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. 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. 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. 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. 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. However, the grantee as a whole did not report  having more than 10 percent over-income families enrolled. 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    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. 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. 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. 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. 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. 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. 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.
Why GAO Did This Study

The Head Start program, overseen by the Department of Health and Human Services and administered by the Office of Head Start, provides child development services primarily to low-income families and their children. Federal law allows up to 10 percent of enrolled families to have incomes above 130 percent of the poverty line--GAO refers to them as "over-income." Families with incomes below 130 percent of the poverty line, or who meet certain other criteria, are referred to as "under-income". Nearly 1 million children a year participate in Head Start, and the American Recovery and Reinvestment Act provided an additional $2.1 billion in funding. GAO received hotline tips alleging fraud and abuse by grantees. In response, GAO investigated the validity of 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. The investigation of allegations is ongoing. To perform this work, GAO interviewed grantees and a number of informants and reviewed documentation. GAO used fictitious identities and bogus documents for proactive testing of Head Start centers. GAO also interviewed families on wait lists. Results of undercover tests and family interviews cannot be projected to the entire Head Start program. In a corrective action briefing, agency officials agreed to address identified weaknesses.

What GAO Found

GAO received allegations of fraud and abuse involving two Head Start nonprofit grantees in the Midwest and Texas. Allegations include manipulating recorded income to make over-income applicants appear under-income, encouraging families to report that they were homeless when they were not, enrolling more than 10 percent of over-income children, and counting children as enrolled in more than one center at a time. GAO confirmed that one grantee operated several centers with more than 10 percent over-income students, and the other grantee manipulated enrollment data to over-report the number of children enrolled. GAO is still investigating the other allegations reported. Realizing that these 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 the families' income to register over-income children into under-income slots. The undercover tests revealed that 7 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 7 instances centers did not manipulate information. To see selected video clips of GAO enrollments, see http://www.gao.gov/products/gao-10-733T . In addition, GAO found that most of the 550 Head Start centers contacted had wait lists. GAO also found that 2 centers where it 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, a group automatically eligible for Head Start. GAO did not attempt to verify family statements.