STATE OF NORTH CAROLINA IN THE OFFICE OF

ADMINISTRATIVE HEARINGS

COUNTY OF DURHAM 06 DHR 0686

Abid Ali )

d/b/a Durham Food Mart )

Petitioner, )

)

v. ) DECISION

)

N.C. Department of Health and )

Human Services, Division of Public Health, )

Women and Children’s Health Section )

Respondent. )

This matter came on for hearing before the undersigned administrative law judge on October 24, 2006, in Raleigh, North Carolina. Attorney Aaron C. Hemmings represented the Petitioner, Abid Ali, owner of Durham Food Mart. Assistant Attorney General, Dana B. French represented the Respondent. The Respondent presented three witnesses and introduced 16 exhibits. The Petitioner presented three witnesses and 6 exhibits.

ISSUE

Whether the Respondent was correct in issuing its intent to disqualify the Petitioner from doing business as a vendor in the Special Supplemental Nutrition Program for Women, Infants and Children (“WIC Program”) for a period of three years for finding that the Petitioner, Abid Ali, owner of Durham Food Mart, had a pattern of claiming reimbursement for the sale of an amount of a specific supplemental food item which exceeded the store’s documented inventory of that supplemental food item for a specific period of time, January 4, 2005, up to April 20, 2005, in violation of 7 C.F.R. § 246.12(l)(1)(iii)(B), 10A N.C.A.C. 43D .0706(c)(29), (g)(2)(A) and the WIC Vendor Agreement.

Based on the evidence presented at the hearing, including sworn testimony of witnesses and documentary evidence, the undersigned makes the following findings of fact:

FINDINGS OF FACT

1. WIC is a federally funded Special Supplemental Nutrition Program for Women, Infants, and Children, administered in North Carolina by the Department of Health and Human Services, Division of Public Health. The purpose of the WIC Program is to provide supplemental foods to pregnant women, infants, and children up to age five (called "participants"), who are at nutritional risk.

2. WIC foods are supplied to participants through the retail grocery system via food instruments which list the authorized foods that the participant may obtain with the food instrument. The WIC Program contracts with retail grocery stores to serve as authorized WIC vendors. Under the contract, the WIC vendor agrees to accept WIC food instruments in exchange for WIC supplemental foods provided to the participants. Participants, in their discretion, may get some or all of the foods listed on the WIC food instrument. The WIC vendor deposits the food instrument in its bank and is reimbursed by the WIC Program for the supplemental foods provided to the participant.

3. The WIC Vendor Agreement is the contract between the Vendor and the State Agency under which the Vendor agrees to comply with the terms of the Agreement and State and Federal WIC Program rules, regulations and laws. A WIC vendor enters into a new agreement each year in order to continue WIC vendor authorization.

4. Petitioner, Abid Ali, is the owner of Durham Food Mart, a convenience store located at 407 Old Oxford Hwy, Durham, North Carolina. The Petitioner operated as an authorized WIC vendor, stamp #8901. He signed a WIC Vendor Agreement on May 12, 2004.

5. The Durham County Health Department WIC Program conducted annual vendor training on WIC Program procedures, rules and regulations on May 6, 2004. Copies of the North Carolina WIC Vendor Manual were distributed to the vendor representatives attending this training session. Petitioner attended the training session and received the manual.

6. Vendors are reimbursed for WIC-approved items that are sold to participants. Vendors are required to maintain a minimum inventory of WIC-approved foods. Vendors must have purchased sufficient WIC foods to equal the WIC redemptions received for that period. Inventory audits involve reviewing a vendor’s inventory records of WIC supplemental foods purchased and sold over a rolling sixty-day period to analyze redemption data. A vendor is subject to disqualification for receiving reimbursements that exceed its documented inventory.

7. Craig Forsythe is employed by the North Carolina Department of Health and Human Services as an Internal Auditor for the WIC Program. Part of his duties for the WIC Program include conducting inventory audits at authorized WIC vendors to determine compliance with the laws, rules and regulations governing the WIC Program. Mr. Forsythe conducted an inventory audit of Durham Food Mart for the period January 4, 2005, up to April 20, 2005, in order to examine the documentation of the Vendor’s inventory, accounts and available records to determine whether the vendor had purchased sufficient quantities of supplemental foods to provide participants the quantities specified on the food instruments redeemed by the vendor during the audit period.

8. Forsythe entered Petitioner’s store on January 4, 2005, to begin the inventory audit count. He returned April 20, 2005, to determine the ending inventory count. Petitioner verified the items counted by Auditor Forsythe. Forsythe requested that the vendor submit all vendor purchase invoices for supplemental foods purchased during the audit period via mail by May 10, 2005. Mr. Forsythe did not receive any receipts by May 10th, 2005. Forsythe contacted the vendor in June to determine the status of the receipts so that he could complete the audit. It was at that time that Mr. Ali informed Mr. Forsythe that he had no receipts to submit because they had been lost or destroyed.

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9. Mr. Ali reported that he placed the receipts in a black trash bag and took them home from his store so that he could mail them to Mr. Forsythe. According to Mr. Ali, he placed the receipts in an unmarked black trash bag on the floor under the dining room table and failed to tell the members of his household that the store’s receipts were in the trash bag. A few days later, Mr. Ali says that the bag was missing and no one in his household knew of its whereabouts. Mr. Ali contended that he did not know where the receipts were and that he believed the trash bag containing the receipts was thrown away during a move from his residence.

10. Mr. Ali explained that upon realizing he could not locate the receipts he decided to turn in his vendor stamp to the local office, thereby terminating his vendor agreement. Mr. Ali thought that by turning in his vendor stamp he would no longer have to comply with the receipt request. Petitioner submitted a letter to Forsythe informing him that there were no receipts to apply towards the audit.

11. Upon receipt of this information, Mr. Forsythe concluded his audit and submitted a report acknowledging that no receipts had been submitted by Petitioner and that a claim and a pattern of violations were found. The State could not confirm that the reimbursements were supported by the sale of food without the presentation of receipts. The state agency sent Mr. Ali a notice that he owed the WIC program money. Mr. Ali contacted an attorney and the attorney sent in a few receipts and bank statements to apply towards the audit. Mr. Forsythe reviewed the receipts and recalculated the data. He was not able to use the bank statements toward the audit as they failed to itemize the items purchased. WIC cannot provide reimbursement for foods that are not WIC-approved; therefore, all the items on the receipts were not usable as the receipts contained several items that were not WIC-approved foods. Upon modifying the calculation, Forsythe found that the Petitioner was reimbursed for WIC sales in excess of documented inventory resulting in an overpayment of $73,870.76.

12. The claim amount of $73,870.76 is not an appealable issue in accordance with a federal regulation stating that claim amounts are not subject to administrative review. 7 CFR 246.18(a)(iii)(G). The WIC program must comply with the federal regulations.

13. Forsythe found that the vendor’s records of specific supplemental food items detailed a pattern of claiming reimbursement for the sale of supplemental food items that exceeded the store’s documented inventory for those supplemental food items for more than six days for specific supplemental food items during the period of August 1, 2004, up to November 2, 2004.

14. Mr. Forsythe found 47 patterns where Petitioner’s inventory was deficient. Specific supplemental foods reimbursed in excess of the documented inventory are gallon and half gallon of milk, cheese, juice, eggs, beans and peanut butter, concentrate and powdered formula and cereal. The Vendor was paid for these food items as if sold to participants.

15. On April 7, 2006, Respondent informed Petitioner of the Notice of Intent to Disqualify Petitioner from the WIC Program. The Notice of Intent to Disqualify stated that a recent inventory audit of Petitioner’s store, Durham Food Mart, had revealed a pattern of claiming reimbursement for the sale of an amount of a specific supplemental food item which exceeded the store’s documented inventory of that supplemental food item for a specific period of time. Respondent notified Petitioner by certified letter of its intent to disqualify Petitioner’s store from participating as a WIC vendor for a period of three years in accordance with Federal and State regulations.

16. Prior to issuing its intent to disqualify the Petitioner’s store, the Respondent complied with 7 C.F.R. 246.12(l)(1)(ix), 246.12(l)(8), and 10A N.C.A.C. 43D .0706(k) by considering participant access to other WIC vendors.

Based upon the foregoing Findings of Fact and upon the preponderance of the evidence in the whole record, the undersigned makes the following:

CONCLUSIONS OF LAW

1. The North Carolina WIC Program is vested with the authority to authorize and disqualify WIC vendors pursuant to G.S. § 130A-361 and 10A N.C.A.C. 43D .0700 et seq.

2. Title 7 C.F.R. § 246.12(l)(1)(iii)(B) and 10A N.C.A.C. 43D .0706(g) provide that the state agency must disqualify a vendor for three years for a pattern of claiming reimbursement for the sale of an amount of a specific supplemental food item which exceeds Vendor’s documented inventory of that supplemental food for a specific period of time.

3. Title 10A N.C.A.C. 43D .0706(g)(2)(A) provides that a pattern is established when a vendor claims reimbursement for the sale of an amount of a specific supplemental food item over a 60-day period which exceeds the store’s documented inventory of that supplemental food item for more than six days.

4. As an authorized WIC Vendor, the Petitioner is bound by the terms of the WIC Vendor Agreement and the administrative rules, regulations, and laws governing the WIC Program. Vendors are required to maintain records of purchases of inventory items.

5. A pattern of vendor overcharges has been established at Petitioner's store, Durham Food Mart, by the occurrence of vendor claiming reimbursement for the sale of an amount of specific supplemental food items over a 60-day period which exceeds the store’s documented inventory of that supplemental food item for six or more days in violation of 7 C.F.R. § 246.12(l)(1)(iii)(B), 10A N.C.A.C. 43 D.0706(g), .0706(g)(2)(A) and the WIC Vendor Agreement.

6. Petitioner’s allegation disputing the claim amount is not an appealable issue under the federal regulations and state rules, so therefore the Office of Administrative Hearings lacks subject matter jurisdiction of this issue.

7. The Respondent did not act in an arbitrary and capricious manner in administering the WIC Program rules, regulations and law; did not fail to act as required by law or rule; did not fail to use proper procedure; did not act erroneously, nor did it exceed its authority or jurisdiction.

Based upon the foregoing Findings of Fact and Conclusions of Law, the Undersigned makes the following:

DECISION

The Respondent did not err by issuing its intent to disqualify the Petitioner’s store from participating as a WIC Vendor for a period of three years.

ORDER

It is hereby ordered that the agency serve a copy of the final decision on the Office of Administrative Hearings, 6714 Mail Service Center , Raleigh, NC 27699-6714, in accordance with G.S. § 150B-36(b3).

NOTICE

The parties have the right to file exceptions and to present written arguments to the agency making the final decision. G.S. § 150B-36(a). The agency making the final decision in this contested case is the North Carolina Department of Health and Human Services. The agency is required to serve a copy of the final decision upon each party and to furnish a copy to each party’s attorney of record and the Office of Administrative Hearings. G.S. § 150B-36(b3).

This the 15th day of December, 2006.

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Fred G. Morrison Jr.

Senior Administrative Law Judge

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