that is not 
appearing as a matter of right are not allowable costs under the 
grantee's grant.

Section 1303.15(d)(3)  Appeal by a Grantee From Denial of Refunding

    In reviewing the NPRM, we realized that we had inadvertently failed 
to revise this paragraph to conform it to the comparable provision on 
terminations. The termination provisions are in Section 1303.14(c). We 
have done so in the final rule. We believe it is clear that the intent 
with respect to termination and non-renewal actions was to have them be 
as identical as possible since they are, for all practical purposes, 
identical actions. They are separately provided for due to the Head 
Start Act's reference to them as separate actions. We have made the 
assumption that those who commented on the termination provisions would 
have the same comments about them in the denial of refunding section. 
Our responses to those comments are the same here.

Section 1303.16(d)  Conduct of Hearing

    Comment: One commenter said that ACF's justification for the use of 
written direct testimony is that it is more efficient and reduces the 
hearing time and expense. However, the commenter maintains that ACF and 
the agency/delegates still will have to provide written testimony, 
which can be more time consuming and expensive.
    Further, the commenter maintains that written direct testimony does 
not allow for the many nuances that may arise with live direct 
testimony. Also, the commenter argues that the use of prepared direct 
testimony does not provide active participation by the presiding 
officer.
    One commenter believes that prepared testimony is prejudicial to 
grantees.
    Response: ACF does not believe that the comments warrant a change 
in the regulations as proposed. ACF has experience with the use of 
prepared direct testimony in these and similar cases.

[[Page 4767]]

    That experience does not support the commenter's view that it 
impairs the Board's ability to assess credibility and the demeanor of 
witnesses. While there may be rareinstances when a key witness is not 
subject to cross-examination or questioning by the Board, in our view 
that would be a rare occurrence. As to the cost savings, by way of 
clarification not only is there a reduction in transcript costs, but 
there is also a reduction in travel costs for all the Federal personnel 
and Federal witnesses.
    Moreover, as we noted in the preamble to the NPRM, the use of 
prepared direct testimony reduces the time of the hearing. A major 
public benefit of this is that Federal personnel are therefore away 
from their other duties for less time. This means there is less 
disruption in the conduct of Federal business. Since these personnel 
also have to provide services to other grantees, this is another major 
benefit of the use of prepared direct testimony.
    As to the comment that use of prepared direct testimony will 
preclude a grantee from making its case to the Board, we know of no 
evidence to support that statement. Our experience is that a grantee 
can make its case to the Board using prepared direct testimony. ACF has 
the same view of the comment that the use of prepared direct testimony 
will cost grantees more money than live direct testimony. Even if true, 
however, we do not believe thatthose costs would be comparable to the 
added costs to taxpayers of having to pay added travel costs of keeping 
Federal personnel and witnesses on-site during a week or more of live 
direct testimony.
    ACF does not believe that the use of prepared direct evidence 
favors or prejudices any party. The provision operates equally on all 
parties with respect to the presentation of evidence. Observing the 
demeanor of witnesses is a consideration that applies to all witnesses 
and that intrinsically does not work for or against one party over 
another. Therefore, ACF does not consider the comments as warranting 
any change to the proposed regulations.
    We believe the comment that the proposal would limit a grantee's 
ability to advocate for itself and children and their families is not 
valid. First, as noted above, our experience is that grantees can 
advocate for themselves when the procedure of prepared direct testimony 
is used. Second, ACF is charged with advocating for children and their 
families as well. Therefore, they are not without advocacy on their 
behalf. Indeed, concern over thechildren and families is the motivating 
factor in the intense efforts ACF engages in to secure interim grantees 
to take over services after non-renewal or termination of a grant. 
Moreover, as the District Court recently noted in denying a preliminary 
injunction brought by a Head Start grantee whose grant was terminated, 
a grantee does not have standing to raise the concerns of children and 
their families in receiving Head Start services from a particular 
provider. Mansfield-Richland-Morrow Total Operation Against Poverty v. 
Donna E. Shalala, ``Memorandum Opinion,'' p. 18, November 25, 1998.

Section 1303.17  Time for Hearing and Decision

    Comment: Four commenters expressed concern regarding the amount of 
time for a hearing and decision. According to the commenters, the new 
timelines proposed by ACF have two defects.
    First, the commenters believe that the rule is not clear concerning 
the 60-days for a decision; specifically,whether the 60-days begins to 
run after briefing and oral arguments or from some other point in time.
    Second, with respect to the overall timelines, there was a concern 
that the timelines would drive up the cost of hearings to grantees. By 
requiring complex litigation to be concluded in approximately seven to 
nine months, it is stated that ACF will succeed in forcing grantees to 
utilize more attorneys to keep up with the demands of such litigation.
    Response: We changed the regulation to clarify that the 60 days for 
a decision starts when the record for an appeal is closed. The record 
is closed when the last permissible submission is received by the 
Board.
    In response to the first part of this comment we have changed the 
last sentence of Sec. 1303.17(a) to provide that the 60 day period for 
the decision begins to run after the Board's receipt of the last 
permissible submittal. The submittal of unauthorized material will not 
stay or prolong the due date of the final decision.
    There is no reason to believe that the total amount of attorney 
time devoted to an appeal will change because of the timelines. The 
fact it will be expended over a shorter period of time does not 
necessarily mean more attorney time will be required or that costs will 
be greater. The intent of Congress is to expedite these appeals and 
that is of prime importance.

V. 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 final 
rule 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, Public Law 104-13, all 
Departments are required to submit to the Office of Management and 
Budget (OMB) for review and approval any reporting or recordkeeping 
requirements inherent in a proposed or final rule. This final rule 
contains information collection in Sec. 1303.14, (written grantee 
appeal) Sec. 1303.15 (appeal of denial of refunding) and 
Sec. 1303.16(d) (written direct testimony) which have been submitted to 
OMB for review and approval.
    The respondents to the information collection requirements in the 
rule are Head Start grantees, which may be State or local nonprofit or 
for-profit agencies or organizations.
    The Department needs to require the collection of certain 
information to conform to the administrative rules that provide for a 
hearing by grantees against which adverse action is contemplated.
    The grantees that will be affected by these requirements will be 
those for which the Department is contemplating adverse action either 
by terminating financial assistance or by denying an application for 
funding.
    Based upon our experience we estimate that adverse action would be 
contemplated against ten grantees in a given year. A written grantee 
appeal (addressed in Sec. 1303.14) and an appeal of denial of refunding 
(addressed in Sec. 1303.15) is a one time activity which

[[Page 4768]]

is preceded by one action which is to research the allegations by 
checking program records and preparing a written response. We 
previously estimated the time it would take to research records and 
prepare a letter at 16 hours per instance for a total burden of 160 
hours, approved under OMB control number 0980-0242. There is no new 
additional burden anticipated in the final rule for these sections.
    A new burden is estimated for written direct testimony (addressed 
in Sec. 1301.16(d)). We estimate an additional burden of 10 hours for 
each grantee for a total new burden of 100 hours annually.
    The Administration for Children and Families (ACF) will consider 
comments by the public on these proposed collections of information in:

    Evaluating whether the proposed collections are necessary for 
the proper performance of the functions of ACF, including whether 
the information will have practical utility;
    Evaluating the accuracy of ACF's estimate of the burden of the 
proposed collections of information, including the validity of the 
methodology and assumptions used;
    Enhancing the quality, usefulness, and clarity of the 
information to be collected; and
    Minimizing the burden of the collection of information on those 
who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technology, e.g., 
permitting electronic submission of responses.
    OMB is required to make a decision concerning the collection of 
information contained in this final rule between 30 and 60 days after 
publication of this document in the Federal Register. Therefore, a 
comment is best assured of having its full effect if OMB receives it 
within 30 days of publication. Written comments to OMB for the proposed 
information collection should be sent directly to the following: Office 
of Management and Budget, Paperwork Reduction Project, 725 17th Street, 
NW, Washington, DC 20503, Attn: Wendy Taylor.

Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1532) requires that a covered agency prepare a budgetary impact 
statement before promulgating a rule that includes any Federal mandate 
that may result in the expenditure by State, local, and Tribal 
governments, in the aggregate, or by the private sector, of $100 
million or more in any one year.
    If a covered agency must prepare a budgetary impact statement, 
section 205 further requires that it select the most cost-effective and 
least burdensome alternative that achieves the objectives of the rule 
and is consistent with the statutory requirements. In addition, section 
205 requires a plan for informing and advising any small government 
that may be significantly or uniquely impacted by the proposed rule.
    We have determined that this final rule will not impose a mandate 
that will result in the expenditure by State, local, and Tribal 
governments, in the aggregate, or by the private sector, of more than 
$100 million in any one year. Accordingly, we have not prepared a 
budgetary impact statement, specifically addressed the regulatory 
alternatives considered, or prepared a plan for informing and advising 
any significantly or uniquely impacted small government.

Congressional Review of Rulemaking

    This rule is not a ``major'' rule as defined in Chapter 8 of 5 
U.S.C.

Executive Order 13132

    Executive Order 13132 on Federalism applies to policies that have 
federalism implications, defined as ``regulations, legislative comments 
or proposed legislation, and other policy statements or actions that 
have substantial direct effects on the States, on the relationship 
between the national government and the States, or on the distribution 
of power and responsibilities among the various levels of government.'' 
This rule does not have federalism implications as defined in the 
Executive order.

The Family Impact Requirement

    Section 654 of the Treasury and General Government Appropriations 
Act of 1999 requires a family impact assessment affecting family well-
being.
    We have determined that this action will not affect the family. 
Therefore, no analysis or certification of the impact of this action 
was developed.

List of Subjects in 45 CFR Part 1303

    Administrative Practice and Procedure, Education of the 
disadvantaged, Grant programs-social programs, Reporting and 
recordkeeping requirements.

    For the reasons set forth in the Preamble, 45 CFR part 1303 is 
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 republishing paragraph (c), 
introductory text, revising paragraphs (c)(1), (2) and (5); removing 
paragraph (e); redesignating paragraphs (d) and (f) through (j) as 
paragraphs (f) through (k); adding new paragraphs (c)(6), (d) and (e); 
and revising the newly redesignated paragraph (h), 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 appeal 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.
    (d) A grantee's appeal 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 and a statement of the relevance of 
the requested documents, and a statement that the grantee has attempted 
informally to

[[Page 4769]]

obtain the documents from ACF and was unable to do so;
    (6) Grantees may submit additional documents within 14 days of 
receipt of the documentation submitted by ACF in response to the 
grantee's appeal and initial submittals. The ACF response to the appeal 
and initial submittals of the grantee shall be filed no later than 30 
days after ACF's receipt of the material. In response to such a 
submittal, ACF may submit additional documents should it have any, or 
request discovery in connection with the new documents, or both, but 
must do so within 10 days of receipt of the additional filings;
    (7) Include a statement on whether the grantee is requesting a 
hearing; and
    (8) Be filed with the Departmental Appeals Board and be served on 
the responsible HHS official who issued the termination notice and on 
the Commissioner of ACYF. The grantee must also serve a copy of the 
appeal on any delegate agency that would be financially affected at the 
time the grantee files its appeal.
    (e) The Departmental Appeals Board sanctions with respect to a 
grantee's failure to comply with the provisions of paragraph (d) of 
this section 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 grantee's 
failures are not substantial, but are confined to one or 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 the grantee has shown good cause for its failure 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.
* * * * *
    (h) 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 
Departmental Appeals Board. Any request for participation, including a 
request by a delegate agency, must be filed within 30 days of the 
grantee's appeal.
* * * * *
    3. Section 1303.15 is amended by revising paragraphs (b)(2), (d)(1) 
and (d)(3), 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 (c) 
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.
* * * * *
    (3) If the responsible HHS official has initiated denial of 
refunding proceedings because of the activities of a delegate agency, 
the 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 Departmental Appeals Board. Any request for participation, 
including a request by a delegate agency, must be filed within 30 days 
of the grantee's appeal.
* * * * *
    (4) A statement that failure of the notice of denial of refunding 
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 Departmental Appeals Board. Any request for participation, 
including a request by a delegate agency, must be filed within 30 days 
of the grantee's appeal.
    (g) Paragraphs (i), (j), and (k) 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 grantee's 
failure to comply is not substantial, but is confined to one or 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 (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 failure 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 the parties submit 
prepared written direct testimony, 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 Departmental 
Appeals Board. This

[[Page 4770]]

application must be made within 30 days of the grantee's appeal 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. It must 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:


Sec. 1303.17  Time for hearing and decision.

    (a) Any hearing on 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 closing of the record, i.e., 60 days after the Board receives the 
final authorized submission in the case.
    (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.

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

    Dated: June 16, 1999.
Olivia A. Golden,
Assistant Secretary for Children and Families.
    Approved: October 5, 1999.
Donna E. Shalala,
Secretary.
[FR Doc. 00-2049 Filed 1-31-00; 8:45 am]
BILLING CODE 4184-01-P