[Federal Register Volume 85, Number 168 (Friday, August 28, 2020)]
[Rules and Regulations]
[Pages 53189-53209]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-17746]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Administration for Children and Families

45 CFR Parts 1304 and 1305

RIN 0970-AC77


Head Start Designation Renewal System

AGENCY: Office of Head Start (OHS), Administration for Children and 
Families (ACF), Department of Health and Human Services (HHS).

ACTION: Final rule.

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SUMMARY: This final rule refines how the Office of Head Start uses 
deficiencies, Classroom Assessment Scoring System: Pre-K 
(CLASS[supreg]) scores, and audit findings for designation renewal. It 
also streamlines and updates the regulatory provisions on designation 
renewal to make them easier to understand.

DATES: This final rule is effective on October 27, 2020.

FOR FURTHER INFORMATION CONTACT: Catherine Hildum, Office of Head 
Start, 202-205-7328 (not a toll-free call). Deaf

[[Page 53190]]

and hearing impaired individuals may call the Federal Dual Party Relay 
Service at 1-800-877-8339 between 8:00 a.m. and 7:00 p.m. Eastern Time.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Statutory Authority
II. Executive Summary
III. Background
IV. Public Comments Analysis
V. Section-by-Section Discussion of Changes to the Designation 
Renewal System
    1304.11(a) Deficiency Condition
    1304.11(b) School Readiness Goals Condition
    1304.11(c) CLASS Condition
    1304.11(d) Revocation Condition
    1304.11(e) Suspension Condition
    1304.11(g) Fiscal Condition
    1304.12 Grantee Reporting Requirements Concerning Certain 
Conditions
    1304.15 Designation Request, Review, and Notification Process
    1305 Definitions
    Effective Dates
VI. Regulatory Process Matters
    Regulatory Flexibility Act
    Unfunded Mandates Reform Act
    Treasury and General Government Appropriations Act of 1999
    Federalism Assessment Executive Order 13132
    Congressional Review
    Paperwork Reduction Act of 1995
    Regulatory Planning and Review Executive Order 12866, Executive 
Order 13563, and Executive Order 13771
VII. Regulatory Impact Analysis

Tribal Consultation Statement

I. Statutory Authority

    The Office of Head Start (OHS) publishes this final rule under the 
authority granted to the Secretary of Health and Human Services (the 
Secretary) by sections 641(a), 641(c), and 644(c), of the Head Start 
Act, as amended by the Improving Head Start for School Readiness Act of 
2007 (Pub. L. 110-134). Generally, under these sections, the Secretary 
is authorized to implement a system for designation renewal that 
determines if a grantee delivers high-quality and comprehensive 
services and adheres to financial management requirements. The 
Secretary is also authorized to designate any local public or private 
non-profit agency, including community-based and faith-based 
organizations, and for-profit organizations as a Head Start agency, as 
well as prescribe rules or regulations, which are binding on all 
agencies that perform Head Start activities.

II. Executive Summary

    Since its inception in 1965, Head Start has been a leader in 
helping children from low-income families reach kindergarten more 
prepared to succeed in school. Through the Improving Head Start for 
School Readiness Act of 2007 (the 2007 Reauthorization) amending the 
Head Start Act (the Act), Congress required HHS to ensure these 
children and their families receive the highest quality services 
possible. In support of that requirement, the 2007 Reauthorization 
directed the Secretary to establish the Designation Renewal System to 
(1) identify Head Start grantees delivering a high-quality and 
comprehensive Head Start program that could receive funding 
noncompetitively for a 5-year period and grantees not delivering a 
high-quality and comprehensive Head Start program that will be required 
to compete for continued funding, and (2) to transition all grants from 
indefinite grants to 5-year grant periods. Congress required that 
decisions about which grantees would have to compete be based on budget 
and fiscal management data (including annual audits), program 
monitoring reviews, classroom quality as measured by a valid and 
reliable research-based observational instrument, and other program 
information.
    The Designation Renewal System regulation, promulgated in 2011, 
requires grantees to compete for continued funding if they meet one or 
more of the following seven conditions: (1) One deficiency under 
section 641A(c)(1)(A), (C), or (D) of the Act; (2) failure to 
establish, use, and analyze children's progress on agency-established 
school readiness goals; (3) scores below minimum thresholds in any of 
the three domains of the Classroom Assessment Scoring System: Pre-K 
(CLASS) or in the lowest 10 percent in any CLASS domain out of the 
grantees monitored in a given year, unless the grantee's score is equal 
to or above the standard of excellence for that domain; (4) revocation 
of a license to operate a center or program; (5) suspension from the 
program; (6) debarment from receiving federal or state funds or 
disqualification from the Child and Adult Care Food Program; or (7) an 
audit finding of being at risk for failing to continue as a ``going 
concern.''
    Since 2011, all Head Start and Early Head Start grants have been 
reviewed under the Designation Renewal System and transitioned from 
indefinite to 5-year grant periods. Approximately a third of grants 
have been required to compete and two-thirds have received a new grant 
non-competitively. As required in section 641(c)(8) of the Head Start 
Act (42 U.S.C. 9836(c)(8)), ACF has been regularly analyzing data on 
the implementation of the Designation Renewal System and on those 
grantees required to compete. In 2016, the ACF Office of Planning, 
Research and Evaluation published a report of its designation renewal 
evaluation, titled ``Early Implementation of the Head Start Designation 
Renewal System,'' which examined how the system is addressing the goals 
of transparency, validity, and reliability.\1\ The study explored 
whether the Designation Renewal System identifies lower-performing 
grantees for competition and how designation renewal might support 
program quality improvement. From the experience of individual grantees 
and the results of the designation renewal evaluation and other Head 
Start research, ACF is confident the Designation Renewal System has 
driven increases in the quality of Head Start and Early Head Start 
services, but believes improvements can be made to the system.
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    \1\ Derrick-Mills, T., Burchinal, M., Peters, H.E., De Marco, 
A., Forestieri, N., Fyffe, S., Hanson, D., Heller, C., Pratt, E., 
Sandstrom, H., Triplett, T., & Woods, T. (2016). Early 
Implementation of the Head Start Designation Renewal System: Volume 
I. OPRE Report #: 2016-75a. Washington, DC: Office of Planning, 
Research and Evaluation, Administration for Children and Families, 
U.S. Department of Health and Human Services.
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    ACF believes revisions to the current conditions will better 
distinguish grantees for noncompetitive continued funding from those 
that could most benefit from competition, particularly after the 
transition of all grantees from indefinite to definite project periods. 
Therefore, we are making some adjustments to the seven conditions that 
require competition; we believe the adjustments will, going forward, 
better identify grantees whose data indicate they are lower performing 
in the important dimensions of quality that Congress requires we 
consider under the Designation Renewal System.
    Regarding the deficiency condition, we will no longer require 
competition for grantees with a single deficiency during their project 
period. While all deficiencies are serious and substantial or systemic, 
we believe changing the condition to require competition after two 
deficiencies during the project period will better reflect significant 
quality failures of an agency. Additionally, the change will 
appropriately put the focus on grantees having systems in place to 
ensure health and safety incidents do not occur or are quickly 
identified and rectified, and on financial and human resource systems 
that support ongoing, high-quality operations.
    With respect to the CLASS condition, we want to ensure this tool 
supports

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quality improvement as part of the Designation Renewal System. The 
aspect of the CLASS condition that requires grantees scoring in the 
lowest 10 percent of any of the three domains of the tool to compete 
creates a moving target for grantees. The moving target combined with 
implementation challenges of this condition have led to periods of 
uncertainty for grantees regarding their designation status. Further, 
the relative nature of the condition in some cases has resulted in 
grantees with rather high scores on a specific domain being designated 
for competition due to that score, while grantees with a rather low 
score on another domain have not always been required to compete.
    In the final rule, we drop the 10 percent criterion, while 
simultaneously establishing quality thresholds and raising the 
competitive thresholds (formerly minimum threshold) for each domain of 
the CLASS. For any grantee with a score below a quality threshold, OHS 
will provide support for quality improvement and help ensure the 
grantee's coordinated approach to training and professional development 
is supporting improvements in the learning environment, particularly in 
teaching practices and teacher-child interactions. We also raise the 
competitive thresholds for each domain and any grantee with a score 
below a competitive threshold will be designated for competition.
    The establishment of quality thresholds for the CLASS domains 
builds on existing program quality improvement efforts to enhance 
classroom quality and will lead to more intentional OHS support for 
these efforts. Further, it is important to raise the CLASS competitive 
thresholds. Evidence suggests children learn more in well-organized 
classroom environments that are characterized by sensitive and 
responsive interactions that promote autonomy, conversation, literacy 
skills, and executive functioning. Children gain these skills when they 
experience higher quality teacher-child interactions and instruction. 
This revised approach will remove the moving target but appropriately 
set the focus on improving the quality of teacher-child interactions in 
all areas the CLASS measures and ensure grantees are focused on 
promoting rich, engaging, and sensitive interactions between teachers 
and children in all classrooms.
    The fiscal condition is also being revised because the current 
condition does not adequately identify grantees whose audit data 
indicates they may have serious fiscal issues warranting competition. 
The current condition identifies for competition grantees that are at 
risk of failing to continue as a going concern, which means the 
organization is in such a dire financial situation that they are likely 
to no longer be a viable financial entity within 12 months. This 
condition only identifies grantees in the last stages of financial 
problems and has identified less than a dozen Head Start grantees for 
competition within the last 8 years, even as many other grantees have 
experienced significant financial management problems. While we retain 
the going concern condition and adjust the time window in which it is 
considered, we also add a second fiscal criterion in which any grantee 
that has a total of two or more audit findings of material weakness or 
questioned costs related to their Head Start funds in audits for a 
financial period within the current project period will also be 
required to compete. Material weaknesses and questioned costs indicate 
challenges in grantees' internal controls, appropriate use of funds, 
financial management, and reporting. These two audit findings indicate 
significant fiscal concerns that we believe warrants competition. We 
believe the additional criterion will provide a richer look at a 
grantee's fiscal management systems and financial systems and better 
identify grantees with potentially serious financial problems 
specifically in their Head Start grant before the financial problems 
might impact their viability. The new criterion will look more deeply 
at Head Start specific audit information, which is consistent with 
section 641(c)(1)(C) of the Act requiring use of annual audits in the 
system. However, it will not identify for competition grantees that 
have less significant audit findings or findings related to non-Head 
Start funds.
    The new conditions will be effective on October 27, 2020. In 
general, grantee performance before the effective date of the rule is 
subject to the prior conditions and grantee performance after the 
effective date is subject to new conditions. Going forward, all 
decisions about which grantees will have to compete for renewed funding 
will be based on the conditions described in this rule. Grantees whose 
performance prior to the effective date of the rule met one or more 
conditions requiring them to compete will have a second look to 
determine if they still meet the new conditions. These grantees whose 
performance would have required competition under the prior conditions 
will only be required to compete after the effective date of this rule 
if they would also be required to compete under the new conditions. 
Likewise, there will be no retroactive implementation of the new 
conditions to ensure grantees are not designated for competition based 
a condition on which they did not know they would be judged.
    Prior to the effective date of this final rule, some grantees will 
have received a letter from OHS with a preliminary decision that they 
are eligible for renewed funding without competition based on not 
having met any of the DRS conditions at the time of the determination. 
These preliminary decisions will not be revisited under the new 
conditions, and these grantees will continue to be eligible for a 
noncompetitive new grant. Only in the rare case that such a grantee 
receives two or more deficiencies, a license revocation, suspension, 
debarment from any federal or state funds, disqualification from the 
Child and Adult Care Food Program, or an audit finding of a going 
concern before receiving their non-competitive 5-year grant award would 
the grantee be required to compete. This would also have happened under 
the current regulation, with the only difference being the number of 
deficiencies requiring competition.
    Prior to the effective date of this final rule, other grantees will 
have received a letter from OHS with a preliminary decision that they 
will have to compete for renewed funding. These preliminary decisions 
will be revisited for each grantee, as long as the Funding Opportunity 
Announcement (FOA) for the competition has not yet been posted, to 
determine if a given grantee will still have to compete based on the 
new conditions put forth in this final rule. For competitions awaiting 
a FOA posting, only those grantees required to compete under the 
current conditions and the new conditions will be required to compete. 
For example, if a grantee was designated for competition based on the 
deficiency condition but had only one deficiency and the FOA has not 
been posted, they would not meet the new condition (two or more 
deficiencies). Therefore, this grantee would become preliminarily 
eligible for a non-competitive new grant. However, if a grantee was 
previously designated for competition based on the deficiency condition 
and had two deficiencies, the grantee would still be required to 
compete because the grantee would meet the new deficiency condition 
(two or more deficiencies) as well.
    Similarly for the CLASS condition and fiscal condition, when making 
DRS

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determinations that consider grantee performance prior to the effective 
date of the rule, OHS will take a second look to see if grantees would 
still be required to compete under the new conditions until a FOA for 
that grantee's service area has been posted. Grantees with CLASS data 
collected prior to the effective date of this rule will only still be 
required to compete after this final rule is effective if those CLASS 
scores would require competition under both the current CLASS condition 
and the new CLASS condition. For example, if a grantee was required to 
compete solely based on a CLASS score that was in the lowest 10 percent 
for one domain, but that score is above the new competitive threshold 
for that domain, this grantee will become preliminarily eligible for a 
non-competitive grant and not have to compete. However, if a grantee's 
CLASS score was in the lowest 10 percent for a given CLASS domain and 
is also below the new competitive threshold for that domain, they will 
still be required to compete. Additionally, any grantee with a going 
concern audit finding will still have to compete since that condition 
exists in both the current and new Designation Renewal System 
conditions. Because audit findings of material weakness and questioned 
costs are included in the new fiscal condition but not the prior fiscal 
condition, only audits from a grantee's fiscal years beginning after 
the effective date of the rule will be considered in competitive 
determinations.
    Once a FOA has been posted to inform the public of the availability 
of funding in that service area, competition decisions will be final. 
After that time, there will be no opportunity for reconsideration based 
on changes in regulatory conditions requiring competition. During the 
first several years after the effective date of this rule, grantees 
that would have been subject to competition under the CLASS and 
deficiency conditions may no longer be required to compete under the 
new conditions. In addition, audit data from grantee fiscal years after 
the effective date of the rule to evaluate the new fiscal criterion 
will not yet be available. This means there may be less competition in 
the first few years of implementation of this final rule, compared to 
when the new conditions are fully implemented. However, the purpose of 
these revisions to the Designation Renewal System is not to ensure a 
certain level of competition, but to ensure all grantees understand the 
markers of quality that they should be aiming for so that quality is 
improved across all Head Start programs.

III. Background

    OHS released a request for comment in December 2017, titled ``CLASS 
Condition of the Head Start Designation Renewal System,'' (82 FR 57905) 
in the Federal Register to collect information and input from the 
public for this rulemaking. The request solicited public input on 
specific changes to the way we use Classroom Assessment Scoring System 
(CLASS) for designation renewal. Specifically, we wanted the public's 
feedback on whether we should: (1) Remove the ``lowest 10 percent'' 
provision of the CLASS condition; (2) increase the minimum thresholds 
for the Emotional Support and Classroom Organization domains; (3) 
remove the minimum threshold for the Instructional Support domain; and 
(4) establish authority for the Secretary to set an absolute minimum 
threshold for the Instructional Support domain prior to the start of 
each fiscal year to be applied for CLASS reviews in the same fiscal 
year. We also sought feedback on ways we could incentivize robust 
competition to include new applicants, facilitate smooth transitions 
when there is a new grantee as a result of competition, and improve the 
designation renewal processes.
    We considered comments we received from the request for comment, 
along with data we collected over the years, and published a notice of 
proposed rulemaking (NPRM) in the Federal Register on August 13, 2019 
(84 FR 39996). In the NPRM, we sought the public's opinion on whether 
we should consider a change to the single deficiency trigger. We also 
proposed changes to both the CLASS and fiscal conditions. Specifically, 
we proposed to raise the absolute threshold for each CLASS domain and 
to remove the lowest 10 percent criterion. We also proposed to add a 
second criterion related to audit findings to the fiscal condition.
    The NPRM generated a diverse pool of comments. We analyze and 
discuss those comments below in Part IV. Public Comments Analysis and 
Part V. Section-by-Section Discussion of Changes with this Final Rule.

IV. Public Comments Analysis

    We received 63 unique submissions, which included a few comments 
with up to 100 signatories and one comment with 1,600 signatories on 
the NPRM. Commenters included Head Start grantees, teachers, other 
staff, large early childhood associations, advocacy organizations, 
early childhood vendors, Members of Congress, Indian tribes, child 
development and policy experts, CLASS experts, and parents.
    In drafting this final rule, we carefully reviewed each comment. 
Most of the comments were supportive of our efforts to hold programs 
accountable for delivering high-quality services. However, commenters 
also criticized our current approach to identifying low performing 
grantees. Commenters gave specific recommendations for how we should 
use deficiencies, CLASS, and the fiscal condition under designation 
renewal. We discuss those comments in Part V., Section-by-Section 
Discussion of Changes with this Final Rule. We also received the 
following comments that were not germane to what we proposed in the 
notice of proposed rulemaking.
    Comment: Many commenters recommended OHS look for ways to move 
designation renewal from being punitive to an approach that better 
integrates continuous quality improvement and provides intentional 
support for programs to address challenges and improve quality. This 
was emphasized due to the disruption competition could cause to 
communities when there is a change in provider.
    Response: Having to compete for continued funding is not an adverse 
action. All eligible grantees can compete for renewed funding and, in 
fact, the majority of grantees are re-awarded the grant following open 
competition. We are revising the conditions to better ensure grantees 
that are required to compete are those whose data and history show they 
are not high performing. Furthermore, the improvements we make in this 
final rule focus designation renewal more on continuous quality 
improvement.
    Comment: A few commenters wanted to see the tribal consultation 
process improved. They wanted a forum where tribal officials could 
openly discuss issues that affect Head Start service delivery and have 
those issues resolved within a timely manner. A few commenters believed 
federal officials with policy-making authority should be required to 
attend tribal consultations and tribal leaders should be afforded 
sufficient advance notice and an agenda (at least 60 days) of scheduled 
consultations. Commenters asked for consultation reports to include a 
record of topics discussed along with next action steps.
    Response: OHS conducts tribal consultations in accordance with the 
HHS policy on tribal consultations. We provide notice of all tribal 
consultations scheduled for the fiscal year to the leadership of tribal 
governments operating Head Start and Early Head

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Start programs, and we ensure a federal official with policy-making 
authority attends each one. We organize the agenda around the statutory 
purposes of Head Start tribal consultations related to meeting the 
needs of American Indian/Alaska Native children and families. In 
addition, we share what actions we have taken and progress made to 
address the issues and concerns raised at these consultations. We 
appreciate commenters' suggestions, and we will continue to consider 
ways in which we can improve our consultations and align with the HHS 
policy.
    Comment: According to some commenters, programs that are designated 
to compete spend money and other resources that could be better spent 
elsewhere, particularly given most of those programs get their grants 
back after competition.
    Response: The purpose of designation renewal has always been to 
identify those communities where competition is most warranted and to 
improve quality through the process. We believe this final rule strikes 
an appropriate balance between the importance of competition to drive 
quality improvement and the resources required for the competitive 
process, and better ensures the right grantees are in competition. 
Specifically, we make changes in the CLASS condition and the deficiency 
condition to better target competition where scores show lower 
performance or there are systemic problems in operations. Further, 
Congress directed Head Start to establish a system of designation 
renewal that would (1) identify Head Start grantees delivering a high-
quality and comprehensive program that could receive funding 
noncompetitively for a 5-year period and grantees not delivering a 
high-quality and comprehensive program that will be required to compete 
for continued funding, and (2) to transition all grants from indefinite 
grants to 5-year grant periods.
    Comment: Many commenters suggested OHS establish an appeals process 
that has clear parameters, procedures, and time frames for final 
determinations, which would make the Designation Renewal System more 
transparent and equitable. Some believed an appeals process would 
afford grantees the opportunity to express concerns, seek 
clarification, address inconsistencies, and provide feedback about ways 
to improve the Designation Renewal System. A few commenters believed an 
appeals process would allow programs to reevaluate findings, seek 
redress, and better integrate the principles of continuous quality 
improvement into the Designation Renewal System.
    Response: Congress did not require grantees designated to compete 
for further funding be given an opportunity to appeal. However, 
Congress did require appeals for grantees that are terminated or 
suspended for more than 30 days. These different approaches indicate 
that Congress did not believe the requirement that a grantee compete 
for further funding was on par with termination or other actions for 
which Congress did require appeals.
    Additionally, all eligible entities that have not been terminated 
from providing Head Start or Early Head Start services or denied 
refunding in the preceding five years, including the grantees 
designated for competition, are able and encouraged to apply through 
competition. Unlike a grant termination, a requirement to compete 
provides a mechanism for a current grantee to demonstrate its capacity 
to provide a high-quality program while providing the ability to shift 
funding to more capable entities if such entities exist in the 
community. Further, a grantee that competed and lost a competition 
would remain eligible for future competitions. The grantee that must 
compete for further funding is one whose level of compliance is 
sufficient to justify continuance in the Head Start program, provided 
that no other organization in the same community establishes through a 
competitive process that it is better able to provide a high-quality 
and comprehensive program.

V. Section-by-Section Discussion of Changes With This Final Rule

    In this section, we discuss comments we received specific to what 
we asked the public to consider, regarding the single deficiency 
trigger, and to what we proposed regarding the CLASS and fiscal 
conditions. We analyze and describe the changes we make to each section 
in the final rule, based on those comments.
    We also make technical fixes that do not alter the substance of the 
standards in these sections. In drafting this final rule, we realize 
outdated, repetitive, and unnecessary language make these sections 
cumbersome and hard to follow. We believe the technical fixes we make 
below ensure these sections are clear, updated, streamlined, and 
transparent to the public.

1. Section 1304.11 Basis for Determining Whether a Head Start Agency 
Will Be Subject to an Open Competition

    This section sets forth the seven conditions for designation 
renewal. It requires a program to compete for continued funding in 
their service area, if they meet any of these seven conditions. While 
we did not propose any changes to this introductory paragraph nor did 
we receive comments on it, we make a few technical fixes to this 
paragraph that do not alter the substance of the provision. We remove 
the word ``shall'' and replace it with the word ``will.'' We also 
remove the phrase ``covered by the responsible HHS official's review.'' 
These fixes remove outdated regulatory language, along with 
repetitious, unnecessary language to streamline the section and make it 
easier to read.
i. 1304.11(a) Deficiency Condition
    This paragraph establishes the trigger for competition related to 
deficiencies. It requires an agency that has one or more deficiencies 
on a single review to compete for continued funding. Since the 
Designation Renewal System was launched in 2011, we have held one 
deficiency is serious enough to cause a grantee to compete for 
continued funding. However, we have heard concerns the single 
deficiency trigger is too stringent and causes grantees that otherwise 
provide high-quality comprehensive services to compete because of a 
single incident that is not a result of system failures. Most of the 
comments we received addressed the deficiency condition.
    In the NPRM, while we did not propose a change to the deficiency 
condition, we did seek comment about whether we should consider a 
change to the single deficiency trigger.
    In this final rule, we amend the deficiency condition requiring a 
grantee to compete from a single deficiency to two or more 
deficiencies. However, this does not mean that all single incidents 
necessarily reflect an isolated issue. If a single serious incident is 
the result of multiple failures within a program, it may very well 
result in more than one deficiency. In addition, it is important to 
note that a single deficiency always leads to follow-up reviews to 
ensure it is corrected. Additionally, if there is serious risk for harm 
to staff and/or children's health and safety, substantial injury to 
property or loss of project funds, OHS can exercise its authority to 
suspend or terminate financial assistance pursuant to Sec. Sec.  1304.4 
and 1304.5(a)(2)(iii).
    Comment: Most commenters believed two or more deficiencies, within 
a project period, better reflect a significant issue in a program than 
a single deficiency. A few commenters offered other suggestions for how 
we should further change the deficiency condition including to combine 
the CLASS and

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deficiency condition, increase the number of deficiencies to three or 
more, and not count self-reported or corrected deficiencies.
    Most commenters expressed concern we do not differentiate 
deficiencies either by severity or between a one-time incident that is 
or is not a result of multiple system failures. This would result in 
cases where one mishap of an individual could require an entire program 
to compete. A few of these commenters recommended we take steps to 
distinguish whether a one-time incident is a result of multiple system 
failures, while most commenters indicated a change to two or more 
deficiencies would help address this concern since two or more 
deficiencies would be a better reflection of systemic issues.
    Response: We considered commenters' suggestions, along with 
monitoring data we collected over the years. Our data shows about half 
of the deficiencies that programs received are most likely the result 
of a single incident of inadequate supervision, which often occur 
during the transition of a group of children from one space to another. 
These findings are substantial but can be often seen as isolated by the 
grantee, especially when training was provided to the staff to prevent 
such an incident or the staff involved faced consequences for the 
incident. We believe a change to two or more deficiencies will capture 
significant quality failures of an agency and will mitigate the concern 
of grantees that a single incident that is not a result of multiple 
system failures could lead to competition.
    One of our primary goals of competition is to improve quality 
through competition. Multiple deficiencies are an indication of lower 
quality in overall program performance and changing the deficiency 
trigger to two or more better aligns with this goal. However, in cases 
where there is a substantial material failure, a serious risk for 
substantial injury to property or loss of project funds or harm to 
staff and children's health and safety, OHS will exercise its authority 
to suspend or terminate financial assistance pursuant to Sec. Sec.  
1304.4 and 1304.5(a)(2)(iii) regardless of the number of deficiencies 
involved. We would not change the deficiency condition if we did not 
have the authority to mitigate or remove serious risk. In prior years' 
competitions, determinations for about half of grantees were based on a 
single deficiency, and we therefore expect this revision may result in 
a reduction in competition associated with deficiencies.
    In this final rule, we do not define and differentiate deficiencies 
based on severity or distinguish whether a one-time incident is a 
result of multiple system failures since Congress, as discussed 
earlier, already defined the term ``deficiency'' under section 637 of 
the Head Start Act in part as ``systemic or substantial material 
failure.'' However, we revise the deficiency condition from a single 
deficiency to two or more deficiencies to mitigate the concern that a 
single isolated incident that is not a result of multiple system 
failures may cause a grantee to have to compete. Specifically, we amend 
paragraph (a), by removing the word ``one'' and replacing it with the 
word ``two.'' We also remove the phrase ``been determined by the 
responsible HHS official to have.'' This phrase is repetitious as this 
language is established in the introductory paragraph of this section 
and does not add anything of substance by being in this paragraph. 
Further, we remove the phrase ``on a single review'' and replace it 
with the phrase ``on reviews'' to ensure grantees that receive one 
deficiency on one monitoring review and another deficiency on a second 
review within the same five-year grant period would be designated for 
competition since the total count of deficiencies is cumulative across 
all reviews within a project period. Finally, we remove the phrase 
``covered by the responsible HHS official's review'' because it is 
unnecessary and does not make the sentence easy to understand.
ii. 1304.11(b) School Readiness Goals Condition
    In this paragraph, a program meets one of the two or more 
conditions for designation renewal if the program does not have school 
readiness goals that meet specific criteria, that are not aggregated 
and analyzed at least three times a year, and that are not analyzed to 
inform progress. We did not receive any comments on this paragraph. 
Therefore, as we proposed in the NPRM, we remove dates and learning 
tools that are either outdated or are no longer relevant. Specifically, 
we amend this paragraph by removing the phrase ``After December 9, 
2011'' in paragraphs (b)(1) and (2). We also remove the phrase ``Birth 
to Five Head Start Child Outcomes Framework'' and replace it with the 
new framework ``Head Start Early Learning Outcomes Framework: Ages 
Birth to Five'' in paragraph (b)(1)(ii).
    In addition, we make a few technical fixes to streamline this 
paragraph by removing unnecessary, repetitive language that is already 
established in the introductory paragraph. These fixes do not alter the 
substance of the regulation, but they make this section easier to read. 
In paragraph (b), we remove the phrase ``been determined by the 
responsible HHS official'' and replace that phrase with the word 
``not,'' and a comma. Similarly, in the same paragraph, we remove the 
phrase ``covered by the responsible HHS official's review.'' It is well 
established in the introductory paragraph that the responsible HHS 
official reviews a program's operations to determine whether that 
program meets a condition for designation renewal. It is not necessary 
for us to repeat that here. Finally, we remove the phrase ``not to 
have'' to make the sentence easier to read.
iii. 1304.11(c) CLASS Condition
    Section 1304.11(c) describes the use of the CLASS tool to assess a 
grantee's designation status. The current CLASS condition consists of 
two criteria for each domain of the tool: An absolute threshold and a 
relative threshold. The CLASS domains are Emotional Support, Classroom 
Organization, and Instructional Support.
    In the NPRM, we proposed to amend the CLASS condition in the 
following ways:
    (1) Drop the relative threshold criterion of this condition, often 
referred to as the ``lowest 10 percent'' criterion.
    (2) Raise the absolute thresholds across the three CLASS domains as 
follows: Raise Emotional Support threshold from 4 to 5; raise Classroom 
Organization threshold from 3 to 5; raise Instructional Support 
threshold from 2 to 2.5.
    In this final rule, we:
    (1) Drop the relative threshold criterion of this condition, often 
referred to as the ``lowest 10 percent'' criterion.
    (2) Raise the competitive threshold for Emotional Support from 4 to 
5, for Classroom Organization from 3 to 5, and for Instructional 
Support from 2 to 2.3. Further, for CLASS reviews beginning on August 
1, 2025, the competitive threshold for Instructional Support will be 
raised to 2.5.
    (3) Establish a quality threshold for each CLASS domain as follows: 
6 for Emotional Support, 6 for Classroom Organization, and 3 for 
Instructional Support.
    Most of the public comments on the NPRM included discussion of the 
proposed changes to the CLASS condition or some other aspect of CLASS 
in relation to its use in the Designation Renewal System. We summarize 
the types of comments we received related to CLASS and our

[[Page 53195]]

corresponding responses, including our approach for the CLASS condition 
in this final rule. The comments we received on the CLASS condition 
were diverse as they covered various aspects of the condition. To make 
our discussion below easier to follow, we organize the comments, our 
responses, and regulatory text changes (if applicable) as follows: (1) 
Absolute Thresholds for the CLASS Condition; (2) Lowest 10 Percent 
Criterion of the CLASS Condition; (3) CLASS as a Quality Improvement 
Tool; (4) Methodological and Implementation Issues with CLASS; (5) 
Research Base on CLASS; and (6) Other Miscellaneous Comments on CLASS.
Absolute Thresholds (Competitive Thresholds) for the CLASS Condition
    Comment: Most commenters discussed the proposed changes to the 
absolute thresholds across the three CLASS domains. Some were 
supportive of the increased thresholds we proposed across all three 
domains (Emotional Support = 5, Classroom Organization = 5, 
Instructional Support = 2.5). These commenters noted that the increased 
thresholds seemed fair and are supported by research or are a ``step in 
the right direction'' to move programs toward higher quality.
    However, most commenters who discussed the absolute thresholds were 
not supportive of some aspect of our proposal to increase the 
thresholds. More specifically, most commenters supported the proposed 
higher thresholds of 5 for the Emotional Support and Classroom 
Organization domains, but did not support the proposal to raise the 
Instructional Support threshold from 2 to 2.5. These commenters stated 
there is not sufficient evidence for a specific threshold for 
Instructional Support that is related to improved outcomes for 
children. Some commenters said we should not increase any of the 
absolute thresholds. They stated that they believed the raised 
thresholds are not supported by research. Commenters also expressed 
concerns that the higher threshold on Instructional Support would 
create more fear and stress for programs and teachers.
    A few commenters supported the proposed thresholds for Emotional 
Support and Instructional Support, but said Classroom Organization 
should not be raised to 5. These commenters argued that there has been 
an increase in challenging behaviors in Head Start classrooms due to 
more exposure to traumatic experiences among the population of children 
and families that Head Start serves, and this makes it difficult for 
teachers to score highly on the Classroom Organization domain of CLASS. 
One commenter suggested that a threshold of 5 for the Classroom 
Organization domain may unintentionally incentivize programs to ``pass 
over'' children that are harder to serve due to behavior issues. One 
commenter agreed with our proposal to raise the Instructional Support 
threshold to 2.5, but said the Emotional Support and Classroom 
Organization thresholds should each be 4. One commenter felt the 
Instructional Support threshold of 2.5 is too low and should, instead, 
be a 3. One commenter requested an exemption for American Indian/Alaska 
Native programs if the CLASS absolute thresholds are raised as proposed 
in the NPRM.
    Response: We believe it is important to raise the absolute 
thresholds (now referred to as competitive thresholds in this final 
rule) across the three CLASS domains to continue to encourage Head 
Start programs to strive for improving the quality of teaching 
practices and teacher-child interactions in their classrooms. To inform 
the CLASS competitive thresholds in this final rule, we considered the 
public comments received on the NPRM and research on the use of the 
measure in early education settings, as well as our own data from 
several years of implementation of the CLASS condition.
    Evidence suggests children learn more in well-organized classroom 
environments that are characterized by sensitive and responsive 
interactions that promote autonomy, conversation, literacy skills, and 
executive functioning. Children gain these skills when they experience 
higher quality teacher-children interactions and instruction.\2\ On the 
CLASS tool, scores of 1 to 2 (low range of quality) reflect a classroom 
environment where teachers poorly manage children's behaviors, 
instruction is purely rote, and where there is little teacher-child 
interaction. Scores of 3 to 5 (midrange of quality) reflect a classroom 
environment where teachers show a mix of effective interactions with 
periods when interactions are either not effective or are absent. 
Scores of 6 to 7 (high range of quality) reflect a classroom 
environment where teachers consistently demonstrate effective teacher-
child interactions. Research suggests that higher levels of 
instructional quality are linked to improvements in child outcomes. 
Although research does not indicate a specific threshold of classroom 
quality that programs must reach to see impacts on child outcomes, 
there is a growing body of research indicating classrooms need to be 
out of the low-quality range (i.e., above a 2 on CLASS) to support 
children's development.\3\
---------------------------------------------------------------------------

    \2\ Hatfield, B.E., Burchinal, M.R., Pianta, R.C., & Sideris, J. 
(2016). Thresholds in the association between quality of teacher-
child interactions and preschool children's school readiness skills. 
Early Childhood Research Quarterly, 36, 561-571.
    \3\ Broekhuizen, M.L., Mokrova, I.L., Burchinal, M.R., Garrett-
Peters, P.T., & The Family Life Project Key Investigators. (2017). 
Classroom quality at pre-kindergarten and kindergarten and 
children's social skills and behavior problems. Early Childhood 
Research Quarterly, 36, 212-222.; Burchinal, M., Vernon-Feagans, L., 
Vitiello, V., & Greenberg, M. (2014). Thresholds in the association 
between child care quality and child outcomes in rural preschool 
children. Early Childhood Research Quarterly, 29(1), 41-51.; 
Burchinal, M., Zaslow, M., & Tarullo, L. (2016). Quality thresholds, 
features and dosage in early care and education: Secondary data 
analyses of child outcomes. Monographs of the Society for Research 
in Child Development.; U.S. Department of Health and Human Services. 
(2012). Report from the Secretary's Advisory Committee on Head Start 
Research and Evaluation. Washington, DC: HHS. Retrieved from: 
https://www.acf.hhs.gov/sites/default/files/opre/eval_final.pdf.
---------------------------------------------------------------------------

    Therefore, we believe strongly that the competitive thresholds for 
all domains of the CLASS should be above a 2, in order to continue to 
strengthen the quality of teacher-child interactions across all Head 
Start classrooms. This final rule raises the competitive threshold for 
Emotional Support from 4 to 5, for Classroom Organization from 3 to 5, 
and for Instructional Support from 2 to 2.3, as of the effective date 
of this rule. Further, beginning on August 1, 2025, the competitive 
threshold for Instructional Support will be raised to 2.5. A grantee 
with a score below any of these competitive thresholds will be 
designated for competition. Scores of 5 in Emotional Support and 
Classroom Organization are in the mid-quality range on the CLASS tool. 
We believe the changes to these competitive thresholds increase the 
minimum standard of quality and set the expectation for programs to 
work toward moving into the high-quality range.
    We take a different approach with the Instructional Support domain 
than the other two CLASS domains, as a result of public comments, 
research, and our own data. We recognize the concern expressed by 
commenters regarding increased stress and fear among program staff that 
may result if the competitive threshold for the Instructional Support 
domain is raised immediately from 2 to 2.5 (as proposed in the NPRM). 
We also recognize the fact that teachers across a variety of preschool 
settings tend to score lower in this domain, and that it takes time to 
improve teacher-child interactions in a way that reflects in

[[Page 53196]]

improved CLASS scores.\4\ For example, the Head Start Family and Child 
Experiences Survey (FACES)--a large, nationally representative study of 
Head Start children, families, staff, and programs--examined changes 
over time in classroom quality after the implementation of the 
Designation Renewal System, and findings showed an increase in average 
Instructional Support scores across programs, but only over a 
significant time, from an average of 1.9 across programs in 2007 to an 
average of 2.4 in 2015.\5\ This study also found an increase over this 
time period in the number of programs scoring in the mid- or high-range 
of quality for the Instructional Support domain, and fewer programs 
scoring in the low-range of quality for this domain.\6\ Qualitative 
findings from the evaluation of the early Designation Renewal System 
implementation indicate that inclusion of CLASS in this system is 
incentivizing Head Start programs to focus on improving teacher-child 
interactions as part of their overall quality improvement efforts.\7\
---------------------------------------------------------------------------

    \4\ Hamre, B.K., Pianta, R.C., & Mashburn, A.J. Building a 
science of classrooms: Application of the CLASS framework in over 
4,000 U.S. early childhood and elementary classrooms. 
Charlottesville, VA: University of Virginia.; Denny, J.H., Hallam, 
R., & Homer, K. (2012) A multi-instrument examination of preschool 
classroom quality and the relationship between program, classroom, 
and teacher characteristics. Early Education and Development, 23:5, 
678-696.; Aikens, N., Bush, C., Gleason, P., Malone, L., & Tarullo, 
L. (2016). Tracking quality in Head Start classrooms: FACES 2006 to 
2014. OPRE Report #2016-82. Washington, DC: Office of Planning, 
Research and Evaluation, Administration for Children and Families, 
U.S. Department of Health and Human Services.
    \5\ Aikens, N., Bush, C., Gleason, P., Malone, L., & Tarullo, L. 
(2016). Tracking quality in Head Start classrooms: FACES 2006 to 
2014. OPRE Report #2016-82. Washington, DC: Office of Planning, 
Research and Evaluation, Administration for Children and Families, 
U.S. Department of Health and Human Services.
    \6\ Ibid.
    \7\ Derrick-Mills, T., Burchinal, M., Peters, H.E., De Marco, 
A., Forestieri, N., Fyffe, S., Hanson, D., Heller, C., Pratt, E., 
Sandstrom, H., Triplett, T., & Woods, T. (2016). Early 
Implementation of the Head Start Designation Renewal System: Volume 
I. OPRE Report #: 2016-75a. Washington, DC: Office of Planning, 
Research and Evaluation, Administration for Children and Families, 
U.S. Department of Health and Human Services.
---------------------------------------------------------------------------

    According to our own monitoring data from the past 5 fiscal years, 
programs have averaged between a 2.8 and 3.0 in the Instructional 
Support domain. In addition, the average cut-off for the bottom 10 
percent of grantee scores in this domain has been about a 2.2 or 2.3 
over the past 5 fiscal years.
    These data demonstrate that, in general, most programs are scoring 
above a 2 in this domain of CLASS over the past five fiscal years. 
However, our monitoring data also demonstrate that a fair number of 
programs score below a 2.5 in this domain (approximately 20 percent of 
those grantees with CLASS scores from the past five years). Meanwhile, 
we must consider the growing body of research indicating programs need 
to be out of the low-quality range to support children's 
development.\8\ Therefore, to take into account both where Head Start 
grantees currently score in this CLASS domain as well as concerns we 
heard in the public comments, but to still push quality improvement 
over time and on an ongoing basis, this final rule uses a graduated 
approach to increasing the competitive threshold for the Instructional 
Support domain, rather than immediately raising the threshold to 2.5 as 
proposed in the NPRM.
---------------------------------------------------------------------------

    \8\ Burchinal, M., Kainz, K., & Cai, Y. (2011). How well do our 
measures of quality predict child outcomes? A meta-analysis and 
coordinated analysis of data from large-scale studies of early 
childhood settings. In M. Zaslow, I. Martinez-Beck, K. Tout, & T. 
Halle (Eds.), Quality measurement in early childhood settings (pp. 
11-32). Baltimore, MD: Paul H. Brookes Publishing Co.; Burchinal, 
M., Vandergrift, N., Pianta, R., & Mashburn, A. (2010). Threshold 
analysis of association between child care quality and child 
outcomes for low-income children in pre-kindergarten programs. Early 
Childhood Research Quarterly, 25, 166-176.; Burchinal, M., Vernon-
Feagans, L., Vitiello, V., & Greenberg, M. (2014). Thresholds in the 
association between child care quality and child outcomes in rural 
preschool children. Early Childhood Research Quarterly, 29(1), 41-
51.; Burchinal, M., Zaslow., M., & Tarullo, L. (2016). Quality 
thresholds, features and dosage in early care and education: 
Secondary data analyses of child outcomes. Monographs of the Society 
for Research in Child Development.
---------------------------------------------------------------------------

    For the first five years following the effective date of this final 
rule, through July 31, 2025, there will be an interim competitive 
threshold for Instructional Support of 2.3. A grantee with a score 
below this interim competitive threshold from a CLASS observation 
conducted as part of Head Start monitoring through July 31, 2025, will 
be designated for competition. Beginning on August 1, 2025, the 
competitive threshold for the Instructional Support domain will be 
raised to 2.5. Therefore, a grantee with a score below 2.5 in 
Instructional Support from a CLASS observation conducted as part of 
Head Start monitoring on or after August 1, 2025, will be designated 
for competition. A score of 2.3 in Instructional Support is an interim 
step that will encourage all grantees to move out of the low-range and 
toward the mid-range of quality on CLASS. Our graduated approach to 
increasing this threshold incentivizes programs to undertake quality 
improvement efforts and provides a window of opportunity for programs 
to make such improvements before the competitive threshold for 
Instructional Support raises to a higher bar. This five-year window 
also aligns with the five-year grant cycle, allowing grantees a 
reasonable amount of time to make improvements. Furthermore, we believe 
our graduated approach sets a minimum bar for quality, considers where 
most programs as well as the broader early childhood field tend to 
score on this domain, addresses concerns raised by public comments, and 
pushes up the bar to a higher standard within a reasonable timeframe. 
Finally, in this final rule we do not provide an exemption from the 
raised competitive thresholds for any specific programs because we 
believe it is important that all children in Head Start are in 
classroom environments with high-quality teacher-child interactions. 
The next paragraph provides a summary of the changes to the regulation 
text for the absolute (competitive) thresholds for CLASS.
    We amend Sec.  1304.11(c)(1) by removing the phrase ``After 
December 9, 2011,'' and capitalizing ``To.'' We also remove the word 
``minimum'' from that same provision and replace it with the word 
``competitive.'' We also amend paragraph (c)(1)(i) (Emotional Support) 
in that section by removing the word ``minimum'' and replacing it with 
the word ``competitive,'' and we remove the number ``4'' and replace it 
with ``5.'' Similarly, in paragraph (c)(1)(ii) (Classroom 
Organization), we remove the word ``minimum'' and replace it with the 
word ``competitive'' and we remove the number ``3'' and replace it with 
``5.'' Finally, in paragraph (c)(1)(iii) (Instructional Support), we 
remove the word ``minimum'' and replace it with the word 
``competitive'' and we remove the number ``2'' and replace it with the 
phrase ``2.3 through July 31, 2025, and 2.5 on and after August 1, 
2025.''
Lowest 10 Percent Trigger of the CLASS Condition
    Comment: Most commenters agreed with our proposal to remove the 
``lowest 10 percent'' criterion from the CLASS condition in the 
Designation Renewal System. These commenters cited reasons similar to 
those described in the NPRM, including that the lowest 10 percent 
criterion lacks transparency for programs and creates a significant 
amount of stress and uncertainty, as programs usually must wait several 
months to learn if they are designated for competition based on the 
annual calculation of the lowest 10 percent in each CLASS domain. 
Commenters discussed how this aspect of the CLASS condition feels 
arbitrary and unfair, as the ``cut-off'' for the lowest 10 percent for 
any given fiscal year depends on the

[[Page 53197]]

grantees that were observed that fiscal year. As described in the NPRM, 
commenters also noted how the lowest 10 percent criterion sometimes 
captures grantees with fairly high scores (i.e., scores above a 5) in 
the domains of Emotional Support and Classroom Organization. One 
commenter disagreed with our proposal to remove the lowest 10 percent 
criterion and described it as a ``safety net'' that ``saved'' their 
program from competition.
    Response: We agree with some of the concerns noted by commenters 
regarding the lowest 10 percent criterion of the CLASS condition. 
Additionally, our approach of raising the Instructional Support 
competitive threshold to 2.3 combined with the implementation of the 
new quality threshold of 3.0 (discussed in more detail in the next 
section) will maintain the same expectation of minimum quality 
standards under the current CLASS condition while also raising 
expectations for quality beyond the minimum and eliminating the 
uncertainty created by the lowest 10 percent criterion. Therefore, in 
this final rule, we eliminate this aspect of the CLASS condition in the 
Designation Renewal System. Specifically, we amend Sec.  1304.11(c)(2) 
by removing the current provision that describes the ``lowest 10 
percent'' criterion of the CLASS condition.
CLASS as a Quality Improvement Tool
    Comment: Many commenters described the way CLASS is used in the 
Designation Renewal System as punitive. These commenters said CLASS can 
be helpful as a professional development tool to examine and reflect on 
teachers' practices in the classroom and support quality improvement 
efforts, but should not be used in the types of decisions made under 
the Designation Renewal System. A few said CLASS should not be used in 
the Designation Renewal System at all or should be used differently. 
One commenter suggested the specific mention of CLASS in regulation has 
undermined the market for the development of other tools to measure 
classroom quality. A few stated that they believe the CLASS tool does 
not meet, or is not the only tool that could meet, the requirements of 
the Head Start Act for use of a valid and reliable research-based 
observational measure of teacher-child interactions in the Designation 
Renewal System.
    Many commenters noted that CLASS as used in the Designation Renewal 
System creates fear and stress for teachers and does not provide enough 
support for improvement, which undermines its usefulness as a 
professional development tool. A few commenters specifically suggested 
CLASS scores below the designated thresholds should trigger support or 
professional development for teachers and programs. Some said that 
American Indian/Alaska Native programs in particular need more 
professional development and technical assistance support in order to 
achieve higher CLASS scores.
    Response: A large body of research points to the importance of 
effective teacher-child interactions as a critical component of a high-
quality early education program that promotes children's development 
and learning.\9\ The Act requires the use of a research-based 
observational measure of teacher-child interactions as a basis for 
competition in the Designation Renewal System. CLASS is a research-
based measure of the quality of teacher-child interactions in preschool 
classrooms, meeting the requirement in the law. In fact, in the 
Conference Report accompanying the 2007 Reauthorization,\10\ Congress 
specifically suggested HHS consider using the CLASS to meet this 
requirement. Following the passage of the 2007 Reauthorization, the 
Office of Head Start had discussions with numerous early childhood 
research experts who agreed that the CLASS was the best tool that fits 
these requirements. The CLASS can also be used to help understand areas 
of teaching and learning where individual teachers excel, as well as 
areas where they may need extra support. Its use in the Designation 
Renewal System over the past several years has enhanced programs' focus 
on the importance of effective teacher-child interactions for promoting 
stronger outcomes for children served in Head Start programs. Indeed, 
as summarized previously, the evaluation of the Designation Renewal 
System found that the inclusion of the CLASS in this system 
incentivized programs to focus on improving teacher-child interactions 
as part of their quality improvement efforts.\11\ Furthermore, data 
from the 2015 Head Start FACES study demonstrate that, on average, 
CLASS scores are improving over time across Head Start programs.\12\
---------------------------------------------------------------------------

    \9\ Bredekamp, S., & Copple, C., eds. (2002). Developmentally 
Appropriate Practice in Early Childhood Programs. Rev. ed. 
Washington, DC: National Association for the Education of Young 
Children.; Burchinal, M. (2017). Measuring early care and education 
quality. Child Development Perspectives, 12(1), 3-9.; Melhuish, E., 
Ereky-Stevens, K., Petrogiannis, K., Ariescu, A., Penderi, E., 
Rentzou, K., Tawell, A., Slot, P., Broekhuizen, M., & Leseman, P. 
(2015). A review of research on the effects of early childhood 
Education and Care (ECEC) upon child development. CARE project; 
Curriculum Quality Analysis and Impact Review of European Early 
Childhood Education and Care (ECEC). Retrieved from: http://ecec-care.org/resources/publications/; Pianta, R., Downer, J., & Hamre, 
B. (2016). Quality in early education classrooms: Definitions, gaps, 
and systems. The Future of Children, 26(2), 119-137.; Phillipsen, 
L.C., Burchinal, M.R., Howes, C., & Cryer, D. (1997). The prediction 
of process quality from structural features of child care. Early 
Childhood Research Quarterly, 12, 281-303.; Soliday Hong, S.L., 
Sabol, T.J., Burchinal, M.R., Tarullo, L., Zaslow, M., & Pesiner-
Feinberg, E.S. (2019). ECE quality indicators and child outcomes: 
Analyses of six large child care studies. Early Childhood Research 
Quarterly, 49, 202-217.
    \10\ https://www.congress.gov/110/crpt/hrpt439/CRPT-110hrpt439.pdf.
    \11\ Derrick-Mills, T., Burchinal, M., Peters, H.E., De Marco, 
A., Forestieri, N., Fyffe, S., Hanson, D., Heller, C., Pratt, E., 
Sandstrom, H., Triplett, T., & Woods, T. (2016). Early 
Implementation of the Head Start Designation Renewal System: Volume 
I. OPRE Report #: 2016-75a. Washington, DC: Office of Planning, 
Research and Evaluation, Administration for Children and Families, 
U.S. Department of Health and Human Services.
    \12\ Aikens, N., Bush, C., Gleason, P., Malone, L., & Tarullo, 
L. (2016). Tracking quality in Head Start classrooms: FACES 2006 to 
2014. OPRE Report #2016-82. Washington, DC: Office of Planning, 
Research and Evaluation, Administration for Children and Families, 
U.S. Department of Health and Human Services.
---------------------------------------------------------------------------

    However, although it is not the intent of the CLASS regulatory 
provisions, we appreciate the public comments we received describing 
how CLASS, as used in the Designation Renewal System, can feel 
punitive. We share the view expressed by many commenters that CLASS can 
be an effective tool for programs to use as part of their local 
continuous quality improvement efforts, and we recognize that many 
programs already do so, separate from the Head Start monitoring 
process. The competitive thresholds represent the minimum scores in 
each CLASS domain that a program must achieve to avoid competition. 
Meanwhile, OHS recognizes programs already strive for CLASS scores 
above the competitive thresholds since the aim by programs is to 
continuously improve classroom quality and eventually reach high-
quality scores across all three domains. Therefore, in this final rule, 
we develop an approach to reframe the use of CLASS in the Designation 
Renewal System that supports using CLASS as a tool for quality 
improvement, while also continuing to use it as a quality indicator as 
required by the Head Start Act. This approach includes the 
establishment of a quality threshold for each CLASS domain that does 
not relate to competition, but instead reflects a quality improvement 
focus in teacher-child interactions, with support from OHS. We believe 
the establishment of quality thresholds for the CLASS domains will 
build on existing program quality improvement efforts to enhance

[[Page 53198]]

classroom instruction beyond any set floor and will lead to more 
intentional OHS support for these efforts.
    In this final rule, we establish a quality threshold for each CLASS 
domain as follows: 6 for Emotional Support, 6 for Classroom 
Organization, and 3 for Instructional Support. A score of 6 is in the 
high-quality range and a score of 3 is in the mid-quality range on 
CLASS. Over the previous five fiscal years, the average score across 
grantees in Emotional Support and Classroom Organization is about 6.1 
and 5.8, respectively. The average score in Instructional Support over 
the previous five fiscal years is 2.9. The quality thresholds we 
establish in this final rule will encourage programs to continue to 
strive for improvements in classroom quality and will also lead to OHS 
support for quality improvement efforts among programs as they 
continuously examine and improve effective teacher-child interactions 
in their preschool classrooms. The inclusion of quality thresholds for 
the CLASS addresses the request of commenters to make better use of 
CLASS as a quality improvement tool.
    If a grantee receives a score on any domain of the CLASS that is 
below the quality threshold, then OHS will support the grantee to 
promote improvement in teacher-child interactions across classrooms. 
Specifically, OHS will identify and connect grantees to resources 
(e.g., resources on the ECLKC website including webinars and 
professional development materials, meetings with OHS regional TA 
specialist if appropriate, etc.) designed to support improvement in the 
area(s) of teacher-child interactions that are below the quality 
thresholds. OHS will further support the program to analyze areas where 
their education staff most need support, and ensure a coordinated 
approach to training and professional development.
    This approach does not place new requirements on programs but, 
rather, provides an opportunity for OHS to support programs in refining 
and improving their existing quality improvement efforts to meet the 
related requirements in the Head Start Act and the Head Start Program 
Performance Standards (HSPPS). This approach also reframes the use of 
the CLASS in Designation Renewal System with a growth mindset. The Head 
Start Act requires that information from the assessment of teacher-
child interactions included in the Designation Renewal System be used 
to inform professional development plans that lead to improved teacher 
effectiveness. Furthermore, several areas of the HSPPS require grantees 
to have planned, intentional approaches to quality improvement in their 
programs. For example, Head Start programs are required to establish 
and implement a systematic approach to staff training and professional 
development, a coordinated strategy for intensive coaching, and 
program-wide coordinated approaches that ensure the training and 
professional development system effectively supports the delivery and 
continuous improvement of high-quality services (see Sec. Sec.  
1303.92(b), 1302.92(c), and 1302.101(b)). The addition of CLASS quality 
thresholds to the Designation Renewal System follows the same model of 
intentional support for targeted quality improvement.
    If a program falls below the quality threshold on any CLASS domain, 
OHS will support the program in determining and addressing the specific 
areas of teacher-child interactions that need the most support and 
improvement, aligned with the program's existing coordinated approach 
for training and professional development. More specifically, within a 
reasonable timeframe after a CLASS review in which a grantee scores 
below one or more of the quality thresholds, OHS will identify and 
connect grantees with resources that focus on the areas of teacher-
child interactions in which the grantee most needs improvement. This 
may include National TTA Center suites, other professional development 
resources available on the ECLKC website, and/or connections with their 
regional TTA support. The grantee will not have to request this; 
rather, scores below the quality threshold will trigger action on the 
part of OHS. OHS plans to use existing CLASS data more effectively to 
inform decision-making around delivery of TTA. OHS will leverage 
existing systems to develop a streamlined way of identifying 
appropriate resources and make these connections for grantees, based on 
their CLASS scores. OHS may request a description of the program's 
efforts in grant applications or through monitoring reviews.
    OHS reminds programs that they have a wealth of resources available 
to support implementation of their coordinated approach to training and 
professional development. As part of their individual grant, every 
program has training and technical assistance funds that can be used at 
the program's discretion. A portion of these training and technical 
assistance dollars could be spent on activities that aim to improve 
teaching practices in the classroom and support effective teacher-child 
interactions. Grantees may use research-based resources available to 
them on the Early Childhood Learning and Knowledge Center (ECLKC) 
website. For instance, on the ECLKC website, grantees can find several 
materials that support the use of CLASS for professional development, 
such as the 15-minute in-service suites \13\ and the ELOF Effective 
Practice Guide \14\ that have been cross-walked with the dimensions and 
domains of the CLASS.\15\ In addition, through their regional office, 
grantees may request regional training and technical assistance 
support. Resources, including the Head Start Coaching Companion,\16\ 
are also available to help support programs to implement intensive 
coaching, which research shows to be a critical component in 
professional development and an effective strategy for improving 
teacher practice.
---------------------------------------------------------------------------

    \13\ https://eclkc.ohs.acf.hhs.gov/professional-development/article/15-minute-service-suites.
    \14\ https://eclkc.ohs.acf.hhs.gov/school-readiness/effective-practice-guides/effective-practice-guides.
    \15\ https://eclkc.ohs.acf.hhs.gov/professional-development/article/crosswalk-15-minute-service-suites-class.
    \16\ https://eclkc.ohs.acf.hhs.gov/professional-development/article/head-start-coaching-companion.
---------------------------------------------------------------------------

    To make regulatory changes for the quality thresholds on CLASS, we 
amend Sec.  1304.11(c)(2) by removing the current provision that 
describes the ``lowest 10 percent'' criterion of the CLASS condition as 
previously stated, and we replace this provision with the following:

    ``If an agency is determined to have an average score below the 
quality threshold on any of the three CLASS: Pre-K domains across 
all classrooms observed, the Office of Head Start will support the 
program to strengthen its coordinated approach to training and 
professional development as required in Sec.  1302.92(b) and (c), to 
help promote improvement in teaching practices and teacher-child 
interactions. The quality threshold for each domain is as follows:
    (i) For the Emotional Support domain, the quality threshold is 
6;
    (ii) For the Classroom Organization domain, the quality 
threshold is 6;
    (iii) For the Instructional Support domain, the quality 
threshold is 3.''
Methodological Issues With CLASS
    Comment: Many commenters who discussed CLASS expressed various 
concerns with methodological issues related to the CLASS. Some 
commenters raised concerns with the reliability and/or validity of 
CLASS scores. A few noted that there is measurement error inherent in 
any tool like the CLASS.
    Some commenters also raised concerns regarding the validity of 
CLASS use with culturally and linguistically diverse populations,

[[Page 53199]]

including American Indian/Alaska Native populations, Migrant and 
Seasonal Head Start programs, and classrooms with high proportions of 
dual language learners. These commenters noted that the CLASS does not 
adequately take into account cultural or linguistic differences with 
these populations and/or that there is not adequate research using the 
CLASS with diverse samples.
    Response: While we appreciate the comments related to 
methodological issues with use of the CLASS tool in the Designation 
Renewal System, we largely disagree with these assertions. We did not 
propose any changes in the NPRM related to CLASS methodology, and we do 
not make any changes in this final rule based on these comments. 
Section 641A(c)(2)(F) of the Act requires the Secretary to include as 
part of the Head Start monitoring review process ``a valid and reliable 
research-based observational instrument, implemented by qualified 
individuals with demonstrated reliability, that assesses classroom 
quality, including assessing multiple dimensions of teacher-child 
interactions that are linked to positive child development and later 
achievement.'' Section 641(c)(1)(D) of the Head Start Act requires that 
this tool be used as part of the Designation Renewal System. As 
discussed previously, the CLASS specifically meets these requirements 
and was suggested by Congress and numerous leading early childhood 
experts as the best instrument to meet these statutory requirements.
    Regarding its use in culturally and linguistically diverse 
classrooms, there is an ample body of research examining CLASS and its 
relationship to children's outcomes. This research largely demonstrates 
that children in classrooms with higher CLASS scores are more likely to 
have stronger outcomes across a variety of developmental domains,\17\ 
and this includes research in classrooms with diverse populations.\18\ 
Further, there is widespread agreement in the early childhood field 
that the aspects of teacher-child interactions that CLASS measures are 
important features for supporting young children's development. 
However, we will continue to examine the use of CLASS in culturally and 
linguistically diverse settings, including American Indian/Alaska 
Native programs.
---------------------------------------------------------------------------

    \17\ Burchinal, M., Vandergrift, N., Pianta, R., & Mashburn, R. 
(2010). Threshold analysis of association between child care quality 
and child outcomes for low-income children in pre-kindergarten 
programs. Early Childhood Research Quarterly, 25(2), 166-176.; 
Hatfield, B.E., Burchinal, M.R., Pianta, R.C., & Sideris, J. (2016). 
Thresholds in the association between quality of teacher-child 
interactions and preschool children's school readiness skills. Early 
Childhood Research Quarterly, 36, 561-571.; Perlman, M., Falenchuk, 
O., Fletcher, B., McMullen, E., Beyene, J., & Shah, P.S. (2016). A 
systematic review and meta-analysis of a measure of staff/child 
interaction quality (the Classroom Assessment Scoring System) in 
early childhood education and care settings and child outcomes. PLOS 
ONE 11(12). Retrieved from: https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0167660#ack.
    \18\ Burchinal, M., Field, S., Lopez, M.L., Howes, C., & Pianta, 
R. (2012). Instruction in Spanish in pre-kindergarten classrooms and 
child outcomes for English language learners. Early Childhood 
Research Quarterly, 27(2), 188-198.; Downer, J.T., Lopez, M.L., 
Grimm, K., Hamagami, A., Pianta, R.C., & Howes, C. (2011). 
Observations of teacher-child interactions in classrooms serving 
Latinos and dual language learners: Applicability of the Classroom 
Assessment Scoring System in diverse settings. Early Childhood 
Research Quarterly, 27(1), 21-32.
---------------------------------------------------------------------------

Implementation of CLASS Observations in Head Start Programs
    Comment: Most commenters who discussed CLASS raised concerns 
related to OHS implementation procedures for conducting CLASS 
observations. We did not propose changes in the NPRM to OHS's 
procedures for conducting CLASS observations as part of Head Start 
monitoring and in fact such procedures are not governed by regulation. 
However, we summarize the comments here as we feel it is important to 
acknowledge and respond to these comments.
    Most commenters stated that teachers need more time in the 
classroom (e.g., 6 months) before they are observed with the CLASS for 
Head Start monitoring purposes, in order to better acclimate to the 
classroom environment. Some commenters said observers need mandatory 
cultural and linguistic awareness training and training in racial 
equity to improve the use of CLASS with diverse Head Start populations. 
Some said OHS needs to utilize more bilingual CLASS observers.
    Many commenters pointed out that OHS does two cycles of observation 
per classroom with the CLASS instrument and said OHS should instead 
conduct four cycles of observation, as described in the CLASS manual. 
Some commenters said OHS needs to ensure observers are following 
appropriate protocols for classroom observations, such as observing 
classrooms for the appropriate length of time and during appropriate 
times of the day (i.e., not at nap time). A few said observers should 
have regular re-training to maintain reliability and appropriate 
compliance with observation protocols. Relatedly, some commenters 
stated that external factors can impact observations and should be 
taken into account when considering grantee scores, such as the time of 
day or year of observations, teacher turnover and lack of qualified 
staff, low teacher wages, teacher stress, and challenging behaviors in 
the classroom. A few suggested that OHS collect CLASS observations via 
video to help with some of these concerns.
    A few commenters suggested that if initial CLASS scores were too 
low, OHS give programs the opportunity to improve their scores through 
follow-up observations. A few commenters requested that OHS be more 
transparent with CLASS data and share specific classroom scores and/or 
observer notes with programs, to help programs better target quality 
improvement efforts. A few others requested OHS establish a formal 
grievance process to challenge CLASS observations that a program feels 
was not carried out correctly.
    Response: We appreciate the comments related to the protocol and 
procedures for use of the CLASS tool in Head Start classrooms. We do 
not make any changes in this final rule related to these topics. 
However, we provide responses to each of these comments, in the order 
summarized in the prior section.
    We understand the desire to allow teachers to have time to 
acclimate to the classroom environment before CLASS observations are 
conducted by OHS. However, we believe strongly that it is critically 
important that children are exposed to high-quality teacher-child 
interactions for the entirety of their time in Head Start. Further, in 
order to ensure OHS can complete all CLASS observations scheduled 
within a given program year, OHS must be able to begin CLASS 
observations in the fall. Therefore, we do not agree that OHS should 
wait at least 6 months before observing a teacher with CLASS; for many 
children, this represents more than half or most of the program year, 
and we believe strongly that programs should ensure teacher-child 
interactions are of high-quality throughout the program year.
    We appreciate comments related to the need for cultural and 
linguistic awareness and racial equity training for CLASS reviewers. We 
are always looking for ways to improve reviewer training and are 
exploring whether this is something that should be implemented in the 
future. With respect to the need for more bilingual CLASS reviewers, 
OHS strives to recruit bilingual individuals who can serve as CLASS 
reviewers. Most of the bilingual CLASS reviewers OHS currently has are 
fluent in Spanish and English. It is challenging to find individuals 
who are

[[Page 53200]]

fluent in languages other than Spanish or English and have the training 
and experience to serve as reviewers. However, OHS continues to seek 
such individuals that could become part of the pool of qualified CLASS 
reviewers. In the event that OHS does not have a reviewer fluent in the 
primary language of instruction for a classroom, OHS does not conduct a 
CLASS review in that classroom.
    With regard to the number of observation cycles per classroom, in 
the initial design of the Designation Renewal System, ACF worked with 
the CLASS developers to help determine the most appropriate number of 
observations to conduct per classroom. Although the CLASS manual 
describes the recommended protocol as four cycles in each classroom, 
the CLASS developers at the University of Virginia (UVA) and other 
researchers with expertise in using the CLASS in Head Start settings 
advised ACF that four cycles with a single teacher, while appropriate 
for research, is not the best use of resources when ACF's objective is 
to get a picture of classroom quality at the grantee level. Instead, 
they recommended a protocol that involved fewer observation cycles per 
teacher, but that included more teachers.
    Further, data from the Head Start FACES study reinforced ACF's 
decision to conduct two rather than four CLASS observation cycles in 
each classroom. FACES data indicated that four CLASS observations were 
not consistently conducted of all grantees, even though that was the 
intention in the study design. Attempting to conduct four observations 
in every monitoring review when it could not be accomplished in FACES, 
and doing so on a scale much larger than the FACES study, likely would 
result in differential treatment of grantees since some grantees would 
likely get four observations and others would get fewer. Finally, 
results from the evaluation of early implementation of the Designation 
Renewal System found no differences in grantee-level CLASS scores when 
either four observation cycles or a fewer number of cycles were 
conducted in classrooms. In other words, findings from this evaluation 
suggest CLASS ratings are the same when classrooms are observed for 
either two cycles or four cycles with the CLASS tool.\19\ Therefore, 
given the importance of observing more classes, rather than fewer 
classes for a longer period of time, ACF chose to conduct two cycles of 
observation in each classroom within the sample for a given grantee. 
Overall, we believe the sampling and observation methods we use best 
meet the goal of finding a grantee-level score for each CLASS domain.
---------------------------------------------------------------------------

    \19\ Derrick-Mills, T., Burchinal, M., Peters, H.E., De Marco, 
A., Forestieri, N., Fyffe, S., Hanson, D., Heller, C., Pratt, E., 
Sandstrom, H., Triplett, T., & Woods, T. (2016). Early 
Implementation of the Head Start Designation Renewal System: Volume 
I. OPRE Report #: 2016-75a. Washington, DC: Office of Planning, 
Research and Evaluation, Administration for Children and Families, 
U.S. Department of Health and Human Services.
---------------------------------------------------------------------------

    Further, we also have a protocol that all CLASS reviewers must 
follow, which includes detailed information on the length of time to 
implement CLASS observations as part of monitoring, as well as what 
time of day and what types of classroom or learning activities are 
acceptable for an observation cycle. All CLASS reviewers must undergo 
rigorous training, including annual recertification of reliability. 
With respect to external factors that can impact observations (e.g., 
teacher stress and turnover, challenging behaviors), we appreciate the 
realities of the challenges of teaching young children; however, the 
purpose of the CLASS tool is to get a picture of the kinds of 
interactions children are experiencing in the classroom on a regular 
basis. Regarding the suggestion to collect CLASS observations via 
videotape, this is an approach we have explored and may consider 
further in the future. We frequently review the policies and procedures 
we use to implement CLASS observations and consider where there can be 
improvements in the process.
    Any program that feels that their CLASS observation was not done 
fairly or appropriately should raise that concern with OHS. While there 
is not a formal appeals process established by the Act or regulation, 
programs regularly raise concerns with CLASS observations to OHS, and 
we investigate all of them. OHS will also share classroom level scores 
if requested. However, the methodology we use for CLASS data collection 
as part of monitoring is designed to get a grantee-level score; the 
score for any single classroom may be less useful for a program. We are 
aware of many programs that conduct their own separate CLASS 
observations for training and professional development purposes.
    Regarding the opportunity for a program to have a follow-up 
observation if CLASS scores are low, we disagree. The purpose of the 
CLASS observation is to capture a picture of the quality of teacher-
child interactions in the program. If a grantee is designated for 
competition due to low CLASS scores, they then have the opportunity to 
demonstrate through the competitive process how they have or will 
improve their program. Further, for American Indian/Alaska Native Head 
Start programs, the Act provides a process for an initial review of 
Designation Renewal System conditions, a period of improvement, and 
then a follow-up review of these conditions, but explicitly does not 
provide such a process for all other programs.
Research Base on CLASS
    Comment: Most commenters suggested that additional research is 
needed on CLASS, such as in the following areas: Relations between 
specific CLASS thresholds and child outcomes; use of CLASS in the 
Designation Renewal System; reliability and validity issues; use of 
CLASS with culturally and linguistically diverse populations or 
alternative measures to assess classroom quality for these populations; 
use of CLASS with children with disabilities; and lessons learned from 
programs who are ``positive outliers'' on CLASS. A few commenters 
specifically stated that research does not indicate that increased 
CLASS scores will lead to improved child outcomes, or requested more 
information on this topic. Conversely, a few commenters specifically 
stated that there is research evidence to support the association 
between CLASS scores and child outcomes.
    Response: We appreciate the comments received regarding the 
research base on CLASS and relations between measures of classroom 
quality and child outcomes. As previously discussed, there is a large 
body of research examining relations between the quality of teacher-
child interactions as measured by the CLASS and children's outcomes. 
This research largely demonstrates children in classrooms with higher 
CLASS scores are more likely to have stronger outcomes across a variety 
of developmental domains.\20\ However, we agree more research could be 
beneficial to continue to examine these relations, as well as broader 
issues related to measurement of classroom quality in early childhood 
settings. ACF is currently funding a variety of research studies on 
related issues, including: (1) The impact of various features of 
classroom quality on child outcomes (Variations in Implementation of 
Quality Interventions (VIQI); study on-

[[Page 53201]]

going through 2021 \21\); (2) use of CLASS with diverse populations; 
and (3) alternative measures of quality for infant and toddler 
classrooms (the Quality of Caregiver-Child Interactions for Infants and 
Toddlers (Q-CIITT); there is a final report on this measure as well as 
accompanying professional development tools; the contractor is 
currently disseminating the tool through trainings for early childhood 
programs).\22\ We also welcome additional research on these complex 
issues.
---------------------------------------------------------------------------

    \20\ Burchinal et al. (2010); Hatfield et al. (2016); Perlman et 
al. (2016).
    \21\ See this link for additional information on the VIQI study: 
https://www.acf.hhs.gov/opre/resource/coming-soon-viqi-2016-2018.
    \22\ See these links for more information and resources on the 
Q-CIITT: https://www.acf.hhs.gov/opre/research/project/development-of-a-measure-of-the-quality-of-caregiver; https://www.acf.hhs.gov/opre/research/project/professional-development-tools-to-improve-the-quality-of-infant-toddler-care-q-cciit-pd-tools.
---------------------------------------------------------------------------

Other Miscellaneous Comments on CLASS
    Comment: A few commenters noted that CLASS is used in many state 
quality rating and improvement systems (QRIS), but not in a high-stakes 
manner in those systems. A few also noted that many of the areas 
measured by the CLASS are not areas supported by public school 
leadership, which makes it challenging for Head Start classrooms 
located in public schools. A few commenters noted that the underlying 
assumptions of the CLASS are based on a more ``traditional'' approach 
to early learning with ``high quantity'' teacher feedback, which may 
disadvantage alternative approaches and teaching styles such as 
Montessori and Reggio Emilia. A few commenters said the cost of 
competition due to low CLASS scores is not a good use of resources.
    Response: We disagree with the assertion that CLASS is used in a 
high-stakes manner in the Designation Renewal System. Meeting the CLASS 
condition only places a grantee into competition where they then have 
the opportunity to demonstrate how they have or will improve their 
program. Unlike termination, competition is not an adverse action. In 
fact, the majority of incumbent grantees win back their grant in full 
or part. We appreciate the comments regarding challenges for programs 
in public school settings or for programs that use an alternative 
teaching approach such as Montessori or Reggio Emilia. However, as 
summarized previously, in order for children to receive a high-quality 
early education experience, we strongly believe that the kinds of 
teacher-child interactions the CLASS measures should be occurring in 
Head Start classrooms on a regular basis throughout the program year. 
Finally, we disagree with the assertion that the cost of competition is 
not a good use of resources. As discussed previously, findings from the 
ACF-funded evaluation of the Designation Renewal System indicate that 
inclusion of CLASS in this system incentivizes Head Start programs to 
focus on improving teacher-child interactions as part of their overall 
quality improvement efforts.\23\ We believe this is a key area for 
quality improvement efforts, given the importance of a high-quality 
classroom environment for facilitating positive outcomes for children.
---------------------------------------------------------------------------

    \23\ Derrick-Mills, T., Burchinal, M., Peters, H.E., De Marco, 
A., Forestieri, N., Fyffe, S., Hanson, D., Heller, C., Pratt, E., 
Sandstrom, H., Triplett, T., & Woods, T. (2016). Early 
Implementation of the Head Start Designation Renewal System: Volume 
I. OPRE Report #: 2016-75a. Washington, DC: Office of Planning, 
Research and Evaluation, Administration for Children and Families, 
U.S. Department of Health and Human Services.
---------------------------------------------------------------------------

iv. 1304.11(d) Revocation Condition
    We also amend paragraph (d) in this section to make a technical 
change that does not alter the substance of the provision. We remove 
the word ``shall'' in the second sentence of the paragraph and replace 
it with the word ``will.'' ``Shall'' is outdated regulatory language.
v. 1304.11(e) Suspension Condition
    Under this paragraph, any grantee that has been suspended from the 
Head Start program must compete for funding. When we implemented 
designation renewal, grantees had the opportunity to appeal certain 
administrative decisions, including suspensions. However, we eliminated 
the appeal process in 2016, when we published the Head Start Program 
Performance Standards final rule. When we removed the process for 
appeals, we did not remove references to the process in this paragraph. 
So, in the NPRM, we proposed to remove those references to keep our 
performance standards streamlined and up to date. We did not receive 
any comments or suggestions on the technical changes we proposed. 
Therefore, we amend this paragraph, as we proposed in the NPRM, by 
removing the phrase ``there is a pending appeal and'' in the second 
sentence. In the third sentence of paragraph (e), after the word 
``cause,'' we add the phrase ``and the suspension remains in place,'' 
and remove the phrase, ``regardless of appeal status.'' We also remove 
the incorrect cross-reference to ``1304.16,'' and replace it with 
``1304.15.''
vi. 1304.11(g) Fiscal Condition
    This paragraph establishes the fiscal condition for designation 
renewal. Head Start programs are required to have annual audits, and 
the Head Start reauthorization requires that information from a 
grantee's annual audit be considered in the Designation Renewal System. 
The current fiscal condition uses information from those audits only to 
identify grantees with such serious fiscal problems that they may be 
near bankruptcy and fails to identify additional grantees with very 
serious financial concerns. Although the current condition uses one of 
the most serious audit findings, we believe this already available rich 
and broad fiscal audit data could be better used to determine 
competition status.
    The current condition of going concern audit finding is a very 
serious fiscal finding indicating threat of liquidation of an 
organization; however, this finding may not effectively capture 
problems in the financial management of the Head Start grant. We revise 
the fiscal condition to better utilize existing requirements and Head 
Start related audit data more effectively for improvement of grantees' 
fiscal systems and management. The revised condition aims to require 
competition before a grantees' fiscal condition becomes so dire that it 
potentially impacts the program's viability.
    The NPRM provided additional background and rationale for adding an 
addition to the fiscal condition. In the NPRM, we proposed to amend the 
fiscal condition at Sec.  1304.11(g) in the following way:
    (1) Revise the timeframe for the going concern condition from 
within the previous 12 months to any time during the 5-year grant 
period.
    (2) Add a second criterion to the fiscal condition that would 
require grantees to compete for continued funding if they had audit 
findings associated explicitly with their Head Start funds in two or 
more audit reports filed during the first, second, or third years of 
their current grant period.
    In this final rule, we:
    (1) Revise the timeframe for the going concern condition from 
within the previous 12 months to anytime during the current Head Start 
project period.
    (2) Add a second criterion to the fiscal condition but clarify 
which specific audit findings associated explicitly with any funding 
from the Office of Head Start for a grantee's fiscal years within the 
project period would require a grantee to compete for continued 
funding. It is important to note that Head Start funds include Head 
Start,

[[Page 53202]]

Early Head Start, Early Head Start--Child Care Partnerships grant 
funding or any other supplemental funding provided by the Office of 
Head Start.
    We received comments, including letters with many signatories, 
related to various aspects of the proposed condition itself and how we 
would implement it. Additional commenters addressed general concerns 
about auditors and audit processes and some requested special 
consideration for specific types of grantees. To make our discussion 
easier to follow, we organize the comments, our responses, and 
regulatory text changes (if applicable) as follows: (1) Going Concern 
Criterion Timeframe; (2) Additional Audit Findings Criterion; and (3) 
Other Comments about Audits and Fiscal Condition.
Going Concern Criterion Timeframe
    Comment: Most commenters stated we should maintain the current 
timeframe for the going concern determination, only considering the 
previous 12 months rather than the full length of the project period as 
proposed in the NPRM.
    These commenters argued that OHS should only consider the most 
recent audit data. Further, commenters stated that if a grantee had a 
going concern finding early in the project period, they could recover 
their fiscal viability within the 5-year project period. The argument 
is that if a grantee has corrected the going concern finding, they 
should not be required to compete.
    Response: We disagree that keeping the 12-month timeframe for going 
concern findings is the appropriate policy. We believe the finding that 
a grantee is at risk of failing to continue as a going concern is so 
serious it warrants competition regardless of when, during the grant 
period, the condition is identified. This finding means an organization 
risks ceasing to exist as a viable entity in the near future. While 
commenters assert organizations can recover from this situation, the 
fact that the situation occurred any time warrants competition. For 
that reason, we maintain the timeframe we proposed in the NPRM and 
consider going concern findings anytime during the project period to 
identify a grantee for competition.
    Therefore, we revise the regulatory text to reflect this policy and 
also update the language in the following way. We revise paragraph (g) 
and add new paragraphs (g)(1) and (g)(2). New paragraph (g) outlines 
the two fiscal criteria and reads as follows, ``An agency meets one of 
two fiscal criteria, if the agency:.'' Existing paragraph (g) is 
redesignated as (g)(1) and is revised by removing unnecessary and 
repetitive language and by changing the timeframe for considering a 
finding of going concern. Specifically, we remove the phrase ``an 
agency has been determined,'' because it is now part of the revised 
introductory language in (g). We also remove the phrase ``within the 
twelve months preceding the responsible HHS official's review under 
1304.15'' and replace it with ``within the current project period.''
Additional Audit Findings Criterion
    Comment: Most commenters expressed concern that the proposal to use 
additional audit findings in the second fiscal criterion is vague and 
could be subjective. These commenters requested clarification about 
which audit findings will determine designation renewal decisions. 
Concerns about inconsistency of findings in their severity and in their 
identification by individual auditors were mentioned by these comments. 
Commenters asserted that some audit findings may not be serious enough 
to warrant competition and feared that we may compete grantees with 
low-level findings.
    Response: We agree and have made the condition more specific about 
exactly which additional audit findings will require competition. We 
limit the findings considered for competition to only findings of 
material weakness and questioned costs related to any funding from the 
Office of Head Start, Additionally, the condition only requires 
competition if there are a total of two or more of either of these 
types of findings across the two most recent audit reports. Each of 
these findings is significant and raises concerns about a grantee's 
management of its federal funding dedicated to the Head Start program. 
Further, two or more findings of material weakness or questioned costs 
indicates a pattern of fiscal challenges that warrant competition.
    The findings of material weakness and questioned costs represent 
serious concerns about an organization's internal controls or 
reasonable fiscal management. An independent auditor evaluates an 
entity based on a set of several elements related to management of 
financial systems and prudent fiscal decision making, or internal 
controls. Internal controls, as defined in accounting and auditing, is 
a process for assuring an organization's objectives in operational 
effectiveness and efficiency, reliable financial reporting, and 
compliance with laws, regulations, and policies.
    The finding of material weakness indicates that it is likely that 
the entity's leadership may not have accurate or sufficient information 
to understand the entity's financial status well enough to make 
reasonable decisions about the management of the organization. Material 
weakness is defined as a deficiency, or combination of deficiencies, in 
an internal control, such that there is a reasonable possibility that a 
material misstatement of the entity's financial statements will not be 
prevented, or detected, or corrected on a timely basis. This means that 
there is the likelihood that financial information is not accurate or 
sufficient for decision makers to make reasonable financial decisions.
    A questioned costs finding in an audit report raises concerns about 
fiscal management and potential risks to federal Head Start funding. An 
auditor notes a finding of questioned costs because they observe an 
issue that indicates a violation or possible violation of a statute, 
regulation, or the terms and conditions of a Federal award. A 
questioned cost finding could also mean the costs, at the time of the 
audit, are not supported by adequate documentation; or the costs 
incurred appear unreasonable and do not reflect the actions a prudent 
person would take in the circumstances.
    As stated earlier, fiscal challenges may result in operational 
challenges that create reduced program quality and stability of 
services to children and families. We believe findings of material 
weakness and questioned costs are significant, transparent, and 
specific findings to appropriately identify grantees for competition.
    Comment: Commenters expressed concern that we would not be able to 
track findings to a Head Start grant, especially if an organization 
receives multiple federal grants. These commenters stated concerns we 
would require an agency to compete for a fiscal problem that was 
actually a fiscal problem in another federal grant.
    Response: In response to comments that fiscal challenges with 
respect to other federal programs could cause an audit finding in Head 
Start, we will only look at audit findings specifically related to Head 
Start, Early Head Start, Early Head Start--Child Care Partnerships 
grant funding or any other supplemental funding provided by the Office 
of Head Start, identified on the federal audit report. This will ensure 
that the identified audit findings that require a Head Start grantee to 
compete directly affect Head Start grant funds and highlights potential 
risk to Head Start funds that must be addressed.

[[Page 53203]]

Therefore, with the exception of a going concern audit finding, Head 
Start grantees will not be required to compete due to findings in other 
funding sources and the organization's overall fiscal management.
    Comment: Some commenters raised concerns that there is confusion 
and inconsistency regarding timing of audits and audit reports between 
grantees. Many commenters noted challenges caused by differences in 
their agency's fiscal year, project year, and the nine months allowed 
to file audit reports after their fiscal year. For example, for some 
grantees, audit reports in the first year of the current project period 
may cover a fiscal year that was in the previous 5-year project period. 
Therefore, for some grantees, there may be a period of two years in the 
current project grant period before an audit report from the first year 
of the project period is filed. Other commenters suggested that the 
timing will not allow grantees to know and correct findings before the 
next audit and could cause repeat findings or confusion.
    Response: We agree with commenters' concerns that lack of alignment 
in grantees' fiscal years, project years, and the audit report filing 
period could cause implementation problems and greater clarity is 
needed. In order to address these timing challenges, we revise the 
criterion to focus on the number of findings and clarify that an audit 
must represent a financial period within the grantee's current project 
period. We believe this approach focuses on grantees with a pattern of 
findings, multiple or repeat audit findings, related to Head Start 
funds. In addition, this approach provides greater consistency across 
grantees regardless of timing of their project period and fiscal years. 
Furthermore, focusing on the findings rather than the timing of the 
audits is consistent with other DRS conditions in which findings are 
considered over the entire project period.
    Comment: Many commenters said only repeat or identical findings in 
consecutive audits should trigger competition. Some of these commenters 
specifically believed grantees should have the ability to correct 
findings before they are required to compete. They recommended we not 
require competition for those grantees who have corrected their 
findings and did not have the same finding in the next audit report. 
One commenter suggested we rely on very serious findings rather than on 
repeat findings to trigger competition.
    Response: We disagree with the suggestion only repeat findings 
should be considered. Therefore, we do not make changes in this final 
rule to address repeat audit findings. The second audit criterion in 
the final rule requires competition for grantees with two or more audit 
findings. In response to the comment that very serious findings rather 
than repeat findings be used to trigger competition, OHS believes that 
multiple findings related to Head Start funds during the project period 
indicates a pattern of fiscal concern. Furthermore, audit findings of 
material weakness and questioned costs represent serious findings. We 
do not require the same or repeat findings, but we also believe that 
the findings we have chosen are serious and indicate red flags for a 
program's management of their Head Start grant.
    Regarding comments about grantees' ability to correct findings 
before being required to compete, all grantees are required to correct 
audit findings. This rule does not contemplate the audit resolution, it 
only focuses on the existence of the findings. A total of two or more 
findings related to Head Start funds during the project period 
identifies a pattern of financial concern whether the findings are 
unique or repeated. We believe audit findings identified in the final 
rule, material weakness and questioned costs, are significant enough 
that the virtue of just having these findings would warrant 
competition. This is similar to the treatment of deficiencies for 
designation renewal purposes. The existence of the findings, regardless 
of its correction, determines whether a grantee will compete.
    Based on the reasons previously described, we amend the regulatory 
language as follows. We amend paragraph (g) by adding paragraph (g)(2), 
which includes a new criterion that reads: ``Has a total of two or more 
audit findings of material weakness or questioned costs associated with 
its Head Start funds in audit reports submitted to the Federal Audit 
Clearinghouse (in accordance with section 647 of the Act) for a 
financial period within the current project period.''
Other Comments About Audits and the DRS Fiscal Condition
General Issues With Auditors and Audit Process
    Comment: Commenters said there were challenges with the audit 
process and inconsistency between auditors, which would make it unfair 
that some grantees would have to compete and others with similar 
findings characterized differently by an auditor would not be required 
to compete. Commenters stated audits are not uniform and some auditors 
use outdated guidance.
    Response: While we appreciate commenters' concerns, we believe 
there is general consistency across federal audits. Each grantee 
chooses its own auditor and so has control over the quality of their 
audits. Furthermore, each grantee is required to have a member on its 
Board with a background in fiscal management or accounting to guide the 
grantee in fiscal matters, including audits. While individual 
differences between auditors exist, every auditor conducting single 
audits of a Head Start program is required to follow established 
regulations and Generally Accepted Governmental Accounting Standards. 
All auditors are required to use the federal audit instructions and the 
most current Compliance Supplement to ensure uniformity.
    In response to commenters' concerns that auditors are using 
outdated information, we note that in 2014, the Office of Management 
and Budget issued the Uniform Administrative Requirements, Cost 
Principles, and Audit Requirements for Federal Awards (Uniform 
Guidance). This guidance replaced the long-standing A-133 circular. 
This regulation overhauled federal audit rules and procedures and 
required all federal departments to issue implementing regulations to 
conform to it. HHS issued implementing regulations for the Uniform 
Guidance in 45 CFR part 75 Uniform Administrative Requirements, Cost 
Principles, and Audit Requirements for HHS Awards. The Head Start 
Program Performance Standards published in 2016 made clear these rules 
applied to Head Start.
    Given the factors described here, we do not believe the challenges 
suggested by commenters prohibit us from fairly and consistently 
implementing the new fiscal criterion. Finally, we believe the 
consistency is even stronger for the serious audit findings of going 
concern, material weakness and questioned costs, which we will use for 
designation renewal determinations as further described in a previous 
section.
Special Considerations for Tribal Grantees
    Comment: A large tribal organization stated that tribal audits 
should account for the unique fiscal reporting implications of the 
tribal grantee--tribal nation relationship. The commenters stated that 
in some cases, the Head Start program does not get information related 
to the audit reports, and it is not

[[Page 53204]]

clear how OHS would identify findings specific to Head Start.
    Response: We respect the sovereignty of the tribal nations that 
administer American Indian/Alaska Native Head Start programs. Tribal 
programs are required, like all other federal grantees, to submit 
annual audits to the Federal Audit Clearinghouse. The only unique 
requirement for tribal grantees is that tribes have an option to not 
make the audit reports public. Otherwise, there are not specific 
requirements for tribal grantees. A majority of Head Start programs are 
run by large agencies that receive multiple federal grants, so we will 
only consider findings specifically associated with Head Start funds in 
the added fiscal criterion for designation renewal determinations.
Technical Assistance Versus Competition
    Comment: Some commenters stated that OHS should not require 
competition based on audit findings, but should use audit findings as a 
trigger for additional technical assistance.
    Response: We believe the limited types of audit findings that will 
be considered as part of the designation renewal determination are 
serious enough to trigger competition. Furthermore, we provide 
continuous and ongoing technical assistance to grantees on fiscal 
management through our extensive training and technical assistance 
system. The National Center on Program Management and Fiscal Operations 
has developed many resources and trainings for programs on fiscal 
management and provides grantees with opportunities to work with expert 
fiscal consultants through the Fiscal Consulting Initiative. Training 
and technical assistance will continue, and grantees with multiple 
serious audit findings will be required to compete for continued Head 
Start funding.
Audit Condition Appeal
    Comment: Most commenters stated they thought the audit condition 
should have an appeal process due to the challenges with audits they 
mentioned. They suggested we establish a process by which grantees 
could challenge audit findings and report on unfair audit practices 
that erroneously caused the grantee to be identified with findings that 
lead to competition.
    Response: We do not agree an appeals process for the audit 
condition is necessary. Therefore, we do not add such a provision to 
the final rule. Congress did not require an appeals process in the 
establishment of the Designation Renewal System rule in the 2007 
Reauthorization for any of the conditions that would require a program 
to be designated for competition. Furthermore, each Head Start grantee 
chooses its own auditor and therefore grantees work through the audit 
process with their selected auditor.

2. Section 1304.12 Grantee Reporting Requirements Concerning Certain 
Conditions

    This section requires a grantee to notify OHS if it loses its state 
or local license to operate a center; files for bankruptcy; has been 
debarred from receiving state or federal funding; or has been found to 
be at risk of failing to continue functioning as a going concern.
    We did not propose any policy changes to this section in the NPRM. 
However, we did propose to remove dates that are no longer relevant, 
and made minor word changes that did not change any meaning. We did not 
receive any comments from the public on what we proposed in the NPRM. 
Therefore, in this final rule, we amend Sec.  1304.12 by removing 
paragraph (a) in its entirety. In paragraph (b), we remove the phrase 
``Head Start agencies'' and replace it with the phrase ``A Head Start 
agency,'' and we add the word ``of'' after ``occurrence'' as an 
additional technical fix to the regulatory text. We also remove the 
phrase ``following December 9, 2011.'' Because paragraph (a) is 
removed, paragraph (b) becomes the sole paragraph in this section and, 
therefore, becomes the introductory text. Finally, we redesignate 
paragraphs (b)(1) through (4) as paragraphs (a), (b), (c), and (d) 
respectively.

3. Section 1304.15 Designation Request, Review, and Notification 
Process

    This section describes the process for designation renewal and 
explains how a grantee will be notified of its designation renewal 
status.
    In the NPRM, we proposed to simplify, clarify, and update this 
section by removing outdated language that refers to the transition to 
5-year grants and the process before and after the transition. The 
language is no longer relevant as all grantees have transitioned 
through designation renewal to 5-year grants. We also proposed to 
revise language to make it clear that only data from the grantee's 
current grant period will be reviewed for designation determinations. 
In addition, we no longer send communication to grantees via certified 
mail, so we proposed to remove that language as well.
    We did not receive any comments from the public on what we proposed 
in the NPRM. We made all of the changes proposed in the NPRM and 
additional small technical fixes to make this section consistent with 
other sections in this Part. Specifically, we amend paragraph (a) with 
a technical fix by replacing the word ``Grantees'' with the phrase, ``A 
grantee.'' As proposed in the NPRM, we remove paragraph (a)(1) 
entirely. In existing paragraph (a)(2), we remove the phrase ``After 
the transition period,'' at the beginning of the first sentence because 
it is out of date. Next, we remove the word, ``each'' and replace it 
with ``A.'' We also remove ``their'' and replace it with the word 
``its'' to make the sentence grammatically correct, and we remove the 
word ``shall'' and replace it with the word ``must.'' The word ``must'' 
connotes the same meaning as ``shall.'' ``Shall'' is outdated 
regulatory language. Finally, we redesignate paragraph (a)(2) as 
paragraph (a).
    In paragraph (b), we make an additional technical fix to remove the 
phrase ``agency's program'' and replace it with ``agency.'' We also add 
the phrase ``during the current project period,'' at the end of the 
sentence since all grantees are now on five-year project periods and 
only data from the current project period will be reviewed. We remove 
the colon ``:'' and replace it with a period ``.''. We also remove 
paragraphs (b)(1), (2), and (3) in their entirety because they are out 
of date.
    We amend paragraph (c) by removing the colon ``:'' after ``Sec.  
1304.14''and replacing it with a comma ``,''. At the end of paragraph 
(c), we add the phrase ``at least 12 months before the expiration date 
of a Head Start or Early Head Start agency's current grant stating:''. 
We also remove paragraphs (c)(1), (c)(2), and (c)(3) entirely because 
they mention the transition period. Consequently, we redesignate 
paragraph (c)(3)(i) as paragraph (c)(1) and paragraph (c)(3)(ii) as 
paragraph (c)(2).
    Finally, in paragraph (c)(2), we remove the reference to 
``(c)(3)(i),'' and replace it with ``(c)(1).''

Section 1305.2 Terms

    Section 1305.2 defines certain terms in the performance standards. 
We realized we accidentally omitted a definition for ``denial of 
refunding,'' when we published the Head Start Program Performance 
Standards final rule in 2016. Therefore, in the NPRM, we proposed to 
add the following definition:

    Denial of Refunding means the refusal of a funding agency to 
fund an application for a continuation of a Head Start program for a 
subsequent program year when the decision is based on a 
determination that the grantee has improperly conducted its program, 
or is incapable of doing so properly in the future,

[[Page 53205]]

or otherwise is in violation of applicable law, regulations, or 
other policies.

    Given we did not receive any comments or suggestions from the 
public, we amend Sec.  1305.2 by adding the definition as proposed.
    Effective Dates: In the NPRM, we proposed that the improvements 
made to the Designation Renewal System become effective the fiscal year 
immediately following the publication of a final rule, but not less 
than 30 days after the publication date.
    We did not receive any comments or suggestions from the public 
regarding this effective date. We simplify the effective date to be 
October 27, 2020.

VI. Regulatory Process Matters

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), see 5 U.S.C. 605(b) as 
amended by the Small Business Regulatory Enforcement Fairness Act, 
requires federal agencies to determine, to the extent feasible, a 
rule's impact on small entities, explore regulatory options for 
reducing any significant impact on a substantial number of such 
entities, and explain their regulatory approach. The term ``small 
entities,'' as defined in the RFA, comprises small businesses, not-for-
profit organizations that are independently owned and operated and are 
not dominant in their fields, and governmental jurisdictions with 
populations of less than 50,000. Under this definition, some Head Start 
grantees may be small entities. We consider a rule to have a 
significant impact on a substantial number of small entities if it has 
at least a three percent impact on revenue on at least five percent of 
small entities. However, the Secretary certifies, under 5 U.S.C. 
605(b), as enacted by the Regulatory Flexibility Act (Pub. L. 96-354), 
that this rule will not have a significant impact on a substantial 
number of small entities. We expect there to be fewer grantees in 
competition due to the changes in this final rule and we also do not 
expect increased costs for grantees to meet the revised conditions; 
therefore, we do not expect there to be a significant impact on a 
substantial number of small entities.
    In the proposed rule, we requested comments on whether any member 
of the public believed their business, organization, or governmental 
jurisdiction qualifies as a small entity and that the actions proposed 
in the notice of proposed rulemaking would have a significant economic 
impact on it. We did not receive any comments from the public on this 
issue.

Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act of 1995 (UMRA), see 2 U.S.C. 1501 
et seq., was enacted to avoid imposing unfunded federal mandates on 
state, local, and tribal governments, or on the private sector. Section 
202 of UMRA requires that agencies assess anticipated costs and 
benefits before issuing any rule whose mandates require spending in any 
one year of $100 million in 1995 dollars, updated annually for 
inflation. In 2019, that threshold is approximately $154 million. This 
rule does not contain mandates that will impose spending costs on 
state, local, or tribal governments in the aggregate, or on the private 
sector, in excess of the threshold.

Treasury and General Government Appropriations Act of 1999

    Section 654 of the Treasury and General Government Appropriations 
Act of 1999 requires federal agencies to determine whether a policy or 
regulation may negatively affect family well-being. If the agency 
determines a policy or regulation negatively affects family well-being, 
then the agency must prepare an impact assessment addressing seven 
criteria specified in the law. We believe it is not necessary to 
prepare a family policymaking assessment, see Public Law 105-277, 
because the action we take in this final rule will not have any impact 
on the autonomy or integrity of the family as an institution. In the 
proposed rule, we requested public comment on whether this action would 
have a negative effect on family well-being, and we did not receive any 
comments on this issue.

Federalism Assessment Executive Order 13132

    Executive Order 13132 requires federal agencies to consult with 
state and local government officials if they develop regulatory 
policies with federalism implications. Federalism is rooted in the 
belief that issues that are not national in scope or significance are 
most appropriately addressed by the level of government close to the 
people. This rule will not have substantial direct impact on the 
states, on the relationship between the federal government and the 
states, or on the distribution of power and responsibilities among the 
various levels of government. Therefore, in accordance with section 6 
of Executive Order 13132, it is determined that this action does not 
have sufficient federalism implications to warrant the preparation of a 
federalism summary impact statement.

Congressional Review

    The Congressional Review Act (CRA) allows Congress to review 
``major'' rules issued by federal agencies before the rules take 
effect, see 5 U.S.C. 802(a). The CRA defines a major rule as one that 
has resulted or is likely to result in (1) an annual effect on the 
economy of $100 million or more; (2) a major increase in costs or 
prices for consumers, individual industries, federal, state, or local 
government agencies, or geographic regions; or (3) significant adverse 
effects on competition, employment, investment, productivity, or 
innovation, or on the ability of United States-based enterprises to 
compete with foreign-based enterprises in domestic and export markets, 
see 5 U.S.C. Chapter 8. The Office of Information and Regulatory 
Affairs has designated this rule as major.

Paperwork Reduction Act of 1995

    The Paperwork Reduction Act of 1995, Public Law 104-13, minimizes 
government-imposed burden on the public. In keeping with the notion 
that government information is a valuable asset, it also is intended to 
improve the practical utility, quality, and clarity of information 
collected, maintained, and disclosed.
    The Paperwork Reduction Act defines ``information'' as any 
statement or estimate of fact or opinion, regardless of form or format, 
whether numerical, graphic, or narrative form, and whether oral or 
maintained on paper, electronic, or other media (5 CFR 1320.3(h)). This 
includes requests for information to be sent to the government, such as 
forms, written reports and surveys, recordkeeping requirements, and 
third-party or public disclosures (5 CFR 1320.3(c)). This final rule 
changes the burden of an existing information collection currently 
approved with Office of Management and Budget Control Number 0970-0148 
under the Paperwork Reduction Act. This information collection is 
entitled the Head Start Program Performance Standards and does not 
contain any standardized instruments to promote flexibility for local 
programs.
    Although no comments were received in response to the Paperwork 
Reduction Act section of the proposed rule, comments were received on 
other changes that were incorporated into the final rule. The changes 
to the burden table reflect those of the final rule.

[[Page 53206]]



----------------------------------------------------------------------------------------------------------------
                                                                                  Average annual
                                                                                    burden per     Total annual
                  Requirement                     Annual number of respondents      respondent     burden hours
                                                                                      (hours)
----------------------------------------------------------------------------------------------------------------
Sec.   1304.13: Agencies required to compete    75 Grants.......................              60           4,500
 will have to complete an application for each
 grant competed.
Sec.   1304.15(a): Each Head Start or Early     400 Grants......................            0.25             100
 Head Start agency wishing to be renewed for 5
 years without competition shall request that
 status from ACF.
----------------------------------------------------------------------------------------------------------------

Description of Information Collection and Associated Burden

    When a Head Start grant meets any of the conditions outlined in 
Sec.  1304.11, the grantee is designated for competition and must 
submit an application during competition to be considered for continued 
funding as required under Sec.  1304.13. The burden to submit an 
application is estimated at 60 hours for an estimated 75 grants each 
year. These projections are based on data available on CLASS, 
deficiencies, and audits from prior years.
    Head Start grantees are required by Sec.  1304.15(a) to submit a 
letter requesting renewal for a new non-competitive continuation grant, 
and the estimated burden to submit a letter is 15 minutes for 400 
grants. The non-competitive renewal request consists of filling in a 
template letter and sending it through the OHS system, so the burden is 
small. This calculation assumes in any given year, about one-fifth of 
all 2,000 grants, or 400 grants, are nearing the end of their current 
project period and, therefore, a designation under the Designation 
Renewal System will be made for these grants.

Regulatory Planning and Review Executive Order 12866, Executive Order 
13563, and Executive Order 13771

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 is supplemental to and reaffirms the principles, 
structures, and definitions governing regulatory review as established 
in Executive Order 12866, emphasizing the importance of quantifying 
both costs and benefits, of reducing costs, of harmonizing rules, and 
of promoting flexibility. Section 3(f) of Executive Order 12866 defines 
a ``significant regulatory action'' as an action that is likely to 
result in a rule: (1) Having an annual effect on the economy of $100 
million or more in any 1 year, or adversely and materially affecting a 
sector of the economy, productivity, competition, jobs, the 
environment, public health or safety, or State, local, or Tribal 
governments or communities (also referred to as ``economically 
significant''); (2) creating a serious inconsistency or otherwise 
interfering with an action taken or planned by another agency; (3) 
materially altering the budgetary impacts of entitlement grants, user 
fees, or loan programs or the rights and obligations of recipients 
thereof; or (4) raising novel legal or policy issues arising out of 
legal mandates, the President's priorities, or the principles set forth 
in the Executive Order. A regulatory impact analysis must be prepared 
for major rules with economically significant effects ($100 million or 
more in any 1 year), and an ``economically significant'' regulatory 
action is subject to review by the Office of Management and Budget.
    Executive Order 13771, entitled ``Reducing Regulation and 
Controlling Regulatory Costs,'' was issued on January 30, 2017 (82 FR 
9339, February 3, 2017) and requires that the costs associated with 
significant new regulations ``shall, to the extent permitted by law, be 
offset by the elimination of existing costs associated with at least 
two prior regulations.'' This rulemaking is not expected to be subject 
to the requirements of Executive Order 13771 because it would result in 
no more than de minimis costs.

VII. Regulatory Impact Analysis

Estimated Impact of Designation Renewal System Changes on the Public

    This regulatory action is necessary to improve a governmental 
process: The process to identify grantees that are lower performing in 
the important dimensions of quality that Congress requires we consider 
under the Designation Renewal System. As a result of public comment, we 
consider revisions to the conditions in the Designation Renewal System 
from those proposed in the NPRM in this regulatory impact analysis.
    We revise the prior deficiency, CLASS, and fiscal condition of the 
Designation Renewal System in this new rule. We estimate that about 20% 
of grants meet the deficiency condition under the prior rule which will 
decrease to 7% in this new rule, about 13% of grants meet the CLASS 
condition under the prior rule which will decrease to 9% in this new 
rule, and nearly no grants meet the fiscal condition under the prior 
rule which will increase to 6% in this new rule. There are a few grants 
that meet multiple conditions, but altogether, we estimate that roughly 
one-third of grants are required to compete in the prior rule and this 
will decrease to about one-fifth of grants.
    With grants potentially affected by this rule totaling $10.4 
billion per year, then this estimated net decrease in the portion of 
grant activity subject to competition would translate to $1.35 billion. 
Historically, 71 percent of re-competing grantees have received their 
full service area back and an additional 7 percent have received part 
of their service area back, so we estimate that the effect of this rule 
is to reallocate approximately $297 to $392 million (= 22% x $1.35 
billion to 29% x $1.35 billion) from new potential grantees to existing 
grantees, with this amount being reached in the fifth year after rule 
finalization after a roughly linear increase in the preceding years. 
However, this rule raises the competitive threshold for the 
Instructional Support domain from 2.3 to 2.5 for CLASS reviews 
conducted on or after August 1, 2025. This approach intends to allow 
grantees to make necessary quality improvements and gradually move to 
higher quality; the establishment of the quality threshold aligns and 
supports this approach. The estimates provided above will be impacted 
by any changes to the distribution of CLASS scores, especially in the 
Instructional Support domain. Although the following is not expected, 
if scores in the Instructional Support domain do not increase by the 
time the 2.5 threshold goes into effect, then there would be an 
estimated increase of competition ranging between 4 to 6%

[[Page 53207]]

resulting in a lower reallocation of funds from the prior rule than 
projected above. This range of estimates may understate the rule's 
transfer impact because it reflects only the estimated net decrease in 
competition, rather than the mix of some regulatory provisions 
increasing competition and some reducing it. The possibility of the 
rule changing the 71 to 78 percent success rate of re-competing 
grantees introduces further uncertainty into the estimates.
    The quantifiable costs of implementation of these rules for the 
subset of grantees that would be required to compete in any year is 
well under $1 million. The cost grantees designated for competition 
will bear in completing a competitive application is estimated at 
$3,097 per grantee. It assumes 60 hours per application at a cost of 
$51.62 per hour in staff time (we multiply the $25.81 hourly wage by 
two to account for fringe benefits). Applications would likely be 
completed by a combination of the Head Start Assistant Director and 
other managers in the program (i.e., Child Development Manager or 
Family and Community Partnership Manager). The average hourly wage for 
these positions is based on the U.S. Bureau of Labor Statistics Job 
Code 11-9031. The total estimated cost for grantees to complete 
competitive applications would be $247,760 per year (400 grantees would 
compete across five years which is an average of 80 grantees per year 
at $3,097 each). This cost of competition decreases in this new rule 
since fewer grantees would be required to compete.
    A non-quantified opportunity cost for this new rule is fewer 
opportunities for entities that are not existing Head Start grantees to 
be able to compete and potentially grow as an early childhood provider 
in their community. However, we believe there is an added benefit of 
existing grantees being able to focus on the cost of quality 
improvement rather than the cost of competition, especially considering 
there were several competitions where the incumbent agency was the only 
applicant.
    Although not possible to quantify, this new rule has the added 
benefit of removing the stress caused by the lowest 10 percent 
criterion of the CLASS condition. Grantees will no longer have to wait 
several months to learn if they are designated for competition due to 
this moving target. Additionally, changes to the deficiency condition 
in this new rule will have the added benefit of reducing the fear 
expressed by grantees that one mishap of an individual could require 
their entire program to compete.
    This new rule establishes quality thresholds for the CLASS domain 
and grantees that fall below them are designated for quality 
improvement. For any grantee with a score below a quality threshold, 
OHS will provide support for quality improvement and help ensure the 
grantee's coordinated approach to training and professional development 
is supporting improvements in the learning environment. The overall 
Head Start budget includes about $250 million for training and 
technical assistance, of which about half goes directly to grantees. A 
number of grantees already spend some portion of their Head Start 
technical assistance dollars on activities related to CLASS; in 
addition, we make available several materials related to supporting 
positive teacher-child interactions to grantees on the Early Childhood 
Learning and Knowledge Center website.
    The cost of quality improvement activities in CLASS leverages these 
existing resources. The key difference is that OHS and grantees will 
shift these existing resources to focus on particular domains of CLASS 
needing improvement for each grantee. Although there is a cost to fewer 
resources going to domains where a grantee already excels while other 
resources go to domains needing improvement, the added benefit of this 
cost is more data-driven and effective use of existing resources.
    Although there is an overall estimated decrease of competition, we 
estimate more grantees will compete due to the fiscal condition, which 
will result in an additional cost for those subset of grantees. An 
anticipated benefit of this cost is competing grantees before known 
fiscal challenges escalate to a crisis point, which could prevent 
potential termination or relinquishment of the grant. A disruption in 
services to children and families may occur if a Head Start grantee is 
terminated or relinquishes the grant but OHS will take all actions 
necessary to attempt to prevent a disruption in services.
Tribal Consultation Statement
    OHS conducts an average of five Tribal Consultations each year for 
those tribes operating Head Start and Early Head Start. The 
consultations are held in four geographic areas across the country: 
Southwest, Northwest, Midwest (Northern and Southern), and Eastern. The 
consultations are often held in conjunction with other tribal meetings 
or conferences, to ensure the opportunity for most of the 150 tribes 
that operate Head Start and Early Head Start programs are be able to 
attend and voice their concerns about issues regarding service 
delivery. We complete a report after each consultation, and then we 
compile a final report that summarizes the consultations and submit the 
report to the Secretary at the end of the year.
    We received comments from tribes on the NPRM. Most of the comments 
focused on the CLASS condition, Head Start's tribal consultation 
process, and suggestions for special considerations during the audit 
process. We considered those comments, responded to them, and used them 
to develop this final rule.

List of Subjects

45 CFR Part 1304

    Audit, Classroom Assessment Scoring System (CLASS), Competition, 
Designation Renewal System, Education of disadvantaged, Fiscal, Grant 
programs, Head Start, Monitoring, Social programs.

45 CFR Part 1305

    Administrative practice and procedure.

    Dated: August 10, 2020.
Lynn A. Johnson,
Assistant Secretary for Children and Families.
    Approved: August 10, 2020.
Alex M. Azar, II,
Secretary.

    For the reasons discussed in the preamble, we amend 45 CFR parts 
1304 and 1305, as follows:

PART 1304--FEDERAL ADMINISTRATIVE PROCEDURES

0
1. The authority citation for part 1304 continues to read as:

    Authority:  42 U.S.C. 9801 et seq.


0
2. Revise Sec.  1304.11 to read as follows:


Sec.  1304.11  Basis for determining whether a Head Start agency will 
be subject to an open competition.

    A Head Start or Early Head Start agency will be required to compete 
for its next five years of funding whenever the responsible HHS 
official determines that one or more of the following seven conditions 
existed during the relevant time period under Sec.  1304.15:
    (a) An agency has two or more deficiencies across reviews conducted 
under section 641A(c)(1)(A), (C), or (D) of the Act during the relevant 
time period under Sec.  1304.15.
    (b) An agency has not, based on a review conducted under section 
641A(c)(1)(A), (C), or (D) of the Act during the relevant time period 
under Sec.  1304.15:
    (1) Established program goals for improving the school readiness of

[[Page 53208]]

children participating in its program in accordance with the 
requirements of section 641A(g)(2) of the Act and demonstrated that 
such goals:
    (i) Appropriately reflect the ages of children, birth to five, 
participating in the program;
    (ii) Align with the Head Start Early Learning Outcomes Framework: 
Ages Birth to Five, state early learning guidelines, and the 
requirements and expectations of the schools, to the extent that they 
apply to the ages of children, birth to five, participating in the 
program and at a minimum address the domains of language and literacy 
development, cognition and general knowledge, approaches toward 
learning, physical well-being and motor development, and social and 
emotional development;
    (iii) Were established in consultation with the parents of children 
participating in the program.
    (2) Taken steps to achieve the school readiness goals described 
under paragraph (b)(1) of this section demonstrated by:
    (i) Aggregating and analyzing aggregate child-level assessment data 
at least three times per year (except for programs operating less than 
90 days, which will be required to do so at least twice within their 
operating program period) and using that data in combination with other 
program data to determine grantees' progress toward meeting its goals, 
to inform parents and the community of results, and to direct 
continuous improvement related to curriculum, instruction, professional 
development, program design and other program decisions; and
    (ii) Analyzing individual ongoing, child-level assessment data for 
all children birth to age five participating in the program and using 
that data in combination with input from parents and families to 
determine each child's status and progress with regard to, at a 
minimum, language and literacy development, cognition and general 
knowledge, approaches toward learning, physical well-being and motor 
development, and social and emotional development, and to individualize 
the experiences, instructional strategies, and services to best support 
each child.
    (c) An agency has been determined during the relevant time period 
covered by the responsible HHS official's review under Sec.  1304.15:
    (1) To have an average score across all classrooms observed that is 
below the following competitive thresholds on any of the three CLASS: 
Pre-K domains from the most recent CLASS: Pre-K observation:
    (i) For the Emotional Support domain, the competitive threshold is 
5;
    (ii) For the Classroom Organization domain, the competitive 
threshold is 5;
    (iii) For the Instructional Support domain, the competitive 
threshold is 2.3 through July 31, 2025, and 2.5 on and after August 1, 
2025.
    (2) If an agency is determined to have an average score across all 
classrooms observed below the quality threshold on any of the three 
CLASS: Pre-K domains, the Office of Head Start will support the program 
to strengthen its coordinated approach to training and professional 
development as required in Sec.  1302.92(b) and (c), to help promote 
improvement in teaching practices and teacher-child interactions. The 
quality threshold for each domain is as follows:
    (i) For the Emotional Support domain, the quality threshold is 6;
    (ii) For the Classroom Organization domain, the quality threshold 
is 6;
    (iii) For the Instructional Support domain, the quality threshold 
is 3.
    (d) An agency has had a revocation of its license to operate a Head 
Start or Early Head Start center or program by a state or local 
licensing agency during the relevant time period under Sec.  1304.15, 
and the revocation has not been overturned or withdrawn before a 
competition for funding for the next five-year period is announced. A 
pending challenge to the license revocation or restoration of the 
license after correction of the violation will not affect application 
of this requirement after the competition for funding for the next 
five-year period has been announced.
    (e) An agency has been suspended from the Head Start or Early Head 
Start program by ACF during the relevant time period covered by the 
responsible HHS official's review under Sec.  1304.15 and the 
suspension has not been overturned or withdrawn. If the agency did not 
have an opportunity to show cause as to why the suspension should not 
have been imposed or why the suspension should have been lifted if it 
had already been imposed under part 1304, the agency will not be 
required to compete based on this condition. If an agency has received 
an opportunity to show cause and the suspension remains in place, the 
condition will be implemented.
    (f) An agency has been debarred from receiving federal or state 
funds from any federal or state department or agency or has been 
disqualified from the Child and Adult Care Food Program (CACFP) any 
time during the relevant time period covered by the responsible HHS 
official's review under Sec.  1304.15 but has not yet been terminated 
or denied refunding by ACF. (A debarred agency will only be eligible to 
compete for Head Start funding if it receives a waiver described in 2 
CFR 180.135.)
    (g) An agency meets one of two fiscal criteria, if the agency:
    (1) Is at risk of failing to continue functioning as a going 
concern within the current project period. The final determination is 
made by the responsible HHS official based on a review of the findings 
and opinions of an audit conducted in accordance with section 647 of 
the Act; an audit, review or investigation by a state agency; a review 
by the National External Audit Review (NEAR) Center; or an audit, 
investigation or inspection by the Department of Health and Human 
Services Office of Inspector General; or
    (2) Has a total of two or more audit findings of material weakness 
or questioned costs associated with its Head Start funds in audit 
reports submitted to the Federal Audit Clearinghouse (in accordance 
with section 647 of the Act) for a financial period within the current 
project period.

0
3. Revise Sec.  1304.12 to read as follows:


Sec.  1304.12  Grantee reporting requirements concerning certain 
conditions.

    A Head Start agency must report in writing to the responsible HHS 
official within 10 working days of occurrence of any of the following 
events:
    (a) The agency has had a revocation of a license to operate a 
center by a state or local licensing entity.
    (b) The agency has filed for bankruptcy or agreed to a 
reorganization plan as part of a bankruptcy settlement.
    (c) The agency has been debarred from receiving federal or state 
funds from any federal or state department or agency or has been 
disqualified from the Child and Adult Care Food Program (CACFP).
    (d) The agency has received an audit, audit review, investigation 
or inspection report from the agency's auditor, a state agency, or the 
cognizant federal audit agency containing a determination that the 
agency is at risk of ceasing to be a going concern.

0
4. Revise Sec.  1304.15 to read as follows:


Sec.  1304.15  Designation request, review and notification process.

    (a) A grantee must apply to be considered for Designation Renewal. 
A Head Start or Early Head Start agency wishing to be considered to 
have its designation as a Head Start or Early Head Start agency renewed 
for another five year period without competition must request that 
status from ACF at least 12 months before the end of their

[[Page 53209]]

five year grant period or by such time as required by the Secretary.
    (b) ACF will review the relevant data to determine if one or more 
of the conditions under Sec.  1304.11 were met by the Head Start and 
Early Head Start agency during the current project period.
    (c) ACF will give notice to grantees on Designation Renewal System 
status, except as provided in Sec.  1304.14, at least 12 months before 
the expiration date of a Head Start or Early Head Start agency's 
current grant, stating:
    (1) The Head Start or Early Head Start agency will be required to 
compete for funding for an additional five-year period because ACF 
finds that one or more conditions under Sec.  1304.11 were met by the 
agency's program during the relevant time period described in paragraph 
(b) of this section, identifying the conditions ACF found, and 
summarizing the basis for the finding; or
    (2) That such agency has been determined on a preliminary basis to 
be eligible for renewed funding for five years without competition 
because ACF finds that none of the conditions under Sec.  1304.11 have 
been met during the relevant time period described in paragraph (b) of 
this section. If prior to the award of that grant, ACF determines that 
the grantee has met one of the conditions under Sec.  1304.11 during 
the relevant time period described in paragraph (b) of this section, 
this determination will change and the grantee will receive notice 
under paragraph (c)(1) of this section that it will be required to 
compete for funding for an additional five-year period.

PART 1305--DEFINITIONS

0
5. The authority citation for part 1305 continues to read as follows:

    Authority:  42 U.S.C. 9801 et seq.


0
6. Amend Sec.  1305.2 by adding, in alphabetical order, the definition 
``Denial of Refunding'' to read as follows:


Sec.  1305.2  Terms.

* * * * *
    Denial of Refunding means the refusal of a funding agency to fund 
an application for a continuation of a Head Start program for a 
subsequent program year when the decision is based on a determination 
that the grantee has improperly conducted its program, or is incapable 
of doing so properly in the future, or otherwise is in violation of 
applicable law, regulations, or other policies.
* * * * *
[FR Doc. 2020-17746 Filed 8-27-20; 8:45 am]
BILLING CODE 4184-01-P