Head Start: Undercover Testing Finds Fraud and Abuse at Selected Head Start Centers
Released: 2010-05-18T00:00:00

Letter

Background

The Head Start program was established in 1965 to deliver comprehensive educational, social, health, nutritional, and psychological services to low- income families and their children who are below the age of compulsory school attendance. These services include preschool education, family support, health screenings, and dental care. Head Start was originally aimed at 3- to 5-year-olds. A companion program, called Early Head Start, began in 1994, and focuses on making these services available to pregnant women and children from birth to 3 years of age. Head Start operates both full- and part-day programs—most only during the school year. The Migrant and Seasonal Head Start program is designed to meet the specific needs of migrant and seasonal farm worker families. OHS makes Head Start grants directly to approximately 1,600 local organizations, including community action agencies, school systems, tribal governments and associations, and for-profit and nonprofit organizations. To accomplish Head Start’s goals, the Congress provided $7.2 billion in federal funds for fiscal year 2010, as well as $2.1 billion in Recovery Act funds.

Head Start statutes and regulations establish several primary eligibility criteria, one of which a child must generally meet in order to enroll in the program. These primary criteria include: the child’s family earns income below the federal poverty level; the child’s family is eligible or, in the absence of child care, would potentially be eligible for, public assistance; the child is in foster care; or the child is homeless. However, Head Start programs may also fill up to 10 percent of their slots with children from families who do not meet any of the above criteria, but who “would benefit” from participation in the program. We refer to these children and their families as “over-income.” There is no cap on the income level for the over-income families. If the Head Start program has implemented policies and procedures that ensure the program is meeting the needs of children eligible under the primary criteria and prioritizes their enrollment in the program, then the program may also fill up to 35 percent of their slots with children from families with income between the federal poverty line and 130 percent of the poverty line. Programs filling slots under this provision are subject to additional reporting requirements. Children from families with incomes below 130 percent of the poverty line, and children that qualify under one of the primary eligibility criteria, are referred to as “under-income” for the purposes of this testimony. In addition, unless a program applies for and receives a waiver, at least 10 percent of each program’s total slots must be filled with children with disabilities who are determined to be eligible for special education and related services or early intervention services. To qualify for the Migrant and Seasonal Head Start program, families must have changed their residence within the preceding 24 months for the purpose of engaging in certain agricultural work, and the families’ incomes must come primarily from this type of work. In enrolling families in Head Start, program staff are to review documentation of income and employment to certify that each family is eligible. Head Start services are to be provided free of charge to eligible families.

OHS assigns each grantee a specific number of children and families it is required to serve, known as the funded enrollment. Head Start statutes and regulations require grantees to maintain enrollment at 100 percent of the funded enrollment level. If a child stops attending the program, after the grantee has attempted, unsuccessfully, to get the child back in regular attendance, the grantee must reopen that spot as a vacancy and no more than 30 calendar days may elapse before the grantee fills the vacancy; otherwise, OHS considers the grantee underenrolled. To facilitate the prompt filling of vacancies, Head Start statutes and regulations require each grantee to maintain a wait list that ranks children according to its selection criteria and to select those with the greatest need for services. Grantees report enrollment numbers monthly, and those that are underenrolled for 4 consecutive months must receive technical assistance from OHS and work to develop and implement a plan to eliminate underenrollment. A grantee that continues to operate with less than 97 percent of its funded enrollment level may have its grant amount recaptured, withheld, or reduced by OHS. According to HHS, funds for 30 grantees were reduced in 2006. A Head Start grantee may also be terminated from participation in the program for continuously failing to meet other performance, education, administrative, and financial management standards that have been established by HHS.

Allegations of Fraud and Abuse Involving Two Head Start Grantees

We are currently investigating the two allegations of fraud and abuse that we received involving Head Start nonprofit grantees in the Midwest and Texas. In Texas, individuals we spoke with told us that the grantee encouraged enrollment of over-income families in order to meet enrollment requirements. We were able to confirm, through records obtained from the grantee, that 9 of the grantees’ 28 centers had more than 10 percent over-income families enrolled. The percentage of over-income families in the 28 centers ranged from centers with no over-income enrollments to one center where 44 percent of the families it enrolled were over-income. Two families enrolled by this grantee had a reported income in excess of $110,000. However, the grantee as a whole did not report having more than 10 percent over-income families enrolled. An aggregate accounting of all centers operated directly by one grantee is permitted under the law for determination of the 10 percent over-income limit, therefore, we could not substantiate this allegation. Individuals we spoke with also told us that Head Start staff encouraged parents to report that they were homeless when they were not in order to qualify them for the program. Records we obtained indicate that 22 percent of all children enrolled by the grantee were classified as “homeless”—a group considered at-risk and categorically eligible for Head Start services regardless of income. Our concern, based on the allegation, is that some portion of these families classified as homeless in grantee records were actually over- income families that were not, in fact, homeless, but were encouraged to report that they were in order to qualify. In addition, we spoke with several individuals who described a number of fraudulent activities that they had witnessed. We are in the process of attempting to determine if other allegations are true, including classifying children as disabled when they were not, counting children in enrollment figures after they had left the program, and allowing staff to use company vehicles for personal use.

For the Midwest Migrant and Seasonal Head Start program, we were able to confirm through documents obtained from the grantee that more than 50 children were moved from one center to other centers with vacancies during the last 60 days of the grant period. According to OHS regulations, if fewer than 60 days remain in the grantee’s program year at the time a child leaves the program, the grantee can choose not to fill the vacancy without OHS considering the grantee underenrolled. By using this process, the grantee was able to make records appear that both centers had reached full enrollment, when in fact 63 children were counted at more than one center. In addition, we spoke with several individuals who alleged that numerous fraudulent activities were occurring at the program. We are in the process of attempting to determine if other allegations are true, including manipulating family income documentation to make over-income families appear to meet Head Start poverty guidelines, enrolling families who do not meet the specific program requirements for the Migrant Head Start program, including earning at least 51 percent of the household income through agricultural work and migrating for work within the past 24 months, and misappropriation of property purchased with Head Start funds.

It is important to note that ultimate determination as to whether these allegations are true is a significant challenge because of the minimal requirement for records requested of families to be maintained by grantees. For example, there is no requirement for grantees to maintain support for income, such as pay stubs and Internal Revenue Service Form W-2. In addition, as the proactive testing in the next section discusses, and as alleged, it is possible the grantee records have been fraudulently altered including showing that children who are actually from over-income families are under-income.

Undercover Tests Show the Head Start Program Is Vulnerable to Fraud and Abuse

Our undercover tests determined that the types of eligibility and enrollment fraud schemes allegedly perpetrated by the two grantees are occurring at other Head Start locations around the country. Posing as fictitious families, we attempted to register children at Head Start centers in California, Maryland, New Jersey, Pennsylvania, Texas, Wisconsin, and the Washington, D.C. metropolitan area. For 13 of these tests our fictitious families were over-income or had disqualifying characteristics. For 2 additional tests, our fictitious families did not have any disqualifying characteristics and were under-income. These 2 tests were designed to determine whether a Head Start center would count our fictitious children toward enrollment numbers even if our children never attended the program. For our tests, we contacted each center in advance and were instructed in all cases to bring certain documents necessary for enrollment, which included income documentation.

In 8 out of 13 eligibility tests, our families were told they were eligible for the program and instructed to attend class. In all 8 of these cases, Head Start employees actively encouraged our fictitious families to misrepresent their eligibility for the program. In at least 4 cases, documents we later retrieved from these centers show that our applications were doctored to exclude income information for which we provided documentation, which would have shown the family to be over-income. Employees at seven centers knowingly disregarded part of our families’ income to help make over-income families and their children appear to actually be under- income. This would have had the effect of filling slots reserved for under- income children with over-income children. At two centers, staff indicated on application forms that one parent was unemployed, even though we provided documentation of the parents’ income. A Head Start employee at one center even assured us that no one would verify that the income information submitted was accurate. For the 2 tests in which our family did not have disqualifying characteristics, we were accepted into the program once and not accepted in the other. In the test where our eligible child was accepted into the program, the scenario was designed to test how long the center would keep a child who never attended the program on enrollment records before counting the spot as a vacancy and attempting to fill it with another child. Due to our concerns about occupying a slot for an actual child, we were forced to contact the center and voluntarily withdraw our fictitious child before sufficient time elapsed that would have allowed us to make a determination regarding how long the center would have kept our child on enrollment records. However, the enrollment of our family that appeared eligible for the program as well as our other successful tests highlight the ease with which unscrupulous parents could fabricate documentation designed to make it appear as though their children were under-income or otherwise eligible for the program. Our fictitious pay stubs and W-2s were made using information found on the Internet, commercially available word processing software, and a printer. At no point during our registrations was any of the information contained in fictitious documentation submitted by our parents verified, which indicates that the program is vulnerable to beneficiary fraud in addition to grantee fraud. For all 9 cases in which we were told that we were eligible for the program, we are taking steps to determine whether our fictitious children were counted on enrollment or attendance records.

Table 1 provides details on our approved applications, followed by our unsuccessful applications. We withdrew our fictitious families from the programs as soon as we documented that there were fewer than two openings at a center. To view selected video clips of these undercover enrollments, go to http://www.gao.gov/products/gao-10-733T.

We also identified a key vulnerability during our investigation that could allow over-income children to be enrolled in other Head Start centers: income documentation for enrollees is not required to be maintained by grantees. According to HHS guidance, Head Start center employees must sign a statement attesting that the applicant child is eligible and identifying which income documents they examined, such as W-2s or pay stubs; however, they do not have to maintain copies of them. We discovered that the lack of documentation made it virtually impossible to determine whether only under-income children were enrolled in spots reserved for under-income children.

Eligible Children May Not Receive Head Start Services Because of Significant Wait Lists

We are concerned that eligible children at other centers do not receive services for which they are in need, given the vulnerabilities to fraud and abuse we found through our undercover tests. At 2 of the 9 centers where we enrolled fictitious children, we were later told, after withdrawing our children from the program, that the center was at full enrollment and was not accepting more children at that time. During the course of our work, we contacted approximately 550 Head Start centers to determine whether they had space for our fictitious children. We found that the majority of the centers stated that they had no open slots for enrollment, but maintained wait lists per program requirements. We found only 44 centers stated they had any openings. We interviewed 21 families on wait lists and found that the majority stated their income was at or below the federal poverty level. In some cases, families had experienced some type of domestic violence or were receiving some other type of public assistance, a group targeted specifically for assistance by Head Start program guidelines. We did not attempt to verify this information.

Head Start Center Wait Lists Were Substantial

The length of these wait lists varied considerably; however, several of the centers we contacted had lengthy wait lists. For example, one grantee we contacted in Texas, which serves approximately 4,260 children in 36 centers, had over 1,150 children on its wait list. Another Head Start grantee told us that they average around 500 children on their wait list. A representative from one Pennsylvania Head Start center we contacted stated that there were around 120 applicants on the center’s wait list. Furthermore, a review of media sources reveals that Head Start centers around the country face similar challenges meeting their communities’ demand for services. We queried a news media search engine and found numerous reports of lengthy waiting lists to enroll in Head Start programs in many parts of the country. For example, according to one Florida newspaper, the state of Florida has 8,000 students on wait lists for Head Start programs. Another newspaper in Indiana, reported that a program in Indiana that serves 380 students has 170 students on the wait list. It is important to note that we found a discrepancy in enrollment levels among the centers we called. While several grantees had lengthy wait lists, other grantees were eager to accept our fictitious, over-income children to fill their rolls. The center in New Jersey that accepted our fictitious over- income family told us that it had more than 30 openings. Another center in California, which did not accept our application, told us that it had 40 part- day openings.

Eligible Applicants Cannot Be Admitted Because of Lack of Space

We contacted 21 families who at the time of interview were on wait lists for Head Start programs. We received a list of 1,600 wait list applicants from a Head Start grantee in Texas—of these we were able to speak to 11 applicants. We also received a wait list of 30 applicants for services in Pennsylvania—of these we were able to speak to 10 applicants. We asked applicants for information on the length of time they spent on the wait list, on the family’s economic situation, and whether they had been affected by being waitlisted for Head Start services. Several of the applicants we spoke with described circumstances that made them especially strong candidates for Head Start, including receiving other types of public assistance, such as Medicaid or Supplemental Nutrition Assistance, or having histories of domestic abuse. Additionally, several applicants reported that family members were unable to accept work opportunities as a result of not enrolling in Head Start, or experienced additional financial strain because they had to pay child care costs. Many applicants also cited concerns that their children would not be adequately prepared for school. Given the fraud committed by several grantees we investigated, and the relative ease with which GAO employees posing as fictitious parents were able to qualify for Head Start services, it is likely that some over-income or otherwise ineligible children are currently enrolled in Head Start programs while low-income children are put on wait lists and do not receive necessary services. For example, when a center manipulates information to make it appear that an over-income family is a low-income family this takes up a Head Start slot set aside for a low-income family. Table 2 summarizes the experiences of 10 applicants we contacted. We did not attempt to verify the applicants’ statements.

Corrective Action Briefing

On April 20 and April 23, 2010, we briefed OHS and HHS officials on the results of our work. Officials indicated that HHS would work quickly to address the weaknesses we identified. We suggested a number of potential actions the agency should consider to minimize Head Start fraud and abuse, including the following: Creating an OHS program management fraud hotline for individuals to report fraud, waste, and abuse. These tips could be investigated by the program, the HHS Inspector General, or both; Establishing more stringent income verification requirements, documentation requirements, or both by Head Start employees responsible for certifying family eligibility, such as maintaining income documentation provided by the applicant (e.g., pay stubs or W-2s); and Conducting undercover tests, such as the ones we describe in our report, as a management oversight function.

Agency officials indicated that they would consider these suggestions. They also told us that they would make sure that grantee staff received training regarding the proper way to validate income documentation.

Mr. Chairman, this concludes my statement. I would be pleased to answer any questions that you or other members of the committee may have at this time.

Contacts and Acknowledgments

For additional information about this testimony, please contact Gregory D. Kutz at (202) 512-6722 or kutzg@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement.

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