Near the end of the same fiscal  year, OHS awarded the balance of all funds for the final, second fiscal year  of the expansion grants. Grantees Report Expanding Program Options, Staff, and Enrollment, but Enrollment Figures May Be Unreliable

		Grantees Expanded Program Options and Staff to Serve More Children and Families, Although Teachers Hired Did Not Always Meet Qualification Requirements

Head Start and Early Head Start grantees received $744 million in first- year Recovery Act funding to expand services from about 890,100 to about  an additional 60,600 children and families, often by initiating home-based  services. FTE data provide insight into the use and impact of the Recovery  Act funds, but recipient reports cover only direct jobs funded by the  Recovery Act. Apart from challenges in expanding enrollment, differences in grantees’  interpretation of OHS’s enrollment policies suggest that reported  enrollment figures may not always be reliable. Grantees use different interpretations of enrollment for two reasons. Because OHS has not established a consistent definition for enrollment  reporting and does not verify during routine monitoring how grantees are  reporting enrollment, the grantee-reported enrollment numbers may be an  unreliable measure of grantee performance. Following Low Expenditure Rates in the First Year, Mixed Messages from OHS about Spending Policy Led to Varied Spending Practices

		Delays, Facilities Issues, and Other Challenges Slowed Expenditure Rates

By the end of the first year of Recovery Act funding, expansion grantees  had expended at least 60 percent of awards, and about 1 month later,  grantees had expended about 70 percent (see figure 6), using a  conservative estimate, which is explained below. However, regional offices did not  consistently communicate a clear policy for Recovery Act funds. Grantees’ uncertainty about whether to “use or lose” Recovery Act grant  funds contributed to varied spending practices that may not always have  targeted expansion funds toward meeting programs’ highest current  priorities. OHS Hired a Contractor to Both Prepare for and Conduct On-Site Reviews, but Has Not Incorporated Some Risk Indicators in Planning for Reviews

		OHS Has Contracted to Help Prepare for and Conduct On-Site Reviews

As required by the Head Start Act, OHS plans to conduct “1-year”  monitoring visits to 626 Early Head Start expansion grantees by expanding  its use of an existing contractor. HHS’s Office of Inspector General (OIG) identified some financial  management risks among grantees, including a few that received Recovery  Act expansion grants. OHS plans to scope and staff its 1-year reviews of Recovery Act grantees  primarily according to their prior experience with Head Start and Early  Head Start and whether the grantees have recently received a triennial  review. HHS and contractor officials have stated that all monitoring visits to new  grantees will be implemented as “surprise” visits in response to GAO  findings of fraudulent enrollment and attendance and enrollment  discrepancies among some Head Start grantees as reported in May 2010. These efforts include initial on-site visits and reviewing  grantee reports. For example, we continued to find a small  number of reports for which there were potential linkage issues across  quarters. As part of our additional analysis, we found that a previously identified  concern with FTE calculations for Head Start reports is being addressed. On September 24, 2010, OMB issued updated guidance to federal agencies  and recipients that included guidance on, among other topics, improving  the transparency of narrative descriptions in recipient reporting. Appendix I: Objectives, Scope, and Methodology

We took a number of steps to address our objectives, which were to  determine (1) how Head Start and Early Head Start grantees have used  American Recovery and Reinvestment Act of 2009 (Recovery Act) funds,  including expanding enrollment; (2) what challenges grantees have  encountered in spending Recovery Act funds; (3) how the Office of Head  Start (OHS) has monitored the use of Recovery Act funds; and (4) how the  quality of jobs data reported by Recovery Act recipients, particularly Head  Start grantees, has changed over time. The recipient reporting section of this report responds to the Recovery  Act’s mandate that we comment on the estimates of jobs created or  retained by direct recipients of Recovery Act funds. Due to the limited number of  recipients reviewed and the judgmental nature of the selection, GAO’s full- time equivalent findings are limited to those Head Start programs and time  periods examined and are not generalizable to any other program’s FTE  reporting..
To update the status of open recommendations from previous bimonthly  and recipient reporting reviews, we obtained information from agency  officials on actions taken in response to the recommendations.
Why GAO Did This Study

This report responds to two mandates for GAO under the American Recovery and Reinvestment Act of 2009 (Recovery Act). First, it is the latest report on the uses of and accountability for Recovery Act funds in selected states and localities. Second, it comments on recipients' reports of the jobs created and retained. The Recovery Act provided $2.1 billion for Head Start and Early Head Start, primarily to expand services. GAO addressed four questions: (1) How have Head Start and Early Head Start grantees used Recovery Act funds, including for expanding enrollment? (2) What challenges have grantees encountered in spending Recovery Act funds? (3) How has the Office of Head Start (OHS) monitored the use of Recovery Act funds? (4) How has the quality of jobs data reported by Recovery Act recipients, particularly Head Start grantees, changed over time? In this report, GAO also updates the status of open recommendations from previous bimonthly and recipient reporting reviews. To address these questions, GAO interviewed grantees, analyzed federal agency and recipient reported data, and interviewed officials.

What GAO Found

Grantees reported using Recovery Act funds to expand enrollment and staff in a variety of ways, but new enrollment was lower than anticipated and reported enrollment numbers may not always be reliable. Grantees received funds to increase enrollment from about 890,100 to an additional 60,600; reported enrollment increased by 55,100 by the end of September 2010. Grantees GAO interviewed used different definitions of "enrollment," which OHS does not verify, introducing some unreliability in reporting. Grantees nationwide reported adding significant numbers of staff, but the portion of teachers who met recently increased standards slightly declined. Grantees experienced challenges in spending first-year Recovery Act funds, including delays in receiving grants and preparing facilities for expanded services, and received mixed messages about what to do with unobligated funds. By the end of the first year of Recovery Act funding, expansion grantees had expended at least 60 percent of their awards. Also, more than half of the grantees GAO interviewed said they were unclear about the policy regarding unobligated first-year funds. Because OHS did not clearly communicate its policy to regional offices, grantees adopted varied spending practices that may not always have directed expansion funds toward programs' highest, current priorities. OHS has engaged a contractor to conduct the large volume of monitoring visits required 1 year after expanded operations begin, but has not always incorporated some risk indicators in planning reviews. OHS has also been conducting other monitoring efforts, including mandatory 1-year visits for Early Head Start expansion grantees. These 1-year reviews include additional coverage of grantee governance and financial management. In response to prior GAO findings of fraudulent enrollment and attendance and enrollment discrepancies among some Head Start grantees, all monitoring visits to new grantees will be implemented as "surprise" visits. A few grantees awarded expansion funds had been earlier identified as high risk by their regional offices, and the HHS Inspector General identified several financial management deficiencies among four of the expansion grantees it reviewed. However, information on identified risks was not always available to OHS reviewers. OHS plans to scope and staff its 1-year reviews of Recovery Act grantees based primarily on their prior experience with Head Start and Early Head Start and whether the grantees have recently received a triennial review. GAO's analysis of the data reported by recipients in Recovery.gov, including jobs funded, shows results similar to previous reporting periods. For example, GAO continued to see a small number of reports for which data issues could prevent linking related reports across quarters. Analysis of Head Start recipient data showed that an earlier concern with calculating full-time equivalent jobs is being addressed. Further, in response to September 2010 Office of Management and Budget guidance on transparency of narrative descriptions, OHS reported that additional agency reviews resulted in recipients clarifying their reports.

What GAO Recommends

GAO recommends OHS verify the definition of enrollment, clearly communicate it to grantees along with policies for extending the use of Recovery Act funds, and incorporate known risks into review planning. HHS generally agreed with GAO's recommendations.