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entitled 'Head Start: A More Comprehensive Risk Management Strategy and 
Data Improvements Could Further Strengthen Program Oversight' which was 
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Report to Congressional Requesters: 

United States Government Accountability Office: 

GAO: 

February 2008: 

Head Start: 

A More Comprehensive Risk Management Strategy and Data Improvements 
Could Further Strengthen Program Oversight: 

GAO-08-221: 

GAO Highlights: 

Highlights of GAO-08-221, a report to congressional requesters. 

Why GAO Did This Study: 

In February 2005, GAO issued a report that raised concerns about the 
effectiveness of the Department of Health and Human Services (HHS) 
Administration for Children and Families’ (ACF) oversight of about 
1,600 local organizations that receive nearly $7 billion in Head Start 
grants. GAO was asked to report on (1) ACF’s progress in conducting a 
risk assessment of the Head Start program and ensuring the accuracy and 
reliability of data from its annual Program Information Report (PIR) 
survey of grantees, (2) efforts to improve on-site monitoring of 
grantees, and (3) how data are used to improve oversight and help 
grantees meet program standards. For this report, GAO surveyed a 
nationally representative sample of Head Start program directors and 
interviewed ACF officials. GAO also reviewed ACF studies on the 
validity of PIR data and conducted tests of data from the 2006 PIR 
database. 

What GAO Found: 

ACF has not undertaken a comprehensive assessment of risks that may 
limit Head Start’s ability to meet federal program objectives, despite 
GAO’s 2005 recommendation, and little progress has been made to ensure 
that the data from its annual PIR survey of grantees, which could 
facilitate such an assessment, are reliable. To conduct a comprehensive 
risk assessment, ACF needs to identify external and internal risks, 
estimate their significance, and decide how to best manage them. While 
ACF says it is working to establish two systems to address programwide 
risk, our analysis suggests that these systems fall short of that goal. 
The first system, by which ACF assesses grantees before providing new 
funds each year, only assesses risk posed to the program by poorly 
performing grantees and does not allow for a broader assessment of 
other sources of risk, such as improper payments to contractors. The 
second system, a new, integrated management information system, has 
been in development for over 4 years and it is not clear how it will 
facilitate a more comprehensive risk assessment for the Head Start 
program. Both initiatives depend, in part, on data from the annual PIR 
survey of grantees, which have been found to be unreliable. 

ACF has taken steps to improve oversight of Head Start grantees by 
implementing a more rigorous process for certifying reviewers who 
conduct on-site monitoring visits, implementing new processes to 
improve the consistency of reviews, and working to establish a system 
for evaluating reviews on an ongoing basis. Now, ACF verifies 
reviewers’ qualifications and requires them to pass online tests in 
writing and computer literacy. Reviewers must also complete ongoing 
training and are evaluated by their peers at the end of each review. 
ACF has also taken a number of steps to improve the consistency and 
objectivity of reviews, including developing a Web-based data 
collection tool to facilitate information gathering, assigning review 
team leaders from outside the grantee’s home region to increase 
independence, and centralizing the review and preparation of monitoring 
reports. ACF is also working to establish an ongoing system for 
evaluating its on-site review process. 

ACF uses data to track grantee performance and target assistance to 
underperforming grantees, but weaknesses may have hindered these 
efforts to improve grantee performance. For example, ACF does not have 
clear criteria for determining which grantees need additional oversight 
as part of its refunding analysis. Such decisions are made on an ad-hoc 
basis, which may result in grantees with similar problems receiving 
different levels of oversight. Moreover, prior to the December 2007 
reauthorization of Head Start, ACF was limited in its ability to 
increase competition for grants to replace underperforming grantees. 
Under the new law, ACF will have more flexibility to open competition 
for Head Start grants to other prospective grantees when current 
grantees fail to deliver high-quality, comprehensive Head Start 
programs. 

What GAO Recommends: 

GAO recommends that ACF develop a more strategic approach to assessing 
risks to the Head Start program, expand its efforts to collect data on 
and estimate improper payments, improve the accuracy of data from its 
annual PIR survey, and develop clear criteria for providing additional 
assistance for high-risk grantees. ACF agreed with the latter two 
recommendations and emphasized progress already made toward developing 
a comprehensive risk assessment process and reducing improper payments. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.GAO-08-221]. For more information, contact 
Cornelia Ashby at (202) 512-7215 or ashbyc@gao.gov. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

ACF Has Not Undertaken a Comprehensive Risk Assessment, and Data 
Reliability and Other Challenges Remain: 

ACF Improved On-site Monitoring by Strengthening Review Processes and 
Is Working to Establish a System to Evaluate Reviews: 

ACF Uses Data to Identify Grantees in Need of Assistance, but 
Weaknesses Have Hindered Efforts to Improve Grantee Performance: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: Comments from the Department of Health and Human Services: 

Appendix III: GAO Contacts and Staff Acknowledgments: 

Appendix IV: Related GAO Products: 

Tables: 

Table 1: Summary of Results for PIR Data Consistency Tests, 2006 PIR 
Database: 

Figures: 

Figure 1: Changes to Reporting Structure for ACF Staff Working on Head 
Start: 

Abbreviations: 

ACF: Administration for Children and Families: 

HSES: Head Start Enterprise System: 

HHS: Department of Health and Human Services: 

OMB: Office of Management and Budget: 

PIR: Program Information Report: 

T/TA: Training and technical assistance: 

United States Government Accountability Office: 

Washington, DC 20548: 

February 12, 2008: 

Congressional Requesters: 

In February 2005, we issued a report that raised concerns about the 
effectiveness of oversight of the Head Start program. We made a number 
of recommendations to improve the Department of Health and Human 
Services (HHS) Administration for Children and Families' (ACF) 
oversight of local organizations that receive Head Start program grants 
and the grantees' financial management.[Footnote 1] Head Start is one 
of the largest federal early childhood programs. In fiscal year 2007, 
Head Start provided nearly $7 billion to 1,604 local organizations that 
provide a wide range of services to over 900,000 primarily low-income 
children, from birth to age 5, and their families. These services are 
aimed at improving the social competence, learning skills, and health 
and nutrition status of low-income children so that they can begin 
school ready to learn. ACF spent $25.6 million in fiscal year 2006 to 
conduct its oversight activities. 

Since our 2005 report, ACF has implemented a number of changes designed 
to improve its monitoring and other oversight of grantees. However, 
policymakers have raised new concerns about the scope of these changes 
and whether they are likely to strengthen the performance of Head Start 
grantees, suggesting a need to reassess ACF's monitoring and oversight 
activities. To respond to your request for more information about ACF's 
monitoring and oversight of the Head Start program, we examined: 

1. ACF's progress in conducting a risk assessment of the Head Start 
program and ensuring the accuracy and reliability of data from its 
annual Program Information Report (PIR) survey of grantees, 

2. ACF's efforts to improve its on-site monitoring processes, and: 

3. ACF's use of data to improve oversight and help grantees meet 
performance standards. 

To address these objectives, we visited and interviewed Office of Head 
Start and ACF officials and their staff in Washington, D.C. We 
interviewed staff from all of ACF's 10 regional offices and reviewed 
relevant documentation from each of these offices. We administered a 
Web-based survey to a nationally-representative sample of Head Start 
and Early Head Start program directors.[Footnote 2] We selected our 
sample of directors from the population of directors whose programs 
were the subject of ACF's on-site reviews from October 2005 through 
March 2007 using a newly revised on-site review process. In total, we 
surveyed 329 program directors, asking them about their experiences 
during the most recent on-site reviews, and their views about the 
changes to the process. Of the 329 program directors, 261 responded-- 
for a response rate of 79 percent. Throughout this report, when we 
refer to our survey results, we use the terms "program directors" and 
"grantees" interchangeably. Finally, we tested the reliability of two 
of ACF's administrative databases--the first contains data on the 
results of each grantee's on-site review, and the second contains data 
from ACF's annual PIR survey of grantees. To assess the reliability of 
on-site review data, we relied on our 2005 assessment of the 
reliability of these data, performed additional electronic tests of 
data elements used for an analysis of the extent of repeat on-site 
review findings, and reviewed new information about the database. Based 
on our previous and updated assessments, we find the on-site review 
data used for our analysis of on-site review findings to be sufficient 
for the purpose of this report. However, we identified concerns about 
the overall reliability of data from ACF's annual PIR survey of 
grantees, which we discuss more fully in this report. To further 
address objective 1, we reviewed a recent ACF study on the validity of 
PIR survey data. To further address objective 2, we met with the 
contractor responsible for coordinating the on-site review process and 
tracking on-site review results, and representatives from the National 
Head Start Association. We also examined patterns of on-site review 
results in areas related to program governance, record-keeping and 
reporting, and fiscal management for all programs reviewed in both 
fiscal years 2003 and 2006 to assess the extent of repeat findings, and 
obtained the results of a study conducted by ACF to evaluate its on- 
site review process. For additional details about our scope and 
methodology, see appendix I. Our work was conducted from February 2007 
through December 2007 in accordance with generally accepted government 
auditing standards. 

Results in Brief: 

ACF has not undertaken a comprehensive assessment of risks that may 
limit Head Start's ability to meet federal program objectives, despite 
our 2005 recommendation, and little progress has been made in ensuring 
that the data from its annual PIR survey of grantees, which could 
facilitate such an assessment, are reliable. Risk assessment is a key 
component of internal control that can provide the basis for 
determining what actions need to be taken to address problems that may 
limit an agency's progress toward meeting federal program objectives. 
For the Head Start program, this would include a formal, ongoing 
process of identifying external and internal risks, estimating their 
significance, and deciding how to best manage them. While ACF has two 
systems in development to address programwide risk, our analysis 
suggests that these two systems fall short of that goal. First, ACF has 
a new system for assessing individual grantees each year before 
deciding whether to refund, or renew, their grants. This system partly 
addresses our 2005 recommendation that ACF produce a comprehensive risk 
assessment of the Head Start program. However, this refunding analysis 
system only assesses risk posed to the program by poorly performing 
grantees; it does not allow for a broader assessment of other sources 
of risk, such as those we previously identified, including limited 
efforts to assess regional office staff adherence to ACF policies and 
procedures and improper payments to contractors. Improper payments 
continue to be an issue for ACF. For example, in April 2007, the HHS 
Inspector General reported that 5 percent of Head Start slots that were 
paid for in 2006 had not been filled. Although ACF collects data on 
improper payments to grantees that enrolled too many children from 
families that did not meet the program's income eligibility 
requirement, ACF officials stated that they do not have plans to track 
other types of improper payments. The second process that ACF is 
developing is a new, integrated management information system, known as 
the Head Start Enterprise System (HSES). However, HSES has been in 
development for over 4 years and it is not clear when or how it will 
facilitate a more comprehensive risk assessment for the Head Start 
program. Furthermore, both the refunding analysis system and the HSES 
depend, in part, on data from the annual PIR survey of grantees, which 
several studies have found to be unreliable. These studies suggest that 
PIR data are unreliable, partly, because of the length and complexity 
of the survey, which includes over 130 questions that are sometimes 
difficult for grantees to answer. ACF does not independently verify the 
accuracy of data submitted by grantees. Despite its widespread use in 
providing the public with information on the national Head Start 
program and in overseeing grantees, our analysis also raises 
significant concerns about the reliability of the data from this 
survey. 

ACF has taken steps to improve its oversight of Head Start grantees by 
implementing a more rigorous process for certifying reviewers who 
conduct on-site monitoring visits, implementing new processes to 
improve the consistency of reviews, and working to establish a system 
for evaluating reviews on an ongoing basis. Now, ACF verifies all 
potential reviewers' qualifications and requires them to pass online 
tests in writing and computer literacy. Reviewers must also complete 
ongoing training and are evaluated by their peers at the end of each 
review. ACF has also taken a number of steps to improve the consistency 
and objectivity of reviews. For example, ACF has developed a Web-based 
data collection tool that provides a more structured way of gathering 
evidence on grantee performance. To help ensure objectivity of review 
teams, they are now led by program specialists from outside the 
grantees' home regions who are directly accountable to the central 
Office of Head Start. Also, to improve on-site monitoring reports, 
review findings are now reviewed by central office staff for 
consistency. Based on the results of our survey of Head Start and Early 
Head Start program directors, grantees have mixed views about the 
revised on-site monitoring procedures. For example, although most 
grantees who were reviewed under the revised procedures were very or 
somewhat satisfied with how their most recent on-site review was 
conducted, they were almost evenly split over whether having a program 
specialist from outside their home region lead their review had a 
positive or negative effect on the review process. In 2005, we found 
evidence that some reviewers may not have followed on-site review 
guidelines and, as a result, some grantees were not reviewed as 
rigorously as others. In 2006, ACF evaluated its on-site reviews to 
determine whether it was followed consistently by different teams of 
reviewers and the extent to which the review process helped reviewers 
identify serious program problems. ACF found that, although review 
teams did not consistently identify the same program problems for the 
same grantees, none of the teams failed to identify serious program 
problems. ACF is working to establish an ongoing system for evaluating 
its on-site review process. 

ACF uses data to track grantee performance and to target assistance to 
underperforming grantees, but weaknesses in the extent to which 
performance data are used to guide oversight may have hindered this 
effort to improve grantee performance. ACF uses the results of its data 
analysis to target resources from its training and technical assistance 
network to help underperforming grantees address program weaknesses 
through workshops, on-site assistance, or other specialized training. 
However, there are limits on ACF's use of data to improve grantee 
performance. Although ACF uses data during its annual refunding process 
to assess grantee performance, it lacks clear criteria for determining 
which grantees need additional oversight. Currently, ACF makes such 
decisions on an ad-hoc basis, which may result in grantees with similar 
problems receiving different levels of oversight. In addition, prior to 
the December 2007 reauthorization of Head Start, ACF had limits to its 
ability to recompete grants in order to replace severely 
underperforming grantees. Competing grants has been shown to facilitate 
grant accountability. The Improving Head Start for School Readiness Act 
of 2007 (Improving Head Start Act),[Footnote 3] which revises and 
reauthorizes the Head Start program, imposes time limits on Head Start 
grants and gives ACF more flexibility to open competition for Head 
Start grants to other prospective grantees on a regular basis[Footnote 
4]. 

We are making a number of recommendations to the Assistant Secretary 
for Children and Families aimed at further improving management and 
oversight of the Head Start program. We recommend that ACF continue to 
address our previous recommendation by developing a more strategic and 
comprehensive approach to assessing Head Start programwide risks. We 
also recommend that ACF expand efforts to look for cost-effective ways 
to collect data on and estimate the extent of improper payments. In 
addition, we recommend that ACF determine which elements of the PIR are 
essential for program management and focus resources on a streamlined 
version of the PIR that would be required of all grantees and 
periodically verified for accuracy. Finally, we recommend that ACF 
develop clear criteria for determining which grantees require more 
thorough reviews--such as special, on-site reviews--as a result of its 
refunding analysis system. In its comments on a draft of this report, 
ACF agreed with the latter two recommendations, and emphasized the 
progress it has already made toward developing a comprehensive risk 
assessment process and toward reducing improper payments. With respect 
to risk assessment, we found that ACF will rely on two key systems--the 
refunding analysis system, which is limited in how it could be used for 
risk assessment, and the Head Start Enterprise System, which has not 
been fully developed. However, it is unclear how these systems will be 
used to proactively manage program risk nationally. Additionally, ACF 
noted its efforts to implement the Improper Payments Information Act of 
2002 and commented that improvements in monitoring and increased risk 
management may identify further areas for study related to improper 
payments. We believe our recommendations in these two areas remain 
valid to help ACF expand and focus its continuing efforts. 

Background: 

The Head Start program was established in 1965 to promote the school 
readiness of low-income children by enhancing their cognitive, social, 
and emotional development by providing a range of individualized 
services to pre-school aged children and their families. The program is 
overseen by ACF, which awards grants directly to a network of about 
1,600 public and private nonprofit and for-profit agencies to help pay 
for health, educational, nutritional, social, and other services to 
primarily low-income children from birth to age 5, and their 
families.[Footnote 5] 

ACF monitors the success of local agencies that receive Head Start 
grants in meeting Head Start program goals and complying with program 
requirements by conducting on-site monitoring reviews of grantee 
programs every 3 years; administering an extensive, annual PIR survey 
of grantees; and reviewing required financial reports and annual audit 
reports. Reviewers assess Head Start grantee compliance with all 
program requirements, including those specified in the Improving Head 
Start Act, the Head Start Program Performance Standards, and other 
relevant federal, state, and local regulations. These requirements 
consist of administrative, financial management, and other standards, 
such as using age-appropriate materials to help children learn to 
recognize letters and numbers, and providing safe play areas. 

By law, each Head Start grantee must receive a full review at least 
once every 3 years. New grantees must receive a full review after 
completion of their first year of providing Head Start services and at 
least once every 3 years thereafter.[Footnote 6] ACF's policy is to 
conduct these reviews on-site. Except for new grantees, Head Start 
grantees are reviewed on a rotating basis, and approximately one-third 
of all grantees are monitored each year. Reviews are conducted by a 
team of reviewers led by a federal Head Start program specialist from 
one of ACF's 10 regional offices. 

In our February 2005 report, we identified a number of weaknesses in 
ACF's oversight of Head Start grantees. Specifically, we found that ACF 
did not have a strategy for bringing information from its various 
monitoring processes together in order to comprehensively assess Head 
Start program risks, and identified problems with each of its 
strategies for monitoring grantees. We found that ACF did not have 
procedures to ensure that on-site reviewers performed their 
responsibilities in accordance with established guidelines or to ensure 
that managers and staff in ACF regional offices were held accountable 
for the quality of the on-site reviews. We also found that ACF did not 
have procedures for independently verifying data submitted by grantees 
in its annual PIR survey, which, in addition to providing information 
about grantee performance, is used to provide information to Congress 
and the public about important program characteristics, such as program 
design and staffing, and numbers and characteristics of children 
enrolled and attending Head Start programs nationwide. Finally, we 
found that ACF made limited use of financial reports and audits to 
ensure that all grantees effectively resolved financial management 
problems and had made little use of its authority to terminate grantees 
that did not meet program, financial management, and other 
requirements, and fund new grantees to replace them. We made a number 
of recommendations to address the problems that we identified, 
including: 

1. producing a comprehensive risk assessment of the Head Start program; 

2. strengthening on-site reviewer training and certification 
procedures; 

3. developing a more consistent approach to conducting on-site reviews 
and analyzing findings; 

4. implementing a quality assurance process that ensures on-site 
reviews are conducted within established guidelines and ACF managers 
are held accountable for the quality of on-site reviews; 

5. ensuring the accuracy of PIR survey data by independently verifying 
key data submitted by grantees, or ensuring that grantees have systems 
in place to collect and report accurate, verifiable data; 

6. making greater use of available information on the status and use of 
federal funds; and: 

7. taking steps to obtain competition for grants that are being 
refunded if it is determined that current grantees have failed to meet 
program, financial management, or other requirements. 

In 2006, ACF reorganized its regional offices in order to streamline 
program operations. (See fig. 1.) Currently, ACF regional program staff 
report directly to its central program offices, rather than to regional 
office administrators. The regional administrators no longer have 
direct authority to manage individual program activities. As a result, 
Head Start program specialists are directly accountable to central 
office management. Also, financial management specialists, who monitor 
financial management of all ACF grants, including Head Start grants, 
are now directly accountable to the central Office of Grants 
Management, which is located within the ACF Office of Administration. 
The Office of Administration provides support to ACF's program offices 
on a range of administrative issues, such as managing personnel, 
information resources, procurement, and grants. The Office of Grants 
Management carries out the Office of Administration's grants 
administration duties and provides leadership and technical guidance to 
ACF program and regional offices on grant operations and grants 
management issues. 

Figure 1: Changes to Reporting Structure for ACF Staff Working on Head 
Start: 

This figure is a flowchart showing changes to reporting structure for 
ACF staff working on Head Start. 

[See PDF for image] 

Source: GAO analysis if ACF information. 

[End of figure] 

The Head Start program was revised and reauthorized in the December 
2007 Improving Head Start Act. Prior to this, the program was last 
reauthorized in 1998, for fiscal years 1999 through 2003. In the years 
between the 1998 and 2007 reauthorizations, the program remained funded 
through the annual appropriations process. 

ACF Has Not Undertaken a Comprehensive Risk Assessment, and Data 
Reliability and Other Challenges Remain: 

ACF has not undertaken a comprehensive assessment of risks to the 
federal Head Start program, despite our 2005 recommendation, and little 
progress has been made in ensuring that the data from its annual PIR 
survey of grantees, which could facilitate such an assessment, are 
reliable. Although ACF has two systems in development to address risk 
assessment, neither system provides for a comprehensive, programwide 
risk assessment for the Head Start program. Further, both systems 
depend to some extent on unreliable data from the annual PIR survey of 
grantees. Although ACF has known about the problems with PIR survey 
data, it has done little to address them. 

ACF Has Not Undertaken a Comprehensive Risk Assessment: 

ACF has not undertaken a comprehensive assessment of risks to the 
federal Head Start program. Risk assessment is one of five internal 
control standards that together provide the foundation for effective 
program management and help government program managers achieve desired 
results through effective stewardship of public resources.[Footnote 7] 
To carry out a comprehensive risk assessment, program managers need to 
identify program risks from both external and internal sources, 
estimate the significance of these risks, and decide what steps should 
be taken to best manage them. Although such an assessment would not 
assure that program risks are completely eliminated, it would provide 
reasonable assurance that such risks are being minimized. For the Head 
Start program, this might include anticipating and developing 
strategies to minimize the impact of changes in resources available to 
oversee and assist local grantees, or to develop initiatives to address 
social and demographic changes that may result in changing service 
needs for families with young children. 

In 2005, we reported a similar finding, noting that despite efforts to 
collect information and assess risks, ACF did not have a strategy for 
bringing this information together in order to comprehensively assess 
program risks, and recommended that ACF produce a comprehensive risk 
assessment of the Head Start program. To address our 2005 finding, ACF 
has attempted to bring together information about local programs and to 
assess risk on a grantee-by-grantee basis; however, it has yet to 
develop a systematic approach to assessing risks that may arise from 
other sources and, if undetected, could hinder ACF's ability to achieve 
Head Start program objectives, or for developing strategies to 
prioritize and address risks proactively. 

New Systems Could Facilitate Comprehensive Risk Assessment but 
Limitations Exist: 

ACF is in the process of developing two systems that may help it assess 
programwide risks; however, significant limitations or uncertainty 
exist with respect to each that could constrain ACF's ability to use 
them to conduct a meaningful risk assessment. The first system, the 
refunding analysis system, is a process whereby ACF evaluates the 
performance of individual grantees each year before it refunds, or 
renews, their grants. The second system, the Head Start Enterprise 
System (HSES), is still under development. As envisioned by ACF, the 
HSES may one day integrate all available Head Start program data into a 
single, interactive database that may one day facilitate analysis 
across many program areas. The first system is limited in how it could 
be used for risk assessment, and the completion of the second system is 
uncertain. The refunding analysis system is limited because it assesses 
risk from only one source--grantee performance--and does not assess 
other types of risk, such as inadequate procedures for ensuring that 
staff follow policies for monitoring grantee activities or for 
minimizing payments that are not in accordance with program 
requirements. Although the planned HSES has the potential for assessing 
a wider range of potential program risks, it has been in development 
for at least 4 years, and it is unclear when or how it will actually be 
used.[Footnote 8] 

The refunding analysis system is an evolving system for evaluating 
grantee financial management and performance annually and determining 
which grantees require additional assistance. Each month, regional 
program staff who are responsible for overseeing Head Start grantees 
bring together and assess all available information about grantees that 
are scheduled to re-apply for their grants. The information is reviewed 
by grants management staff and Head Start central office staff. 
Although the refunding analysis system is intended to provide analysis 
of grantee performance prior to refunding, it serves primarily as a 
means of identifying grantees that need assistance and not as a means 
of discontinuing grants for underperforming grantees. 

Although the refunding analysis system allows grantees that are 
considered high risk to be brought to the attention of Head Start 
program managers, it does not allow for a broader assessment of other 
sources of risk, such as those we previously identified. For example, 
in 2005, we identified improper payments to contractors as a source of 
potential risk for the Head Start program. Under the Improper Payments 
Information Act of 2002,[Footnote 9] agencies are required to annually 
identify programs and activities that may be susceptible to significant 
improper payments;[Footnote 10] provide Congress with the annual 
estimated amount of improper payments; and, for programs and activities 
with estimated improper payments that exceed $10 million, report on 
actions taken to reduce improper payments. In addition, the Improving 
Head Start Act requires the Secretary of HHS to submit a report to the 
appropriate congressional committees certifying that HHS has completed 
a risk assessment to determine which ACF programs are at significant 
risk of making improper payments, and describing the actions HHS will 
take to reduce these improper payments.[Footnote 11] Since fiscal year 
2004, ACF has taken limited action to minimize improper payments by 
collecting data on payments to grantees that do not meet the 
requirement that at least 90 percent of the children who are enrolled 
in Head Start programs must be from low-income families.[Footnote 12] 
However, ACF officials stated that, due to resource constraints, they 
do not have plans to track other types of improper payments, such as 
overpayments to grantees that serve fewer children than are reported to 
be enrolled in their local Head Start programs and excessive 
compensation paid to Head Start program staff. Overpayments to grantees 
with programs that have enrollment below their funded levels are not 
uncommon. In April 2007, the HHS Inspector General reported that in the 
2006 program year, fewer than half (40 percent) of Head Start grantees 
were fully enrolled and that enrollment levels by grantee ranged from 
full enrollment to as low as 68 percent of funded enrollment.[Footnote 
13] Overall, this translated into 5 percent of Head Start slots that 
were funded but not filled. The HHS Inspector General also found that 
only 11 percent of grantees had reported enrollment levels to ACF that 
matched their actual enrollment levels, and questioned the ability of 
26 percent of grantees to maintain accurate attendance records and to 
determine enrollment accurately. The HHS Inspector General has also 
conducted a series of audits of Head Start programs that identified 
unreasonable levels of compensation to Head Start program 
executives.[Footnote 14] Although ACF requires grantees to provide 
information about Head Start program staff salaries and compensation as 
part of their annual refunding applications, ACF has not estimated the 
extent to which excessive compensation may be a problem, or verified 
the extent to which information provided by grantees is accurate. 

ACF Has Made Little Progress toward Ensuring Accuracy of Key Data: 

In developing its new systems, ACF plans to use data from its annual 
PIR survey of grantees, which several studies over the past 12 years 
have determined to be unreliable. Specifically, the refunding analysis 
system uses PIR data on grantees' enrollment of children with 
disabilities and provision of medical and dental treatments as factors 
when determining the risk that an individual grantee will fail to meet 
program standards. In addition, ACF plans to use the PIR database in 
the HSES. Our February 2005 report found discrepancies in the 2003 PIR 
database. During our current review, we conducted similar tests to 
check for data consistency in the 2006 PIR database and found that it 
continues to provide some inconsistent data. Our findings are 
consistent with a more recent study funded by ACF that was undertaken 
in response to our 2005 recommendation to address the accuracy of PIR 
data. Specifically, ACF's 2007 study found that the PIR data reported 
by individual Head Start grantees are frequently inaccurate and may be 
unreliable for grantee monitoring or risk assessment purposes. 

The 2007 study found that data submitted by grantees for the PIR survey 
may be unreliable due to the length and complexity of the survey. The 
survey includes over 130 questions and provides data on program 
operations, enrollment, staff and their qualifications, services for 
children and families, and other information used for policymaking and 
accountability. All Head Start grantees are required to submit PIR data 
every year. ACF's 1995 study on PIR data validity also suggested that 
the length of the survey reduced the accuracy of PIR data submitted by 
grantees, and its 2007 study further suggested that instructions 
provided to grantees for completing the PIR may be unclear and could 
lead to grantees submitting incorrect data. Based on our survey of 
program directors, we estimate that over half of all Head Start 
grantees spend more than 24 hours to complete the PIR. In our survey, 
we solicited comments from program directors about potential obstacles 
to completing the PIR and they cited various obstacles, such as unclear 
instructions and questions that may change from one year to the next. 

In addition to using the PIR data to assess progress of individual 
grantees, ACF aggregates the PIR data to provide national, regional, 
and state-level statistics on Head Start. ACF uses the aggregate data 
to report to Congress and the public on the performance of the Head 
Start program. Head Start grantees report using the PIR survey to help 
manage their programs. A majority of grantees report using the PIR 
survey to help ensure compliance with federal laws and regulations, 
compare the performance of their program to national or regional 
benchmarks, and observe trends in their own performance over time. 
Moreover, the Improving Head Start Act requires ACF to use the PIR as 
one determinant of whether grantees meet program and financial 
management requirements and standards, as part of a new system for 
renewing Head Start grants.[Footnote 15] Reliance on systems that 
contain inaccurate data can mislead policymakers and program managers 
and result in inappropriate decisions. 

In its 2007 study, ACF asserted that the national statistics produced 
by the PIR present a reasonable estimate of the services provided by 
the Head Start program even though the data collected from individual 
grantees are unreliable. However, if there are actual errors in grantee-
reported data, the nationally-reported PIR statistics might present a 
false picture of the services provided by the Head Start program. For 
example, the study estimated that grantees over-reported the number of 
children that received medical exams by 3.6 percentage points and noted 
that problematic record-keeping on the part of grantees or physicians 
might account for some of the discrepancy between the PIR statistics 
and the study's estimates. [Footnote 16] Given that the Head Start 
program provides services to more than 900,000 children, over-reporting 
in the number of children that received medical exams by 3.6 percentage 
points could mean that as many as 32,000 fewer children may be 
receiving medical exams than the nationally-reported PIR statistics 
indicate. 

The 2007 study found that ACF lacked procedures to independently verify 
the accuracy of the data. Although ACF has built internal consistency 
checks into the PIR database, these checks will not detect inaccurate 
data as long as the grantee reports data consistently throughout its 
PIR report. In our 2005 report, we also found that ACF lacked a data 
verification process and recommended that ACF either (1) independently 
verify key data submitted through the survey or (2) ensure that 
grantees have systems in place to collect and report accurate, 
verifiable data. 

The 2007 study offered several recommendations for enhancing the 
reliability of PIR data. Most of the study's recommendations would 
address the accuracy of data reported by individual grantees, to allow 
ACF to better assess grantee performance. For example, the study 
recommends that ACF perform regular validation of the PIR data 
submitted by grantees, possibly during the triennial on-site monitoring 
reviews. Alternatively, one recommendation focuses on ACF's use of the 
PIR as a tool for generating national statistics, and suggests 
accomplishing this through a more limited survey to a random sample of 
grantees, thereby reducing the overall burden on grantees. ACF 
officials told us that they have not yet developed any plans to 
implement the specific recommendations from its 2007 study. 

ACF Improved On-site Monitoring by Strengthening Review Processes and 
Is Working to Establish a System to Evaluate Reviews: 

ACF has implemented several changes aimed at improving the quality and 
consistency of its on-site reviews of Head Start grantees, in response 
to our 2005 recommendations. These changes directly address our 
previous findings regarding the lack of procedures for ensuring that 
review teams were following on-site review protocols or for ensuring 
that managers and staff in ACF regional offices are held accountable 
for the quality of the reviews. Specifically, ACF has implemented a 
more rigorous process for certifying reviewers and new processes to 
improve the consistency of reviews, and is working to establish a 
system for evaluating reviews on an ongoing basis. 

ACF Has Implemented More Rigorous Certification Procedures for 
Reviewers: 

ACF has implemented more rigorous procedures for ensuring that a 
sufficient number of qualified reviewers are available to help conduct 
required on-site reviews of Head Start programs. Danya International, 
Inc. (Danya) manages the on-site review process under a contract with 
ACF and monitors whether reviewers meet all of the necessary 
qualifications, such as having a Bachelor's degree and at least 3 years 
of work experience in a field related to early childhood development or 
public program management, and whether they comply with ongoing 
training and performance requirements. Danya's polices require that 
reviewers who do not satisfactorily meet the necessary qualifications 
or who fail to comply with ongoing requirements for reviewers cannot 
participate in an on-site review. According to Danya, 174 reviewers 
were placed on hold or removed from the reviewer pool in fiscal years 
2006 and 2007 because they did not meet the necessary qualifications. 

Procedures for recruitment of on-site reviewers are more systematic 
than in the past. Previously, ACF relied on informal networking among 
individuals affiliated with the Head Start program to recruit new 
reviewers. Now, Danya procedures provide for an ongoing assessment of 
the composition of the current reviewer pool and the numbers of 
reviewers needed to carry out reviews in a given year, and a targeted 
recruitment strategy to address any shortfalls in the numbers or types 
of reviewers needed. For example, to address a shortfall of reviewers 
who speak Spanish or have experience in Native American issues, Danya 
representatives may attend conferences to recruit new reviewers with 
needed special skills and experience, such as conferences sponsored by 
the National Hispanic Head Start Association or the National Indian 
Education Association. Each month, a three-person panel of qualified 
reviewers screens all new applications to determine which applicants 
appear to have the required skills and experience. Applicants who meet 
the initial screening requirements are asked to provide more detailed 
employment and education information, which is then verified by 
Danya.[Footnote 17] 

In addition to meeting the basic requirements for qualifying to become 
an on-site reviewer, Danya procedures require that new and current 
reviewers alike must meet minimum training and performance requirements 
before they are assigned to a review team. New reviewers are required 
to complete a basic training course and must successfully complete a 
Head Start monitoring review as a trainee under the supervision of an 
experienced coach. All reviewers are required to complete any new 
training that may be specified during a given fiscal year, stay 
informed about changes to the review process, and successfully complete 
online tests in writing and computer literacy. Also, members of the 
reviewer pool who are employees of Head Start programs, known as peer 
reviewers, who work for programs that are in serious noncompliance with 
program requirements are not eligible to participate in on-site 
reviews.[Footnote 18] ACF also requires the review team leader and 
report coordinator to complete evaluations for all members of the 
review team; in addition, each team member must assess the performance 
of several colleagues on the team. If a reviewer's performance is rated 
as unsatisfactory by two or more raters on a single review, Danya will 
follow up to verify the raters' assessments, if necessary, and consult 
with ACF to decide whether the reviewer should be placed on probation 
and allowed to participate in an additional review for further 
assessment, or whether the reviewer should be dropped from the reviewer 
pool. 

New Processes Increase Consistency of Reviews: 

In fiscal year 2006, ACF implemented new procedures to improve the 
quality and consistency of on-site reviews. Concerns about the lack of 
independence of on-site review team leaders prompted changes in how 
team leaders are assigned. As a result, each review team is now led by 
ACF program staff from a region other than the grantee's home region. 
Concerns regarding inconsistencies in the findings cited by different 
teams of reviewers for the same grantees led to changes in how findings 
are developed and reported. The review teams collect only data and 
facts during their review: they do not draw conclusions from the 
information they gather or prepare the final report. Instead, reviewers 
record their observations in a centralized, Web-based system, noting 
any potential areas of noncompliance. The reviewers' notes are then 
submitted for centralized review by ACF. The draft review report is 
prepared centrally and includes findings of noncompliance with program 
requirements or deficiency--a more serious form of noncompliance that 
can lead to termination of the grant. The draft report is then 
forwarded to the grantee's home region and to the review team leader's 
region for review and comment. Any comments received are incorporated 
into the report as necessary to clarify the reviewers' observations, 
and the final report is signed by the Director of the Office of Head 
Start and then issued to the grantee. 

ACF has also revised its on-site review protocols to encourage a more 
efficient and uniform approach to conducting on-site reviews. In fiscal 
year 2007, ACF implemented a more uniform set of on-site review 
protocols, under which every grantee is asked the same questions 
relating to 10 distinct program areas, such as health services, fiscal 
management and education and early childhood development services. The 
protocols encourage a more targeted assessment of whether or not 
grantees are in compliance with program regulations, and no longer 
provide for reporting about program strengths, such as the provision of 
services that extend beyond what is required by regulation. Prior to 
the on-site review team's visit, grantees receive a 30-day notification 
and are asked to prepare a uniform set of documents for reviewers to 
examine before meeting with the grantee. During the review, reviewers 
are required to enter the information they gather into a central, Web- 
based system, which facilitates sharing evidence among reviewers and 
tracking whether reviewers have completed all necessary tasks. 

ACF has also implemented uniform corrective action periods and 
mandatory follow-up visits when grantees are found to be either 
noncompliant or deficient. At the time of our previous review, ACF 
relied on grantees to self-certify that they had corrected any problems 
identified during audits or on-site reviews and only made follow-up 
visits to grantees that had been found deficient. Now, when grantees 
are found to be noncompliant with Head Start program regulations, ACF 
allows them 90 days to resolve the underlying problems and bring their 
programs into compliance. If found deficient, grantees are given 6 
months to fully resolve deficiencies before ACF will take action to 
terminate their grants, though ACF will allow additional time if a 
grantee can justify its request for an extension.[Footnote 19] At the 
end of the relevant corrective action period, ACF conducts follow-up 
reviews in order to verify that grantees have resolved the problems 
identified during the initial on-site review. 

ACF officials said that most grantees have adjusted well to the new on- 
site review process, although there were some initial negative 
reactions from the grantees when the new procedures were first 
introduced. ACF officials told us that they encourage grantees to 
provide feedback on the review process and on the conduct of on-site 
reviewers. They have also established formal procedures for review team 
leaders to report violations of the on-site code of conduct by 
reviewers and to replace reviewers while the team is on-site, if 
necessary. Based on our survey results, we estimate that 9 percent of 
grantees encountered problems with reviewers during their most recent 
review that required outside intervention. For example, one respondent 
reported several problems, including trouble scheduling the review, a 
reviewer with a conflict of interest, and overly aggressive reviewers. 

Our survey results suggest that grantees have mixed views about the 
revised on-site monitoring procedures. Generally, directors of programs 
reviewed under the revised procedures had positive views of the 
reviewers but had less positive views of specific changes in the 
procedures and the extent to which their most recent on-site review had 
led to improvements in their Head Start programs. Specifically, most 
directors of programs that were reviewed under the revised procedures 
were very or somewhat satisfied with how their most recent on-site 
reviews were conducted. Most directors also found that the review teams 
had adhered to the new protocols and that the review teams demonstrated 
an understanding of program requirements. They were almost evenly split 
over whether having program specialists from outside their home region 
lead their review had a positive or negative effect on the review 
process,[Footnote 20] but about three-quarters thought that the focus 
on reporting only noncompliance had a negative or very negative effect 
on the on-site review process. When asked the extent to which their 
most recent reviews led to program improvements in each of the 10 
program component areas, directors generally reported that the review 
led to few or no improvements in most program areas, with the exception 
of health services and program design and management, which directors 
generally thought had improved to a greater extent than other program 
areas as a result of their most recent reviews. 

Although we cannot directly attribute any improvements in Head Start 
program management to these changes, our analysis of on-site review 
data does suggest that there may have been some improvements in Head 
Start program management since our last review. In 2005, we reported 
that about 76 percent of all grantees that had on-site reviews in 2000 
had been found to be out of compliance with one or more standards in 
the areas of fiscal management, program governance, or record-keeping 
and reporting. We also reported that, in subsequent reviews, 53 percent 
of those same grantees had been cited again for problems in these same 
program areas. Our more recent analysis of on-site review data shows 
that, for grantees reviewed in 2003, about 71 percent were found to be 
out of compliance with standards in the same three areas of program 
management. In 2006, 29 percent of grantees reviewed were cited again 
for problems in these three areas. 

In response to our 2005 recommendation, ACF has begun to implement 
procedures for assessing the quality of on-site reviews. In 2006, ACF 
conducted a one-time study of the consistency of on-site reviews. This 
study revealed some differences in the findings identified by different 
teams of reviewers that visited the same grantees. However, ACF 
determined none of the non-duplicated preliminary findings identified 
by re-review teams were serious enough to meet the regulatory 
definition of a program deficiency. The Improving Head Start Act 
further requires that on-site reviews are to be conducted in a manner 
that includes periodic assessments of the reliability of the 
process.[Footnote 21] ACF is currently working to establish an ongoing 
system for evaluating its on-site review process that would address 
this new requirement. 

ACF Uses Data to Identify Grantees in Need of Assistance, but 
Weaknesses Have Hindered Efforts to Improve Grantee Performance: 

To improve Head Start grantee performance, ACF uses data from multiple 
sources to identify underperforming Head Start grantees. For example, 
it uses data to direct resources to grantees in need of training and 
technical assistance. It also uses data to identify high-risk grantees 
that may need additional oversight. However, ACF's use of data to 
improve grantee performance has faced limitations. For example, ACF 
does not have clear criteria for determining which grantees need 
additional oversight. In addition, ACF had limits on its ability to 
obtain competition for grants prior to the recent reauthorization of 
Head Start. 

ACF Uses Data to Track Grantee Activities and Performance and to Target 
Resources to Underperforming Grantees: 

ACF uses data from multiple sources to track Head Start grantee 
performance and to identify grantees with program weaknesses. In 
addition to findings from on-site monitoring reviews, ACF also assesses 
grantees' performance through analysis of their audit reports, 
financial reports, and other sources of information. One of the ways 
that ACF uses data to assess grantee performance is by calculating risk 
levels for each grantee, through its refunding analysis system. ACF 
determines grantee risk levels by using various indicators, such as 
findings from on-site monitoring reviews, turnover of key program 
staff, PIR survey data, and negative media coverage.[Footnote 22] 

After ACF identifies underperforming grantees, it targets resources 
from its training and technical assistance (T/TA) network to help these 
grantees address their program weaknesses. ACF gives grantees with 
deficiencies priority for receiving services from the T/TA network. 
Priority for receiving services is then given, in order, to other 
grantees in non-compliance or at risk for deficiencies, grantees new to 
providing Head Start services, and grantees with new directors or key 
staff. Grantees with deficiencies are sometimes offered on-site 
assistance to address their program weaknesses. The T/TA network also 
assists grantees through workshops, cluster training for groups of 
grantee program staff and management, presentations at local and 
national conferences, and other activities. For example, T/TA network 
staff members affiliated with ACF's regional office in Atlanta have 
provided clustered training to grantees covering topics like literacy, 
domestic violence, and guidance related to ACF's on-site monitoring 
review process. In addition, all grantees are required to submit an 
annual T/TA plan to ACF, identifying their T/TA needs for the coming 
year. Grantees can use multiple data sources to identify their T/TA 
needs, including on-site monitoring review reports and community 
assessments. 

Lack of Criteria for Initiating Additional On-site Reviews Undermines 
ACF's Ability to Address Severely Underperforming Grantees: 

ACF uses the refunding analysis system as an opportunity to identify 
program weaknesses before it reviews grantees' annual grant 
applications. If the process identifies an underperforming grantee-- 
those designated as "high risk"--ACF may decide to initiate a special 
on-site review to determine whether the grantee is deficient and 
whether the grantee should ultimately be terminated. If the grantee is 
deemed deficient, ACF can require the grantee to correct the 
deficiencies within specified time frames,[Footnote 23] or to begin a 
quality improvement process, after which ACF will assess whether the 
grantee has corrected all deficiencies. In all cases, grantees that do 
not correct identified deficiencies are subject to termination 
proceedings. However, ACF's criteria for deciding which grantees are 
subject to the special on-site review are unclear. These decisions are 
typically made on an ad-hoc basis, which may result in grantees with 
similar problems receiving inconsistent levels of oversight. We have 
reported that consistency is an essential component to ensuring 
performance accountability in federal grants.[Footnote 24] 

Prior to enactment of the Improving Head Start Act, statutory 
provisions limited ACF's ability to terminate underperforming grantees 
at the time an on-site review or the annual refunding analysis showed 
inadequate performance. ACF was required to grant priority to existing 
grantees[Footnote 25] when making funding decisions, unless ACF 
determined that the grantee failed to meet program, financial 
management, or other requirements established by ACF. However, before 
ACF could terminate a failing grantee and open the grant to competition 
from other prospective grantees, ACF was required to provide the 
grantee with official notice and an opportunity for a hearing on its 
termination--or convince the grantee to relinquish its grant. Moreover, 
if a grantee appealed ACF's termination decision, ACF was required to 
pay the grantee's legal fees until the hearing process was completed. 

Recent work related to grants management has pointed to competition for 
grants as a way to facilitate grant accountability. For example, the 
Domestic Working Group, chaired by the Comptroller General of the 
United States, cited grant competition as a key area of opportunity for 
improving grant accountability.[Footnote 26] It noted that grant 
competition promotes fairness and openness in the selection of 
grantees, and that agencies can better ensure that grantees have the 
capability to efficiently and effectively meet grant goals by 
incorporating evaluation criteria focused on factors indicative of 
success into the competition process.[Footnote 27] 

The recent reauthorization of Head Start amends some of the 
requirements and procedures for refunding Head Start grantees, 
including the introduction of time limits for Head Start 
grants.[Footnote 28] This will give ACF the ability to open competition 
for Head Start grants to additional grantees, thereby enhancing ACF's 
ability to remove severely underperforming grantees from the program, 
on a regular basis. 

Conclusions: 

In light of federal budget limitations and increasing expectations for 
program accountability, ACF's ability to demonstrate effective 
stewardship over billions of dollars in Head Start grants has never 
been more critical. Since our 2005 review, ACF has made significant 
improvements in its procedures for monitoring local Head Start 
programs. In particular, the agency has taken steps to bring together 
information about individual grantees from various sources in order to 
identify those that are struggling to meet Head Start performance 
standards, and to target assistance to help these grantees strengthen 
their programs. This risk-based approach is promising and provides a 
foundation for a more strategic, comprehensive approach to managing the 
Head Start program. Nevertheless, ACF's current initiatives do not yet 
constitute a comprehensive plan for managing program risks. Without a 
more comprehensive approach to identifying risks, threats to ACF's 
ability to achieve Head Start program objectives will likely go 
undetected until a problem arises. For example, undetected improper 
payments could result in a severe reduction in the funds available to 
pay for services for children. 

Although ACF has made progress since we last reported in 2005 toward 
strengthening its oversight of the approximately 1,600 local agencies 
that receive Head Start program grants, its systems for doing so depend 
in part on data that are unreliable. If ACF does not act to address the 
weaknesses in its data, it cannot depend on its new systems to provide 
it with reliable information on grantee performance. The lack of 
reliable information about local program activities further compromises 
ACF's ability to manage risks by limiting its ability to understand 
whether problems are isolated or national in scope, as well as whether 
they arise from individual grantee failures or from weaknesses in the 
broader structure of the program itself. A lack of sound information 
also calls into question the credibility of ACF's reporting to Congress 
and the American public on the services provided by the Head Start 
program. 

Even if ACF conducts a comprehensive risk assessment of the Head Start 
program and works to improve the accuracy of its data, it will still 
face challenges addressing risks posed by the most severely 
underperforming grantees. The annual refunding process could be used to 
link funding opportunities to performance. For example, if ACF develops 
clear and objective criteria for deciding which grantees are subject to 
a special on-site review, it could ensure that all grantees with 
similar problems receive similar levels of oversight. Without such 
criteria, special on-site reviews will continue to be conducted on an 
ad-hoc basis and, as a result, ACF may continue to fund poorly 
performing grantees that do not receive special on-site reviews without 
providing them the additional oversight they need. 

Recommendations for Executive Action: 

To improve its management and oversight of the Head Start program, we 
are making the following four recommendations to HHS's Assistant 
Secretary for Children and Families: 

* More fully implement our 2005 recommendation by developing a 
strategic and comprehensive approach to assessing Head Start 
programwide risks. A comprehensive, programwide risk assessment should 
take all program risks into account. Specifically, a comprehensive risk 
assessment should include an assessment of risks arising from external 
sources, such as social and demographic changes that may affect the 
availability or demand for Head Start program services, as well as from 
internal sources, such as underperforming grantees, differences in how 
regional offices implement program policies and procedures, or the 
availability of sound data to help manage the program. A comprehensive 
risk assessment should also include strategies for minimizing risks 
that could significantly limit the ability of ACF and grantees to help 
grantees deliver high-quality programs. 

* Look for cost-effective ways to expand ACF's efforts to comply with 
the Improper Payments Information Act of 2002 and to address our 2005 
recommendation by collecting data on and estimating the extent of 
improper payments made for unallowable activities and other 
unauthorized purposes. These should take into account various aspects 
of the program and should not be limited to improper payments to 
grantees that enroll too many children from families that do not meet 
the program's income eligibility requirement. 

* Take additional steps to ensure the accuracy of PIR data by 
determining which elements of the PIR are essential for program 
management and focus resources on a streamlined version of the PIR that 
would be required annually of all grantees, with the responses verified 
periodically. If additional information is needed to produce national 
estimates of a wider range of Head Start program services, ACF should 
include the relevant, additional data items in an expanded version of 
the PIR, which could be administered to a random, representative sample 
of grantees each year. 

* Develop clear criteria for determining which grantees require more 
thorough reviews--such as special, on-site reviews--as a result of its 
refunding analysis system. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to ACF for comment. The full text of 
these comments appears in appendix II. ACF agreed with two of our 
recommendations, and emphasized progress already made toward developing 
a comprehensive risk assessment process and toward reducing improper 
payments. Specifically, ACF noted that it plans to implement a 
programwide risk management process in early 2008. ACF also said that 
it has developed a new integrated data management system. While we 
agree that ACF's planned programwide risk management process and 
integrated data management system are important initiatives that may 
facilitate programwide risk assessment, both systems have yet to be 
fully implemented and it remains to be seen how these systems will 
actually be used to proactively manage the Head Start program 
nationally. ACF also emphasized the progress it has made to reduce the 
frequency and amount of improper payments arising from participants' 
ineligibility, and that its focus on eligibility is consistent with how 
ACF has implemented the Improper Payments Information Act of 2002 for 
other programs, and was approved by HHS and OMB management. We agree 
that ACF's progress toward reducing the improper payment error rate due 
to Head Start program ineligibility from 3.6 percent in 2003 to 1.3 
percent in 2006 is commendable, and acknowledge ACF's commitment to 
reducing improper payments for the Head Start program. However, as 
noted in ACF's comments, the agency's improved monitoring efforts and 
planned risk management initiatives may help ACF to identify further 
areas for study related to improper payments, and we encourage ACF to 
pursue these areas, as practical. ACF agreed with our recommendation to 
review and streamline its annual PIR survey of grantees, noting that it 
will continue to use the results of its own PIR validation study to 
inform the design of future surveys, take steps to periodically verify 
grantee responses, and leverage technological improvements to capture 
program data more frequently and consistently. Finally, ACF said it 
will soon have the ability to define realistic criteria for determining 
which grantees require more thorough or special reviews, and noted that 
improvements in monitoring, and changes to the process for designating 
grantees resulting from reauthorization, should help enable it to do 
so. We're encouraged that ACF said it should have both its risk 
management process and its integrated data management systems 
operational this year. Both systems will play an important role in its 
efforts to better target its oversight efforts. 

List of Congressional Requesters: 

The Honorable Edward M. Kennedy: 
Chairman: 
The Honorable Michael B. Enzi: 
Ranking Member: 
Committee on Health, Education, Labor and Pensions: 
United States Senate: 

The Honorable Christopher J. Dodd: 
Chairman: 
The Honorable Lamar Alexander: 
Ranking Member: 
Subcommittee on Children and Families: 
Committee on Health, Education, Labor and Pensions: 
United States Senate: 

The Honorable George Miller: 
Chairman: 
The Honorable (Howard) P. "Buck" McKeon: 
Ranking Member: 
Committee on Education and Labor: 
House of Representatives: 

The Honorable Dale E. Kildee: 
Chairman: 
The Honorable Michael N. Castle: 
Ranking Member: 
Subcommittee on Early Childhood, Elementary and Secondary Education: 
Committee on Education and Labor: 
House of Representatives: 

The Honorable Lynn C. Woolsey: 
House of Representatives: 

[End of section] 

Appendix I: Scope and Methodology: 

To answer our research objectives, we interviewed Administration for 
Children and Families (ACF) and Office of Head Start officials and 
their staff in Washington, D.C., and in the ACF regional offices in 
Philadelphia and Atlanta. We conducted interviews with staff from all 
of ACF's 10 regional offices, and reviewed relevant documentation from 
each of these offices. We visited two regional offices--Philadelphia 
and Atlanta--to help us develop interview and data collection protocols 
and conducted telephone interviews with the remaining eight regional 
offices. 

To obtain grantees' opinions on ACF's oversight of the Head Start 
program, we administered a Web-based survey to a nationally- 
representative sample of Head Start and Early Head Start program 
directors. Our target population consisted of directors whose programs 
were the subject of on-site reviews from October 2005 through March 
2007, and were reviewed under ACF's newly revised on-site review 
process. Based on data supplied by ACF and the contractor responsible 
for coordinating the on-site reviews, we identified a total population 
of 598 Head Start grantees. From this population, we selected a 
stratified random probability sample of 329 grantees. We stratified the 
population based on whether or not the grantee has any delegate 
agencies and the ACF region in which the grantee operates.[Footnote 29] 
We also included in our sample all grantees that participated in ACF's 
2006 one-time study of the consistency of its on-site reviews. With 
this probability sample, each grantee had a nonzero probability of 
being selected, and that probability could be computed for any grantee. 
Each grantee selected in the sample was subsequently weighted in the 
analysis to account statistically for all the grantees in the 
population. 

Because we followed a probability procedure based on random selections, 
our sample is only one of a large number of samples that we might have 
drawn. Since each sample could have provided different estimates, we 
express our confidence in the precision of our particular sample's 
results as a 95 percent confidence interval. This is the interval that 
would contain the actual population value for 95 percent of the samples 
we could have drawn. As a result, we are 95 percent confident that each 
of the confidence intervals in this report will include the true values 
in the study population. All percentage estimates from this survey have 
margins of error of plus or minus 10 percent or less, unless otherwise 
noted. 

We developed our survey questions based on feedback that we received 
during three focus group sessions that we conducted with Head Start 
program directors whose programs were reviewed under the revised on- 
site review process. After we drafted the survey questionnaire, we 
conducted a series of six pretests by telephone to check that (1) the 
questions were clear and unambiguous, (2) terminology was used 
correctly, and (3) the information could feasibly be obtained. We made 
changes to the content and format of the questionnaire as necessary 
during the pretesting process. 

The survey was fielded between July 12, 2007, and August 20, 2007. Of 
the 329 program directors in our sample, 261 responded--for a response 
rate of 79 percent. 

To assess the changes ACF made to its on-site monitoring review 
process, we met with the contractor responsible for coordinating the 
reviews, as well as with representatives from the National Head Start 
Association, and reviewed the results of a study conducted by ACF to 
evaluate its on-site review process. 

We also analyzed the extent to which ACF's on-site monitoring reviews 
identified repeat noncompliance by Head Start grantees, using 2003 and 
2006 data from the on-site review database that is currently maintained 
by Danya International, Inc. (Danya). We used four data elements from 
this database for our analysis: Grantee ID, Fiscal Year, Review Type, 
and Core Area. We further limited our analysis to three core areas: 
program governance, record-keeping and reporting, and fiscal 
management. To assess the reliability of these data, we relied on both 
our 2005 assessment of the reliability of 2003 data, and performed 
additional tests. Specifically, we conducted electronic testing of both 
the 2003 and 2006 data and found no missing or out-of-range entries for 
any of the four elements that we used, and obtained additional 
information about the 2006 data from Danya. Based on our previous and 
updated assessments, we find the 2003 and 2006 data sufficient for the 
purpose of this engagement. 

We analyzed the on-site review data for 2003 and 2006 to obtain, for 
each year, the numbers of (1) all grantees reviewed, (2) grantees 
receiving triennial or first-year reviews only, and (3) grantees cited 
for deficiency or noncompliance in one, two, or all three of the core 
areas of interest (program governance, record-keeping and reporting, 
and fiscal management). To obtain the number of grantees with repeat 
noncompliance, we computed the number of grantees cited for 
noncompliance or deficiency in both 2003 and 2006, in each of the same 
core areas. The computer code used to derive these numbers was 
subjected to independent review within GAO and was found to be 
accurate. 

We reviewed ACF studies from 1995 and 2007 on the validity and accuracy 
of PIR data, the results of which are discussed in this report. We also 
conducted consistency tests on PIR data from the 2006 PIR database, 
similar to the tests that we conducted on the 2003 PIR database for our 
2005 report on Head Start oversight. Overall we conducted 29 tests, 
across all three sections of the PIR database: Enrollment and Program 
Operations, Program Staff and Qualifications, and Child and Family 
Services. In 9 of our 29 tests, PIR data contained inconsistent data 
that did not sum to the expected totals. In each of the nine tests that 
failed, less than 1 percent of the 2,696 data items failed. Our 
findings indicate that the PIR database contains some inconsistent 
data. 

Table 1: Summary of Results for PIR Data Consistency Tests, 2006 PIR 
Database: 

Section of PIR Database: Enrollment and Program Operations; 
Number of PIR data elements tested: 8; 
Number of tests that passed: 8; 
Number of tests that failed: 0. 

Section of PIR Database: Program Staff and Qualifications; 
Number of PIR data elements tested: 7; 
Number of tests that passed: 5; 
Number of tests that failed: 2. 

Section of PIR Database: Child and Family Services; 
Number of PIR data elements tested: 14; 
Number of tests that passed: 7; 
Number of tests that failed: 7. 

Section of PIR Database: Total; 
Number of PIR data elements tested: 29; 
Number of tests that passed: 20; 
Number of tests that failed: 9. 

Source: GAO analysis. 

[End of table] 

Our work was conducted from February 2007 through December 2007 in 
accordance with generally accepted government auditing standards. 

[End of section] 

Appendix II: Comments from the Department of Health and Human Services: 

Department Of Health & Human Services: 

Office of the Assistant Secretary for Legislation: 
Washington, D.C. 20201: 

January, 10, 2008: 

Cornelia M. Ashby, Director: 
Education, Workforce, and Income Security Issues: 
U.S. Government Accountability Office: 
Washington, DC 20548: 

Dear Ms. Ashby:

Enclosed are the Department's comments on the U.S. Government 
Accountability Office's (GAO) draft report entitled: "Head Start: A 
More Comprehensive Risk Management Strategy and Data Improvements Could 
Further Strengthen Program Oversight".

The Department appreciates the opportunity to review and comment on 
this report before its publication.

Sincerely, 

Signed by: 

Rebecca Hemard for: 

Vincent J. Ventimiglia: 
Assistant Secretary for Legislation: 

Comments Of The Department Of Health And Human Services (HHS) On The 
Government Accountability Office Draft Report Titled, "Head Start: A 
More Comprehensive Risk Management Strategy And Data Improvements Could 
Further Strengthen Program Oversight" (GAO-08-221): 

GAO Recommendations: 

To improve its management and oversight of the Head Start program, we 
are making the following four recommendations to HHS's Assistant 
Secretary for Children and Families: 

* More fully implement our 2005 recommendation by developing a 
strategic and comprehensive approach to assessing Head Start program-
wide risks. A comprehensive, program-wide risk assessment should take 
all program risks into account. Specifically, a comprehensive risk 
assessment should include an assessment of risks arising from external 
sources, such as social and demographic changes that may affect the 
availability or demand for Head Start program services, as well as from 
internal sources, such as underperforming grantees, differences in how 
regional offices implement program policies and procedures, or the 
availability of sound data to help manage the program. A comprehensive 
risk assessment should also include strategies for minimizing risks 
that could significantly limit the ability of ACF's [sic] and grantees 
to help grantees' [sic] deliver high-quality programs. 

* Look for cost-effective ways to expand ACF's efforts to comply with 
the Improper Payments Information Act of 2002 and to address our 2005 
recommendation by collecting data on and estimating the extent of 
improper payments made for unallowable activities and other 
unauthorized purposes. These should take into account various aspects 
of the program and should not be limited to improper payments to 
grantees that enroll too many children from families that do not meet 
the program's income eligibility requirement. 

* Take additional steps to ensure the accuracy of PIR data by 
determining which elements of the PIR are essential for program 
management and focus resources on a streamlined version of the PIR that 
would be required annually of all grantees, with the responses verified 
periodically. If additional information is needed to produce national 
estimates of a wider range of Head Start program services, ACF should 
include the relevant, additional data items in an expanded version of 
the PIR, which could be administered to a random, representative sample 
of grantees each year. 

* Develop clear criteria for determining which grantees require more 
thorough reviews—such as special, on-site reviews—as a result of its 
refunding analysis system.

HHS Comments: 

Since GAO's last report on this topic, ACF has made progress in 
implementing the recommendations outlined in order to provide high-
quality services to our nation's children, families, and communities. 
Improvements to results-oriented oversight and management, including 
reconciliations in Federal funds and changes to the monitoring process, 
have been made. The Office of Head Start (OHS) was reorganized and 
policies and procedures are being standardized. Inconsistencies in 
policy and policy implementation have been identified and largely 
addressed. Further action will continue. The Head Start program 
performance standards and other regulations are under review and 
redesign to address changes required in the law, in the field of early 
childhood, and in the social and demographic landscape. 

With regard to specific recommendations: 

* A national refunding analysis process for central office 
communication with regional office program and grants staff was 
instituted to analyze available data and information prior to issuance 
of each grantee's annual refunding notice. Simultaneously, a more 
comprehensive grantee risk assessment was developed and implemented in 
two regions. These activities evolved into a program-wide risk 
management process that is on track for national implementation in 
early 2008. This process involves internal program, grants, and 
technical assistance staff and managers, grantee staff and board 
members, and representatives of other funding sources for the grantee. 
Through this process, Head Start will better identify risks, 
challenges, and opportunities that Head Start programs may be 
experiencing, and proactively provide targeted technical assistance to 
minimize risks and foster innovations. An integrated data management 
system has been developed to provide operational oversight and to 
improve the quality, availability, and consistency of grantee and 
management data. In addition to greater knowledge of grantee operations 
to inform of decision making, the process offers increased ability to 
identify internal risks based on staff performance and to target staff 
development opportunities. Aggregate data will be utilized to determine 
program-wide risks, strengths, and trends. It should be noted that this 
system is in full compliance with the Office of Management and Budget's 
(OMB) requirements for technical investment reporting. 

* OHS has made regular and successful efforts since passage of the 
Improper Payments Information Act of 2002 (IPIA) to identify and 
eliminate improper payments. OHS has fully complied with the 
requirements of the Act and the directives of OMB in this area. In 
2002, before passage of the Act, OHS worked with OMB and Health and 
Human Services (HHS) and ACF management to arrive at an appropriate and 
effective approach to identify and eliminate improper payments in the 
Head Start program. This approach has indeed focused on eligibility, as 
the GAO report notes. This was done primarily because eligibility was 
considered an area where the most frequent improper payments could be 
found and such payments most closely fit the definition of improper 
payment in the Act. Examining eligibility of recipients in the context 
of possible improper payments is consistent with the manner in which 
ACF has implemented the Act for other programs designated at risk of 
improper payments, and has been approved by both HHS and OMB 
management. 

The report implies that OHS does not focus on other possible improper 
payments than those related to eligibility. While ACF's IPIA efforts do 
in fact focus on eligibility, OHS uses other efforts to identify and 
eliminate improper payments as well, including but not limited to OMB's 
A-133 annual audit process. 

Finally, the report fails to credit OHS for not only meeting the spirit 
of the IPIA but its intent. OHS has a proven track record of reducing 
the frequency and amount of improper payments. Since 2002, the Improper 
Payment Error Rate for Head Start, as reported in the annual HHS 
Performance and Accountability Report, has declined from 3.6 percent in 
2003 to 1.3 percent in 2006. 

Further areas for study related to improper payments may be identified 
through monitoring improvements and increased risk management. Head 
Start will determine whether formal study on other types of improper 
payments is warranted, based on, for example, analysis of disallowance 
issues and rates. Where necessary, OMB approval will be pursued. 

* OHS agrees with GAO's recommendation to review and streamline the 
Program Information Report (PIR). The PIR validation study results will 
continue to inform the design, and OHS will periodically verify the 
responses. Increases in technological capacity at the national and 
program levels provide the ability to capture and use data with greater 
frequency and consistency. 

* OHS will soon have the ability to define realistically the criteria 
for determining which grantees require more thorough or special 
reviews, based on continued improvements to the OHS monitoring process, 
the redesignation process required through reauthorization, and 
implementation of the national risk management process.

[End of section] 

Appendix III: GAO Contacts and Staff Acknowledgments: 

GAO Contact: 

Cornelia Ashby (202) 512-7215 or asbyc@gao.gov: 

Acknowledgments: 

The following individuals made important contributions to this report: 
Bill J. Keller, Regina Santucci, Christopher W. Backley, Susannah 
Compton, James Ashley, Cindy Gilbert, Alison Martin, George Quinn, 
Jerry Sandau, Elizabeth Wood, Kimberly Brooks, Jacqueline Nowicki, 
Doreen Feldman, Alexander Galuten, and James Rebbe. 

[End of section] 

Appendix IV: Related GAO Products: 

Improper Payments: Incomplete Reporting under the Improper Payments 
Information Act Masks the Extent of the Problem. GAO-07-254T. 
Washington, D.C.: December 5, 2006. 

Grants Management: Enhancing Performance Accountability Provisions 
Could Lead to Better Results. GAO-06-1046. Washington, D.C.: September 
29, 2006. 

Head Start: Progress and Challenges in Implementing Transportation 
Regulations. GAO-06-767R. Washington, D.C.: July 27, 2006. 

Head Start: Comprehensive Approach to Identifying and Addressing Risks 
Could Help Prevent Grantee Financial Management Weaknesses. GAO-05-176. 
Washington, D.C.: February 28, 2005. 

Head Start: Better Data and Processes Needed to Monitor 
Underenrollment. GAO-04-17. Washington, D.C.: December 4, 2003. 

Head Start: Increased Percentage of Teachers Nationwide Have Required 
Degrees, but Better Information on Classroom Teachers' Qualifications 
Needed. GAO-04-5. Washington: D.C.: October 1, 2003. 

Managing for Results: Efforts to Strengthen the Link between Resources 
and Results at the Administration for Children and Families. GAO-03-9. 
Washington, D.C.: December 10, 2002. 

Strategies to Manage Improper Payments: Learning from Public and 
Private Sector Organizations. GAO-02-69G. Washington, D.C.: October 
2001. 

Standards for Internal Control in the Federal Government. GAO/AIMD-00- 
21.3.1. Washington, D.C.: November 1999. 

[End of section] 

Footnotes: 

[1] GAO, Head Start: Comprehensive Approach to Identifying and 
Addressing Risks Could Help Prevent Grantee Financial Management 
Weaknesses, GAO-05-176 (Washington, D.C.: Feb. 28, 2005). 

[2] Head Start is authorized to serve children at any age prior to 
compulsory school attendance. The program was originally aimed at 3-to 
5-year-olds. Early Head Start, begun in 1994, focuses on serving 
children from birth to 3 years of age and pregnant women. For the 
purposes of this report on program oversight, when we discuss the Head 
Start program, we are referring to both Head Start and Early Head 
Start. 

[3] Pub. L. No. 110-134 (2007). 

[4] Under the Improving Head Start Act, a grantee that is determined to 
be delivering a "high-quality and comprehensive Head Start program" is 
designated as a "Head Start agency" for 5 years. Grantees that do not 
deliver a high-quality, comprehensive Head Start program are subject to 
an open competition for grant funding. 

[5] Although Head Start is intended to serve primarily children whose 
family income is at or below the federal poverty line, its regulations 
permit up to 10 percent of children to be from families that are not 
low-income, and up to 49 percent in American Indian-Alaska Native 
programs. See 45 C.F.R. § 1305.4(b)(2)-(3). 

[6] 42 U.S.C. § 9836a. 

[7] For a complete discussion of the principles of internal control and 
their importance to federal program management, see GAO, Standards for 
Internal Control in the Federal Government, GAO/AIMD-00-21.3.1 
(Washington, D.C.: November 1999) and Office of Management and Budget 
(OMB) Circular A-123, Management's Responsibility for Internal Control 
(Dec. 21, 2004). 

[8] As of early November 2007, OMB had yet to approve funding for this 
project. According to OMB Circular A-11 Part 7, Planning, Budgeting, 
Acquisition, and Management of Capital Assets (July 2007), agencies are 
required to submit an attachment to their yearly budget request 
justifications, known as an OMB Exhibit 300, outlining any new spending 
for information technology initiatives, such as the HSES. OMB uses this 
to help allocate budgetary resources according to the Administration's 
priorities and to assess whether agencies' programming processes are 
consistent with OMB policy and guidance. According to OMB, ACF has not 
submitted an OMB 300 for the HSES. 

[9] Pub. L. No. 107-300 (2002). 

[10] Improper payments include any payments that should not have been 
made under applicable requirements, including payments in an incorrect 
amount or to an ineligible recipient. 

[11] Pub. L. No. 110-134, § 28. 

[12] Under 45 C.F.R. § 1305.4(b)(1), at least 90 percent of the 
children who are enrolled in each Head Start program must be from 
families with incomes below the official poverty line. Children from 
families that are receiving public assistance or who are in foster care 
are eligible to receive Head Start services, regardless of income. 

[13] U.S. Department of Health and Human Services Office of Inspector 
General, Enrollment Levels in Head Start, OEI-05-06-00250 (April 2007). 

[14] See OIG reports A-01-04-02501, A-05-04-00023, and A-07-04-02016, 
available at [hyperlink, http://oig.hhs.gov]. 

[15] Pub. L. No. 110-134, §7, 42 U.S.C. § 9836(c)(1)(E). 

[16] This difference was found to be statistically significant at the 
95 percent confidence level. 

[17] Danya policy also requires that, beginning in fiscal year 2007, 
all educational degrees and work experience of current reviewers must 
also be verified before they may conduct further monitoring reviews. 

[18] The reviewer pool includes both peer reviewers, who are employees 
of Head Start grantees and may participate in a limited number of 
reviews each year, and consultant reviewers, who are full-time 
consultants. As of October 2007, 482 of the 1,285 available on-site 
reviewers (38 percent) were peer reviewers. 

[19] ACF requires that violations of health and safety regulations must 
be resolved within 30 days. 

[20] An estimated 36 percent thought that selecting review team leaders 
from outside of their region had a very or somewhat positive effect and 
37 percent thought that this change had a very or somewhat negative 
effect. About 24 percent thought that the change had neither a positive 
nor negative effect. 

[21] Pub. L. No. 110-134, § 8, 42 U.S.C. § 9836a(c)(2)(G). 

[22] As previously indicated, the PIR data reported by individual Head 
Start grantees are frequently inaccurate and may be unreliable for 
grantee monitoring or risk assessment purposes. 

[23] Under 42 U.S.C. § 9836a(e)(1)(B), ACF shall require the grantee to 
correct the deficiency immediately if the deficiency threatens the 
health or safety of staff or program participants or poses a threat to 
the integrity of federal funds. If ACF determines, in light of the 
nature and magnitude of the deficiency, that a 90-day period is 
reasonable, ACF may require that the grantee correct the deficiency 
within that time frame. 

[24] GAO, Grants Management: Enhancing Performance Accountability 
Provisions Could Lead to Better Results, GAO-06-1046 (Washington, D.C.: 
Sept. 29, 2006). 

[25] Priority was required to be granted to grantees that were 
receiving Head Start funds on August 13, 1981. 

[26] The Domestic Working Group consists of 19 federal, state, and 
local audit organizations. The purpose of the group is to identify 
current and emerging challenges of mutual interest and explore 
opportunities for greater collaboration within the intergovernmental 
audit community. 

[27] Domestic Working Group: Grant Accountability Project, Guide to 
Opportunities for Improving Grant Accountability (Washington, D.C.: 
October 2005). 

[28] As previously stated, under the Improving Head Start Act, a 
grantee that is determined to be delivering a high-quality and 
comprehensive program is designated as a Head Start agency for a 5-year 
period. A grantee that does not deliver a high-quality and 
comprehensive program is subject to an open competition. 

[29] A Head Start grantee may subcontract with other public, or private 
nonprofit organizations to provide part or all of the grantee's Head 
Start services. The subcontractors providing the Head Start services 
are referred to as delegate agencies.

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