FILE COpy 
GRANTEE COMPLIANCE WITH 
H:EAD START 
STATUTORY ADMINISTRATIVE COST LIMIT 
OFFICE OF INSPECTOR GENERAL

OFFICE OF ANAL YSIS AND INSPECTIONS

DECEMBER 1986
 Off ice of the Inspector General

The mission of the Off 
ice of the Inspector General 
(OIG) is to
promote the eff iciency, effectiveness and integr i ty of 
programs
in the United States Department of Health and Human Services 
(HHS) . It does this by developing methods to detect and prevent
fraud, waste and abuse. 
Created by statute in 1976, the
Inspector General keeps both the Secretary and the Congress fully 
and currently informed about programs or management problems and 
recommends corrective action. The OIG performs its mission by
conducting audits, investigations and inspections with
approximately 1, 
200 staff strategically located around the country. 
Office of Analysis and Inspections

This report is produced by the Office of Analysis and Inspections 
(OAI), one of the three major offices within the OIG. 
The other 
two are the Office of Audit and the Office of Investigations.
OAI conducts inspections which are typically, short-term studies
designed to determine program effectiveness, efficiency and
vulnerabili ty to fraud or abuse. 
This Report

Enti tled "Grantee Compliance with Head Start Statutory
Administrati ve Cost Limit, " this study was conducted to: 
(1) review Head Start administrative cost levels and trends;

(2) review the status of existing administrative cost control

methods and policies; and, (3) review the benefits to the Head

Start program of grantee administrative services. 
This report was prepared by the Regional Inspector General,

Off ice of Analys is and Inspections, Region VI. Participating in

this review were the following people: 
Ches ter Slau  hter  National  Pro  ect  Director,  OAI,  ion 
Geor  Luna  National  Lead  Anal  st,  OAI,  ion 
Tillie  Rod  ers  ort  Anal  OAI,  ion 
s t, 
Frank  Almendarez  ort  st,  OAI,  ion 
Anal 
Fer nando  ort  Anal  st,  OAI,  ion 
Leonard  Cza  ort  Anal  OAI,  ion 
s t,  GRANTEE COMPLIANCE WITH

HEAD STAFT

STATUTORY ADMINISTRATIVE COST LIMIT

DATE OF INSPECTION

RICHARD P. KUSSEROW

DECEMBER 1986

INSPECTOR GENERAL

OAI-06-86-00069  EXECUTIVE SU  ARY 
The Inspector General ini 
tiated this study in response to 
concerns voiced by Head Start officials that many Head Start 
or may soon exceed, the statutory 15 percent 
grantees exceed 

admi nistrati ve cos t limi t; that administrative costs are in need 
of greater control; and, that Head Start programs may not be
recei ving 
commensurate grantee administrative services for the
dollars paid for these services. 
to:  The purpose of the study was
(1) review Head Start developmental and administrative cost 
factors 
levels and trends, including an examination of key 
influencing these cost levels and the percentage of Head Start 
grantees approaching or possibly exceeding the statutory 15 
percent administrative cost limit; (2) review the status of 
existing administrative cost control methods and policies; and
( 3) review the benef i ts to the Head Start program of grantee
administrative services. 
findings: 
This study surfaced the following 
There is a moderate, but potentially growing, problem with 
Head Start grantees equalling or exceeding the statutory 15 
limit. 
percent administrative cost 
Grantee ,lnd Office of Human Development Services (OHDS)
regional off ice 
respondents report that policy governing 
explicit. 
grantee administrative costs is not clear and 
Reliable summary statistical data on individual and total 
Head Start grantee administrative cost levels and trends are
not available in ei 
ther OHDS central or regional offices. 
Independent audi tors do not examine grantee compliance with

the 15 percent administrative cost limi t.

Nonfederal share (NFS) contributions in excess of 20 percent, 
included in the total budget against which the 15 percent 
admini strati ve cost limi t is computed, directly affect the 
zed by grantees for
amount of Federal funds that can be utili 
administrative services. 
Grantee and OHDS regional office respondents state that
grantee compliance wi th the 15 percent administrative cost 
future. 
limit may become more difficult in the  The Inspector General reco TIends that OHDS: 
Strengthen its analysis of and controls over grantee

administrati ve costs.

Examine its administrative cost policy to provide more 
costs that 
explicit standards and examples of administrative 
will promote a more consistent definition of these costs by 
This clar ified 
grantee and regional OHDS off ice staff. 
policy standard should be issued via regulations. 
Secure the necessary Assistant Secretary for Management and
Budget (ASMB) and' Office of Management and Budget (OMB) 
additional 
clearances to institute systematic reporting of 
administrati ve cost data, 
on an exception basis, for selected 
detailed 
grantees, and require these grantees to submit a 
breakdown of administrative costs with their funding
applications. 
certification form, the 
Require grantees to show, on the self-
projected total amount of administrative costs they expect to 
incur in operating the Head Start program. 
In consul tat ion with ASMB, revi se its program regulations to 
conform to departmental audit policy and notify all Head 
Start grantees of the Department I s  audi t requirements. 
for grantees affected by the Single Audit Act and 
Request 
for grantees exceeding or determined to be at risk of 
exceeding the 15 percent administrative cost limit, any
its 
addi tional audi ts which are necessary to carry out 
responsi bi  ties to enforce the statutory limit on 
1 i  Before requesting any additional 
administrative costs. 
audi ts, OHDS shou 1d coordinate with the OIG Off ice of Audi 
(OIG/OA) to determine the most feasible way to obtain the 
audi ts and to assure that no functions of the 
organi zation-wide audi t wi 11 be duplicated. 
Conduct further study to determine whether or not NFS 
contributions in excess of 20 percent should be included in 
the total budget against which the 15 percent limi t 
compu ted  TABLE OF CONTENTS

PAGE 
EXECUTIVE SUMMARY

PURPOSE 
BACKGROUND 
METHODOLOGY 
FINDINGS AND RECOMMENDATIONS

Patterns In Administrative Cost Percentage

Levels 
Trends In Head Start Administrative Costs

Grantees Equalling or Exceeding The Statutory

Administrative Cost Limit 
Is The Statutory Provision Limiting Administrative

Costs To 15 Percent Fair And Reasonable?

Should The Head Start Administrative Cost

Limi t Be Var ied Based On Grantee Total Funding?

Is OHDS Policy Governing Head Start Grantee

Admini s tra t i ve Costs Suff iciently Clear?

Need To Strengthen Analysis And Controls On

Grantee Administrati ve Costs 
Independent Audi tors Do Not Examine Grantee

Compliance With The 15 Percent Administrative

Cos t Limi t

How Do Reg iona1 OHDS Staff Handle Problems With

Grantees Exceeding The Administrative Cost

Limi t?

Reg ional OHDS Off ices Generally Neither Encourage

Nor Discourage Grantee Indirect Cost Rates

Regional OHDS Offices Are Sometimes Not Consulted

In Establishing Indirect Cost Rates

ii i  ..  ..  ..  ..  ..
TABLE OF CONTENTS

(Continued) 
PAGE 
Head Start Program Directors ' Concerns With

Indirect Cost Rates

Statutory Administrative Cost Limit Sometimes

Prevents Full Reimbursement Of Indirect Costs

Grantee Indirect Cost Rates Fairly Distribute

The Cost Burden Among All Funding Sources

Nonfederal Share Contributions In Excess Of

Twenty Percent Included In Grantee Total Budget

Most Head Start Programs Report Receiving Adequate

Administrative Service Benefits From Grantees

Grantee Compliance with Administrative Cost Limit

May Become More Difficult In The Future

SUMMARY OF COMMENTS

ATTACHMENTS 
Attachment 1  Prof ile of Grantee Sample

Attachment  nistrati ve Cost Percentage 
Admi 
by Grantee Type

Attachment 
3 ..... Administrative Cost Percentage 
by Grantee and Cost Type 
Attachment 
4 ..... Head Start Grantees Reported Equalling 
or Exceeding Statutory Administrati 

Cos t Limi t

4-A ... By Grantee Type

4-B ... By Type Cost

4 -C ... By Reg ion

... By Funding Level

4-D 
Attachment 
5 ..... Head Start Grantees Administrative 
Cost Percentages by Funding Level  GRANTEE COMPLIANCE WITH

HEAD START

STATUTORY ADMINISTRATIVE COST LIMIT

PURPOSE 
to: 
The purpose of this program inspection was  (1) review 
Head Start developmental and administrative cost levels and 
trends, including an examination of key factors influencing 
these cost levels and the percentage of Head Start grantees 
approaching or possibly exceeding the statutory 15 percent 
limit; 
developmental and administrative cost  (2) review the 
status of existing administrative cost control methods and 
policies; and (3) review the benefits to the Head Start 
services. 
program of grantee administrative 
II. 
BACKGROUND 
For over 20 years the Head Start program has played a

significant role in the effective delivery of comprehensive

heal th, educational, nutritional, social and other services 
families. 
to economically disadvantaged children and their 
The Program is administered by the Administration for

lies 
Children, Youth and Fami  (ACYF) wi thin the Off ice of 
Human Development Services (OHDS). 
By legislation, Federal financial assistance for a Head

Start program shall not exceed 80 percent of the approved

costs of the Program. 
However, Federal assistance in 
excess of 80 percent may be approved if OHDS officials

determine that such action is required in furtherance of

the purposes of the Program. Nonfederal contr ibutions are 
to make up the rest of the grantee s Head Start total

budget. 
The grantee shall not be required to obtain 
nonfedera1 contr ibutions in excess of 20 percent of the

Program  s approved costs. 
STATUTORY ADMINISTRATIVE COST LIMIT

Head Start enabling legislation and pertinent 
regulations, P. L. 97-35 and 45 CFR 1301. 32, prohibit 
the expendi ture of more than 15 percent of the total 
and nonfedera1) for 
approved grantee budget (Federal 
the costs of developing and administering a Head Start 
program. 
Head Start funding applications in which such 
- 1 
 costs exceed thi s limi t are not to be approved by 
authorizing officials without a waiver, which is not to 
exceed 12 months in duration. Each initial and 
subsequent grant application must include a signed
certif ication that 
developmental and administrative 
costs do not exceed 15 percent of the total budget. 
Grantees must also keep records which fully disclose
the amount and disposi tion of financial' assistance; the 
total cost of the project; the amount of that portion 
of the cost supplied by other sources; and such other 
records as will facilitate an effective audit and/or 
OHDS/Heal th and Human Services (HHS) review. If audi ts 
or financial reviews disclose actual grantee 
developmental and administrative costs in excess of 15 
percent of total costs, these costs are to be 
disallowed, unless author i zed by wai ver. 
ADMINISTRATIVE COSTS DEFINED

45 CFR 1301. 2 defines developmental and administrative
costs as " 
all costs other than those which are incurred 
service, 
in carrying out the education, health, social 
and parent involvement functions. These costs include,
but are not limi 
ted to, the personnel and other costs 
of overall planning, coordination, general program 
bonding, insurance, 
direction, accounting, auditing, 
and the allocated costs of occupying, operating, and
maintaining the space utili 
zed for those purposes. 
Developmental and administrative costs may be comprised 
of both direct and/or indirect cost components. Direct 
cSotsatsr ta.r e those costs specifically incurred for Head
Indirect costs are those costs necessary for 
I s  zation, 
the operation of the grantee  overall organi 
but not incurred for the benefit of any specific 
program, such as Head Start or Meals on Wheels. 
Usually, program costs are direct charges and most 
costs. 
indirect costs are classified as administrative 
III. 
METHODOLOG Y 
This program inspection focused on five Federal OHDS

regions chosen to provide a diverse sampling of Head Start

cost control processes and administrative

administrati  ve 
cost levels. These regions were representative in terms of 
total grantees (Communi ty Action Agency (CAAJ grantees,

grantees having indirect cost rates (including a mix of

high and low total indirect cost levels J) and total

regional funding levels. Addi tionally, these regions had 
Instrument 
applied the Head Start Cost Management  (HSCMI) 
grantees. 
to a significant number of their 
- 2 
 From these five reg ions we drew a representative sample of 
120 grantees. This sample, a 10 percent stratified sample 
of the universe, reflected the characteristics of the 
national Head Start grantee population in terms of numbers, 
types and distribution of grantees. (See Attachment 1 for 
a profile of regional sample grantees. 
The inspection employed mailout questionnaires to ten 
grantees; 
regional OHDS offices and to the sample of 120 
si te vi 
on - sits to four regional off ices, where structured 
interviews were conducted with selected individuals from 
Programs, and the 
the offices of OHD  Grants Management and 
Division of Cost Allocation (DCA); review of regional OHDS 
and telephone interviews wi th a sample of 
grantee files 

67 grantee Head Start directors. The sample of Head Start
di rectors 
was selected from the 115 grantees who returned 
completed questionnaires, and reflected the characteristics 
of the grantee sample. 
Following receipt of the mail-out questionnaires, the 
on-si te interviews and records review, and the telephone 
interviews, OAI performed an in-depth analysis which 
focused on patterns and trends in Head start administrative
costs. This analysis included: 
the identification of any
grante\, exceeding the statutory administrative cost limit, 
types, 
and cost variations due to differences in grantee 
funding levels, regional locations and the effect of 
a review of the status of existing controls 
indirect costs 

on Head Start administrative costs; and a review of the 
i ts to 
reported benef  Head Start of grantee administrative
services. 
In general, summary statistical data on Head 
Start grantee administrative cost levels and trends were 
offices. 
not avai lable in either OHDS central or regional 
Therefore, administrative cost levels and trends data are
based on grantee self -report data. 
OAI did not perform 
I records. 
audi ts of grantees 
- 3 
 --- ---------- ----------.---.---.---.---------------------------.---..--.-..----.-.-------------------------
-.., , %-.
. .. .. .. ..  .. .. .. .. 
.. .. .. .. .. .. .. .. ..
IV.  FINDINGS AND RECOMMENDATIONS

PATTERNS IN ADMINISTRATIVE COST PERCENTAGE LEVELS

Admi n i str a t i ve cos ts as a percentage of total budgets 
for all sample grantees in 1983, 1984 and 1985: 
Adrninis1:..at ive  Cas  Pe.. cen  ages 
1: 
ees 
G.. arl 1: 
.(11%  12%  13%  14%  =15% 
111111111
1983  1984  1985 
Percenta 
Graph 1

- 4 
 As shown by Graph 1 and the table following, the number 
in var ious administrative 
of grantees  cost levels have 
years. 
remained relatively stable over the last three 
numbers of 
There was, however, an increasing trend in 
11 percent and 14 percent levels. 
grantees at the 
Number of Grantees At Each

Administrat i ve Cost Percentaoe Level 
1983  1984  1985  3 Year Total 
ACdomsi tn iP setrrc aetn it avoe e
 Percentaoe  Percentaqe  r-o.  Percentaae  Percentaae
( = 11  43. 16%  40 . 59  41. 90%  126  41. 86 
11 - 11. 99%  12.  15.  12. 
12 - 12. 99%  10. 
13 - 13 . 99%  18.  10.  11. 43  13. 
14 - 14.  13.  14.  16.  14. 
15 - 15. 99% 
;, = 16 
100 '!  101  99. 99  105  100 %  301  100 '! 
T ot al s 
TABLE 
Overall Administrative Cost Percentages

Total  Total  Percentage 
Head Start  Head Start  Administrat 
Year  Budoet *  Administrative Costs *  Caste to Budaet 
1983  89.  $ 10.7'! 
1984  $ 102.  $ 11. 6  $ 11. 3'! 
1985  $ 113.  $ 12.  11. 2", 
(* In Millions)  TABLE 2 
Overall average administrative cost percentages 
Ii ttle 
change from 
reported by grantees show relatively 
1983 to 1985. Total administrative costs of sample 
6 million 
grantees were reported to rise by 32% from $9. 
7 million in 1985. 
in 1983 to $12.  However, this rate 
of increase in administrative costs only slightly 
budgets 
exceeded the rate of increase in total grantee 
of 27%, accounting for only a slight overall rise 
the average administrative cost percentage of about 5% 
for the period of 1983 to 1985. 
- 5 
 mi ni stra t i ve Cos t Percentages By Grantee Type 
15 3 
CAA  L GOV  OTH  SCH B  UNIV 
IIII 
I " I " III
1983  1984  1985 
CAA - COMMUN I TY ACT I ON AGENCY  SCH  8 - SCHOOL 80A 
L GOu - LOCAL GOUE NMENT  UNIU - UNIUERSITY 
OTH - OTHE

Graph 2

An analysis of administrative cost percentages by 
grantee type shows CAA percentages rose slightly (8. 9%) 
from 1983 to 1984 and then declined slightly in 1985 
for a small overall increase of 6. 9 percent over the 
Administrative cost percentages for 
three year period. 
all other grantee types either declined slightly
rema i ned unchanged. 
Table 
3 shows the 3-year average of administrative cost 
Attachment 
percentages by grantee type.  2 shows that 
the relat i ve ranki ng of admi ni strat ive cost percentages 
period. 
by grantee type were unchanged over this same 
No.  Rank  3 Year 
Tvoe  Grantees  (Hioh To Low)  Averaae % 
Universities  13. 
Local Governments  13. 
Other  Pri vat e

Non-Profits  12.

CAAs  10. 6?, 
Schools  8. 6 
Table 3

- 6 
 It is interesting to note that CAAs, which comprise 
grantees, report 
about three-fourths of all Head Start 
an average overall administrative cost percentage of
10. 6 percent, a ranking lower than all other grantee 
types except schools. Reportedly, schools often simply 
costs of 
do not charge Head Start for the full 
administering the program. 
Comparison Of Administrative Cost Percentages For 
Grantees With And Without Indirect Cost Rates 
Total Head Start  Tot al Head Start  Percentage Administrat i ve 
Year  Type Cost  Budqet *  Administrative Costs *  Costs to Budaet 
1983  Direct  $ 65.  $ 7.  10. 
Indirect  $ 24.  10. 
1984  Direct  $ 71.4  11. 
Indirect  $ 31. 4  12. 
1985  Direct  $ 76.  10. 
Indirect  37.  12. 
* In Millions)  TABLE 4 
The overall average of administrative costs as a

percentage of total budget for grantees with and

without indirect cost rates shows some noteworthy

di ff erences, although they do not di ffer radically. 
grantees 
Average administrative cost percentages for 
with indirect costs are about 10 percent higher than
for those without. Also, average administrative cost 
percentages for grantees having indirect cost rates 
have risen by 12 percent over the 1983 through 1985 
cost-
period, whereas direct- only grantees were
unchanged. 
Average administrative cost percentages for CAAs having

approved indirect cost rates for the 3-year period were

11. 7 percent or about 16 percent higher than for
direct-cost-only CAAs (10.1 percent). The amount of 
increase in administrative cost percentages for CAAs 
having indirect costs rose by 12 percent from 1983 to 
1985, whereas percentages for CAAs wi th direct costs 
3 percent. 
only rose by  Average administrative cost 
for 
percentages were also found to be somewhat higher 
local government and other pr i vate nonprofit grantees 
wi th approved indirect cost rates than for grantees 
wi th direct costs only (see Attachment 3). 
- 7 
 TRENDS IN HEAD START ADMINISTRATIVE COSTS

In general, summary statistical data on Head Start 
grantee administrative cost levels and trends were not 
offices. 
available in either OHDS central or regional 
Partial documentation of administrative cost 
percentages was available through the HSCMI - a cost 
year. 
management system applied to grantees every third 
However, as discussed below, some of these data were 
inaccurate and had not been updated to show adjusted 
administrative cost percentages following regional
off ice - available 
grantee negotiations. Most 
administrative cost data are based on prospective or 
costs. 
budgeted costs rather than actual or audi ted 
ever, 
Annual grantee independent audits rarely, if 
costs. 
examine and document grantee administrative 
Moreover, grantee self-reported sample data, HSCMI data 
and regional questionnaire responses on administrative 
cost levels, particularly for those grantees exceeding 
agree. 
the statutory 15 percent limit, do not generally 
Grantees Equallinq Or Exceeding The Statutory

Administrati ve Cost Limit 
Data reviewed during this inspection indicate there 
is a moderate, but potentially growing, problem 
wi th grantees equalling or exceeding the statutory 
administrati ve cost limi t of 15 percent of total
budget. Grantee self -
report data, including sample 
grantee questionnaires and Head Start director 
telephone interviews, regional OHDS questionnaires 
and HSCMI summary data for 1984 all report grantees
exceeding the limi 
t by varying degrees. 
Grantee Self-Report Data

As shown by Table 1 on page 4, an average of
about l  4, or 23 
out of  percent, grantees 
reported administrative cost levels of 14 
percent or higher for the 3-year period. Seven
of 
95, or 7. 4 percent, in 1983; 10 of 101, or 
105, or 7. 
9 percent, in 1984; and 8 of 
percent, in 1985, of the lgirmanitte.e s equalled or 
This represents
exceeded the 15 percent 
an yearly average of 8. 
3 percent of sample 
grantees who reported equalling or exceeding
the administrative cost limit. 
- 8 
 At tachments 4A-4D provide breakdowns of 
grantees equalling or exceeding the limit by 
grantee type, regional location, presence or 
absence of an indirect cost rate and grantee 
funding level. A total of 25 grantees equalled 
or exceeded the limit during the 1983 through 
1985 period. Of these, 17 or 68 percent were 
CAAs, 4 or 16 percent were local governments, 
3 or 12 percent were other private nonprof i ts 
and 1 was a school board. The percentages of
CAAs and other pr i vate nonprof its over the 
limi t correspond almost exactly wi th the 
percentages of these grantees in our sample. 
The percentage of local governments over the 
limi t is double their representation in our
sample. 
limit,
Of grantees equalling or exceeding the 
17 or 68 percent were grantees wi thout indirect 
cost rates and 8 or 32 percent had approved 
indirect cost rates. These figures correspond 
qui te closely wi th the percentages of such 
sample. 
grantees in our  However, the 
distribution of grantees over the limit 
according to OHDS regional location was not 
proportional to numbers of sample grantees from 
each region. Regions II and IV were somewhat 
overrepresented in that 72 percent of grantees
over the 1imi t came from these regions, whereas 
their grantees comprised only 47 percent of our 
sample. By contrast, Reg ions VI and VI 
particularly Region VII, were underrepresented 
in grantees over the limi t. There does appear 
to be a correlation between a lower number of 
grantees reported over the limi t in these 
regions and the somewhat more thorough and 
systematic reviews of administrative cost 
levels noted in these two regions during our
inspection. 
A review of grantees equalling or exceeding the 
limi t according to funding level shows a 
concentration of excessive administrative cost 
rates among smaller si zed grantees. For 
example, 10 grantees or 40 percent had total 
budgets of $500, 000 or less and 10 grantees, 
and another 40 percent, had total budgets
ranging from $500, 000 to $1 million. While 
grantees of this size comprised about 
percent of our sample they consti tute 80 
percent of total grantees over or equal to the 
the three year period. Stated 
limi t dur ing 
differently, 34. 5% or about 1 of every 
- 9 
 grantees below $5l0i0m, 0i0t0.  in our sample equalled 
or exceeded the  Likewi se, among very 
large grantees, those with budgets ranging from 
$3 to 5 million, three of six, or half of the 
limit. 
sample grantees, exceeded the 
The above indicates a si zable number of 
grantees may merit increased management
at tent ion to assure their compliance with the 
15 percent statutory limit.

Other Data Sources On Administra ive Cost

Compliance 
Limi t 
Head Start Cost Management Instrument

The HSCMI system, which called for a fairly

rigoious breakdown of grantee administrative

and program costs, typically showed higher

administrati ve cost percentages than grantees 
and regional OHDS staff report. For example,

our 
in 1984, 73 of the grantees included in 
sample had the HSCMI reviews. Of these 73

grantees, a total of 18 or 25 percent were

found to exceed the 15 percent administrative

cost limit. By contrast, only 10 sample

eded the 1imi t 
grantees reported they had exc 
in 1984, and OHDS staff in our sample regions

reported only 5 grantees were over the limit 
that year. 
dur ing  OHDS staff in Reg ions II, IV 
and X say these substantial differences ianriet ial 
largely accouhted for by the fact that 
inputs of HSCMI administrative cost data were

usually not adjusted to reflect regional office

corrective actions to adjust administrative

levels. 
cos ts downward to acceptable 
Regional Staff Views On Grantees More Apt To

Exceed The 15 Percent Administrative Cost

Limi t

Eight of ten regional OHDS offices believe 
certain types of grantees are more likely to
have problems in complying wi th the 15 percent 
than others. Among 
administrati ve cost limi t 
the commonly listed "problem " grantees are 
small budget grantees; local government and 
school grantees; large multi-layered or 
multiple delegate agency grantees; and grantees 
wi th " high" indirect cost rates who bill trhaete s. 
full amount authorized by their approved 
- 10 
 Small agencies reportedly have more problems

limi ted 
due to the  funding base over which they 
must spread a minimum essential core of 
administrative services. Local governments and 
school di str icts contend they sometimes have
ies, 
di ff icu1 ties due to their high salar 
tenured staff or excessive administrative
overhead. 
Administrative costs also mount up 
quickly for very large multilayered 
very  grantees. 
agencies or multiple delegate agency 
Finally, those agencies whose funding base
bei ng eroded through loss 
of programs or 
reduced budgets are also more liable to have 
difficulty staying under the administrative
cost limit. 
OHDS ADMINISTRATIVE COST POLICY

Is The Statutory provision Limi ting Administrative 
Costs To 15 Percent Fair And Reasonable? 
A major i ty of respondents, including 74 percent of 
directors, 
grantees and 69 percent of Head Start 
state that the statutory provision limiting 
administrative costs to 15 percent of total Program 
costs is generally fair and reasonable.
Seventy-one (71) percent of grantees with direct
costs only and 81 percent of grantees wi th indirect 
cost rates responded that the administrative cost 
limi t is fair and reasonable. 
As shown by the following, administrative costs are

higher for grantees stating that the 15 percent

1imi t is not fair and reasonable.

Limit F air and  Years/Administrative Cost Percentane 
Reasonab Ie  1983  1984  1985 
YES  10 . 14%  10. 23%  10. 28% 
11.  13.  12. 
The main reason why some grantees and Program 
directors think the administrative cost limit 
not fair and reasonable is that grant funding
awards have not kept pace wi th increased program
administrative costs. 
- 11 
 Should The Head Start Administrative Cost Limit Be

Var ied Based On Grantee Total Funding?

Though a major i ty 
of grantees generally consider 
fair 
the 15 percent administrative cost limit as 
and reasonable, many state that the limit should 
funding. 
perhaps be varied based on grantee total 
Five of the ten regional OHDS off ices also 
expressed this opinion. 
Administrative Cost Limit 
ResDondents  Should Be Varied 
113 Grantees  62% 
67 Head Start Directors  37% 
10 Reqional OHDS Offices  50% 
Reasons for preferring an administrative cost limit 
tha t var i es based on grantee total fundi ng are as
follows: 
Single purpose agencies, unlike  multipurpose
have  no other funding sources to 
wagenhcieis, ch they can charge the bas i c  core of
administrative  services. 
Small grantees need more administrative dollars

to obtain qualified staff and to cover core

administrative services. 
Larger programs need larger staff to operate

efficiently. 
Data received from Head Start grantees suggests 
there is a fairly consistent inverse relationship 
between grantee total budget and average 
nistrati ve cost percentages. 
admi  For example, 
average administrative cost percentages are highest 
for grantees with the smallest budgets, declining 
steadily from the $500, 000 and under level through 
Administrative cost 
the $ 3 million level. 
large,
percentages appear to rise again for the 
multilayered grantees wi th budgets totalling more 
than $3 million. This pattern is consistent with 
feedback from regional OHDS personnel concerning 
grantees most apt to have problems complying with 
grantee 
the administrative cost limi t, and wi th 
reported statistics on exceeding the limi t (see
Attachment 5). 
- 12 
 g ., 
 ------
As OHDS develops more complete and accurate

administrative cost data on its grantee population

it might be advisable to assess the

cost-effecti veness and appropr iateness of employing 
administrative cost limits that vary by grantee

funding level. 
3 .	 Is OHDS Policy Governing Head Start Grantee 
Administrative Costs Sufficiently Clear? 
The extent to which the OHDS policy governing

administrative costs is clear, explicit and

uniformly interpreted by grantees and regional OHDS 
staff varies considerably, depending on the

respondent. 
For example: 
Po1icy Clear And Explici t? 
While 
40 percent of the OHDS staff contacted stated 
that such policy is not clear and explicit, only 
agreed. 
percent of the responding grantees 
Policy Uni formly Interpreted By Grantees And

Regional OHDS Staff?

Percentage Indicating 
Policy Not Uniformly

Interoreted 
Resoondents  By Grantee  By OHDS Staff 
109 Grantees

20 Regional OHDS Staff  65%  25%

10 Reoiona1 OHDS Offices  40%

ACYF Information Memorandum 83-9, dated April 11, 
1983 includes examples of costs that may be 
considered administrative. Certain costs may 
benefit both direct program as well as 
strati ve functions (e. 
admi ni  the salary and 
benef i ts of a Head Start director who performs both 
functions). 
program and administrative 
That OHDS policy does not specifically indicate 
what percentage of certain costs should be 
admini strati ve or programmatic is cited as the main 
reason for administrative cost policy not being 
uniformly interpreted by grantees and regional OHDS
staff 
(e.g., some regional OHDS offices may 
- 13 
 clas s i fy the salar ies and benef i ts of certain 
grantee staff (Head start director) as 100 percent 
administrative, yet grantees may classify the same 
40 percent
cost as 60 percent programmatic and 
administrative) . 
RECOMMENDATION 
OHDS should examine its administrative cost policy in

ACYF Information Memorandum 83-9 with a view to

providing more explicit stawndialrld:s  and examples of

administrative costs that  (1) promote a more
consistent defini tion 
of these costs by grantee and
regional off ice 
staff, and (2) assure more uniform 
interpretation and enforcement of this policy. 
provide a more firm basis for regional office 
enforcement, this clarified policy standard should be 
as an information 
issued via regulations, rather than 
memorandum. 
STATUS OF OHDS CONTROLS ON GRANTEE ADMINISTRATIVE

COSTS 
Head Start enabling legislation and pertinent

program. 
regulations prohibit the expenditure of more than 15

percent of the total approved grantee budget for the

costs of developing and administering a Head Start

Responsibilities And Methods For Verifying

Compliance With The Administrative Cost Limit

Officials at eight of the ten regional OHDS offices 
state that responsibili ty for ensuring Head Start
grantee compliance wi th the 15 percent 
administrative cost limit is shared by both Office 
of Financial Operations (OFO) and Head Start 
program officials. At the other two regions 
program officials are viewed as having total 
function. 
responsibi1i ty for this 
Ver i fying compliance wi th the developmental and 
administrative cost limit has been accomplished by 
several methods: verifying that the grantee 
bmi ts a signed certification that these costs do 
budget; 
not exceed 15 percent of the total 
performing a cost analysis of the grantee s budget 
at time of funding; and/or completion of the 
HSCMI . 
- 14 
 Certi f ication 
Of Head Start Administrative 
Cos ts 
. certification that 
developmental and 
administrative costs for a program year will 
not exceed 15 percent of the total budget is to 
be signed by an official from the grantee and 
submi tted with each budget proposal. This
certi f ication also 
states that documents to 
substantiate these costs are available in the 
grantee 
s files for review by audi tor and 
OHDS/HHS personnel. 
Budget Analys is 
Regional OHDS grants management staff, in

coordinat ion wi th Head Start program off icia ls , 
e responsible for performing a cost analysis 
of Head Start grant awards prior to funding to
determine the necessi 
ty, reasonableness and 
allocability of the costs reflected in the 
grantees I budgets. 
Head Start Cost Management Instrument

In recent years OHDS began developing a cost 
management instrument, the HSCMI, designed to
provide addi 
tional information on grantee 
factors. 
program and administrative cost  As it 
costs, the HSCMI 
pertains to administrati  ve 
requires that detailed administrative cost data 
be provided by the grantee. Regional OHDS 
staff generally agree that this instrument 
adequately breaks out administrative costs and, 
therefore, provides an effective means for 
costs. 
monitoring of these 
The HSCMI is, as a rule, to be completed every

three years for each grantee. OAI found that 
the HSCMI, in six OHDS regions was being 
completed by ACYF; in two regions by ACYF and 
OFO jointly; and in two regions by the
grantees. 
In most instances the instrument was 
completed after telephone and/or wr i tten 
communication between the regional offices and 
the grantees. 
- 15 
 inspection, 
Subsequent to the start of this 
OHDS submi tted the HSCMI to the Off ice 
Management and Budget (OMB) for approval as a 
public use document. 
The HSCMI was not approved as a public use
document. 
As a result, OHDS cannot request 
grantees to complete the HSCMI themselves, nor 
can grantees be requested to prepare data so 
instrument. 
that OHDS staff can complete the 
The only permitted use is for Head Start staff 
to extract data during on-site visits to the 
grantee and to gather data from existing OHDS 
sources. 
Need To Strengthen Analysis And Controls On

Grantee Administrative Costs

Many regional OHDS staff state there are no 
requirements for grantees to submi t detailed 
administrati ve cost data wi th their funding 
certification 
applications; that grantees ' signed "
that such costs do not exceed the 15 percent cost 
1imi t is suff icient to satisfy OHDS requirements; 
that completion of the HSCMI required this detailed 
data be reviewed by OHDS staff; and that their 
years of exper ience in working with grantees 
sufficient to alert them to problems in this area. 
As a result, cost analyses of Head Start 
grant applications do not generally involve a 
thorough, systematic review, nor do they determine 
costs. 
the specific level of grantee administrative 
Regional OHDS Cost Analysis Efforts Are Weak

The thoroughness of review of administrative costs 
region. 
varies significantly from region to 
Grantee records are generally not documented with 
resu1 ts of cos t analys is. Whi Ie the grantees 
certification 
signed "  " indicates that 
administrati ve costs do not exceed the 15 percent 
limi t, it does not indicate the actual percentage 
and amount of such costs. Therefore, not only does 
OHDS not know the actual level of administrative 
costs, it is also unable to determine what such
costs should be (i. 
e., are they necessary,
reasonable (excessive) and allowable). 
- 16 
 Some regions report that lack of time and staff
prohibi t them 
from conducting detailed cost
analyses. 
Need To Upgrade Regional Cost Analysis Efforts

Chapter 15 of the OHDS Grants Administration Manual 
sta tes, in part, that grants management staff, in 
coordination with program office officials, are 
responsible for perfo ming a cost analysis of Head
Start funding applications pr ior to funding to assure 
that grantee costs are necessary, reasonable and
allowable. 
The extent of a cost analysis will vary 
among projects and shall be determined on the basis 
of the amount and types of costs involved, the nature 
grantee. 
of the project and past experience with the 
A cost analysis may consist of an arithmetic 
verification to assure that computations are correct, 
a review to assure that costs identified are 
allowable, and, if applicable, a determination of the 
consistency of charges between direct and indirect 
costs, as well as the application of the proper
indirect cost rate. 
L. 97-35, Section 644(b) states, in part, that in

any case in which it is determined that the costs of

administering a Head Start program does not exceed 15

percent of such total costs but is excessive, the

grantee shall be required to take such steps

prescribed by OHDS as will eliminate such excessive

administrative costs. 
Need For Detailed Administrative Cost Data

Each regional OHDS office, at its own discretion, may 
require detailed administrative cost data from Head' 
Start grantees. At 
ten regional OHDS offices: 
One does request grantees to submit detai led 
applications. 
administrative cost data with their 
One requires grantees to place an asterisk by

those costs considered by the grantee to be

ve.
administrati 
One required such detai 
led cost data only if it 
appeared that the 15 percent 1imi t would be

exceeded; however, beginning with FY 86 budget,

grantees wi 11 be requested to submit such
detai led data 
wi th each grant proposal. 
- 17 
 One, beginning with FY 86 budgets, has begun to

greater 
review these administrative costs in 
detail, by having developed a form on which OFO

will list the administrative costs after

reviewing the grantee s application.

Six do not request grantees to submit detailed
administrati ve cost data 
wi th their applications. 
Of 20 (8 OFO; 12 ACYF) regional OHDS staff 
interviewed at four regional OHDS offices, 11 stated 
that detailed administrative cost data should be 
required wi th all grantee applications; 4 stated that 
it should not be a requirement because of differences 
between regional office and grantees in the 
interpretation of what is/is not an administrative 
cost, and because this data could be obtained upon 
completion of the HSCMI every 3 years; and 1 stated 
that it would not be possible to get this information 
because the grantees themselves cannot determine what 
cost. 
is/is not an administrative 
There are no OHDS grant application guidelines that
require grantees to. 
submi t detailed administrative 
cost data wi th their funding applications. However, 
such requirement is implied by both the OHDS Grants 
Administration Manual and P.L. 97-35, if a grantee 
level of such costs is to be determined necessary,
reasonable and allowable. 
OHDS Shou1d Reexamine Its Intended Usage Of The

HSCMI 
Al though OMB has not approved the HSCMI as a public 
use document, Regional OHDS staff generally regard 
this instrument as a good tool for measuring overall 
grantee costs. Many of them state that completion of 
the HSCMI will provide the necessary breakdown of 
cost data to determine the level of administrative 
cos ts . Some state that annual completion of this 
instrument would take care of problems in this area. 
ty for all 
However, ACYF staff who have responsibili 
aspects of the HSCMI preparation and input into the
national data base have ci 
ted the following
problems: 
Data entry is a long tedious process due to the

number of entries required and the frequent poor

system response time. A single HSCMI may take

6 hours to input. 
from 2 to 
- 18 
 Staff shortages make it difficult to handle the

current HSCMI data input requirements.

Annual preparation might result in diminishing

returns, in that this staff feels most grantees

budgets do not change very much from year to

year. 
Another problem now facing OHDS is that grantees can 
no longer be requested to complete the HSCMI, nor can 
grantees be requested to prepare data so that OHDS 
staff can complete the instrument. As previously 
stated, the only permi tted use is for Head Start 
staff to extract data during on-site visits to the 
grantee and to gather data from existing OHDS 
sources. 
While many regional OHDS staff state that their years

of experience in working with grantees will alert 
them to any problem (s) in this area, not only is the 
known, but 
yearly level of administrative costs not 
it is also not known if this level is excessive. 
Also, in the event of staff turnover, the new staff 
ience in working wi
member (s) may lack exper 
grantees. 
RECOMMENDAT IONS

OHDS should change the self-certification form to 
require grantees to show the projected total amount of 
incur in 
administrative costs the grantee expects to 
running the program, not only that administrative costs 
budget. 
are under 15 percent of total 
2 .	 OHDS should require selected grantees  (i. e., those 
whose administrative costs exceed, equal or closely 
approximate the statutory administrative cost limit) to 
submi t a detailed breakdown of administrative costs 
with their funding applications. OHDS should secure 
institute 
the necessary ASMB and OMB clearances to 
systematic reporting of addi 
tional administrative cost 
grantees. 
data, on an exception basis, for these 
3 .	 Reg ional OHDS staff should utili ze this data in 
analyzing the amount and appropriateness of
costs. 
These cost analyses reviews 
administrati  ve 
should carefully and clearly document and control the 
portion of time allocated to administrative and
programmatic acti vi ties by all key grantee staff from 
year to year. 
- 19 
 Cost analysis findings should be systematically 
documented in grantee files each year to establish a 
toring. 
baseline for moni  Regional OHDS staff should 
accumulate summary records on administrative costs for 
tor ing and management needs. 
ongoing moni 
5 .	 For grantees with indirect cost rates, regional OHDS 
staff should check to avoid duplicate billing of costs 
as both direct and indirect by reviewing the makeup of 
the indirect cost pool against other administrative 
costs items. 
6 .	 In light of OMB not approving the HSCMI as a public use 
document, OHDS should examine the HSCMI to determine 
this instrument can be utilciozesdt sb.y  Iift s staff to stay 
abreast of administrative  OHDS determines 
should: 
that the HSCMI can be utilized, it 
Review the feasibility of completing this 
instrument, at least the administrative costs 
grantee. 
section, on an yearly basis for each 
Assure that regional grants management staff

responsible for cost analysis of grantee budgets

routinely consult the last HSCMI findings on

administrative costs during their cost analysis

ties. 
acti vi 
Make the necessary systems adjustments that would

reduce the two to six hour system response time

when HSCMI data input occurs.

3 .	 Independent Audi tors Do Not Examine Grantee 
Compliance With The 15 Percent Administrative
Cost Limit 
L. 97-35, Sections 647(a) and (b), state, in 
part, that recipients of financial assistance shall
keep such records as will facili 
tate an effective 
audi t; and that the Secretary or any of his duly 
authorized representatives shall have access for
the purpose of audi t and examination to any books, 
recipients 
documents, papers and records of the 
that are pertinent to the financial assistance
recei ved. 
- 20 
 Head Start program regulations at 45 CFR 
1301. 12(a), state, in part, that an audit of the 
Head Start program covering the prior budget period 
of each Head Start grantee and its delegate 
agencies, if any, shall be made by an independent 
to determine: 
audi tor  (1) whether the grantee 
financial statements are accurate; (2) whether the 
grantee is complying with the terms and conditions 
of the grant; and (3) whether appropriate 
financial and administrative procedures and 
controls have been installed and are operating
effecti vely. 
No distinction is made between State 
i t grantees. 
and local government and nonprof 
The Single Audi t Act of 1984 requires State and 
local government grantees participating in the Head 
Start program to obtain independent 
organi zation-wide audits of their operations. OMB 
Circular A-128 was issued pursuant to this Act and 
grantees. 
established audit requirements for these 
74, state 
Departmental Regulations at 45 CFR Part 
tha t recipients that are governments shall comply
wi t h requirements concerning nonfederal audits 
OMB Circular A-128; and recipients that are not
governments shall comply wi th the requirements in 
OMB Ci rcular A-IIO. 
OMB Circular A-IIO requires all other Head Start 
program grantees to obtain nonfedera1
insti tution-wtisde.  audi ts in lieu of individual 
program audi  The Assistant Secretary for 
Management and Budget (ASMB) and the OIG/OA 
indicate that some confusion may exist among Head 
Start grantees as a result of conflicts between 
this OMB Circular and Head Start program audit
requi rements . 
Per ASMB and OIG/OA, grantees that are not

governments are to be audited following Circular

IIO guidelines. 
Therefore, OHDS is out of 
compliance wi th departmental regulations by
requiring, per 
45 CFR 1301. 2(a), audits of Head 
Start programs using the Head Start Audi t Guide. 
Per OHDS, until audit guidelines similar to those 
delineated in Circular A-128 are issued for 
grantees that are not governments, it may continue 
to require audi ts of nongovernment Head Start 
programs using the Head Start Audit Guide. 
However, if a nongovernment grantee requests an 
organi zation-wide audit, OHDS will comply with the 
request and accept the results of the audi 
- 21 
 ASMB and OIG/OA recognize that the issue of whether 
grantees that are not governments are to be audited 
following Circular A-IIO or 45 CFR 1301. 2 (a) 
requirements may not be totally resolved until the 
issuance of a revised OMB Circular A-llO, but they 
view the existing Head Start regulation as 
particularly misleading to these grantees. ASMB 
and OIG/OA feel that OHDS must take some interim 
immediate action to resolve confusion among the 
Head Start grantee community. 
Compliance review guidelines for grantees that are 
not governments do not exist. Guidelines 
established by Circular A-128 are used when 
under Circular A-IIO. 
performing audi ts  However, 
these review guidelines do not include review of 
the 15 percent administr  ivecost limit. 
addi tion, none of the audi t standards currently 
being used by independent auditors when auditing 
Head Start grantees mention review of grantee 
records to determine compliance with the 15 percent
administrative cost limit. 
At four regional OHDS offices, OAI reviewed

independent audit reports on 16 Head Start grantees

and did not find any evidence that Program

independent audits address grantee compliance wi 
nistrati ve cost 
the 15 percent admi  1imi t. 
Among regional OHDS offices there is a definite 
difference of opinion as to whether the annual 
Program audit should specifically review compliance 
with the 15 percent limit: five regions stated 
that the limi t should be addressed; four regions 
stated that it should not; and one region stated 
yes (OFO) and no (Programs). 
Reasons for "Yes" Res onses: 
(1) 15 percent limit is a statutory requirement and

(2) should be reviewed.

Most cost effective way for OHDS to monitor this
area yearly.
Pr id  sts. 
Reasons for  " No " Res onses: 
(1)  Will result in excess Head Start program audit 
costs. 
(2) There is usually not a clear audit trail of

costs, as grantee financial records do not

(3) always break out this information.

Audit period would not always be the same as

the program year.

single audit" (i.

(4) Won't matter if go to "
audit encom assin all rantee ro rams).

- 22 
 Per the Single Audit Act and OMB Circular A-128, to 
the extent that the organi zation-wide audit 
provides OHDS wi th information and assurances 
needed to carry out its overall responsibilities, 
information. 
it shall rely upon and use such 
However, OHDS can request any additional audi ts 
which are necessary to carry out its
responsibili ties under Federal law and regulations. 
Such additional audits can include economy and
ef f ic iency audi ts, program result audits, and 
program evaluations. Any additional audi t effort 
shall be planned and carried out in such a way 
wide audit, 
to avoid duplication of the organization-
and OHDS shaallu adrriatn.g e for funding the cost of any 
addi tiona1 
RECOMMENDATIONS 
its 
OHDS, in consultation with ASMB, should revise 
program regulations to conform to departmental audit

policy and notify all Head Start grantees of the

Department'  requirements. 
s audi t 
2 .	 OHDS should develop compliance review guidelines that 
will address grantee compliance wi th the 15 percent 
admini strati ve cost limit when grantees are audited 
110. 
under OMB Circulars A-128 and A- OHDS should 
request OIG/OA assistance in developing these
guidelines. 
These guidelines should be based upon a 
more explicit and consistent definition of 
administrative costs as issued in OHDS regulations, as 
recommended on page 14. 
3 .	 OHDS should request, for grantees affected by the 
Single Audit Act and for grantees exceeding or 
determined to be at risk of exceeding the 15 percent
administrati ve cost 
limit, any additional audits which 
are necessary to carry out its responsibilities to 
costs.
enforce the statutory limit on administrative 
Before requesting any additional audi 
ts, OHDS should
coordinate wi th OIG/OA to determine the most feasible 
way to obtain the audits and to assure that no

functions of the organi zation-wide audit will be

duplicated. 
How Do Regional OHDS Staff Handle Problems With

Grantees Exceedinq The Administrative Cost Limi t?

Sparing Use of Waiver Authority

OHDS policy (ACYF-IM-83-9) author i zes Head Start 
officials to grant waivers of up to 12 months
duration to cover si 
tuations where grantees expect 
- 23 
 limit. 
to exceed the administrative cost  However, 
regional questionnaires indicate only very sparing 
use of this authority. Over the 3-year study 
period only 16 waivers were requested, with
granted. 
HalIfI Iof.  these requests and approvals were
from Region  In 1985 only three waivers were 
III, 
requested and granted, 1 each in Regions 
V and X. It appears that most regions prefer 
negotiations or corrective action to reduce 
rather 
potentially excessive administrative costs 
than waivers authorizing them. 
No Disallowances Of Excessive Administrative Costs

OHDS policy also specifies that when excessive
actual administrati 
ve costs are discovered by audit 
or financial review "the excessive administrative 
costs shall be disallowed"  During 1983, 1984 and 
ever 
d198i5 snoane lofl othew 10 iOHnDS greg iaonsd remportiedn  istrative costs 
6ver the 15 
percent limi t when such costs were detected 
subsequent to funding awards through audits or
financial reviews. 
This is not surprising in view 
of the fact that reg ions report audits rarely, 
ever, address administrative cost compliance. 
Prefer 
Prefunding Negotiation - The Method Regions 
Prefunding negotiation between the regional OHDS 
staff and grantee is the preferred method for
dealing wi th administrative costs known or expected 
to exceed the 15 percent limi t. Regions try to get 
agreement on what costs are administrative and then 
seek voluntary grantee compliance on corrective 
reduce. Regions report 
actions or target areas to 
a wide variety of means may be used to reduce 
including: 
overall administrative costs 
Reorganizing and eliminating or combining staff

posi tions. 
Revising position descriptions.

Revising or reallocating staff hours expended

functions. 
on program versus administrative 
Increasing grantee nonfedera1 share

contributions to expand the base for computing

the 15 percent limi 
full 
Disallowing indirect costs billed whenever 
payment would push the grantee over the 
statutory 15 percent limi t. 
- 24 
 " front-
Doubtless, such  end" controls help hold down 
administrative costs. However, the extent to which 
such prefunding adjustments of budgeted or projected 
administrative costs result in real decreases in actual 
administrative costs, rather than mere bookkeeping or 
paper changes, can only be verified by audits of 
actual costs. Unfortunately, thi s rarely occurs. 
INDIRECT COSTS

OMB Circular A-122 "Cost Principles for Nonprofit

Organi zations " and other OMB circulars govern the

definition of indirect costs and the calculation of

indirect cost rates for Head Start grantees.

Indirect costs are those costs which cannot be 
specif ica11y 
identif ied wi th a particular project or 
program but are nevertheless necessary to the operation 
of an organi zation and the performance of its programs. 
facilities, 
The cost of operating and maintaining 
equipment and grounds; depreciation or use allowances; 
administrative salaries and supplies are typical 
examples of the type of costs which are usually 
considered as indirect costs at nonprofit 
organi zations. 
In theory, these types of costs might be charged
directly. 
However, this approach is usually 
impractical for many grantees. These costs, therefore, 
are grouped into a common pool and distributed to
ting acti vi ties 
benef i  by a cost allocation process. The 
end product of this allocation process is an indirect 
cost rate which is applied to individual projects 
supported by grants, contracts and other agreements 
wi th the Federal Government to determine the amount of 
ject. 
indirect costs applicable to each pro 
The indirect cost rate is a ratio, expressed as a 
percentage, of the indirect costs to a direct cost
base. 
The direct cost base is usually either total
direct cost 
(not including capital expenditures and 
other distorting items) or direct salaries and wages. 
The base selected must produce an equitable
distribution of indirect costs. 
These costs are 
reimbursed based on a cost rate, subject to statutory 
or administrative limitations, as part of the total
cost of indi 
vidual awards. 
- 25 
 ). 

Indirect cost rates are established by agreement
between the organi zation and a cogni zant Federal agency 
that acts on behalf of all Federal agencies
zation. 
approving rates wi th the organi  With limi ted 
exceptions, the Division of Cost Allocation 
(DCA) in 
the Regional Administrative Support Center 
responsible for approving indirect cost rates for all 
HHS grants and contracts. 
Obtaining An Indirect Cost Rate

costs 
All grantees desiring reimbursement ofr aitnedi.r ect 
must have a negotiated indirect cost  The 
grantee, to obtain an approved rate, will submit an 
DCA. 
indirect cost rate proposal to the  Along with the 
proposal, the grantee submits financial information and 
statements (usually in the form of consolidated 
financial statements or independernta taeud.i ts) to 
The proposal 
substantiate its request for the 
and financial information is then reviewed in 
accordance with regulations. 
The DCA will ascertain that only allowable costs are 
inc1 uded in the indirect cost pool for reimbursement; 
that the indirect cost allocation procedures fairly 
distribute the costs among all of the grantees 
programs; and that there is no duplicate billing of
serviaes (i . e., billing for a service as both a direct 
and indirect cost). After all required actions are 
indirect 
completed, the DCA advises the grantee of the 
cost rate to be used. 
The approved rates are
formal i zed by a Negot iat ion Agreement which reflects 
the rates and information directly related to the use

of the rates (e.g., effective dates, base, etc.  The 
Negotiation Agreements are published as part of an

overall Departmental system and are to be distributed

to all awarding agencies.

Grantees have obtained indirect cost rates primarily

for the following reasons:

administrative cost reimbursement through direct

charges was inadequate; 
reg ional OHDS off icials required or encouraged
thi s 
reg iona1 DCA off icia1s encouraged this; 
- 26 
 . .
State Communi ty Service Block Grant officials

required this; or

this. 
other grantee administered programs required 
Regional OHDS Offices Generally Nei ther Encourage 
Nor Discourage Grantee Indirect Cost Rates

Of the ten regional OHDS off ices contacted.

Seven neither encourage nor discourage grantee

indirect cost rates. 
One discourages grantees from obtaining

indirect cost rates because ndirect costing

provides a better picture of administrative

costs and allows for more effective OHDS

monitori ng of such costs. 
Two encourage grantees to obtain indirect cost 
rates, one because of "DHHS Grants
Administrative Policy, 
" the other because it is 
s fair
a fair method of determining a program 
share of grantee costs. 
2 .	 Problems Encountered With Indirect Cost Rates 
Approved By The DCA 
Regiona1 OHDS Offices Are Sometimes Not Consulted

In Establishing Indirect Cost Rates

Departmental guidance from the Off ice
Procurement and Ass istance Financial Management, 
dated June 30, 1982 was sent to all the DCAs 
wherein they were directed to provide copies of 
indirect cost proposals from mUltiple-purpose Head 
Start grantees to the OHDS staff for their review
and comment pr ioI ri ntdo irtehec tn ecgoostita rtaioten sa.n d approval
On July 20,
of the grantees 
1983 this guidance was followed by another 
memorandum to the DCAs requiring them to note on 
the Negotiation Agreements the specific components
of the indirect cost pool. 
This was done so that 
applications, 
OHDS staff, when reviewing grant 
would be aware of what costs were treated as 
indirect so they could ensure that the same costs 
were not proposed, and approved, as direct costs in 
- 27 
 the grant award. 
This information was to be 
provided to aid OHDS staff in reviewing grantee 
compliance wi th the 15 percent administrative cost
limitation. 
Despite this guidance, so long as
grantee proposals complied wi th OMB guidelines, a
few reg iona1 DCA off ices were not convinced of the 
facet 
benef it of or need for involving OHDS in any 
of approving indirect cost rates. 
DCA offices in seven regions usually consult with 
OrHaDtSe s.t aff prior to approving iannc liunddier:e ct cost
(1) ,advising 
This consultation may 
OHDS staff that a grantee rate proposal has been
recei ved; 
(2) providi ng OHDS staff with a copy of 
ascertaining that 
the proposal for review (e. g., 
there is no duplicate billing, and reviewing the 
necessi ty of such costs); and (3) requesting OHDS

comments based on the review or on staff'

knowledge of a grantee s operation.

Though no action (s) may result from thei r review, 
OHDS offices in these regions state that they at 
least stay abreast of those grantees that obtain 
indirect cost rates, and if questions concerning
indirect costs ar 
ise, they are able to readily 
respond to them.

DCA respondents at the other three regions state

they do not advise OHDS staff of grantee requests 
because: 
for indirect cost rates  (1) there is no 
requirement to do so, and (2) they used to advise 
and/or provide copies of the requests, but stopped

after never recei ving any comments.

Other OHDS Indirect Cost Rate Concerns

At four regional OHDS offices, over one-half of the 
staff interviewed reported other problems with the 
indirect cost rates approved by the DCA: 
Fi ve believe rates are too high at times and, 
therefore, cause some grantees to exceed the

percent administrative cost limit. 
Three state that potential for duplicate
billing exists (i . 
e., billing certain costs as
both direct and indirect). 
- 28 
 Two are not sure how the indirect cost rate 

calculated. 
One states that the Program does not receive a

commensurate level of administrative services

for the amount paid.

Head Start Program Directors ' Concerns With

Indirect Cost Rates

Program directors interviewed in grantees having

indirect cost rates, expressed several concerns

grantees: 
with the indirect costs charged by 
Three state that the Program does not receive a

commensurate level of administrative services

for the amount paid.

Two state that the Program was charged more than 
costs. 
what was budgeted for administrative 
Two state that directors are not involved 
rate. 
the establishment of the indirect cost 
One states that Policy Board members do not

understand the effects of obtaining an indirect

cost rate. 
RECOMMENDATION 
Regional OHDS offices should be actively involved in the

review of indirect cost rates, including obtaining copies

of indirect cost rate proposals from the DCA; reviewing

these proposals and being able to communicate any findings

to the DCA for appropriate action; and receiving copies of

rates. 
the final approved indirect cost 
3 .	 Statutory Administrative Cost Limit Sometimes 
Prevents Full Reimbursement Of Indirect Costs 
Some programs, including Head Start, have limi ts on

the amount they will pay for administrative and

indirect costs. 
The result is that the grantee 
often unable to recoup the full amount of indirect

administers. 
costs due from the programs it 
Of the ten regional OHDS offices contacted, seven

sta ted they wi 11 reduce reimbursement of grantee 
indirect costs if full payment will cause total

administrati ve costs to 
exceed the 15 percent 
administrati ve cost 1imi 

- 29 
 OMB circulars and OHDS policy clearly allow Head 
Start grantees to obtain indirect cost rates and to 
costs. 
Nevertheless, 
bill the Program for indirect 
limit, 
because of the statutory administrative cost 
OHDS does not fully reimburse indirect costs when 
adding them to other grantee administrative costs 
would result in the grantee exceeding the 15 
percent limit. In other words, indirect costs 
billed are used as a final adjusting item to hold 
limit. 
grantees under the 15 percent 
RECOMMENDATION 
OHDS should issue a policy notif ication to grantees 
apprising them that this practice will be commonly used to 
provisions. 
reconcile conflicts between these two policy 
Grantee Indirect Cost Rates Fairly Distribute The

Cost Burden Among Al1 Fundinq Sources

some programs place a limi 
Whi Ie  t on the amount 
they will pay for indirect costs, a majority of
respondents (regional 
OHDS offices, grantees and 
Head Start directors) stated that the indirect cost 
rate chosen fairly distributes the cost burden 
I funding sources. 
among all of the grantees  For 
example: 
Seven of ten regional OHDS offices stated that

the Program does pay its fair share of indirect

costs; one stated that in only one instance did

it feel Program was paying a disproportionate

share of such costs; and two stated that they

did not know.

Seventy-three 
(73) and 65 percent of the 
grantees and Head Start directors, 
respecti vely, stated that the indirect cost 
rate chosen fairly distributed the cost burden 
sources. 
among all grantee funding 
NONFEDERAL SHARE CONTRIBUTIONS 
Financial assistance for a Head Start program 
comprised of Federal and nonfedera1 share (NFS)
contributions. 
Federal financial assistance shall not 
exceed 
80 percent of the program s approved costs. NFS 
in kind, fairly 
contributions, which may be in cash or 
evaluated, including plant, equipment or services, are 
to make up the remaining 20 percent of the program 
- 30 
 budget. 
The grantee shall not be required to obtain 
NFS contributions in excess of 20 percent of the
program I s approved costs. However, the grantee is not
prohibi ted 
from obtaining such contributions in excess 
of 20 percent. 
1 .	 Nonfedera1 Share Contributions In Excess Of 
Twenty Percent Included In Grantee Total Budqet 
In 1983, 1984 and 1985, 51, 62, and 55 percent of 
the grantees, respectively, reported that they
recei ved NFS contr ibutions in excess of 20 percent. 
Of those, 39 percent stated that all NFS 
contributions were included in the total budget 
against which their 15 percent administrative cost 
limi t was computed. 
Seven of ten regional OHDS offices stated they 
allow grantees to include all NFS contributions in 
their total budgets against which the
administrati ve cost limit is computed. One region 
states that it allows grantees to include all NFS 
contributions in their total budgets only under 
(i. 
if a grantee 
special circumstances 	 e.,
administrative costs will exceed the 15 percent 
limit, and after all other alternatives to lower 
the limit have been explored). 
Allowing grantees to include NFS contributions in

excess of 20 percent of their total budgets, when

computing their administrative cost limit, may

result in the following:

Allows the administrative cost percentage to

remai n below the 15 percent limit (e. 
g., a
grantee 
s administrative cost percentage 
reported as 13. 6 percent if NFS contributions of
37 percent are allowed. 
However, if NFS 
contributions are limited to 20 percent, its 
limit 
administrative cost rate would exceed the 
at 18. 1 percent). 
Increases the amounts of funds that can be

services 
utilized by grantees for administrative 
(e.g., a grantee receiving a Federal grant of
$800, 000 can match it with $160, 000 of NFS
contr ibutions 
and therefore, be entitled to at 
most $144, 000 ($960, 000 x 15 percent) of 
- 31 
 administrati ve spending. 
However, if the 
grantee includes $300, 000 of NFS contributions 
in its proposed budget, the funds available for 
spending increases to $165, 000). 
admini strati  ve 
If nonfedera1 contributions consist mostly of 
items that require substantial amounts of a
grantee 
s administrative resources to manage, 
the grantee s administrative cost percentage 
might exceed the 15 percent limit (e.g., if NFS 
contributions are mostly volunteers, the costs 
of recruiting, training, etc., might actually 
cause the grantee to exceed the 15 percent
limit). 
The number of grantees that would exceed the 

percent administrative cost limit if their NFS

contributions were held to 20 percent of their

total budgets are as follows: 
Total No  No. Grantees That 
Year  Grantees  Would Exceed Limit  Percentaqe 
1983  37% 
1984  101  94% 
1985  105  76% 
uti Ii 
The increased amounts of funds  zed by sample 
services as a result of 
grantees for administrati  ve  ibutions in 
being able to include all NFS contr 
excess of 20 percent of their total budgets 
totalled $258, 028 from 1983 through 1985: 
Number  Amounts 
Year  Grantees  Per Year 
1983  $ 57. 336 
1984  90 071 
1985  110 621 
Tot al s  $258 028 
RECOMMENDATION 
OHDS should conduct further study to determine whether or

not NFS contr ibutions in excess of 20 percent should be

included in the total grantee budget against which the 15

percent limi t is computed. Until such a determination 

made, OHDS needs to assure consistency among all regional 
offices on how NFS contributions in excess of 20 percent of

I total budgets are handled.

the grantees 
- 32 
 . .
BENEFITS TO HEAD START PROGRAM OF ADMINISTRATIVE

SERVICES RECEIVED FROM GRANTEES

interviewed, 
Of 67 Head Start program directors  54, or 
81 percent, stated the Program is receiving adequate 
administrative service benefits from grantees; 9, or 13 
unnecessary 
percent, stated the Program is subsidi zing 
or unreasonably high grantee administrative costs; and 
4, or 6 percent, did not know whether or not the 
Program is receiving sufficient administrative services 
from grantees. 
Directors stating that the Program is subsidizing 
unnecessary or unreasonably high grantee administrative
costs ci te 
the following examples: 
Fi ve state that the problem stems from indirect 
rates bei ng too high. 
cos t 
other 
Two state Program dollars are used to pay 
' bills. 
grantee programs 
services 
One states that the Program receives no 
from the grantee.

One states it is only a " feeli ng .

Indirect Cost Grantees

directors, in
Almost half of the interviewed Program 
grantees wi th indirect cost rates, do not think the 
grantee administrative services they receive are worth 
Program. 
the indirect costs charged to the  However, 
only two directors were wi lling to state that either 
the Program was paying for services not received or for 
Eight 
services its employees were already performing. 
directors provided no explanation for their opinion 
that the Program was not recei ving a commensurate level
of services. (Note: 
One director stated that he knew 
of other directors being fired for questionning the 
amount of services received/not received from the 
grantee; another director wanted to find out who would 
be reading our report before he answered certain 
his 
questions, presumably because of fear of losing 
job. 
Some directors who think the Program does receive a

commensurate level of administrative services from the

grantee gave the following reasons why other directors

percei ve def iciencies in grantee services: 
- 33 
 Lack of communication between the grantee and the

Program director as to what services would/would

not be provided.

The director s lack of understanding of which

indirect costs are legi timate. 
Lack of involvement by the director and/or Policy

Council in development of indirect cost rates

(e.g., not wishing to be involved or not rightfully

demanding to be involved based on the Program

size and significance).

Eight of 20 regional OHDS staff respondents believe 
the 
grantee indirect cost charges are not justified by 
receives. 
level of administrative support Head Start 
Three of them stated, respectively, that the Program 
can perform administrative services more
cost-
effectively than grantees; that the Program has 
been able to provide its own administrative services
wi thout grantee assistance; and, even with indirect 
cost rates, the grantee is still not rendering any 
Program. 
administrative services to the  The other five 
opinion. 
provided no explanation for their  Most 
regional staff were not able to assess the benefits
associated wi th indirect charges. 
It is interesting to note that OHDS staff stating the 
Program does not receive commensurate services from the 
grantee were from two of seven regional OHDS offices 
that said the Program is paying its fair share of the
s indirect cost rate. 
grantee I 
FUTURE COMPLIANCE WITH ADMINISTRATIVE COST LIMIT

Grantee Compliance wi th The 15 Percent Administrative 
Cost Limit May Become More Difficult In The Future 
The extent to which compliance problems are foreseen 
var ies considerably, depending on the respondent. For 
example: 
Percentage Indicating Future 
ResDondents  Grantee ComDliance Problems 
115 Grantees  23% 
67 Head Start Directors

20 Regional OHDS Staff  65% 
10 Reoional OHDS Office  70% 
- 34 
 - "
The main reasons why Head Start grantees are expected 
to have difficulty complying with the 15 percent 
are as follows: 
administrati ve cost limi t 
Reason  Resoondents  Percentaqe 
Increases in administrative  Grantees  54% 
costs with no commensurate  Head Start 
increases in grantee budgets.  Directors  28% 
OHDS Staff  15% 
2. Budget cuts  Gramm-Rudman- Head Start 
Hollings  Directors  55% 
OHDS StAff  69% 
Other funding sources  Grantees  15% 
decreasing Dr stopping OHDS Regiona
fundino.  Offices  71% 
grantee 
* Percentages based on respondents  indicating 
problems in complying with the administrative cost

limit . 
Increases in administrative costs stem from rising

costs for insurance, administrative salaries and fringe

utili ties, transportation, etc. 
benefi ts, 
Some grantees have mandatory increases due to State

laws. For example, at some school distr icts, 
specifically those functioning as Head Start grantees 
or delegate agencies, State law may provide that any 
person working for the school system is entitled to all 
received by all school employees. 
benef i ts  Thus, a 17 
percent raise for school employees means a similar 
raise for Head Start employees affiliated with the 
school district. 
The Balanced Budget and Emergency Def ici t Control Act 
of 1985 (P. 
L. 99-177, commonly known as 
Gramm-Rudman-Hollings) resulted in a 1. 4 percent 
reduction in Head Start grantee budgets for fiscal year
1986. 
Also, some grantees that receive additional 
funding from other sources have been advised by these 
sources that funding may be decreased or stopped. 
SUMMRY OF COMMENTS 
OHDS 
OHDS stated the OAI inspection is thorough and identifies

key issues related to the monitoring and control of

administrative costs in the Head Start program. 
ngs.  However, 
OHDS did not specif ically comment on the inspection I s 
recommendations, but limi ted its comments to technical 
aspects of the report and the methodology used to obtain
the f indi 
- 35 
 OAI and OHDS met to resolve and incorporate revisions, as 
appropriate, for all technical and clarification questions
raised. 
Conveying its general support for the thrust and
content of the report' 
s recommendations, OHDS asked OAI to
strengthen some of the recommendations. OHDS noted general
its 
consistency between the report' s recommendations and 
in-
process or planned activiitnisesp teoc atdidorens.s  most of the 
problems raised by the OAI 
ASMB 
findings 
ASMB had two substantive comments affecting OAI 
and recommedations: 
(1 )	 All references to the Head Start Cost Management
Instrument 
(HSCMI) need to be updated to reflect OMB
action. 
OMB disapproved the instrument as a public
use document. The only permitted use is for Head 
Start staff to extract data onsite and to gather data
from existing sources. 
It is illeg l to request 
staff 
grantees to prepare the data so that Head Start 
can fill in the blanks. 
( 2) Discus s ion on audit requirements is inaccurate: 
( 1) under OMB Ci rcu1ar A-110, nonprof it grantees are 
required to have organi zation-wide audi ts; and (2) the
Single Audi t  Act limi ts the audit requirements that can
be placed on governments. Therefore, the first 
recommendation must be revised, and the second must 
point out that Head Start' s annual audi t requirement 
has to be revoked. 
I S comments,  follows: 
Concerning ASMB  OAI revised the report as 
(1 )	 References to the HSCMI reflect OMB disapproval of the

instrument as a public use document.

(2) OMB Circular A-IIO requires all other Head Start

program grantees to obtain nonfederal indsittistu.t ion-wide

audits in lieu of individual program a  The

Assistant Secretary for Management and Budget and the

OIG/OA indicate that some confusion may exist among

Head Start grantees as a result of conflicts between

thi s 
OMB Circular and Head Start program audit

r equ i r emen t s . 
(3) Per ASMB and OIG/OA, grantees that are not governments

guidelines.

are to be audited following Circular A-110 
Therefore, OHDS is out of compliance with departmental

audits

regulations by requiring, per 45 CFR 1301. 2 (a), 
- 36 
 . ,
of Head Start programs using the Head Start Audit

Guide. 
Per OHDS, until audit guidelines similar to 
those delineated in Circular A-128 are issued for 
grantees that are not governments, it may continue to

require audi ts of nongovernment Head Start programs

using the Head Start Audit Guide. 
However, if a 
nongovernment grantee requests an organization-wide 
audi t, OHDS wi 11 comply with the request and accept the

results of the audi 

(4) ASMB and OIG/OA recogni ze that the issue of whether 
grantees that are not governments are to be audited
followi ng Circular 
A-I10 or 45 CFR 1301. 2 (a) 
requirements may not be totally resolved until the 
issuance of a revised OMB Circular A-IIO, but they view 
the existing Head Start regulation as particularly 
misleading to these grantees. ASMB and OIG/OA feel 
that OHDS must take some interim immediate action to 
resol ve confus ion 
among the Head Start grantee 
communi ty. 
- 37 
 ... 
ATTACHMENTS 
Attachment 1 ..... Profile of Grantee Sample

Attachment 2 ..... Administrative Cost Percentage

by Grantee Type

Attachment 
3 ..... Administrative Cost Percentage 
by Grantee and Cost Type 
Attachment 4 ..... Head Start Grantees Reported Equalling or

Exceeding Statutory Administrative

Cost Limi t 
4-A ... By Grantee Type

4-B ... By Type Cost

By Region

4-C 
4-D ... By Funding Level

Attachment 5 ..... Head Start Grantees Administrative Cost

Percentages by Funding Level  . .
ATT ACHMENT 1 
PROF ILE OF GRANTEE SAMPLE

National Head Start 
Grantee Pooulation *  Reaional Sam Ie Grantees 
Grantee 
(Cost TYoe)  Number  Percentaoe  VII  Total  Percentaae 
CAA  910  75.  68. 
(Indirect) (207)  (17) (4) (8) (2) (31)
(Direct)  (703)  (14)  (8)  (19)  (4)  (6)  (51) 
Other  12. 
Pr i vat 
Non Profit 
(Indirect) (14) (1) (1)  (1)
(Direct)  (47)  ( 3)  (4)  (2)  (3)  (12) 
Schools 
Public and 
Private 
(Indirect) (19) (2) (1)
(Direct)  (57)  (2)  (2)  (1)  (1) 
State and  7. 3 
Local Gov ' t. 
(Indirect) (21)  (1) 
(Direct)  (66)  ( 3)  (2)  (3)  (1) 
Hiqher
Education 
(Indirect) (23) (1)  (1)  (1) 
(Direct)  (2)  (1) 
Other and 
Unknown 
(Indirect)
(Direct)  (40) 
Tot al s  1199  100%  120  100% 
((DInidreircet)c t)  ((921854))   ((2736..  73%%))   ((200))   ((2107))   ((254))   ((89))   ((160))  ((7491))   ((3645..  82%%))  
* National Grantee Population from 1984 OHDS Grants Management Information System

(GMIS) Report; * 99. 9% rounded)
 , \ 
ATT ACHMENT 2 
Administrative Cost PercentaQe by Grantee Type

Grantee Se1f-Report Data

Type Grantee  No.  1983  1984  1985 
Percentaae  Rank  Percentaae  Rank  Percentaae  Rank 
CAA  10.  11.  10. 
Local  Government  13.  13.  13. 
Other Private 
Non-Profit  12.  12.  11. 9% 
School 
University  13.  13.  13. 
(* Only One Grantee Included)
 ATT ACHMENT 3 
Administrative Cost Percentaqe by Grantee and Cost Type

Grantee  5el  Report Data

No. 
Tvoe Grantee  Grantees  Tvoe Cost  1983  1984  1985 
CAA  Direct  10.  10. 
Indirect  10.  11.9  12. 
Local	 Direct  13.  12.  13. 
Governments 
Indirect  N/A  18.  13. 
Other	 Direct  12.  12.  11.4 
Private

Non-Profit  Indirect  11.8  11.5  13.

School  Direct	 11.1  11.6
11.0 
Indirect 
Uni versit y	 Direct  N/A  N/A  N/A 
Indirect  13.  13.  13.  ***
ATT ACHMENT  4"'A 
Head Start Grantees Reported Equa11inq or Exceedinq

Statutory Administrative Cost Limit

By Grantee Type

Grantee 5e1 f -Report Data 
Number  Equal or Exceedina 15 Percent Limit by Grantee Type 
Samr Ie  1983  1984  1985  3 Year Total 
Type  No.  No.  No.  No.  No.
Grantee  Grantee  Total  Grantee  Grantee  Grantee  Grantee( 
Tot al 
CAA  70%  68% 
Local

Governments

Other

Private

Non-Pro fit

School 
University 
Totals  115  100%  100% 
* Grantees returning completed questionnaires.

** 5 CAA grantees exceeded limit in two or more years.

*** 1 Local Government grantee exceeded limit in two years.
 ATT ACHMENT 4
'C' 
Head Start Grantees Reported Equallinq or Exceedinq

Statutory Administrative Cost Limit

By Type Cost 
Grantee Self-Report Data 
Number  Equal  or Exceedinq 15 Percent  Limit by Type Cost 
Sam Ie  1983  1984  1985  3 Year Tot al 
Type  No.  No.  No.  No.  No. 
Cost  Grantee  Total  Grantee  Grantee  Grantee  Grantee  Total 
Direct 
67%  68% 
Indirect 
Totals  115  100%  100% 
* Grantees returning completed questionnaires.
 ATT ACHMENT 4
Head Start Grantees Reported Equa11inq or Exceedinq

Statutory Administrative Cost Limit

By Reqion

Grantee Se1f-Report Data 
Number Eoual  or Exceedino 15 Percent Limit  bv Renion 
Sam! Ie  1983  1984  1985  3 Year Total

No.  No.

Reoion  Grantee  Total  No.  No.  No.  Grantee  Tat a1

17. 
28% 
30. 
25. 
14. 
12.

Totals  115  100%  100%

* Grantees returning completed questionnaires.
 , '

ATT ACHMENT 4
Head Start Grantees Reported EquallinQ or Exceedinq

Statutory Administrative Cost Limit

By FundinQ Level 
Grantee Self-Report Data

Number  Equal or Exceedinn 15 Percent Limit bv Fundina Level 
Samr Ie  1983  1984  1985  3 Year Total 
Funding Level  No.  No.  No.  No.  No. 
($ Thousands)  Grantee  Total  Grantee  Grantee  Grantee  Grantee  Total 
500 & 8e1ow  31%  40% 
500 - 000 
000  - 2 000 
2 ,000 - 000 
000  - 5 000 
000  - Above 
Totals  100%  100% 
* For 1985 - Grantees returning completed questionnaires with budget and

administrative cost data for 1985
 ,,  ",
ATT ACHMENT 5 
Head Start Grantees

Administrative Cost Percentaqes

By Fundinq Level 
1983  1984  1985 
Funding Level  No.  Average  No.  Average  No.  Average 
($ Thousands)  Grantees  Rate  Grantees  Rate  Grantees  Rate 
500 & Below  11. 5%  11. 8%  12. 
500 - 000  11. 5%  11.  12. 
000  - 2 , 000  10.  10. 
000  - 3,000 
000  - 5 000  11.6  11. 6%  10. 
5 000 - Above  15.  15. 
Total 
Overall  Average 
Rate  10.  11.  11.