[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
EXAMINING GAO'S REVIEW OF SELECTED HEAD START GRANTEES
=======================================================================
HEARING
before the
COMMITTEE ON
EDUCATION AND LABOR
U.S. House of Representatives
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
HEARING HELD IN WASHINGTON, DC, MAY 18, 2010
__________
Serial No. 111-62
__________
Printed for the use of the Committee on Education and Labor
Available on the Internet:
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COMMITTEE ON EDUCATION AND LABOR
GEORGE MILLER, California, Chairman
Dale E. Kildee, Michigan, Vice John Kline, Minnesota,
Chairman Senior Republican Member
Donald M. Payne, New Jersey Thomas E. Petri, Wisconsin
Robert E. Andrews, New Jersey Howard P. ``Buck'' McKeon,
Robert C. ``Bobby'' Scott, Virginia California
Lynn C. Woolsey, California Peter Hoekstra, Michigan
Ruben Hinojosa, Texas Michael N. Castle, Delaware
Carolyn McCarthy, New York Mark E. Souder, Indiana
John F. Tierney, Massachusetts Vernon J. Ehlers, Michigan
Dennis J. Kucinich, Ohio Judy Biggert, Illinois
David Wu, Oregon Todd Russell Platts, Pennsylvania
Rush D. Holt, New Jersey Joe Wilson, South Carolina
Susan A. Davis, California Cathy McMorris Rodgers, Washington
Raul M. Grijalva, Arizona Tom Price, Georgia
Timothy H. Bishop, New York Rob Bishop, Utah
Joe Sestak, Pennsylvania Brett Guthrie, Kentucky
David Loebsack, Iowa Bill Cassidy, Louisiana
Mazie Hirono, Hawaii Tom McClintock, California
Jason Altmire, Pennsylvania Duncan Hunter, California
Phil Hare, Illinois David P. Roe, Tennessee
Yvette D. Clarke, New York Glenn Thompson, Pennsylvania
Joe Courtney, Connecticut
Carol Shea-Porter, New Hampshire
Marcia L. Fudge, Ohio
Jared Polis, Colorado
Paul Tonko, New York
Pedro R. Pierluisi, Puerto Rico
Gregorio Kilili Camacho Sablan,
Northern Mariana Islands
Dina Titus, Nevada
Judy Chu, California
Mark Zuckerman, Staff Director
Barrett Karr, Minority Staff Director
C O N T E N T S
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Page
Hearing held on May 18, 2010..................................... 1
Statement of Members:
Biggert, Hon. Judy, a Representative in Congress from the
State of Illinois.......................................... 3
Prepared statement of.................................... 4
Miller, Hon. George, Chairman, Committee on Education and
Labor...................................................... 1
Prepared statement of.................................... 3
Additional submissions:
Letter to Head Start grantee, dated May 17, 2010,
from Hon. Kathleen Sebelius, Secretary, U.S.
Department of Health and Human Services............ 43
Letter dated May 10, 2010, to Daniel R. Levinson,
Inspector General, U.S. Department of Health and
Human Services, from Hon. John Kline, Senior
Republican Member, Committee on Education and Labor 45
Letter to Secretary Sebelius, dated May 3, 2010...... 46
Letter from Timothy J. Menke, Deputy Inspector
General, U.S. Department of Health and Human
Services, to Messrs. Miller and Kline.............. 47
Statement of Witnesses:
Kutz, Gregory D., Managing Director, GAO Forensic Audits and
Special Investigations..................................... 6
Prepared statement of.................................... 8
Nazario, Carmen R., Assistant Secretary for Children and
Families, U.S. Department of Health and Human Services..... 23
Prepared statement of.................................... 25
EXAMINING GAO'S REVIEW OF
SELECTED HEAD START GRANTEES
----------
Tuesday, May 18, 2010
U.S. House of Representatives
Committee on Education and Labor
Washington, DC
----------
The committee met, pursuant to call, at 1:40 p.m., in room
2175, Rayburn House Office Building, Hon. George Miller
[chairman of the committee] presiding.
Present: Representatives Miller, Kildee, Payne, Scott,
Tierney, Davis, Courtney, Shea-Porter, Biggert, and Guthrie.
Staff Present: Andra Belknap, Press Assistant; Jody
Calemine, General Counsel; Patrick Findlay, Investigative
Counsel; Denise Forte, Director of Education Policy; Ruth
Friedman, Deputy Director of Education Policy; Jose Garza,
Deputy General Counsel; David Hartzler, Systems Administrator;
Ryan Holden, Senior Investigator; Broderick Johnson, Staff
Assistant; Mike Kruger, Online Outreach Specialist; Bryce
McKibben, Staff Assistant, Education; Alex Nock, Deputy Staff
Director; Lillian Pace, Policy Advisor, Subcommittee on Early
Childhood, Elementary and Secondary Education; Meredith Regine,
Junior Legislative Associate, Labor; Alexandria Ruiz,
Administrative Assistant to Director of Education Policy;
Melissa Salmanowitz, Press Secretary; Michael Zola, Chief
Investigative Counsel; Mark Zuckerman, Staff Director; Kirk
Boyle, Minority General Counsel; Allison Dembeck, Minority
Professional Staff Member; Angela Jones, Minority Executive
Assistant; Susan Ross, Minority Director of Education and Human
Services Policy; Mandy Schaumburg, Minority Education Policy
Counsel; and Linda Stevens, Minority Chief Clerk/Assistant to
the General Counsel.
Chairman Miller. A quorum being present the committee will
come to order, and I want to welcome all of the members of the
committee who are participating today and thank our witnesses
for their agreement to appear before the committee.
We are here today to learn about what appears to be serious
fraudulent behavior uncovered by the Government Accountability
Office during its investigation into the enrollment and
eligibility process at some Head Start programs. We will also
hear about what actions the Department of Health and Human
Services is taking to strengthen its oversight and
accountability of the Head Start programs.
I am very disappointed that there are Head Start programs
and employees at the center of these allegations of fraud. Upon
learning of this investigation, I immediately wrote a letter to
the Secretary of Health and Human Services, Secretary Kathleen
Sebelius, urging her to take swift action to review the claims
of fraudulent activities among some Head Start employees.
Secretary Sebelius and I agree that we have an obligation to
ensure Head Start is held to the highest standards, which
starts with people who enroll the children in the program. One
in five children under the age of 5 live in poverty in America,
and less than 50 percent of the children who are eligible for
Head Start are able to attend this critical program. So it is
vital that Head Start enrollment procedures are followed and
that taxpayer dollars are used as intended.
Unfortunately, the GAO has found that some Head Start
employees are betraying the integrity of the program. The
behavior on the part of some Head Start employees that we are
going to hear about today is reprehensible and completely
unacceptable, and I want to thank the GAO for bringing it to
our attention.
I believe the Head Start community will likewise be
outraged at this behavior, because the majority of the
employees that work in Head Start represent the program with
integrity and with a deep commitment to help the future of this
country. We know if you invest in children before they enter
the kindergarten classroom, they will have a much better chance
of success in elementary school and throughout their lives.
Head Start receives bipartisan support for billions in
Federal financial assistance. It is imperative that these
programs be transparent, ethical, accountable, and maintain the
confidence of the taxpayers. We intend to continue our
oversight of this program to ensure prompt and effective
enforcement by the Department and put a stop to the fraudulent
conduct.
Head Start works for our children, and we are here today to
help make sure that it will continue to do so.
I want to thank our witnesses and look forward to hearing
about what can be and will be done to fix this problem. And I
want to again thank them for being here today.
I want to say as an aside that when we had allegations of
fraud, maybe embezzlement of funds back was in--was it 2004--in
2003, this committee responded under the leadership of
Congressman, then-chairman, John Boehner, and we responded in a
bipartisan fashion to deal with those issues of program
integrity. And I want to thank Congressman Kline and the
Republican staff and others for helping us to work on this
problem when we were alerted to it. And we have been talking
back and forth, and this hearing is proceeding along lines with
suggestions and recommendations by Congressman Kline and the
staff.
This program has had, as I have noted, tremendous
bipartisan support both in administrations and throughout the
Congress. And it is important that we do what we have to do to
maintain the integrity of this. But I want to thank the staffs
on both sides of the aisle and Congressman Kline for his
response to this problem when he and I became aware of it.
[The statement of Mr. Miller follows:]
Prepared Statement of Hon. George Miller, Chairman, Committee on
Education and Labor
Good afternoon.
We're here today to learn about what appears to be serious,
fraudulent behavior uncovered by the Government Accountability Office
during its investigation into the enrollment and eligibility process at
some Head Start programs.
We will also hear what actions the Department of Health and Human
Services is taking to strengthen its oversight and accountability of
Head Start programs.
I am very disappointed that there are Head Start programs and
employees at the center of these allegations of fraud.
Upon learning of this investigation, I immediately wrote a letter
to Secretary of Health and Human Services Kathleen Sebelius urging her
to take swift action to review the claims of fraudulent activities
among some Head Start employees.
Secretary Sebelius and I both agree that we have an obligation to
ensure Head Start is held to the highest standard, which starts with
the people who enroll children in the program.
One in five children under the age of five live in poverty in
America, and less than 50 percent of the children who are eligible for
Head Start are able to attend this critical program.
So it is vital that Head Start enrollment procedures are followed
and that taxpayer dollars are used as intended.
Unfortunately, GAO has found that some Head Start employees are
betraying the integrity of the program.
The behavior on the part of some Head Start employees that we are
going to hear about today is reprehensible and completely unacceptable.
I want to thank the GAO for bringing it to our attention.
I believe the Head Start community will likewise be outraged by
this behavior because the majority of employees that work at Head Start
represent the program with integrity and with a deep commitment to help
the future of this country.
We know that if you invest in children before they enter the
kindergarten classroom, they will have a much higher chance at success
in elementary school and through their lives.
Head Start receives bipartisan support for billions in federal
financial assistance. It is imperative that the program be transparent,
ethical, accountable and maintain the confidence of taxpayers.
We intend to continue our oversight of this program to ensure
prompt, effective enforcement by the Department puts a stop to this
fraudulent conduct.
Head Start works for our kids and we are here today to help make
sure that it will continue to do so.
I want to thank our witnesses and look forward to hearing about
what can and will be done to fix this problem.
Thank you for being here today.
______
Chairman Miller. With that, I want to recognize
Congresswoman Judy Biggert, the senior Republican today.
Mrs. Biggert. Thank you, Chairman Miller, and thank you to
the witnesses who are here this afternoon to discuss this
extremely important and extremely troubling topic. As the name
indicates, the Head Start program is designed to give our
neediest children a head start before enrolling in school,
because children who lag behind when they start school tend to
remain behind. Head Start is supposed to help close the
readiness gap between low-income children and their more
affluent peers.
After my clerking for a judge at the U.S. court of appeals
and before starting another job, I volunteered for a summer at
the Head Start program in Chicago, at Hull House, the very
first year that this program was offered. So I saw firsthand
the value of early intervention in the lives of those that are
in need and underprivileged children.
So that is why I was so disturbed to hear about the recent
findings of the Government Accountability. At that time, I was
rushing home every evening to turn on Sesame Street so I could
learn a little more Spanish before I went back the next day to
be with these wonderful children.
But today we will hear about deliberate efforts to
circumvent the program's income limitations, including
compelling evidence of Head Start centers disregarding proof of
income in order to pad their enrollment, absorb funding for
children who are never served, and continue collecting a larger
share of Head Start resources than they were due.
And this is not a victimless crime. Every dollar that goes
to higher-income children or to centers not serving as many
children as they claim is a dollar that cannot be used for the
low-income children this program is meant to serve.
The GAO sampled but a few of the roughly 1,600 Head Start
grantees across the Nation. Based on these preliminary
findings, it is clear that further review is necessary. Indeed
it is my understanding that investigations by GAO and other
authorities are ongoing. For that reason, I believe that this
is important to go on record to express reservations about the
potential consequences of a public hearing.
The cases we will review this afternoon are part of an
undercover investigation, and in such case, it is important
that neither the identity of those who are targeted in the
investigation nor the identities of undercover agents posing as
prospective enrollees be compromised. We have received
assurances from Chairman Miller that steps are being taken
today to conceal individual identities and localities. And with
those assurances, we are able to move forward today.
I think that we can all agree that additional congressional
oversight, including future hearings, will be in order once
these investigations are complete and the full results of GAO's
work can be revealed. It is vital for Congress to expose and
root out any of this type of waste, fraud and abuse, but I do
not believe that any of us wishes to jeopardize an ongoing or
potentially criminal investigation.
In fact, I and many others were so troubled by these
preliminary findings that we believe the investigations into
these specific incidents and the investigative authorities
ought to be broadened. Upon being informed of the GAO's
preliminary findings, Congressman John Kline, this committee's
senior Republican member, wrote to the Department of Health and
Human Services Inspector General to request a comprehensive
investigation into the vulnerability of Head Start's
verification processes to fraud and abuse. And I echo his
concerns. The GAO has brought to light a disturbing pattern of
abuse in a program designed to serve our most vulnerable
children. And I expect the GAO will continue its important work
in this area. And I am pleased its investigation will be
bolstered by many more comprehensive reviews by the agency's
independent watchdog. And I will insert the balance into the
record.
Chairman Miller. Thank you very much.
[The statement of Mrs. Biggert follows:]
Prepared Statement of Hon. Judy Biggert, a Representative in Congress
From the State of Illinois
Thank you Chairman Miller, and thank you to the witnesses who are
here this afternoon to discuss this extremely important--and extremely
troubling--topic.
As the name indicates, the Head Start program is designed to give
our neediest children a ``head start'' before enrolling in school.
Because children who lag behind when they start school tend to remain
behind, Head Start is supposed to help close the ``readiness gap''
between low-income children and their more affluent peers.
After leaving law school, I volunteered at the Head Start program
in the Chicago Hull House--the very first year that the program was
offered. I saw first-hand the value of early intervention in the lives
of these underprivileged children. That's why I was so disturbed to
hear the recent findings of the Government Accountability Office.
We will hear today about deliberate efforts to circumvent the
program's income limitations, including compelling evidence of Head
Start centers discarding proof of income in order to pad their
enrollment, absorb funding for children who were never served, and
continue collecting a larger share of Head Start resources than they
were due.
This is not a victimless crime. Every dollar that goes to higher-
income children--or to centers not serving as many children as they
claim--is a dollar that cannot be used for the low-income children this
program is meant to serve.
The GAO investigation sampled but a few of the roughly 1,600 Head
Start grantees across the nation. Based on these preliminary findings,
it is clear that further review is necessary. Indeed, it is my
understanding that investigations by GAO and other authorities are
ongoing. For that reason, I believe that it is important to go on
record to express reservations about the potential consequences of a
public hearing.
The cases we'll review this afternoon are part of an undercover
investigation. In such cases, it is important that neither the
identities of those who are targeted in the investigation--nor the
identities of the undercover agents posing as prospective enrollees--be
compromised. We have received assurances from Chairman Miller that
steps are being taken today to conceal individual identities and
localities--and with those assurances, we are able to move forward
today.
However, I think that we can all agree that additional
congressional oversight--including future hearings--will be in order
once these investigations are complete and the full results of GAO's
work can be revealed. It is vital for Congress to expose and root out
this type of waste, fraud, and abuse, but I do not believe that any of
us wishes to jeopardize an ongoing and potentially criminal
investigation.
In fact, I and many others were so troubled by these preliminary
findings that we believe the investigation into these specific
incidents--and the investigating authorities--ought to be broadened.
Upon being informed of the GAO's preliminary findings, Congressman John
Kline--this committee's Senior Republican Member--wrote to the
Department of Health and Human Services' Inspector General to request a
comprehensive investigation into the vulnerability of Head Start's
verification processes to fraud and abuse.
I echo his concerns. The GAO has brought to light a disturbing
pattern of abuse in a program designed to serve our most vulnerable
children. I expect the GAO will continue its important work in this
area, and I'm pleased its investigation will be bolstered by a more
comprehensive review by the agency's independent watchdog. I also
appreciate the steps announced yesterday by HHS Secretary Kathleen
Sebelius to intensify program oversight.
The IG was quick to respond to Ranking Member Kline's request for a
broader investigation, recognizing the severity of this issue and
agreeing to expand the investigation to determine whether there are
systemic vulnerabilities that victimize both the taxpayers and the low-
income children and families Head Start is intended to serve.
As lawmakers, we need to have confidence that the programs we
authorize and the dollars we appropriate are serving their intended
purpose. Today's hearing is an important first step to determine
whether the public trust has been broken and whether it can be restored
to ensure that Head Start fulfills its mission of serving low-income
children and families. Thank you, and I yield back.
______
Chairman Miller. I would like now to introduce our panel of
witnesses for this hearing. Gregory Kutz is the managing
director of the GAO's Forensic Audits and Special
Investigations Unit. Mr. Kutz joined GAO in 1991 after 8 years
at KPMG Peat Marwick. He previously served as a senior
executive in GAO where he testified over 80 times at
congressional hearings on matters related to fraud, waste and
abuse and other special investigations. Mr. Kutz graduated from
the Pennsylvania State University in 1983. He is a certified
public accountant and certified fraud examiner.
Carmen Nazario is the assistant secretary for the
Administration of Children and Families within the Department
of Health and Human Services. During the Clinton
administration, she first served as associate commissioner of
child care in the Administration for Children, Youth and
Families. Ms. Nazario has held a number of leadership roles,
including vice president of the board of directors of the
American Public Welfare Association, president of the National
Council of Local Public Welfare Administrators, secretary to
the National Council of Human Service Administrators. Ms.
Nazario graduated from the University of Puerto Rico in 1967
and was awarded her master's in social work degree from the
Virginia Commonwealth University School of Social Work in 1993.
Welcome, and thank you for your willingness to be here
today. And as you know the lighting system, Mr. Kutz, Ms.
Nazario, we will put on a green light and a yellow light. This
is a little unusual, your testimony, other parts, so take the
time that you deem necessary to fully explain the case to us
and we will make, likewise, time available to you, Ms. Nazario,
so you can testify in the manner you are most comfortable.
Thank you again. Mr. Kutz.
STATEMENT OF GREGORY D. KUTZ, MANAGING DIRECTOR, GAO FORENSIC
AUDITS AND SPECIAL INVESTIGATIONS
Mr. Kutz. Mr. Chairman and members of the committee, thank
you for the opportunity to discuss the Head Start program.
Today's testimony highlights the results of our investigation
into allegations of fraud and abuse. My testimony has two
parts. First, I will discuss the results of our investigation;
and second, I will discuss the consequence of fraud and abuse
in this program.
First, we are investigating allegations of fraud and abuse
that we received on our hotline related to two nonprofit grant
recipients. Specifically, 11 informants provided us with
numerous allegations of fraud and abuse. It is important to
note that enrollment of children from families with incomes
over 130 percent of the poverty level is generally limited to
10 percent. Thus, with some exceptions, 90 percent of families
must be under this income level, which, in 2009, was about
$24,000 for a family of three.
A key allegation is that grant recipients are manipulating
records to enroll over-income children into under-income slots.
This is being done to fill open slots that were intended for
children from families with incomes below the 130 percent
level.
Key findings to date for these two cases include at one
grantee, staff encouraging parents to apply as homeless, which
results in automatic enrollment; 353 of 1,587 children at this
grantee are enrolled as homeless, or 22 percent of all
children. For the other grantee, 63 children were moved between
centers so that they could be double-counted. The incentive for
management here was to boost enrollment so that they would not
lose any of their $13 million of Head Start grants.
Based on these two allegations, we decided to perform
undercover testing across the country to look into this issue.
The primary scenario that we used was to provide evidence to
centers showing that our bogus children and families were over
the 130 percent of poverty level. We refer to these as our
over-income tests.
Using bogus children and fabricated documents, our
undercover testing was done in centers in California, Texas,
Wisconsin, Pennsylvania, New Jersey, Maryland, and Washington,
D.C. Seven centers in four of these States and D.C.
fraudulently enrolled our over-income children into under-
income slots.
We also successfully enrolled children using bogus
documents showing that we were under-income. These tests
clearly show that the Head Start program is vulnerable not only
to grantee fraud but also to beneficiary fraud.
Here are two examples of what we found. First, as you can
see on the two monitors, on the top, you see the W-2 we
provided for our fictitious parent, Vinnie. Notice on the
bottom that, rather than record the $23,000 of wages, Vinnie
was recorded in center records as being unemployed. Exclusion
of this $23,000 of income made Vinnie and his family under-
income.
In the next case, the monitors show on the top left $23,000
of wages for our fictitious grandfather, Gary. On the top right
you see the $9,500 of wages for Grandma. Once again, the
$23,000 of wages for Gary were excluded from center records. As
you see on the bottom, the only income recorded in center
records was the $9,500 of wages for Grandma. In this case the
Head Start employee who perpetrated this fraud agreed with our
undercover agent that, and I quote, ``Grandma wins,'' end of
quote.
At the end of my presentation, as was mentioned, we will
play audio excerpts showing Head Start employees facilitating
the fraudulent enrollment of bogus over-income children into
under-income slots.
Moving on to my second point, 450 of the 550 Head Start
centers that we contacted had waiting lists. The parents we
spoke to on these wait lists, assuming they were truthful, were
generally under income. Some were unemployed, while others were
making $200 to $300 a week.
My concern is that over-income families, fraudulently
enrolled, are being served while the poorest children in our
country are on wait lists. Without Head Start, the parents on
these wait lists told us that they cannot work. They fear that
their children will enter kindergarten substantially behind
their peers. This, Mr. Chairman, is the answer to our ``so
what'' question today.
In conclusion, the victims of fraud and abuse in the Head
Start program are not only taxpayers but, more importantly,
children from the very poorest families in our country.
I fear that enrollment fraud is not the only fraud in the
Head Start program.
Mr. Chairman I look forward to working with you and this
committee and HHS to prevent future fraud in the Head Start
program.
I will now play audio excepts from several of the
undercover visits to Head Start centers. You will see the
transcription of the conversations on the monitor as you watch.
[Video shown.]
Mr. Chairman, that ends my statement and I look forward to
your questions.
Chairman Miller. Thank you.
[The statement of Mr. Kutz follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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Chairman Miller. Secretary Nazario.
STATEMENT OF CARMEN R. NAZARIO, ASSISTANT SECRETARY,
ADMINISTRATION FOR CHILDREN AND FAMILIES, U.S. DEPARTMENT OF
HEALTH AND HUMAN SERVICES
Ms. Nazario. Chairman Miller, members of the committee, I
am pleased to have this opportunity to appear before you today
to discuss GAO's review of selected Head Start grantees. I
appreciate this committee's longstanding support for the Head
Start program. I know that you, like me, are deeply disturbed
by GAO's report. According to GAO, employees in approximately
eight Head Start programs appear to have determined children
eligible for services, despite evidence that their income
exceeded the eligibility limits. The Head Start program is
designed to move our Nation's low-income children along the
road of school success.
Diverting funds to children who are less needy is quite
literally stealing away that opportunity from children who need
it most. I want to assure the committee that we take these
allegations very seriously.
As soon as we were given the names of the grantees, we
referred the cases to the inspector general. The OIG has
directed ACF to refrain from taking action against these
grantees while they the investigation is pending.
I want to assure this committee that we are partnering with
both GAO and the OIG.
In the meantime, we have taken immediate actions to bolster
our program integrity efforts. Yesterday the Secretary sent a
letter to every Head Start grantee to underscore the serious
nature of these allegations and notify them that the Department
is intensifying its oversight and enforcement actions.
On May 10, the Office of Head Start issued a program
instruction designed to remind grantees of their obligation to
verify income and encourage them to retain copies of
verification documents for review and provide annual training
to all employees responsible for income verification.
In addition, we will take a number of actions in the coming
weeks to strengthen Federal oversight, including conducting
unannounced monitoring visits; creating a Web-based hotline
that will allow those with information of impropriety to report
directly to me; developing new regulations that promote program
integrity; increasing oversight, particularly of grantees with
identified risk factors; issuing proposed regulations to
implement a new system for recompeting grants to improve
quality and ensure integrity; implementing an important reform
enacted in the Head Start reauthorization; and continuing our
partnership with the inspector general to conduct in-depth
reviews of high-risk grantees.
At the same time, we are in the process of conducting a
top-to-bottom review of our program monitoring, erroneous
payment study, and risk management process to determine how we
can improve program oversight.
While we have significant oversight and data collection
mechanisms already in place, they can be strengthened to fight
fraud and promote program integrity more effectively.
These efforts represent one aspect of our overall Head
Start roadmap to excellence and effectiveness. This road map is
designed to raise the bar on quality in the Head Start program.
Additional elements of the road map include strengthening the
Head Start performance standards and improving our training and
technical assistance systems.
The Department's commitment to strengthening program
integrity is not limited to reacting to fraud allegations in a
particular program, but it is a broad-based priority for
preventing, detecting and prosecuting, as appropriate, fraud in
all our programs.
Last week, the Secretary announced the formation of the
Secretary's Council on Program Integrity to look systematically
across all parts of HHS to determine how we can strengthen our
fraud and error-fighting efforts.
I share the Secretary's commitment. A core part of ACF's
strategic mission has been promoting a culture of integrity
from the highest levels at ACF to the local level where
children and families are served. I am establishing an ACF
Office of Program Integrity chartered to strengthen internal
procedures and improve grantee financial management and fiscal
integrity in all ACF-funded programs.
Each year, Head Start programs provide almost 1 million of
our country's most vulnerable children with a much-needed
chance at success. ACF is committed to ensuring that all
program resources are used appropriately and that every slot is
filled with an eligible child in need.
We are eager to work with the GAO, Congress, and our
grantees to ensure that we capitalize on every possible
opportunity to strengthen Head Start and to help eligible, low-
income children prepare for success in school and in life. I am
confident that we can achieve these goals together.
Thank you. I would be happy to answer any questions.
Chairman Miller. Thank you very much.
[The statement of Ms. Nazario follows:]
Prepared Statement of Carmen R. Nazario, Assistant Secretary for
Children and Families, U.S. Department of Health and Human Services
Chairman Miller, Ranking Member Kline, and members of the
Committee, I am pleased to have this opportunity to appear before you
today to discuss the Government Accountability Office's (GAO) review of
selected Head Start grantees.
Just over 45 years ago, in the Rose Garden of the White House,
Project Head Start was announced--a program dedicated to fighting the
war on poverty so that millions of children could get a ``head start''
on their future by receiving the education, health, and social services
they need to be prepared fully to enter Kindergarten ready to learn.
Over the last four decades, over 26 million children and their families
have participated in the Head Start program. This program is vital to
the Administration's strategic focus on early learning and I share
Secretary Sebelius' sentiments that ``* * * for Head Start to achieve
its full potential, we must improve its quality and promote high
standards. * * *''
I appreciate this Committee's long-standing strong support for the
Head Start program and know that you, like me, are deeply disturbed by
GAO's report that employees in approximately eight Head Start programs
appear to have determined children eligible for Head Start despite
being given evidence that their income exceeded the eligibility limits.
The Head Start program is designed to move our nation's low-income
children along the road of school success. Diverting funds to children
who are less needy is, quite literally, stealing away that opportunity
from children who need it most. I want to assure the Committee that we
take these allegations very seriously. The matter was immediately
referred to the Department's Inspector General. More broadly, we are
taking steps to root out fraud and errors program-wide and ensure that
every Head Start slot is used to serve an eligible child. I now will
discuss our response to the GAO investigation, our broader efforts to
bolster program integrity in Head Start, and Secretary Sebelius'
Department-wide program integrity initiative.
Response to GAO's Investigation Findings
While I have only seen GAO's statement for today's hearing, I
understand that during its investigation undercover investigators posed
as parents or grandparents with preschool age children in 15 different
situations and allegedly uncovered approximately eight instances in
which a Head Start employee made a determination that a child was
eligible for services despite evidence that the family's income
exceeded the eligibility limit.
As soon as the Department was given the names of the grantees that
GAO alleges to have engaged in fraudulent eligibility practices, we
referred the cases to the HHS Inspector General, the Department's
investigative arm. The OIG has directed the Administration for Children
and Families (ACF) to refrain from taking investigatory or disciplinary
actions against any individuals or organizations implicated in the GAO
study while the investigation is pending. The OIG--a law enforcement
body--does not want our actions to interfere with their efforts. We
must respect their judgment and support law enforcement in making sure
they have the ability to determine whether there are potentially
criminal acts warranting prosecution. To this end, we are fully
cooperating with both GAO and the OIG while continuing to pursue broad
program integrity enhancements to reduce any potential risks of fraud
or abuse within Head Start.
We will await completion of the OIG and GAO investigations before
taking specific steps in these cases. Depending on the evidence and the
findings by either the OIG or the Office of Head Start (OHS), a grantee
may face a summary suspension leading to termination. If the OIG
uncovers possible fraud or program violations, but does not develop
sufficient evidence to support suspension or termination, then the
Department will immediately conduct in-depth reviews of these grantees
to gather additional data in the areas of enrollment, recruitment,
selection, eligibility and attendance (ERSEA). If this additional
evidence does not support suspension and termination (for example, if
there are isolated instances of individual workers acting fraudulently
rather than a systemic breakdown), we can require immediate corrective
actions, including requiring grantees to pay back funds that were
misspent.
Bolstering Broader Head Start Program Integrity Efforts
Since learning of the GAO review, we have taken immediate actions
to bolster our broader program integrity efforts. Yesterday, the
Secretary sent a letter to every Head Start grantee in the country to
underscore the serious nature of these allegations and notify them that
the Department is intensifying its oversight and enforcement actions.
On May 10, the Office of Head Start issued a Program Instruction
(PI), entitled ``Income Eligibility for Enrollment in Head Start and
Early Head Start Programs,'' designed to remind grantees of their
obligation to verify income and other factors of eligibility. The PI
reinforces the requirements related to income verification and the
consequences should an employee knowingly sign a verification form that
contains false information. The PI also encourages grantees to use the
Head Start Eligibility Verification Form, to retain copies of
verification documents for review, and to provide annual training to
all employees responsible for income verification. To highlight the
importance of this PI, the Director of the Office of Head Start will
hold a web cast with all Head Start grantees.
We are in the process of conducting a top-to-bottom review of our
program monitoring, Erroneous Payment Study, and risk management
process to determine how we can improve program oversight and modify
regulatory requirements to assure compliance with the Head Start Act.
While this review is ongoing, we will take a number of actions in the
coming weeks and months to strengthen federal oversight of Head Start
programs. These actions will include:
Conducting unannounced monitoring visits to Head Start
grantees. In the past, we have typically provided grantees with notice
before coming to conduct monitoring or other onsite visits. We will
increase our use of unannounced visits to ensure that we are able to
review how Head Start programs operate on a daily basis.
Creating and publicizing a web-based ``hotline'' that will
allow those with information of impropriety of any kind to report it
directly to me. We know that fraud is often detected and reported by
scrupulous employees who stand up and do the right thing and, thus, we
will ensure that all Head Start employees are informed about this
hotline.
Developing new regulations that promote program integrity.
We are developing new regulations that will address verification
requirements and staff training on eligibility criteria and procedures.
Increasing oversight, particularly of grantees with
identified risk factors. Each year, ACF conducts an assessment with
grantees to identify programs at risk for program violations or
management problems. ACF, in partnership with the grantees, develops
and implements action plans to mitigate the risk factors. Our staff
will be scrutinizing programs more carefully in the risk assessment
process and the action plan phase.
Recompeting grants when questions arise about whether
grantees are offering high-quality services or have management lapses.
We soon will issue proposed regulations that articulate which grantees
will be required to compete for continued Head Start funding--
implementing an important reform enacted by Congress in the Head Start
for School Readiness Act of 2007. The goal of the regulations is to
promote program integrity and strengthen the quality of services that
Head Start provides.
The improvements to the monitoring system, risk assessment system,
and the role of recompetition are discussed in more detail below.
Partnership with the Office of Inspector General
Before this GAO investigation was made public, we already were
working with the OIG to combat fraud in Head Start. Since 2007, OHS and
the OIG Office of Audit Services (OIG-OAS) have had an ongoing
partnership. In 2007, the OIG-OAS conducted an in-depth review of one
grantee and notified OHS that the grantee was not in compliance with
Federal Health and Safety regulations and Financial Management
requirements. Based on the information, OHS stopped funding this
grantee.
This success led to a more robust partnership with the OIG. In
2009, OIG-OAS and OHS partnered to conduct 24 Health and Safety Reviews
and an additional 24 Capability Audits of existing grantees that were
deemed high risk by OHS. The OIG audits led to one relinquishment,
increased oversight of three high risk grantees that entailed
restrictions on use of funds, and initiation of termination proceedings
against two grantees.
In 2010, this partnership shifted to focus on funding from the
American Recovery and Reinvestment Act. OHS and OIG-OAS partnered to
review pre-award Early Head Start applicants to ensure that funds were
only provided to viable organizations. Applicants who did not
demonstrate the capacity to properly account for and manage Federal
funds were not awarded ARRA grants.
In 2011, OHS again will identify high risk grantees using program
monitoring and risk management data and refer them to the OIG for in-
depth audits.
Tools for Improving Program Integrity
While we have significant monitoring operations already in place
that include triennial onsite reviews of every grantee, more frequent
onsite monitoring of programs where problems have been identified, and
significant data collection, we can do better. We look to GAO's review
to help inform our efforts to improve Head Start program integrity.
The following are oversight mechanisms in place or called for in
the statute that can be strengthened to fight fraud and promote program
integrity more effectively: the monitoring system, Risk Management
Process, the Erroneous Payment Study, the Redesignation Renewal System,
Performance Standards, and Training and Technical Assistance.
Monitoring System
The Head Start monitoring system is the most comprehensive tool
currently available for ensuring accountability of Head Start grantees.
All grantees receive an on-site review at least once every three years.
New grantees are reviewed immediately after completion of their first
year of providing services. Follow-up reviews are conducted for
grantees that fail to meet any requirements identified during a review.
Additionally, reviews may be initiated whenever an issue is identified
that requires immediate attention.
On February 28, 2005 the GAO issued a report entitled, ``Head
Start: Comprehensive Approach to Identifying and Addressing Risks Could
Help Prevent Grantee Financial Management Weaknesses'' (GAO-05-176).
Based on recommendations from this report, we took steps to strengthen
the monitoring system in FY 2006 by centralizing the elements of
quality control and setting a uniform set of standards and verification
for validating the expertise and capacity of each reviewer.
The review teams include experts in fiscal, early childhood
education, program management, health and nutrition services, mental
health, social services, and health and safety. The expertise of all
team members is verified using reference checks, degree checks,
comprehensive screenings, and interviews. Reviewer performance in the
field is monitored through a standardized assessment tool, as well as
by analyzing the quality of the evidence collected.
When a review team finds areas in which Head Start programs are not
in compliance, in all cases the grantee must demonstrate timely
corrective actions. More severe instances of noncompliance--called
``immediate deficiencies''--must be corrected in 30 days or less while
less serious problems--called ``noncompliances''--generally must be
corrected within 120 days. Regional Office staff as well as Training
and Technical Assistance providers support the grantee in their efforts
to correct the findings. When a deficiency is identified that requires
immediate corrective action, OHS works to ensure that the grantee takes
immediate corrective action to ensure that: 1) staff and/or children
are removed from imminent harm or immediate danger; or 2) threats to
integrity of Federal funds are removed.
Follow-up reviews are conducted for all grantees that have one or
more areas of noncompliance or a deficiency. An area of noncompliance
that remains uncorrected within the timeframe specified will become
categorized as a deficiency. Deficiencies that remain uncorrected will
result in termination of the grant.
While the monitoring reviews are in-depth and expose areas of
noncompliance as well as more serious deficiencies, we think the
process can be strengthened. This summer, we will begin conducting
unannounced monitoring visits. This will help us ensure that we are
reviewing Head Start programs as they operate on a daily basis. We also
intend to step up our monitoring visits of programs that are not
performing up to our standards. Moreover, we are going to look more
carefully at certain aspects of programs' operations during monitoring
reviews, including whether grantees are providing regular training to
employees who verify eligibility income and whether grantees have
waiting lists that include relevant eligibility information.
Following my confirmation in September 2009, we began an analysis
of the Head Start Monitoring protocol and guidance to improve the
quality of information collection; stimulate more comprehensive program
analysis; and maintain transparency in the monitoring system. We will
continue those efforts with more vigor to be certain our programs are
held to the highest standards and grantees are provided the assistance
they need to run successful Head Start programs.
The Risk Management Process
In the same 2005 report referenced above, GAO found that ACF had
not undertaken a comprehensive assessment of risks which might limit
Head Start's ability to meet its objectives. In response, in 2008 HHS
implemented a Risk Management Process (RMP) through which staff
conducts a risk assessment of each Head Start grantee annually and
works with grantees to develop action plans to mitigate areas where the
grantee is at risk of failing to meet program requirements. The action
plan may include changes that the grantee will make as well as training
and technical assistance that OHS will provide.
The RMP is used to address a range of issues throughout the year,
including post-monitoring concerns; progress in meeting goals or
sustaining improvements for grantees at high risk; grantees with under-
enrollment; and program expansion. We are reviewing the Risk Management
Process to determine how to strengthen the process to ensure that staff
correctly identify grantees with problems and develop effective action
plans to mitigate those problems.
Erroneous Payment Study
The Office of Head Start conducts an annual Erroneous Payment (EP)
study which entails a review of documentation related to children's
eligibility in 50 Head Start grantees. During regularly scheduled
monitoring visits, these grantees' eligibility files are reviewed. The
objective of the EP study is to produce a nationally representative
error rate that represents the share of children served in Head Start
or Early Head Start who did not meet eligibility criteria. The study is
conducted to comply with the Improper Payments Information Act of 2002
and the Office of Management and Budget (OMB) requirements that Federal
programs susceptible to payment errors report annually on erroneous
payments in their programs.
A payment error in the Head Start program is defined as
``enrollment of more than the allowed percentage of children whose
family income exceeds the income eligibility guidelines.'' The study
has yielded a relatively low error rate in recent years, but it is
important to note that the design would not uncover many types of
errors or intentional fraud. The study examines whether the program met
the administrative requirements regarding eligibility determinations--
namely, the monitors review whether the program staff signed the form
certifying that each child is eligible for the program. This study, as
currently conducted, cannot identify cases where a program has
intentionally certified an ineligible child as eligible or where a
program has not correctly verified income and, thus, unintentionally
made an incorrect eligibility determination. We recognize the limited
utility of this methodology, and we are considering different options,
including revising the study design to be certain we are attaining the
most benefit from this study.
Redesignation Renewal System
Another key program integrity and quality initiative involves
implementation of the new Redesignation Renewal System. Since 1965
there have been few opportunities to introduce competition into the
Head Start grant process. If an entity was awarded a Head Start grant
and complied with the standards (or, at a minimum, corrected
deficiencies when they arose), it has been able to keep the grant in
perpetuity. Compared to the many other Federal grant programs, this is
highly unusual.
In their 2005 report, the GAO criticized ACF because it did not
recompete the grants of poorly performing grantees. GAO stated, ``When
grants are allowed to remain with poorly performing grantees, children
being served may not be getting the ``head start'' they deserve because
the grantees continuously fail to meet program and financial management
standards.''
Congress, and this Committee in particular, addressed this issue in
the 2007 Head Start reauthorization by establishing that Head Start
grantees will be awarded grants for a five-year period and only
grantees determined to be delivering high-quality services will be
given another five-year grant non-competitively. The Act also provided
HHS with the authority to recompete grants and required the Secretary
of HHS to develop and implement a system for designation renewal to
determine if a Head Start agency is delivering a high-quality and
comprehensive Head Start program. We have been working to develop a
vigorous recompetition plan that will leverage competition to improve
quality program-wide and ensure program integrity. We anticipate
publishing the Notice of Proposed Rulemaking describing the designation
renewal system and our transition plans from continuous grants to five-
year grants this summer
Vigorously implementing the Redesignation Renewal System is one
aspect of our overall Head Start Roadmap to Excellence and
Effectiveness. This roadmap is designed to raise the bar on quality in
the Head Start program. Additional elements of the roadmap include
strengthening the Head Start performance standards and improving our
training and technical assistance system.
Head Start Performance Standards
The Head Start Program Performance Standards provide a standard
definition of quality services for all Head Start grantees. We are in
the process of revising the Head Start Program Performance Standards
regulations to reflect the changes made in the 2007 reauthorization and
the latest research on quality services for children and families. The
revised program performance standards will incorporate best practices
in the field of early education and child development to ensure that
Head Start programs meet the educational, health and nutritional needs
of the children and families they serve, along with improving program
integrity and fiscal management.
Training and Technical Assistance
While we hold grantees to the highest standard, it is our
responsibility to provide the training and technical assistance needed
to achieve those standards. OHS has a State Training and Technical
Assistance (T&TA) System that builds program capacity by providing
comprehensive, individualized technical support to Head Start grantees.
Currently, we are working to modify the State T&TA System to improve
teacher training and prepare children to enter school ready to learn
and create a National Training and Technical Assistance System that
would provide targeted information, resources, and assistance to
individual Head Start grantees to promote positive, sustained child
outcomes. Under the new integrated system, trainers and practitioners
specialized in early education and child development will provide
support to improve classroom practice and promote family engagement to
support their children's learning.
Also this summer, we will establish five new National Centers of
Early Childhood Excellence designed to provide targeted information on
critical aspects of the Head Start program. The five new National
Centers include: National Center on Program Management and Fiscal
Operations that will focus on fiscal accountability, management
oversight, and training; National Center on Parent, Family, and
Community Engagement that will focus on strengthening training provided
directly to staff at the local level addressing a range of issues
including verifying income eligibility, recruitment and selection;
National Center on Quality Teaching and Learning; National Center on
Cultural and Linguistic Responsiveness; and National Center on Health,
Nutrition, Dental, and Mental Health. These five centers, along with
the existing Early Head Start National Resource Center, will provide
experts who can offer training and resources regarding best practices
to assist local Head Start programs along with State efforts to build a
quality early childhood and development infrastructure for local early
childhood providers.
Program Integrity at HHS
The Department's commitment to strengthening program integrity is
not limited to reacting to fraud allegations in a particular program,
but is a broad-based priority for preventing, detecting, and
prosecuting as appropriate fraud in all of our programs. Recently,
Secretary Sebelius unveiled her Secretarial priorities and identified
strengthening program integrity as one of nine priority areas. Last
week, the Secretary announced the formation of the Secretary's Council
on Program Integrity to look systematically across all parts of HHS to
determine how we can strengthen our fraud and error-fighting efforts,
from Medicare and Medicaid, to Head Start and LIHEAP, to medical
research and public health grants. This effort is critical because the
success of all of the important work we do--from providing
comprehensive preschool to poor children or health benefits to
seniors--depends on making sure that taxpayers' dollars are used
wisely, efficiently, and according to the law.
I share the Secretary's commitment. Since my arrival last year, a
core part of ACF's strategic mission has been promoting a culture of
integrity from the highest levels of ACF to the local level where
children and families are served. I also am in the process of
establishing an ACF Office of Program Integrity chartered to strengthen
internal procedures and improve grantee financial management and fiscal
integrity in all ACF funded programs. Stamping out any fraud or
erroneous payments in Head Start is a key priority.
Conclusion
Each year, Head Start programs provide almost one million of our
country's most vulnerable children with a much-needed chance at
success. ACF is committed to ensuring that all program resources are
used appropriately, and that every slot is filled with an eligible
child in need. I hope my testimony has provided the Committee with a
clearer picture of our continued and aggressive commitment to eliminate
fraud and strengthen the quality of Head Start. We are eager to work
with the GAO, Congress, and our grantees to ensure we capitalize on
every possible opportunity to strengthen Head Start and help eligible,
low-income children prepare for success in school and in life. I am
confident that we can achieve these goals together.
Thank you. I would be happy to answer any questions.
______
Chairman Miller. I will say to members who may have joined
us, this panel may not be able to answer some questions that
members have at this stage of the investigation, because this
investigation has been referred to the Office of Inspector
General, and the committee is working to be cooperative with
GAO finishing its study and the Inspector General's
investigation and the Department. And Secretary Sebelius has
made it very clear that she intends to pursue this in a very
forceful way.
So, again, members should feel free to ask whatever
questions they want, but it may be that either the witnesses
defer for the moment because of that investigation and, again,
we have talked to Congressman Kline and staff about this.
If I might, the universe of your investigation is programs
without a waiting list; is that correct, Mr. Kutz?
Mr. Kutz. For the undercover testing to look for programs
without a wait list, yes, at the time we did this, which was
between September 2009 and March 2010. The other rush period of
June, July, August, we did not test during that period. There
would be a lot more places with wait lists then or open spots.
Our testing started in September, the undercover testing of
2009 through March of 2010, so I think a lot of the evidence we
have seen is the big rush to recruit and get kids into the
program happens right before the school year starts in the
June, July, August time frame, so I think there were more
centers with openings then, but we looked at places that,
between between September and March, had openings at that time.
Chairman Miller. What you presented on the audiotape are
people, various people at different programs appearing to
doctor the income requirements; is that correct?
Mr. Kutz. I would say they didn't appear to. They did. They
did commit fraud.
Chairman Miller. I don't know how you want to handle these
questions. But we don't know at this stage anything about what
is behind that; is that correct? We have these actions on----
Mr. Kutz. Correct. With respect to the undercover testing,
we do not know whether management instructed these employees to
do it. At the two case studies we have from our hotline
allegations, part of that allegation was management was
pressuring staff to boost enrollment through various
fraudulence.
Chairman Miller. That was the unsolicited call on the
hotline?
Mr. Kutz. Correct. The two hotlines. The other one, they
didn't know who we were, what we were doing. We don't know the
motivation behind it, except there were wait lists and open
slots.
Chairman Miller. The other one was that it appeared that
from reading your report that documentation to support the
decisions to make somebody eligible or not, that documentation,
those files weren't complete; it may be that income records had
disappeared. Do you want to explain that?
Mr. Kutz. The requirements were fairly loose, and I assume
they are tightening them up as part of the discussion here
today. But in this cases of Vinnie, for example, they
disregarded a W-2 showing $23,000 of income. That was a
common----
Chairman Miller. So it is not just they chose Grandma or
they disregarded Vinnie's income, the documentation
disappeared?
Mr. Kutz. For the income that was excluded, correct. It was
not in the filing. In fact, they went in, Mr. Chairman, and
actually checked that Vinnie was unemployed. We saw that in
numerous cases. So they made the income go away and they wrote
in the file ``unemployed.''
Chairman Miller. These files are kept on computers? These
files are kept in paper folders?
Mr. Kutz. These appear to be handwritten enrollment files
that are there for the applicants being made. We went back in
after we did our undercovers as GAO, and asked for the records
related to the bogus children, and we enrolled as if we were
investigating the children and their parents, and that is how
we got the evidence after the undercovers showing that our
children were enrolled and that the parents had had income
excluded and that they were checked off in some cases, for
example, as being unemployed.
Chairman Miller. But those are not computerized files?
Mr. Kutz. Most of them looked like they are hand-filled-out
application forms in the center.
Chairman Miller. The question came also as to whether or
not children were being double enrolled. As I read your report,
I don't know whether or not one center could check that
enrollment against a master enrollment role of that region or
city, or how they do it, whether there is any ability to do
that or not.
Mr. Kutz. That is an excellent question and one of the
reasons it is so difficult, is they don't keep Social Security
numbers for these children. So you have very little information
in the files about who the children actually are. So it would
be difficult to determine in some cases whether children were
being double counted.
But one of the cases we got on our hotline, we
substantiated at least 63 children were counted twice, meaning
the government paid for them twice effectively, or they
justified their grants from two different funding streams.
Chairman Miller. Thank you.
Secretary Nazario, you point out in your testimony, I am
looking at page 13, I don't know if that comports with your
version, but this question of recompeting programs has been
around the Head Start community for a long time. And it came up
again, as you point out, in 2005 because we had these incidents
in 2003-2004 and the general discussion about competition
within the programs. And then in 2007, again as you point out
in your testimony, this committee in particular and on a
bipartisan basis was insistent on the recompetition of some of
these programs as part of that reauthorization. So this kind of
incident raises questions about how we will then decide that
provision of reauthorization.
And I raise this not to get a definitive answer from you,
but you point out in your testimony later that you anticipate
publishing a notice of proposed rulemaking describing the
designation of renewal system in our transition plans for
continuous grants on a 5-year basis.
As is explained today, and I am not taking this as a final
conclusion, but as explained today it appears that the system
is not set up to detect fraud, and we don't know enough about
whether children are being double counted, or we don't require
sufficient documentation of income--or at least it appears that
it can disappear. I don't know if that is in violation--we
don't know whether that is in violation of requirements, or
that is just done, or what have you.
But if we are going to talk about whether or not a program
is required to be recompeted and whether or not it is
sufficient for it to compete and win again or to be awarded the
grant, or what others are competing, again, I think we have to
look in light of this investigation, whatever its outcome, it
raises some very serious red flags about the requirements for
program integrity as part of that recompetition.
And unfortunately, most of the money taken out of Medicare
fraud comes through doctors' offices. And it is not people
going in to get a shot or a hip replacement voluntarily. They
get charged for it, but it doesn't happen. So here we have
people running the program, apparently involved in the fraud.
And we are talking about tightening up and making this program
more competitive to hopefully get better programs into the
program and perhaps better alternatives for those grants.
I just would, before we rush to publish this summer, I
would raise that concern. And I don't know if you want to
respond. You are certainly welcome to.
Ms. Nazario. We absolutely agree with you, Mr. Chairman, on
all of these counts. The system right now--this is why we are
so grateful for this information, because we are going to now
work to find out where it is happening, how much it is
happening, and stop it.
We do intend to issue two sets of regulations. One is to
strengthen what we just issued now as a program instruction. In
the program instruction we are encouraging grantees to maintain
the source documents; because you are absolutely right, because
the current regulations do not require them to maintain the
source documents. So it is not a violation of the requirements
not to keep it. It is a violation of the requirements to lie
and ignore it.
Right now what the grantee has to maintain is a form; that
is, the verification form where the Head Start associate
certifies that they have looked at the income source documents,
but they are not required to keep the source document. The new
regulations will indeed require them to maintain the source
documents. And that is a separate rule that the one on
recompetition, which we are also working on, that is long
overdue in terms of being able to weed out the nonperforming
programs so that the high-quality programs will be certified as
Head Start grantees.
Chairman Miller. And like all Members of Congress I am
going to put competing agendas here. We obviously want the
program integrity part of this, and we don't want recompetition
to go without it. But we also want recompetition. It was a very
serious matter and a very heated debate, as you know, in this
Congress; and for this committee it was a very serious matter.
We want that recompetition in place as soon as possible, but
clearly this has to accompany it.
Ms. Nazario. Absolutey.
Chairman Miller. Thank you. Mrs. Biggert.
Mrs. Biggert. Thank you, Mr. Chairman.
Director Kutz, your testimony talks about a number of
investigations, I think it was around 15, and that there were
eight that were found to result in misrepresentation or fraud.
That seems to be certainly a high rate of fraud for a limited
sample. But is there anything that these results tell us about
the system in general or about under-enrollment programs in
particular?
Mr. Kutz. Yes. I believe that, by design, it appears that
the system is vulnerable to fraud. And you mentioned the
grantee fraud. But also the beneficiary fraud; some of our
enrollments just walked in with basic counterfeit documents,
saying that we were under-income, and there were no questions
asked. They checked the boxes and they said, You can start
tomorrow. So I think that the system is vulnerable to both
grantee fraud and beneficiary fraud.
Mrs. Biggert. And it seems like most all of the paperwork
was handwritten. There were no computers that were used to keep
records of anything?
Mr. Kutz. I can't say all, but most of the documents that I
reviewed that we got back were handwritten, yes.
Mrs. Biggert. Would that be something as far as having
maybe a standard program that has to be filled out for all of
these enrollees?
Mr. Kutz. Perhaps. And, again, certain things now are only
voluntary or encouraged. They are not mandatory. So if you want
consistency across centers, you are going to have to mandate
certain requirements.
Mrs. Biggert. And you stated in the investigation that
began in October of 2008--do you know how far back the alleged
misconduct goes?
Mr. Kutz. At one of the two centers, it is back 4 years;
the other one is several years. So this potentially goes back
into the 2006, 2007, 2008 time frame.
Mrs. Biggert. When we did the reauthorization, was there
anything that we did that, I don't want to say incentivized
doing this, because it is absolutely wrong, but made it easier
for such fraud?
Mr. Kutz. I don't know. I mean one of the things that came
up I mentioned is the homeless issue and the definition of
homeless, and they were actually 22 percent of people at one
grantee--which is a large grantee, with 1,500 or so children--
are in that center as being homeless. Now, I believe part of
that is perhaps fraud, part of it may be the need to tighten up
the definition of what constitutes homeless. Homeless in these
cases is not people who are not living in a home; it might be a
single mother living with her boyfriend who may be making
$100,000 a year, but because they are called homeless, they are
automatically shown as effectively under-income.
Mrs. Biggert. Thank you.
Secretary Nazario, in your testimony you mentioned that you
can require immediate corrective action for a Head Start center
if the evidence does not support termination of the grant. Can
you elaborate on what actions might be included and how often
any of the remedies have been utilized in the past?
Ms. Nazario. I was looking at the last 3 years, and we have
had about 10 centers per year where they have been terminated
as a result of corrective action going back 2008, 2009 and
2010. We can reprogram the money. We can recover the money from
the grantee, money that has been misspent. We can, if it is
simply a matter of under-enrollment, we can give them technical
assistance so they can convert into an early Head Start center,
or that they begin a longer school day or school year. But if
it is mismanagement, we take disciplinary action and either
terminate or suspend them.
Mrs. Biggert. You stated that since you learned of the GAO
review, HHS has taken immediate action to bolster the integrity
of the programs. When did you first learn of this investigation
and when did the first action to bolster the program integrity
occur?
Ms. Nazario. The first briefing I believe was April 22.
Mrs. Biggert. Of?
Ms. Nazario. Of 2010. We already had a partnership with the
IG's Office where they do in-depth review of grantees that we
consider to be high risk. And we provide them--this has been
going on since 2007 with just a couple of cases. And then in
2009 they began working on 25 percent--I am sorry, 25 cases of
the grantees that the staff considered to be high risk. And so
we have that, even prior to this investigations starting.
But from when we knew about the investigation, we
immediately issued a program instruction to remind grantees of
their obligation to verify income. And the Secretary, as I
said, has sent letters to every Head Start grantee. We
developed a Web-based mechanism--it is called Strengthen Head
Start--so that grantees can share ideas on how to promote sound
management, and that is already in place.
So those are things we have already done. But in the very
short term, we are doing to do a Webcast to go over the program
instruction that we have issued so that grantees understand
very well the income verification, PI, and we are going to do a
Web hotline so that that is overall for all of ACF programs, in
addition to the Head Start program, to collaborate in fraud and
mismanagement notification directly to me, to my office.
And as I said, in the summer we plan to issue the
regulations. And we are very cognizant and agree with the
chairman that they have to be inclusive of the fraud and
mismanagement.
Mrs. Biggert. Thank you. My time has expired.
Mr. Kildee [presiding]. Thank you very much.
When this program started 45 years ago, many of the poverty
programs were using maybe state-of-the-art at that time, which
are quite archaic now, but if we had better technology, could
we not centralize and spot maybe an inordinate number of
homeless people in a program? Would that be of some help?
Mr. Kutz. Absolutely. And not only for the HHS to have that
visibility, but for Congress to have that visibility. That
would seem to be something you and your staff might want to see
various information across the country about wait lists,
homelessness rates, children with disabilities enrolled. Just
you can see across the country what is going on. I think that
information would help not only from a management perspective
but from a fraud perspective, because I don't think 23 percent
passes the giggle test anywhere.
Mr. Kildee. Because I think with our technology you could
ring some bells, literally, when you saw certain numbers that
seem to be not ordinary numbers; and you could check maybe they
were appropriate, maybe they were not. But I think we might
want to look into better technology for this.
How much of this was due to that agency fear of losing
dollars for their agency? And was there any evidence of
sweetheart arrangements, any significant arrangements of
sweetheart arrangements, bringing people in who they knew did
not qualify but said, By the way, there is a good program over
here? Either one of you. How much was just to fill out the
slots that were assigned to that agency to serve and to receive
dollars for that?
Mr. Kutz. Well, the allegations we received and what we see
is the incentive to boost enrollment so that they do not lose
any of their grant money. And so it is all about the dollars
and it is all about--almost like Head Start and head count, and
making sure you have enough people to fill the slots, even if
you don't. And that is where the pressure came in where you did
see--I saw e-mails, for example, from management, saying we
have got to look at some of these over-income and see if we can
turn them into under-income. Let's call some parents and see if
they are willing to say they are under-income, things like
that. So there is pressure especially, perhaps in the time
leading up to the September period when you are trying to get
enrolled for the beginning of the year. But even after that,
you see some of the centers where they were trying to fill
their slots, it was almost the middle of September, late
September. They almost panicked and said, Hey, we are short 10
or 15 kids, we have to do something about it.
Mr. Kildee. You indicated that not only did you detect
enrollment fraud, but other types of fraud. Could you go into
that further with us?
Mr. Kutz. Yes. There were a lot of allegations, almost too
many to investigate in a lifetime, because you never know which
ones are credible. But the boosting of enrollment seemed to be
the most prevalent.
But let me give you some other examples. And I mentioned we
substantiated the moving children around to double-count
between two separate funding streams, intimidation of staff to
get them to do this kind of boosting of enrollment,
manipulation of the in-kind contribution. That is where the
centers have to come up with in-kind matching contributions.
One of the allegations was they were using the hours
parents used at home to help their kids do school work as an
in-kind contribution. For example, allegations of family
vacations taken with Head Start money. You name it, there were
a lot of different allegations out there. But the most
prevalent were related to the boosting of enrollment with
ineligible children.
Mr. Kildee. To what degree at this point are criminal
charges being pursued in this area of Head Start?
Mr. Kutz. As with any investigation, we do dozens of these
investigations for committees across Congress. We identify
hundreds of thousands of cases of fraud. We refer these to law
enforcement. And in this case, the HHS OIG will get an official
referral from us and all evidence that we have collected to
provide this investigation to Congress will be provided to the
inspector general, which is what we always do. And typically
these things result in action.
Whether anyone can get a prosecution out of this depends on
whether a U.S. attorney is interested or not. But that doesn't
mean the fraud wasn't committed. Fraud is fraud. Very little
fraud is ever identified. Very little fraud is ever actually
taken to a U.S. attorney and actually prosecuted successfully.
So, hopefully, in several of these cases we will see some
consequences.
And one fear I have is that the employees will be the ones
blamed in these cases, and management will claim they had
nothing to do with it. And what you saw in the videos there, I
have to believe management knew what was going on and perhaps
encouraged those people to do that to fill their rolls
Mr. Kildee. To what degree could the change in regulations
by the Department help minimize what is going on now with
fraud?
Mr. Kutz. The current change or the 2007 changes.
Mr. Kildee. The changes that you could implement now.
Mr. Kutz. I think that what they have put on their letter--
and again the devil is in the details--but we agree that a
hotline for management would be one way for them to weed out
bad actors and get information from employees or parents where
there is fraud. We certainly believe going in on a surprise
basis, the unannounced Federal reviews, is important, because
again the allegations are--they know when these people are
coming, weeks and months in advance, and so there are
allegations that they are doctoring their records up for the
Federal review. One way to perhaps deal with that is to show up
on a surprise basis. And, of course, the undercover visits that
we made, there is nothing that says management can't do a
little of that on their own to keep people straight out there.
Mr. Kildee. Mr. Scott.
Mr. Scott. Thank you, Mr. Chairman.
Mr. Kutz, as I understand it, you have mentioned a lot of
different allegations. The only allegations you actually
investigated involved enrollment fraud; is that correct?
Mr. Kutz. Primarily enrollment fraud, and there was a
little bit on personal use of automobiles that, although it
doesn't appear to be a lot of money, it appears to be
substantiated at this point.
Mr. Scott. The tests were done only at programs where
there, in fact, was no waiting list; is that right?
Mr. Kutz. There were open slots, correct.
Mr. Scott. Is there any evidence that the fraud, enrollment
fraud, involved the enrichment of employees; that is, that the
employee involved in the fraud made money?
Mr. Kutz. We saw no evidence of that.
Mr. Scott. Did you see any evidence that the fraud resulted
in favoritism so that the relatives, friends, or associates of
the Head Start employees benefited to the detriment of others?
Mr. Kutz. I believe there were allegations of that, but we
have not substantiated that.
Mr. Scott. Because the only places that you investigated in
fact had waiting lists?
Mr. Kutz. The two Head Start centers that came in through
our hotline, there was some allegations of that, but we have
seen no evidence.
Mr. Scott. I am talking about the ones you investigated.
Mr. Kutz. The undercover ones, we did not do anything
except the undercover visits.
Mr. Scott. So you have no evidence based on investigations
that any Head Start employee looked out for their relatives,
friends, or associates to the detriment of anybody else?
Mr. Kutz. No. We have come up with no evidence of that
ourselves, no.
Mr. Scott. Ms. Nazario, can you tell me how much money is
stolen in Medicare and Medicaid fraud?
Ms. Nazario. I know it is a substantial amount,
Congressman, but I don't know.
Mr. Scott. Round numbers, more than the total Head Start
budget? Probably?
Mr. Kutz. Most people estimate it is double digits, low
double digits, and that would be more than the Head Start
program substantially.
Mr. Scott. Good. Now that these irregularities have been
made known to the Department, you mentioned that you are going
to be doing professional development to make sure that the
programs know that this is serious?
Ms. Nazario. Yes, sir.
Mr. Scott. And will you be doing random checks and audits
to be make sure the programs are complying?
Ms. Nazario. Yes, sir. We do that routinely, every 3 years.
At least every 3 years, every program is audited in depth. We
will now increase the monitoring and conduct unannounced
visitation.
Mr. Scott. And that the programs will be warned that they
could lose their program, they will not be renewed, if they are
caught with these irregularities?
Ms. Nazario. Yes. We will instruct them of the consequences
of fraud and mismanagement.
Mr. Scott. And do you feel that the irregularities, which
seem to be widespread based on the random checks, can be fixed
with this professional development, random checks and warnings
about funding?
Ms. Nazario. We will absolutely look at every possible way,
and we will have that Web site for other ideas to correct the
situation, including recoupment of funds from the grantee.
Mr. Scott. And do you think this will be--the things that
you are doing will be sufficient to fix the problem?
Ms. Nazario. We are going to stop it. We are going to find
the mechanism to be sure that this is not occurring, so that
slots are not taken away from poor children who do need it.
Mr. Scott. Thank you, Mr. Chairman.
Mr. Kildee. Thank you. Mr. Tierney.
Mr. Tierney. Thank you Mr. Chairman.
Well, thank both of you for your testimony here today; Mr.
Kutz, for your good work in a number of different areas in the
GAO whom we rely on so often.
Ms. Nazario, how long have you been in your position?
Ms. Nazario. I arrived September 26, 2009.
Mr. Tierney. The system that you have in place now for
program oversight, is that something that was inherited by you
or is that something you have implemented on your own?
Ms. Nazario. The system was in place. What we have been
doing since I arrived and since the new Head Start director,
Yvette Sanchez Fuentes, arrived, is to, as I said, do a top-to-
bottom review. And we established the Head Start Road Map to
Excellence, which is looking at everything Head Start:
standards, monitoring, technical assistance. We are turning the
tables upside down in how we do technical assistance. So we are
looking at revamping the entire system. We call it the ``new
Head Start.''
Mr. Tierney. How many people would you say are in your
integrity department, in the departments responsible for the
integrity of this program, the monitoring of the funds?
Ms. Nazario. We have, I would say--I have to count, but I
can get you the exact number. But we have 60 people in grants
management and we have a total staff of Head Start. Around 229
Head Start staff.
Mr. Tierney. How many Head Start programs around the
country?
Ms. Nazario. We have 1,600 grantees and approximately 3,300
programs.
Mr. Tierney. Three thousand three hundred programs with 60
people that are monitoring them?
Ms. Nazario. This is grants management; am I correct?
Ballpark? And 229 Head Start. That includes regional program
specialists. We also have contractors who assist in technical
assistance.
Mr. Tierney. I guess my question is, how many people on
your staff dealing with program integrity are actually
available to go out and implement some sort of a system that
would make sure this doesn't happen, the complaints that we
received today?
Ms. Nazario. It is hard to say, full-time, because the way
we operate is that for the monitor and review, we build teams
who then go to the grantees and spend a week with the grantee
looking at--and these are not people who are full-time on
integrity but are pulled to do the reviews in addition to the
fiscal accountability staff.
Mr. Tierney. When you took over and started your top-to-
bottom review, did you consult the GAO or any other
investigative-type body for how you might go about setting up
systems that would prevent this kind of abuse?
Ms. Nazario. We have not to my knowledge consulted GAO, but
we consult the inspector general and have an ongoing
partnership with the inspector general.
Mr. Tierney. Did the IG make recommendations to you as to
what standards or systems you might put in place to help you
make sure this didn't happen?
Ms. Nazario. One of the things that we have already put in
place tried to address that, but there is a lot more that we
can do and will do. As we have received this information, we
have uncovered even more things that can be done. And we will
put them in place.
Mr. Tierney. Do you think you have the personnel that will
enable you to do the type of job that is necessary to stop this
kind of behavior and ensure Congress that it won't happen with
any regularity in the future?
Ms. Nazario. As of this moment, we have not identified the
need for additional personnel, but we will be looking at that
and we will submit requests accordingly.
Mr. Tierney. And will you be relying on GAO for any advice
and counsel in this process?
Ms. Nazario. Yes, absolutely. We want to partner with both
the IG and GAO.
Mr. Tierney. The point of my questioning is that we have a
special resolution here that, when we have money in trust, as
we do, for a program that people on both sides of the aisle
have confidence it has the potential to lift people out of a
bad situation and provide a service, we have a special
obligation to make sure the money just doesn't go south on us.
We neglect enough with the Department of Defense, which is only
about $296 billion overspending on just 93 programs; and we do
it, as Mr. Scott mentioned, on Medicaid and Medicare or
whatever. But people are always looking sometimes for the
narrowest little areas on that.
So we have to make sure we are resolute and get this in
place. And so I urge you--and I congratulate you, first of all,
for doing your top-to-bottom review. I understand it takes
time. But let's make sure we nail it down so we don't spend our
time debating this but, rather, debating how the program is
implemented and whether or not it is working and whom it is
benefiting. And that would be appreciated on that.
And I really do think you should use GAO in an advice and
counsel role in addition to the IG. They have the systems in
place and they have the way to help you through that. And it is
important that we do it.
Ms. Nazario. We completely concur, sir.
Mr. Tierney. Thank you. I yield back.
Mr. Kildee. Thank you very much. And I yield to the
gentleman from Kentucky, Mr. Guthrie.
Mr. Guthrie. Thank you, Mr. Chairman. I appreciate that.
And, Mr. Kutz, I have been watching and looking at the
testimony. One of the concerns, you said 8 of 15 undercover
investigations of Head Start employees actively encourage
undercover investigators, posing as parents or guardians, to
misrepresent their eligibility; and in four of those cases, the
information that was provided had been doctored by Head Start
employees to remove income information that had been provided.
And I know that is correct, what you said, and the question is
you said at least four, and I was wondering if there were more
than four.
And you had a more than 50 percent--I wouldn't say success
rate--but your undercover investigators, 50 percent of them
were able to enroll fraudulently. And in your experience as an
investigator, is this typical in these kinds of environments?
Is that high? Can you extrapolate what this means pervasively?
And then, finally, just how widespread do you think this may
be?
Mr. Kutz. It is hard to tell whether widespread-wise, I
think as I mentioned earlier, the system is vulnerable to not
only grantees doing what we are talking about, but some of the
undercover tests we did we went in actually with documents
showing we were eligible. They were just bogus documents, and
they would have bought our story. We could have walked in and
said we were unemployed, and they would have bought that. So it
is vulnerable to beneficiary fraud in addition to the grantees
on their own, without our prompting, telling us, ``Hey, you are
over-income, here is what we do to make you under-income. Give
me that one pay stub and I will pretend I didn't see it.'' So
you had both of those things ongoing.
So the system is vulnerable. There is no way to tell how
widespread this is, but it is particularly vulnerable for those
places trying to fill empty slots so they can maintain their
grant funding. So that would be--we were looking at this
between September 2009 and March 2010 in the undercover piece.
Many of the schools were part of the places that were already
full, probably, by the beginning of September. You probably
have another period of vulnerability coming up in the next few
months, so the timing of this hearing and the actions here are
very good because the rush to recruit and enroll is coming up
this summer for the next year.
Mr. Guthrie. Well, there is a difference, in my mind, if an
investigator presented fraudulent documents and said, I'm
eligible to have this and presented documents. They were so,
and Head Start accepted that. Versus the Head Start employee
helping you be fraudulent in your submission. So they are
vulnerable for the--did you just say, I'm unemployed, and they
took that for your word? Or you are saying you submitted
fraudulent unemployment documents?
Mr. Kutz. Just fraudulent pay stubs, or said we were
unemployed or we were under-income in several cases. Most of
our tests were on the over-income, because that was really the
primary focus. But we also wanted to see if there were--any due
diligence done, if they ever asked us for Social Security
numbers any of that kind of thing. And, again, there was very
little requirement for any of that type of documentation.
I will say there was a lot of requirements for dental
records, medical records, things like that. And so that gets
into the nonfraud issues which are also very important to the
program.
Mr. Guthrie. Well, just in my mind, it is a little
different for the Head Start employee if you present something
and they take it. Are they required to go two or three steps
further? Are they meeting the requirements and the problem is
the system.
Mr. Kutz. Absolutely. I don't think they are required to
verify anything. They are required to get paper. It is a paper
process. You get paper, or someone tells you something, you
write it down, and you move forward.
Mr. Guthrie. That is a problem with the system, but not
necessarily a problem with the employee. But it is a problem
with the employee if they are telling you not to submit pay
stubs and so forth.
Mr. Kutz. Yes. That is fraud.
Mr. Guthrie. Thank you.
Mr. Kildee. Thank you, Mr. Guthrie. Mrs. Davis.
Mrs. Davis. Thank you, Mr. Chairman, and thank you to both
of you for being here.
I wanted to go back to the recompetition requirements, I
think you were speaking to the chairman about that earlier, and
try to understand some of the issues, particularly for those
grantees who have had a longstanding record, and then there are
a number of issues that are coming forward.
Could you just expand on the pending regulations, then,
that are part of the authorization passed in 2007, talking
about the automatic indicators and what will change in light of
these GAO findings now?
Ms. Nazario. We will issue regulations that will take into
account public comments and we will take those public comments
very seriously. We want to issue regulations that are fair, but
that also provide for swift action for recompetition, so the
poorly performing programs are weeded out and the high-
performing programs remain; because when you allow programs to
continue to serve indefinitely, then the children are not
receiving the best care possible.
So we want to be sure that grantees meet performing
standards in terms of quality, and, at the same time,
performing in terms of financial management standards.
Mrs. Davis. The automatic indicators that you are looking
at now, as a result of some of the work that you have been
sharing with us today, do you see those changes? Those have
more to do with management, or more to do with performance, or
is it both?
Ms. Nazario. I think both, a combination. I will be happy
to get you a statement for the record as to what those will be,
but we should be issuing the rule very soon.
Mrs. Davis. Okay. And you think--when are those coming
forward again?
Ms. Nazario. In the summer.
Mrs. Davis. In the summer. Okay. Could you talk a little
bit more about some of the deficiencies that could cause a
grant to be rebid? What sorts of things are we talking about?
Ms. Nazario. Right now, or under the new rule? I think I
will get a statement for you for the record.
Mrs. Davis. Okay. All right.
You are talking about both performance and both management,
correct?
Ms. Nazario. Yes.
Mrs. Davis. Is that something that is not known to people?
When you are saying you are going to get it----
Ms. Nazario. The new rule is still being developed, so I
hesitate to speak about it. But when it comes out, it will come
out for substantial public comment.
Mrs. Davis. Do you think that grantees are going to be able
to understand why that might be new indicators? Is that
something that is going to come as a surprise, do you think, or
is it something that they would recognize pretty easily?
Ms. Nazario. I think they will recognize it. First of all,
we already have issued a program instruction that gives very
clear indications of where we are going. We will then also
issue a rule that makes the program instruction mandatory. Then
we will issue the redesignation rule. So by this time, we will
be doing Webcasts and we will be doing training, so it should
not be a surprise.
Mrs. Davis. Do you think that that discussion that would be
held with grantees, whether on line or otherwise, would it
address trying to get at fraud and abuse in this system?
Ms. Nazario. Absolutely.
Mrs. Davis. Directly, in terms of why something is being
done?
Ms. Nazario. Yes. And it will give indications as to what
are the actions that will result from a worker on their own
doing something, and what we can expect from the grantee to
correct it. And we will require swift directive action on the
part of the grantee, even if it is a rogue worker.
Mrs. Davis. Is it likely that there will be more
recompetition as a result of this across-the-board for
grantees?
Ms. Nazario. Yes. Absolutely. Like the chairman said, we
will be sure that it is included.
Mrs. Davis. Just very, very quickly, you mentioned keeping
track of the information. It just struck me: Why we are not
doing that now? You said it wasn't required that they keep some
of the information that is presented, some of the paperwork, et
cetera.
Ms. Nazario. Well, you know, I wasn't here when these rules
were developed, but we always are struggling in public
services, particularly in social services, to walk the line
between being responsive to people's needs and maintaining the
same administration. So the way it has been developed up to now
is that they have to look at the eligibility documents, but
they were not required to keep them in the record.
Mrs. Davis. Do you think it is going to be difficult for
them to do that? Will they be able to computerize that so that
they really have all that at their fingertips, essentially.
Ms. Nazario. Well, at this point, we haven't looked into
the details of whether it is going to be computerized files or
manual files, but, at any rate, they will have something. Right
now, they should be able--they will be able, both the grantee
and the parents, to furnish the documents. They have to have
them in order to apply. So they will have the documents and the
grantees can even scan them, which is now very commonplace.
Mrs. Davis. Thank you very much, Mr. Chairman.
Mr. Kildee. Thank you, Ms. Davis.
First of all, I want to thank both of you. I know that HHS
is very angry over this. That is good. You should be angry,
because this is a program that you supervise and that you care
a great deal for. Thank God for the GAO. I have been in
Congress for 34 years, and I have learned more when GAO gets
involved with the other parts of the government to make sure
that the taxpayers' dollars and those dollars meant for, in
this instance, poor children are used properly.
So I am sure that with the attitude both of you have and
the beliefs that both you have, that we are going to get to the
bottom of this and take those reforms that are necessary to
make sure that this program reaches the goals that were set 45
years ago.
The last official action I had with Ted Kennedy, I was
chief sponsor of the reauthorization of this bill, and Ted and
I went over to the White House with Mr. Enzi and George Miller.
And George Bush signed the bill. We felt very proud. And it was
only about a month later that Ted Kennedy discovered that he
had that fatal illness, and I think one of the greatest
tributes we can pay to his memory is to make sure we get this
back to where it should be, and I know both of you want to do
that, and I appreciate that.
Without objection, members will have 14 days to submit
additional material or questions for the hearing record.
[Additional submissions of Mr. Miller follow:]
Washington, DC, May 17, 2010.
Dear Head Start Grantee: I am writing to address fraud and
mismanagement in Head Start and to notify you of the steps the
Department of Health and Human Services will be taking to strengthen
program integrity in the Head Start Program. Recently, I was informed
of an investigation initiated by the Government Accountability Office
(GAO) into potentially fraudulent eligibility determination procedures
and other types of misconduct. According to GAO, individuals employed
by approximately eight Head Start grantees determined that certain
children were eligible for Head Start services despite being given
evidence that their families' incomes were above the eligibility limit.
Our Office of Inspector General is now following up on these
allegations. If proven, these actions not only violate Head Start's
rules and regulations, but would represent serious breaches of the
public trust.
As you know, Head Start is designed to put our nation's low-income
children on a road to opportunity. Allowing ineligible children to
enroll in the program is a blatant violation of Head Start's rules and
it steals opportunity from children who need it most. This Department
will not stand for it.
On May 10, the Office of Head Start issued a Program Instruction
entitled, ``Income Eligibility for Enrollment'' (ACF-PI-HS-10-02),
which reminds grantees of their obligations to verify income
eligibility and determine eligibility in accordance with the Head Start
statute and regulations. This was just the first step in our efforts to
strengthen program integrity in the Head Start program.
The following are additional concrete steps that we are undertaking
to ensure that every Head Start slot is reserved for a child eligible
for the program.
Refer fraud allegations to the HHS Inspector General. When
HHS discovers potential fraud, those cases are referred to the
Department's Inspector General who can pursue a criminal investigation.
Knowingly falsifying documents and determining a child eligible for
Head Start when the child does not meet the eligibility criteria can
lead to criminal charges.
Move to suspend and terminate grantees where pervasive
fraud or misuse of funds is found. The Head Start statute provides us
with ample authority to suspend and then terminate grants in such
instances.
Require grantees that have inadequate controls to prevent
errors in eligibility or other critical lapses in program management to
take swift, decisive corrective action. This could include firing
employees that are found to be knowingly violating Head Start rules, as
well as tightening eligibility determination procedures.
Conduct unannounced monitoring visits to Head Start
grantees. In the past, we have typically provided grantees with notice
before coming to conduct monitoring or other onsite visits. We will
increase our use of unannounced visits to ensure that we are able to
review how your programs operate on a daily basis.
Create and publicize a web-based ``hotline'' that will
allow those with information of impropriety of any kind to report it
directly to me. When this hotline is up and running, we will issue
guidance to you about how to access the site. I expect that every
grantee will ensure that all Head Start employees are informed about
this hotline. We know that fraud is often detected and reported by
scrupulous employees who stand up and do the right thing.
Increase oversight and reviews of programs with identified
risk factors. Each year, the Administration for Children and Families
(ACF) conducts a risk assessment with every grantee to identify risks
for program violations or management problems. ACF, in partnership with
the grantee, develops and implements an action plan to mitigate the
risk factors. Program specialists will be scrutinizing programs more
carefully in the risk management process and the action plan phase.
Develop new regulations that promote program integrity. We
are developing new regulations that will address verification
requirements and staff training on eligibility criteria and procedures.
Recompete grants when questions arise about whether
grantees are offering high-quality services or have management lapses.
We will soon issue proposed regulations that articulate which grantees
will be required to compete for continued Head Start funding--
implementing an important reform enacted by Congress in the Head Start
for School Readiness Act of 2007. The goal of the regulations is to
promote program integrity and strengthen the quality of services that
Head Start provides.
As these initiatives gear up, you will be kept fully apprised of
new requirements and changes in our operating procedures. Now that you
know of our increased focus on program integrity, I hope you will
immediately review your own oversight and quality assurance mechanisms
and begin to develop ways to strengthen your own programs. If we work
together, we can build an even stronger Head Start program.
I know our Head Start grantees can be a source of good ideas for
how to promote sound management and ensure that this program meets the
highest possible program integrity standards. If you have an idea,
please send it to [email protected]. You are our
partners in this important program, and we want to hear your thoughts
and ideas.
Program integrity is one of my key priorities and goes well beyond
Head Start. I recently established the Council on Program Integrity,
which will look at all areas within the Department from Medicare and
Medicaid, to Head Start and LIHEAP, to medical research and the public
health grants--to conduct risk assessments of programs or operations
most vulnerable to waste, fraud, or abuse; enhance existing program
integrity initiatives or create new ones; share best program integrity
practices throughout HHS; and measure the results of our efforts. I
look forward to partnering with you as part of this Department-wide
initiative.
I know the great majority of people who work at Head Start centers
are dedicated professionals who make tremendous efforts to provide
quality care and early education to more than 900,000 children and
carry out their work each day with great integrity. We--grantees and
federal officials alike--cannot allow a few unscrupulous individuals or
grantees to get in the way of the services that Head Start provides to
our nation's low-income children.
Sincerely,
Kathleen Sebelius.
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[Additional submission of Messrs. Miller and Kline
follows:]
Department of Health & Human Services,
Office of Inspector General,
Washington, DC.
Hon. George Miller, Chairman; Hon. John Kline, Senior Republican
Member,
Committee on Education and Labor, U.S. House of Representatives,
Washington, DC.
Dear Chairman Miller and Ranking Member Kline: I am writing
regarding the hearing, scheduled for Tuesday May 18, 2010, before the
House Education and Labor Committee, to examine an investigation by the
Government Accountability Office (GAO) of allegedly fraudulent behavior
by certain Head Start grantees regarding enrollment and eligibility. As
you know, the Office of Inspector General, Department of Health & Human
Services (OIG), recently opened an investigation stemming from
preliminary information provided by GAO regarding allegations of
enrollment fraud in certain Head Start programs. As part of its
investigation, GAO conducted undercover operations at a number of Head
Start centers. The operations yielded video and audio tapes of
interactions between Head Start employees and GAO investigators.
Last week, GAO informed us that it anticipates making a formal
referral to OIG of its findings within the next 10 days. After
reviewing that investigative material, our office will be in a better
position to evaluate the allegations and finalize an investigative
plan.
Earlier today, Assistant Inspector General for Investigations
Gerald Roy and OIG Chief Counsel Lewis Morris met with your staff to
view excerpts of four of the GAO video tapes. During that meeting your
staff asked that OIG apprise the Committee whether display of the video
tapes during the hearing would adversely impact OIG's investigation.
Upon review, we have determined that if the Committee shows the four
video tapes during the hearing or otherwise makes them available to the
public, it would be problematic. Although we have not received a formal
referral of this matter from GAO and therefore cannot speak to the
merits of the allegations or where an investigation may lead, we are
concerned that disclosure of identifying information, such as witness
identity or Head Start location, could compromise OIG's ongoing
investigation. Thank you for your consideration of these concerns.
Sincerely,
Timothy J. Menke,
Deputy Inspector General for Investigations.
______
Mr. Kildee. Without objection, the hearing is adjourned.
[Whereupon, at 2:47 p.m., the committee was adjourned.]