If the Head Start program has  implemented policies and procedures that ensure that 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 its slots with children from families with income below  130 percent of the poverty line. Children from families  with incomes below 130 percent of the poverty line, and children who  qualify under one of the primary eligibility criteria, are referred to as  “under-income” for the purposes of this report. Allegations of Fraud and Abuse Involving Two Head Start Grantees

We investigated the allegations of fraud and abuse that we received  involving Head Start nonprofit grantees in the Midwest and Texas. Based  on our investigation, two of the allegations were substantiated. Texas Grantee Allegations

			Over-Income Enrollments

In Texas, individuals we spoke with alleged that the grantee enrolled more  than 10 percent of over-income families in order to meet enrollment  requirements. GAO found that over-income families at this  center reported incomes ranging from a low of $27,000 to a high of  $120,000. 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. 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. To view selected video clips of these undercover  enrollments, go to http://www.gao.gov/products/gao-10-1049/. We found that only 44 centers stated that they had any  openings. We interviewed 21 families on wait lists and found that the  majority stated that 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. While several grantees reported that they had lengthy wait lists,  other grantees were eager to accept our fictitious, over-income children to  fill their rolls. We did not validate the actual number of students on  waitlists in these centers. We did  not attempt to verify the applicants’ statements. Review and analysis of the existing Head Start monitoring system to  ensure that (1) the verification of income eligibility is clearly  understood and fully implemented; (2) Head Start grantees are  providing regular training to employees who verify income; (3) Head  Start grantees have active waiting lists that, based on the Head Start  grantees’ selection criteria as mandated in the 2007 Head Start Act,  include income-eligible children as well as categorically eligible  children, such as families receiving public assistance and homeless  children and families; and (4) Head Start grantees are taking a closer  look at their recruitment efforts and the need for the reallocation of  slots. HHS officials also indicated that the agency has moved expeditiously to  begin a rule making process to strengthen the regulations on the eligibility  verification process. Appendix I: Objectives, Scope, and Methodology

Our objectives were to (1) investigate the allegations of fraud and abuse at  these two Head Start grantees, (2) conduct undercover tests to determine  if other grantees were committing similar abuses, and (3) document  instances in which potentially eligible children were put on wait lists for  Head Start services at other centers.
Why GAO Did This Study

The Head Start program provides child development services primarily to low-income families and their children. Federal law allows up to 10 percent of families to have incomes above 130 percent of the poverty line--GAO refers to them as over-income families. Families with incomes below 130 percent of the poverty line, or that meet certain other criteria, are referred to as under-income families. Nearly 1 million children a year participate in Head Start, and the American Recovery and Reinvestment Act provided an additional $2.1 billion. GAO received hotline tips alleging fraud by grantees. In response, GAO investigated the allegations, conducted undercover tests to determine if other centers were committing fraud, and documented instances where potentially eligible children were put on Head Start wait lists. On May 18, 2010 GAO testified on the preliminary results of the ongoing investigation. This report reiterates the findings disclosed in GAO's May testimony, and discusses new findings related to specific fraud allegations at two Head Start grantees. Since GAO's May testimony, HHS has taken a number of actions to address identified weaknesses, such as implementing a fraud hotline. HHS also indicated that it has moved expeditiously to begin a rule making process to strengthen the regulations on the eligibility verification process.

What GAO Found

GAO received allegations of fraud and abuse involving two Head Start nonprofit grantees in the Midwest and Texas. Two of the many allegations were substantiated. For example, one grantee inappropriately counted time parents spent helping children with homework as contributions to meet program funding requirements. While not fraudulent, we found that at both grantees, the average number of students who attended class was significantly lower than the number of students the grantees reported as enrolled in class. Realizing that the alleged fraud schemes could be perpetrated at other Head Start programs, GAO attempted to register fictitious children as part of 15 undercover test scenarios at centers in six states and the District of Columbia. In 8 instances staff at these centers fraudulently misrepresented information, including disregarding part of a family's income to register over-income children into under-income slots. The undercover tests revealed that seven Head Start employees lied about applicants' employment status or misrepresented their earnings. This leaves Head Start at risk that over-income children may be enrolled while legitimate under-income children are put on wait lists. At no point during our registrations was information submitted by GAO's fictitious parents verified, leaving the program at risk that dishonest persons could falsify earnings statements and other documents in order to qualify. In seven instances centers did not manipulate information. To hear selected video clips of GAO enrollments, see http://www.gao.gov/media/video/gao-10-1049/ . In addition, GAO found that most of the 550 Head Start centers contacted had wait lists. GAO also found that two centers where GAO enrolled fictitious children later became full and developed wait lists after the fictitious children had been withdrawn. Only 44 centers reported that they had openings. GAO interviewed families on wait lists from other centers and found that many stated that their incomes were at or below the federal poverty level. In some cases, families stated they had experienced some type of domestic violence, or were receiving some type of public assistance, which made them automatically eligible for Head Start. GAO did not attempt to verify family statements.