In re Youth Leadership Acad.

• Decision Date: 13 February 2023
• Docket Number: A22-0378
• Citation: In re Youth Leadership Acad., A22-0378 (Minn. App. Feb 13, 2023)
• Parties: Youth Leadership Academy dba Gar Gaar Family Services Appeal of Denial of Application for the Child and Adult Care Food Program (CACFP).
• Court: Minnesota Court of Appeals

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Youth Leadership Academy dba Gar Gaar Family Services Appeal of Denial of Application for the Child and Adult Care Food Program (CACFP).

No. A22-0378

Court of Appeals of Minnesota

February 13, 2023

This opinion is nonprecedential except as provided by Minn. R Civ. App. P. 136.01, subd. 1(c).

Barbara Podlucky Berens, Carrie L. Zochert, Berens &Miller, P.A., Minneapolis, Minnesota (for relator Youth Leadership Academy d/b/a Gar Gaar Family Services)

Keith Ellison, Attorney General, Kristine K. Nogosek, Alec Sloan Assistant Attorneys General, St. Paul, Minnesota (for respondent Minnesota Department of Education)

Considered and decided by Jesson, Presiding Judge; Connolly, Judge; and Johnson, Judge.

JESSON, Judge

After relator Youth Leadership Academy d/b/a Gar Gaar Family Services (Gar Gaar) participated as a sponsor in the Summer Food Service Program (Summer Program), Gar Gaar applied to be a sponsor of the Child and Adult Care Food Program (Child Care Program). Respondent Minnesota Department of Education (the Department) denied Gar Gaar's application. Gar Gaar appeals the denial of its application because it claims the Department's decision was based on erroneous theories of law; arbitrary, capricious, and unsupported by the record; and violated Gar Gaar's due process rights. Because the Department's decision applied the correct federal regulations and its findings that Gar Gaar was neither financially viable nor had proper financial management in place were supported by substantial evidence, and neither arbitrary nor capricious, we affirm.

FACTS

Gar Gaar is a Minnesota nonprofit organization created in 2020 during the COVID-19 pandemic with the purpose of providing food to Somali children and adults who do not have access to regular meals. In order to achieve this mission, Gar Gaar sought to participate as a sponsor in two federal food-disbursement programs: the Summer Program and the Child Care Program. 7 C.F.R. §§ 225, 226 (2022).

There are four key components for the effective administration of the Summer Program and the Child Care Program:

(1) sites-public or non-profit businesses that distribute food to children and/or adults;

(2) sponsors (Gar Gaar sought this status)-public or non-profit businesses that regulate sites, provide sites with training and technical assistance, interact with the state agency on behalf of the sponsored sites, and reimburse sites for proper expenses;

(3) state agency (the Department)-regulates sponsors and sites, provides technical assistance, and distributes program funds to sponsors; and

(4) United States Department of Agriculture-promulgates and enforces program regulations, provides administrative guidance, and reimburses state agencies for funds properly paid to sponsors.

See 7 C.F.R. §§ 225.2-3, .6(b) (defining and explaining sites, new sponsors, state agency, and the United States Department of Agriculture's interplay).

Here, our focus is on the role of sponsors, which are subject to detailed regulatory requirements regarding operations. Sponsors are assessed against three core federal performance standards: (1) financial viability and financial management, (2) administrative capability, and (3) program accountability. 7 C.F.R. § 226.6(b)(1)(xviii)(A-C).

In summer 2021, Gar Gaar participated as a sponsor after the Department approved its application for the Summer Program. See 7 C.F.R. § 225. The Summer Program's purpose is to provide food to children from needy areas during periods when schools are closed for summer vacation. 7 C.F.R. § 225.1. Through the Summer Program, Gar Gaar sponsored numerous sites and received about $28 million in federal funding across the approximately three months that it operated in 2021.

In order to continue its work from the Summer Program, Gar Gaar sought to become a sponsor of the Child Care Program.^[1] See C.F.R. § 226. The Child Care Program's purpose is similar to the Summer Program's purpose-to provide nutritional-food aid to child and adult participants and family or group daycare homes-but the Child Care Program operates during the school year, not just the summer, and the sponsor applications for the two programs are reviewed under two separate federal regulations. 7 C.F.R. §§ 225.1, 226.1.

Gar Gaar began its application to become a 2021-22 sponsor for the Child Care Program in August 2021 with the same mission and goal of operating approximately 52 sites. The Department provided technical assistance and guidance to Gar Gaar on its Child Care Program application from August 2021 to November 2021. For example, the Department exchanged emails and conducted telephone conversations with Gar Gaar in order to address some concerns the Department had with Gar Gaar's application before it went under review.

In addition to email and telephone conversations, the Department and Gar Gaar had approximately five in-person meetings^[2] to further discuss those concerns. And the Department conducted site visits to determine whether Gar Gaar and its chosen sites were meeting federal regulations. Of the four proposed sites the Department visited, all four sites were found ineligible. None met program eligibility requirements. See 7 C.F.R. § 226.6(b)(1)(xviii)(A-C).

Some of the Department's other concerns included:

• Of the over one hundred sites submitted by Gar Gaar, almost all were either ineligible or sites already assigned to other Child Care Program sponsors;

• Three county health departments-Hennepin, Anoka, and Olmstead-refused to grant food and beverage licenses to Gar Gaar;

• During Gar Gaar's sponsor participation in the Summer Program, over $2 million of federal funds were expended in cashier's checks and cash, within a short period, without invoices or proper accounting, and were labeled as "miscellaneous debits" or "payroll"; and

• Gar Gaar lacked internal controls and management procedures to ensure meals met federal regulations for food disbursement.

After Gar Gaar attempted to rectify these concerns, Gar Gaar's application was considered complete in November 2021, and the Department began its formal review of Gar Gaar's application.

In December 2021, the Department denied Gar Gaar's Child Care Program application, listing six main reasons for its denial:

(1) failure to demonstrate financial viability and financial management (federal performance standard 1);

(2) failure to demonstrate administrative capability (federal performance standard 2);

(3) failure to demonstrate program accountability (federal performance standard 3);

(4) failure to provide a budget;

(5) failure to document that its sites met eligibility requirements; and

(6) failure to demonstrate an unmet need in the community.

In addition to denying Gar Gaar's Child Care Program application, the Department issued a notice of serious deficiency for Gar Gaar's participation in the Summer Program for the submission of false information, which is not appealable according to the Department's appeal process.

Gar Gaar filed an internal appeal of the denial of its application. In response, the Department sent Gar Gaar an acknowledgement of its appeal and a link to a site that contained all the Department's documentation related to Gar Gaar's application and appeal. Gar Gaar sent the Department its written appeal argument with accompanying exhibits, which included, but was not limited to, its financial documents, management plan, employee handbook, and corrective-action plan. The Department, through its appeal panel,^[3] reviewed Gar Gaar's materials.

In February 2022, the Department affirmed the denial of Gar Gaar's sponsor application for the Child Care Program. In its conclusions of law, the Department denied Gar Gaar's application for two main reasons: Gar Gaar failed to demonstrate (1) financial viability and financial management and (2) program accountability.^[4]

Gar Gaar's certiorari appeal follows.

DECISION

Gar Gaar contends that the Department's denial of its application to participate as a sponsor of the Child Care Program was (1) based on erroneous theories of law when it referred to Gar Gaar's Summer Program's financial history in determining Gar Gaar lacked financial viability and financial management and (2) unsupported by substantial evidence in the record, thus making the Department's determination that Gar Gaar lacked financial viability and financial management and program accountability arbitrary and capricious.^[5]

Turning to the standard of review in this certiorari appeal, we examine whether the administrative agency's determination "was arbitrary, oppressive, unreasonable, fraudulent, under an erroneous theory of law, or without any evidence to support it." Anderson v. Comm'r of Health, 811 N.W.2d 162, 165 (Minn.App. 2012) (quotation omitted), rev. denied (Minn. Apr. 17, 2012); see also Axelson v. Minneapolis Tchrs.' Ret. Fund Ass'n, 544 N.W.2d 297, 299 (Minn. 1996) (explaining that a quasi-judicial decision of an agency that does not have statewide jurisdiction will be reversed if the decision is fraudulent, arbitrary, unreasonable, unsupported by substantial evidence, not within its jurisdiction, or based on an error of law); see also In re Partners in Nutrition's Appeal of Disapproval of Site Expansion in the CACFP Program, 904 N.W.2d 223, 228 (Minn.App. 2017) (applying standard of review for a quasi-judicial agency decision not subject to the Minnesota Administrative Procedure Act to a Child Care Program application).

It is important to note that an administrative agency's decision enjoys a presumption of correctness, and we defer to the relevant agency's expertise and special knowledge in its field when conducting our review. In re Cities of Annandale &Maple Lake NPDES/SDS Permit Issuance for the Discharge of...