Newark Preschool Council, Inc., Did Not Always Comply With Head Start Requirements

Newark Preschool Council, Inc. (Newark), which operated throughout Newark, New Jersey, did not always comply with Head Start program requirements, resulting in its receiving approximately $10 million of excess Head Start funds during a 17-month period. In addition, it did not monitor its partner agencies' operations to ensure that children at these facilities received Head Start services.

Specifically, Newark did not maintain its funded enrollment level and, as a result, received an excess of nearly $8 million in Head Start funds. In addition, Newark used Head Start funds for unallocable general and administrative costs ($1.5 million), unauthorized purposes ($450,000), and salary paid to its former executive director that did not comply with Newark's policies ($46,000). Further, Newark did not monitor its partner agencies' operations to ensure that children at these facilities received Head Start services.

We recommended that ACF (1) request Newark to refund $10 million to the Federal Government for unallowable costs applicable to underenrollment, general and administrative expenses, unauthorized purposes, and salary payments; (2) use the information presented in the draft report to complete the closeout process for Newark's Head Start grant; (3) if Newark is awarded a Head Start grant in the future, ensure that Newark maintains its funded enrollment level, properly monitors partner agencies, and follows its policies and procedures relating to salary payments and cash management for any future grant awards; and (4) retain information related to Federal funds used to acquire, construct, or renovate its grantees' properties, in accordance with Departmental requirements.

Newark did not provide comments on our draft report. In October 2016, after the issuance of our draft report to Newark, the grantee filed for bankruptcy under Chapter 7 of the Bankruptcy Code.

In written comments on our draft report, ACF generally concurred with our recommendations and stated that, given the history of serious and systematic failures in Newark's oversight and management of ACF grant funds, ACF would not consider awarding Newark a new grant in the foreseeable future.