Head Start: A More Comprehensive Risk Management Strategy and	 
Data Improvements Could Further Strengthen Program Oversight	 
(12-FEB-08, GAO-08-221).					 
                                                                 
In February 2005, GAO issued a report that raised concerns about 
the effectiveness of the Department of Health and Human Services 
(HHS) Administration for Children and Families' (ACF) oversight  
of about 1,600 local organizations that receive nearly $7 billion
in Head Start grants. GAO was asked to report on (1) ACF's	 
progress in conducting a risk assessment of the Head Start	 
program and ensuring the accuracy and reliability of data from	 
its annual Program Information Report (PIR) survey of grantees,  
(2) efforts to improve on-site monitoring of grantees, and (3)	 
how data are used to improve oversight and help grantees meet	 
program standards. For this report, GAO surveyed a nationally	 
representative sample of Head Start program directors and	 
interviewed ACF officials. GAO also reviewed ACF studies on the  
validity of PIR data and conducted tests of data from the 2006	 
PIR database.							 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-221 					        
    ACCNO:   A80689						        
  TITLE:     Head Start: A More Comprehensive Risk Management Strategy
and Data Improvements Could Further Strengthen Program Oversight 
     DATE:   02/12/2008 
  SUBJECT:   Data collection					 
	     Data integrity					 
	     Educational grants 				 
	     Educational standards				 
	     Federal grants					 
	     Grant monitoring					 
	     Program management 				 
	     Risk assessment					 
	     Risk management					 
	     Standards evaluation				 
	     Systems analysis					 
	     Systems evaluation 				 
	     Education program evaluation			 
	     Head Start Program 				 
	     Head Start Program Review Instrument for		 
	     Systems Monitoring 				 
                                                                 

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GAO-08-221

   

     * [1]Results in Brief
     * [2]Background
     * [3]ACF Has Not Undertaken a Comprehensive Risk Assessment, and

          * [4]ACF Has Not Undertaken a Comprehensive Risk Assessment
          * [5]New Systems Could Facilitate Comprehensive Risk Assessment b
          * [6]ACF Has Made Little Progress toward Ensuring Accuracy of Key

     * [7]ACF Improved On-site Monitoring by Strengthening Review Proc

          * [8]ACF Has Implemented More Rigorous Certification Procedures f
          * [9]New Processes Increase Consistency of Reviews

     * [10]ACF Uses Data to Identify Grantees in Need of Assistance, bu

          * [11]ACF Uses Data to Track Grantee Activities and Performance an
          * [12]Lack of Criteria for Initiating Additional On-site Reviews U

     * [13]Conclusions
     * [14]Recommendations for Executive Action
     * [15]Agency Comments and Our Evaluation
     * [16]GAO Contact
     * [17]Acknowledgments
     * [18]GAO's Mission
     * [19]Obtaining Copies of GAO Reports and Testimony

          * [20]Order by Mail or Phone

     * [21]To Report Fraud, Waste, and Abuse in Federal Programs
     * [22]Congressional Relations
     * [23]Public Affairs

Report to Congressional Requesters

United States Government Accountability Office

GAO

February 2008

HEAD START

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

GAO-08-221

Contents

Letter 1

Results in Brief 3
Background 6
ACF Has Not Undertaken a Comprehensive Risk Assessment, and Data
Reliability and Other Challenges Remain 10
ACF Improved On-site Monitoring by Strengthening Review Processes and Is
Working to Establish a System to Evaluate Reviews 16
ACF Uses Data to Identify Grantees in Need of Assistance, but Weaknesses
Have Hindered Efforts to Improve Grantee Performance 21
Conclusions 23
Recommendations for Executive Action 25
Agency Comments and Our Evaluation 26
Appendix I Scope and Methodology 28
Appendix II Comments from the Department of Health and Human Services 31
Appendix III GAO Contacts and Staff Acknowledgments 35
Appendix IV Related GAO Products 36

Tables

Table 1: Summary of Results for PIR Data Consistency Tests, 2006 PIR
Database 30

Figures

Figure 1: Changes to Reporting Structure for ACF Staff Working on Head
Start 9

Abbreviations

ACF: Administration for Children and Families: 
HSES: Head Start Enterprise System: 
HHS: Department of Health and Human Services: 
OMB: Office of Management and Budget: 
PIR: Program Information Report: 
T/TA: Training and technical assistance: 

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separately.

United States Government Accountability Office
Washington, DC 20548

February 12, 2008

Congressional Requesters

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

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

           1. ACF's progress in conducting a risk assessment of the Head
           Start program and ensuring the accuracy and reliability of data
           from its annual Program Information Report (PIR) survey of
           grantees,
           2. ACF's efforts to improve its on-site monitoring processes, and
           3. ACF's use of data to improve oversight and help grantees meet
           performance standards.

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

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

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

Results in Brief

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

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

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

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

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

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

Background

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

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

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

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

6 42 U.S.C. S 9836a.

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

           1. producing a comprehensive risk assessment of the Head Start
           program;
           2. strengthening on-site reviewer training and certification
           procedures;
           3. developing a more consistent approach to conducting on-site
           reviews and analyzing findings;
           4. implementing a quality assurance process that ensures on-site
           reviews are conducted within established guidelines and ACF
           managers are held accountable for the quality of on-site reviews;
           5. ensuring the accuracy of PIR survey data by independently
           verifying key data submitted by grantees, or ensuring that
           grantees have systems in place to collect and report accurate,
           verifiable data;
           6. making greater use of available information on the status and
           use of federal funds; and
           7. taking steps to obtain competition for grants that are being
           refunded if it is determined that current grantees have failed to
           meet program, financial management, or other requirements.

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

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

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

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

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

ACF Has Not Undertaken a Comprehensive Risk Assessment

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

7 For a complete discussion of the principles of internal control and
their importance to federal program management, see GAO, Standards for
Internal Control in the Federal Government, [25]GAO/AIMD-00-21.3.1
(Washington, D.C.: November 1999) and Office of Management and Budget
(OMB) Circular A-123, Management's Responsibility for Internal Control
(Dec. 21, 2004).

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

New Systems Could Facilitate Comprehensive Risk Assessment but Limitations Exist

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

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

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

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

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

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

11 Pub. L. No. 110-134, S 28.

ACF Has Made Little Progress toward Ensuring Accuracy of Key Data

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

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

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

14 See OIG reports A-01-04-02501, A-05-04-00023, and A-07-04-02016,
available at [26]http://oig.hhs.gov .

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

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

15 Pub. L. No. 110-134, S7, 42 U.S.C. S 9836(c)(1)(E).

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

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

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

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

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

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

ACF Has Implemented More Rigorous Certification Procedures for Reviewers

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

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

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

New Processes Increase Consistency of Reviews

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Prior to enactment of the Improving Head Start Act, statutory provisions
limited ACF's ability to terminate underperforming grantees at the time an
on-site review or the annual refunding analysis showed inadequate
performance. ACF was required to grant priority to existing grantees25
when making funding decisions, unless ACF determined that the grantee
failed to meet program, financial management, or other requirements
established by ACF. However, before ACF could terminate a failing grantee
and open the grant to competition from other prospective grantees, ACF was
required to provide the grantee with official notice and an opportunity
for a hearing on its termination--or convince the grantee to relinquish
its grant. Moreover, if a grantee appealed ACF's termination decision, ACF
was required to pay the grantee's legal fees until the hearing process was
completed.

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

24 GAO, Grants Management: Enhancing Performance Accountability Provisions
Could Lead to Better Results, [27]GAO-06-1046 (Washington, D.C.: Sept. 29,
2006).

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

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

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

Conclusions

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

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

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

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

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

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

Recommendations for Executive Action

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

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

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

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

           o Develop clear criteria for determining which grantees require
           more thorough reviews--such as special, on-site reviews--as a
           result of its refunding analysis system.
			  
			  Agency Comments and Our Evaluation

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

           List of Congressional Requesters

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

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

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

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

The Honorable Lynn C. Woolsey: 
House of Representatives: 

           Appendix I: Scope and Methodology

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

           To obtain grantees' opinions on ACF's oversight of the Head Start
           program, we administered a Web-based survey to a
           nationally-representative sample of Head Start and Early Head
           Start program directors. Our target population consisted of
           directors whose programs were the subject of on-site reviews from
           October 2005 through March 2007, and were reviewed under ACF's
           newly revised on-site review process. Based on data supplied by
           ACF and the contractor responsible for coordinating the on-site
           reviews, we identified a total population of 598 Head Start
           grantees. From this population, we selected a stratified random
           probability sample of 329 grantees. We stratified the population
           based on whether or not the grantee has any delegate agencies and
           the ACF region in which the grantee operates.1 We also included in
           our sample all grantees that participated in ACF's 2006 one-time
           study of the consistency of its on-site reviews. With this
           probability sample, each grantee had a nonzero probability of
           being selected, and that probability could be computed for any
           grantee. Each grantee selected in the sample was subsequently
           weighted in the analysis to account statistically for all the
           grantees in the population.

           Because we followed a probability procedure based on random
           selections, our sample is only one of a large number of samples
           that we might have drawn. Since each sample could have provided
           different estimates, we express our confidence in the precision of
           our particular sample's results as a 95 percent confidence
           interval. This is the interval that would contain the actual
           population value for 95 percent of the samples we could have
           drawn. As a result, we are 95 percent confident that each of the
           confidence intervals in this report will include the true values
           in the study population. All percentage estimates from this survey
           have margins of error of plus or minus 10 percent or less, unless
           otherwise noted.
			  
1 A Head Start grantee may subcontract with other public, or private
nonprofit organizations to provide part or all of the grantee's Head Start
services. The subcontractors providing the Head Start services are
referred to as delegate agencies.			  

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

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

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

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

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

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

           Table 1: Summary of Results for PIR Data Consistency Tests, 2006
           PIR Database
			  
Section of PIR Database: Enrollment and Program Operations; 
Number of PIR data elements tested: 8; 
Number of tests that passed: 8; 
Number of tests that failed: 0. 

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

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

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

           Source: GAO analysis.

           Our work was conducted from February 2007 through December 2007 in
           accordance with generally accepted government auditing standards.
           
			  Appendix II: Comments from the Department of Health and Human Services
			  			  
Department Of Health & Human Services: 

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

January, 10, 2008: 

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

Dear Ms. Ashby:

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

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

Sincerely, 

Signed by: 

Rebecca Hemard for: 

Vincent J. Ventimiglia: 
Assistant Secretary for Legislation: 

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

GAO Recommendations: 

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

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

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

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

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

HHS Comments: 

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

With regard to specific recommendations: 

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

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

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

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

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

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

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

           Appendix III: GAO Contacts and Staff Acknowledgments
			  
			  GAO Contact

           Cornelia Ashby (202) 512-7215 or [28][email protected]
			  
			  Acknowledgments

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

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

           Grants Management: Enhancing Performance Accountability Provisions
           Could Lead to Better Results. [30]GAO-06-1046 . Washington, D.C.:
           September 29, 2006.

           Head Start: Progress and Challenges in Implementing Transportation
           Regulations. [31]GAO-06-767R . Washington, D.C.: July 27, 2006.

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

           Head Start: Better Data and Processes Needed to Monitor
           Underenrollment. [33]GAO-04-17 . Washington, D.C.: December 4,
           2003.

           Head Start: Increased Percentage of Teachers Nationwide Have
           Required Degrees, but Better Information on Classroom Teachers'
           Qualifications Needed. [34]GAO-04-5 . Washington: D.C.: October 1,
           2003.

           Managing for Results: Efforts to Strengthen the Link between
           Resources and Results at the Administration for Children and
           Families. [35]GAO-03-9 . Washington, D.C.: December 10, 2002.

           Strategies to Manage Improper Payments: Learning from Public and
           Private Sector Organizations. [36]GAO-02-69G . Washington, D.C.:
           October 2001.

           Standards for Internal Control in the Federal Government.
           [37]GAO/AIMD-00-21.3.1 . Washington, D.C.: November 1999.
			  
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(130639)

To view the full product, including the scope
and methodology, click on [44]GAO-08-221 .

For more information, contact Cornelia Ashby at (202) 512-7215 or
[email protected].

Highlights of [45]GAO-08-221 , a report to congressional requesters

February 2008

HEAD START

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

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

[46]What GAO Recommends

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

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

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

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

References

Visible links
  24. http://www.gao.gov/cgi-bin/getrpt?GAO-05-176
  25. http://www.gao.gov/cgi-bin/getrpt?GAO/AIMD-00-21.3.1
  26. http://oig.hhs.gov/
  27. http://www.gao.gov/cgi-bin/getrpt?GAO-06-1046
  28. mailto:[email protected]
  29. http://www.gao.gov/cgi-bin/getrpt?GAO-07-254T
  30. http://www.gao.gov/cgi-bin/getrpt?GAO-06-1046
  31. http://www.gao.gov/cgi-bin/getrpt?GAO-06-767R
  32. http://www.gao.gov/cgi-bin/getrpt?GAO-05-176
  33. http://www.gao.gov/cgi-bin/getrpt?GAO-04-17
  34. http://www.gao.gov/cgi-bin/getrpt?GAO-04-5
  35. http://www.gao.gov/cgi-bin/getrpt?GAO-03-9
  36. http://www.gao.gov/cgi-bin/getrpt?GAO-02-69G
  37. http://www.gao.gov/cgi-bin/getrpt?GAO/AIMD-00-21.3.1
  38. http://www.gao.gov/
  39. http://www.gao.gov/
  40. http://www.gao.gov/fraudnet/fraudnet.htm
  41. mailto:[email protected]
  42. mailto:[email protected]
  43. mailto:[email protected]
  44. http://www.gao.gov/cgi-bin/getrpt?GAO-08-221
  45. http://www.gao.gov/cgi-bin/getrpt?GAO-08-221
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