The objective of this audit was to determine whether Region 19 Education Service Centerís (Region 19) compensation practices for five key executives and teachers were reasonable and consistent with Federal requirements and guidelines for grant years 2000, 2001, and 2002. We found that Region 19ís compensation practices did not meet Federal requirements and guidelines. While compensation for Region 19ís key executives appeared reasonable based on our comparisons, teachers appeared to be underpaid. In addition, compensation charges for three executives were inequitably allocated to Head Start. We recommended that Region 19 consider bringing its teacher wages in line with wages paid at local preschools or the minimum amount required for public school classroom teachers with the State of Texas as recommended by the Administration for Children and Families (ACF); ensure quality improvement funds are spent in accordance with ACF Head Start program instructions; and establish a time and effort reporting system that complies with OMB Circular A-87, Attachment B, ß11h to ensure that the salaries of employees with responsibilities over more than one program are properly allocated to the various programs. Region 19 concurred with our findings and recommendations.