Head Start Designation Renewal System, 39996-40006 [2019-17024]

Agencies

• DEPARTMENT OF HEALTH AND HUMAN SERVICES
• Administration for Children and Families

[Federal Register Volume 84, Number 156 (Tuesday, August 13, 2019)]
[Proposed Rules]
[Pages 39996-40006]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-17024]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Administration for Children and Families

45 CFR Parts 1304 and 1305

RIN 0970-AC77


Head Start Designation Renewal System

AGENCY: Office of Head Start (OHS), Administration for Children and 
Families (ACF), Department of Health and Human Services (HHS).

ACTION: Notice of proposed rulemaking.

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SUMMARY: In this NPRM, we propose changes to two of the seven 
conditions of the Designation Renewal System for Head Start Grantees 
(DRS): The condition related to the Classroom Assessment Scoring 
System: Pre-K (CLASS) and the fiscal condition related to audit 
findings. For the CLASS condition, we propose to remove the lowest 10 
percent criterion and set more rigorous minimum thresholds across all 
three domains that grantees must meet in order to avoid competition. 
For the fiscal condition, we propose to add a second criterion that 
would consider additional findings from annual audits. A grantee would 
be required to compete for continued funding if they met either 
criterion.
    We also propose technical changes within part 1304 subpart B 
(Designation Renewal) to remove any outdated provisions to the 
regulation. These technical fixes were not included in the publication 
of the Head Start Program Performance Standards (performance standards) 
final rule in 2016 because the Designation Renewal section of the 
regulation was not open for amendment in the revision of the 
performance standards.

DATES: Submit either electronic or written comments by September 27, 
2019.

ADDRESSES: You may submit comments, identified by [docket number and/or 
RIN number], by any of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail: Office of Head Start, Attention: Director of Policy 
and Planning, 330 C Street SW, 4th Floor, Washington, DC 20201.
    Instructions: All submissions received must include the agency name 
and docket number or Regulatory Information Number (RIN) for this 
rulemaking. All comments received will be posted without change to 
https://www.regulations.gov, including any personal information 
provided.

FOR FURTHER INFORMATION CONTACT: Colleen Rathgeb, Office of Head Start, 
Planning, Oversight, and Policy Division Director, (202) 358-3263, 
[email protected]. Deaf and hearing impaired individuals may call 
the Federal Dual Party Relay Service at 1-800-877-8339 between 8 a.m. 
and 7 p.m. Eastern Standard Time.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Background
    Designation Renewal System
    Request for Comment on Head Start Designation Renewal System 
Improvements
    The CLASS Tool
    Fiscal Condition
    Goal of This NPRM
II. Statutory Authority To Issue NPRM
III. Section by Section Discussion of Proposed Changes to the 
Designation Renewal System
    1304.11(b) School Readiness Goals
    1304.11(c) CLASS Condition
    1304.11(e) Suspension by OHS
    1304.11(g) Fiscal Condition
    1304.12 Grantee Reporting Requirements Concerning Certain 
Conditions
    1304.15 Designation Request, Review and Notification Process
    1305 Definitions
    Effective Dates
IV. Regulatory Process Matters
    Regulatory Flexibility Act
    Unfunded Mandates Reform Act
    Treasury and General Government Appropriations Act of 1999
    Federalism Assessment Executive Order 13132
    Congressional Review
    Paperwork Reduction Act of 1995
    Regulatory Planning and Review Executive Order 12866, Executive 
Order 13563, and Executive Order 13771
V. Regulatory Impact Analysis

I. Background

Designation Renewal System

    Since its inception in 1965, Head Start has been a leader in 
helping children from low-income families reach kindergarten more 
prepared to succeed in school. Through the Improving Head Start for 
School Readiness Act of 2007 (the 2007 Reauthorization) amending the 
Head Start Act (the Act), Congress required the Department of Health 
and Human Services to ensure these children and

[[Page 39997]]

their families receive the highest quality services possible. In 
support of that requirement, the 2007 Reauthorization directed the 
Secretary to establish the DRS to: (1) Identify Head Start grantees 
that are delivering high quality services and can receive funding 
noncompetitively for a five-year period and grantees that will be 
required to compete for continued funding and (2) to transition all 
grants from indefinite grants to five-year grant periods.
    The DRS requires grantees to compete for continued funding if they 
meet one or more of the following seven conditions:
    (1) One deficiency under section 641A(c)(1)(A), (C), or (D) of the 
Act;
    (2) failure to establish, use, and analyze children's progress on 
agency established School Readiness goals;
    (3) scores below minimum thresholds in any of the three domains of 
the CLASS or in the lowest 10 percent in any CLASS domain out of the 
grantees monitored in a given year unless the grantee's score is equal 
to or above the standard of excellence for that domain;
    (4) revocation of a license to operate a center or program;
    (5) suspension from the program;
    (6) debarment from receiving federal or state funds or disqualified 
from the Child and Adult Care Food Program; or,
    (7) an audit finding of at risk for failing to continue as a 
``going concern.''
    We did not revise the DRS when we issued the new Head Start Program 
Performance Standards (performance standards) in 2016 because the 
transition period to five-year grants was not complete.
    As required in Section 641(c)(8) of the Head Start Act (42 U.S.C. 
9836(c)(8)), ACF has been regularly analyzing data on the 
implementation of the DRS and on those grantees required to compete. In 
2016, ACF's Office of Planning, Research, and Evaluation published a 
report of its DRS evaluation, titled ``Early Implementation of the Head 
Start Designation Renewal System,'' which examined how the system is 
addressing its goals of transparency, validity, and reliability.\1\ The 
study further explored whether DRS is identifying lower-performing 
grantees for competition and how DRS might support program quality 
improvement.
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    \1\ https://www.acf.hhs.gov/opre/research/project/evaluation-of-the-head-start-designation-renewal-system-drs.
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Request for Comment on Head Start Designation Renewal System 
Improvements

    We published a request for comment in the Federal Register in 
December 2017 to solicit input from the public on the implementation of 
DRS broadly, including the implementation of CLASS and other conditions 
of DRS. See 82 FR 57905. We proposed consideration of the following:
    (1) Remove lowest 10 percent in any of the three CLASS domains;
    (2) Increase Emotional Support threshold from 3 to 5;
    (3) Increase Classroom Organization threshold from 4 to 5;
    (4) Allow the Secretary to set Instructional Support (IS) threshold 
each year using CLASS scores from previous year's monitoring data;
    (5) How Instructional Support and other thresholds could be set 
and/or adjusted to incentivize continuous program improvement; and
    (6) Administrative changes to DRS to more broadly include ways we 
can incentivize robust competition with new applicants, facilitate 
smooth transitions when there is a new grantee as a result of 
competition, and improve the DRS processes.
    We received 145 unique comments in response to the Federal Register 
notice. It is important to note that one submission had thousands of 
cosigners from organizations such as regional and state Head Start 
associations, grantees, community partners, and national organizations. 
All comments are available for public view at www.regulations.gov, and 
we briefly summarize them here.
    Some commenters recommended we no longer use CLASS in DRS. Nearly 
all commenters supported removal of the lowest 10 percent CLASS 
condition. Most commenters mentioned the lowest 10 percent CLASS 
condition resulted in a moving target for grantees. A majority 
supported the use of absolute thresholds and keeping the current 
thresholds in each domain. Many commenters suggested using CLASS scores 
from two reviews (e.g., two CLASS reviews) or an opportunity to show 
improvement before designating grantees for competition. The tribal 
community suggested establishing mandatory cultural and linguistic 
awareness training for CLASS observers to be developed and implemented 
in consultation with tribal nations. Commenters offered various 
approaches or systems for using CLASS scores in determining designation 
status, all of which had varying levels of complexity from an 
implementation perspective.
    We believe the DRS has driven increased accountability and improved 
the quality of services Head Start programs are providing to children 
and families. The DRS evaluation provides evidence that DRS is 
incentivizing grantees to engage in a range of quality improvement 
activities.\2\ In addition, the Head Start Family and Child Experiences 
Survey (FACES) report from 2016 indicates improvements in Head Start 
classroom quality from 2006 to 2014, including the time during the 
implementation of DRS.\3\ However, concerns with the fiscal audit 
finding and the way CLASS is implemented have become increasingly 
clear.
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    \2\ https://www.acf.hhs.gov/opre/research/project/evaluation-of-the-head-start-designation-renewal-system-drs.
    \3\ Aikens, N., Bush, C., Gleason, P., Malone, L., & Tarullo, L. 
(2016). Tracking Quality in Head Start Classrooms: FACES 2006 to 
FACES 2014. Washington, DC: U.S. Department of Health and Human 
Services.
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    For reasons established in this document, we only propose targeted 
changes to the CLASS condition and the audit-based fiscal condition. 
The current CLASS condition competes grantees who fall below the 10 
percent requirement in any of the three CLASS domains, which often 
results in grantees being designated for competition that are 
demonstrating high quality in Emotional Support and Classroom 
Organization, while grantees who fall below the mid-range for quality 
in Instructional Support are not always identified for competition. The 
existing fiscal condition, under-identifies grantees with fiscal 
challenges documented in their annual audit data and underutilizes 
important annual audit data. Consequently, we believe revisions to 
these conditions are necessary to ensure we identify those communities 
where competition is the most warranted, more effectively hold grantees 
accountable, and increase the transparency of DRS.
    In the request for comments, we received a few comments related to 
the deficiency condition. While ACF is not proposing a change to the 
deficiency condition in this NPRM, we are seeking comment about whether 
we should consider a change to the single deficiency trigger. ACF 
continues to stand by its policy that one deficiency is serious enough 
to cause a grantee to compete for continued funding. However, we have 
heard concerns that the single deficiency trigger is too stringent and 
causes competition for grantees that are high quality and had an 
isolated issue. We believe this NPRM provides another opportunity for 
stakeholders to provide input to ACF on this issue. We specifically 
seek comment on whether the condition should be two or more 
deficiencies rather than a single deficiency.

[[Page 39998]]

The CLASS Tool

    After extensive expert feedback it was determined that CLASS is the 
only existing instrument that meets the statutory requirements in 
Section 641A(c)(2)(F) of the Act. The CLASS is a research-based tool 
that measures teacher-child interaction on a seven-point scale in three 
broad domains: Emotional Support, Classroom Organization, and 
Instructional Support. Emotional Support assesses the degree to which 
teachers establish and promote positive classroom climates through 
everyday interactions. Classroom Organization assesses teachers' 
productivity, how they organize classroom routines and learning 
formats, and how they manage children's behaviors. Instructional 
Support assesses the ways in which teachers implement the curriculum to 
effectively promote cognitive and language development.\4\
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    \4\ Hamre, Bridget K., La Paro, Karen M., & Pianta, Robert C. 
(2009). Classroom Assessment Scoring System Manual Pre-K. Baltimore, 
MD: Paul H. Brooks Publishing Co, Inc.
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    The CLASS was developed in response to research findings indicating 
the importance of teacher-child interactions as a demonstrated measure 
of classroom quality and as a means to promote children's development 
and learning. The tool is administered by trained and certified 
observers using a specific protocol for scoring. Observers assess how 
teachers interact with children in classrooms and rate each CLASS 
domain on a 7-point scale, from low to high. Observers assign a score 
of 1 to 2 (low-range of quality) when teachers poorly manage children's 
behaviors, when instruction is purely rote, or when there is little 
teacher-child interaction. Observers assign a score of 3 to 5 (mid-
range of quality) when teachers show a mix of effective interactions 
with periods when interactions are either not effective or are absent. 
Observers assign a score of 6 to 7 (high-range of quality) if teachers 
show consistently effective teacher-child interactions throughout the 
observation period.\5\
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    \5\ Hamre, Bridget K., La Paro, Karen M., & Pianta, Robert C. 
(2009). Classroom Assessment Scoring System Manual Pre-K. Baltimore, 
MD: Paul H. Brooks Publishing Co, Inc.
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Fiscal Condition

    Section 641(c)(1) of the Head Start Act requires DRS to include, as 
a condition for competition, a criteria based on grantee's annual 
audits. The current DRS fiscal condition requires competition when a 
grantee is at risk for failing to continue as a going concern, meaning 
an organization is facing threat of liquidation. As defined in the 
performance standards, going concern means an organization that 
operates without the threat of liquidation for a period of at least 12 
months. This finding is a very serious fiscal finding related to the 
viability of an organization. Based on our analysis of the last six 
cohorts, this condition has identified very few grantees for 
competition.
    The Head Start Act and regulations have required annual audits of 
grantees for decades. The performance standards conform to the new 
Uniform Administrative Requirements for HHS Awards (45 CFR part 75) 
that requires every federal grantee receiving $750,000 or more to 
complete an annual audit and report the results to the Federal Audit 
Clearinghouse (FAC). 45 CFR 75.501(a). This requirement applies to a 
majority of Head Start grantees. Qualified independent audit 
professionals prepare annual audit reports and file the reports with 
the FAC. Once an audit report is filed with the FAC, it is final and 
available to the public. If there are questioned cost or findings in 
the audit report, ACF implements its audit resolution process to ensure 
the grantee has addressed any issues. The audit resolution process may 
require the grantee to implement new fiscal policies and procedures to 
resolve an issue. Further, the process may require resolution of any 
questioned costs or any disallowances.
    Audit findings according to the Uniform Administrative Requirements 
for HHS Awards at 45 CFR 75.2 mean ``deficiencies which the auditor is 
required by 75.516(a) to report in the schedule of findings and 
questioned costs.'' An independent auditor evaluates an entity based on 
a set of several elements related to management of financial systems 
and prudent fiscal decision making, or internal control.
    Internal control, as defined in accounting and auditing, is a 
process for assuring an organization's objectives in operational 
effectiveness and efficiency, reliable financial reporting, and 
compliance with laws, regulations, and policies. The elements of audit 
findings include significant deficiencies or material weaknesses in 
internal control; questioned costs, compliance with federal and other 
statutes and regulations; and known or likely fraud.
    In 2005, the United States Government Accountability Office (GAO) 
issued a report that identified risks in ACF oversight of Head Start 
grantees financial management weaknesses and recommended considering 
competing grantees showing fiscal management and other risks.\6\ 
Subsequently, Congress required that OHS use audit findings in making 
DRS determinations. The Secretary's Advisory Committee on Re-
designation of Head Start Grantees recommended that grantees that are 
considered to be fiscally ``high risk'' be required to compete.\7\ 
While ACF no longer uses the ``high risk'' designation for grantees, 
its mention in the report highlights the importance the Advisory 
Committee placed on mitigating fiscal risk.
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    \6\ GAO (2005). `Head Start: Comprehensive Approach to 
Identifying and Addressing Risks Could Help Prevent Grantee 
Financial Management Weaknesses (GAO-05 176). Washington, DC: U.S. 
Government Accountability Office. https://www.gao.gov/new.items/d05176.pdf.
    \7\ HHS (2008). A System of Designation Renewal of Head Start 
Grantees: Report of the Secretary's Advisory Committee on Re-
designation of Head Start Grantees. https://eclkc.ohs.acf.hhs.gov/report/system-designation-renewal-head-start-grantees-report-secretarys-advisory-committee-re.
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    In 2010, the DRS Notice of Proposed Rulemaking proposed a two part 
fiscal condition that included ``going concern'' and ``material 
weakness.'' 75 FR 57704, 57717. Commenters responding to the NPRM 
stated a material weakness finding could represent a minor problem and 
suggested that we look instead for a pattern of fiscal challenges. 76 
FR 70010, 70021. As described in the Section-by-Section Discussion, we 
believe that a more comprehensive look at the audit report would 
identify patterns of fiscal challenges and more accurately identify 
grantees for competition.

Goal of This NPRM

    We propose changes to the CLASS condition and the fiscal condition 
related to audit findings to ensure we identify those communities where 
competition is the most warranted, more effectively hold grantees 
accountable, and increase the transparency of DRS. For the CLASS 
condition, our goals are to ensure we are not competing grantees 
demonstrating high quality in Emotional Support and Classroom 
Organization, to compete grantees who have Instructional Support scores 
that fall below the mid-range of quality, and to create meaningful 
competition that maximizes our resources and drives quality 
improvement. For the fiscal condition, our goal is to broaden our use 
of information about a grantee's fiscal processes, financial 
management, and fiscal systems by incorporating additional audit 
findings to ensure ACF better identifies grantees with fiscal 
challenges for competition. The additional technical revisions to this 
subpart will not alter the substance of the regulation, but will ensure 
the

[[Page 39999]]

language of the Head Start requirements are clear, updated, 
streamlined, and transparent to the public.

II. Statutory Authority To Issue NPRM

    We publish this NPRM under the authority granted to the Secretary 
of Health and Human Services by sections 641, 644(c), 645A(b)(12), and 
647 of the Act (42 U.S.C. 9836, 9839, 9840a, 9842) as amended by the 
Improving Head Start for School Readiness Act of 2007 (Pub. L. 110-
134). Generally, under these sections, the Secretary is required to 
develop a system for designation renewal. The system must determine if 
a grantee delivers high-quality comprehensive services that meet 
families' educational, health, nutritional, and social needs and to 
determine if the grantee meets program and financial management 
requirements.

III. Section-by-Section Discussion of Proposed Changes to the 
Designation Renewal System

    We propose the following changes to the Head Start regulations, 
under subpart B of part 1304, Federal Administrative Procedures, at 
Sec. Sec.  1304.11, 1304.12, and 1304.15 and part 1305, Definitions. We 
believe these changes will ensure the regulations are accurate and up 
to date; and that they clarify and streamline the language of the 
existing regulation. For example, we propose to remove all references 
to December 9, 2011, the effective date of the DRS regulation, because 
that date has passed. We also propose to remove any references to the 
transition to five-year grants since all grantees have been evaluated 
through DRS and transitioned to five-year grants.
    Additionally, we propose substantive changes to conditions in 
Sec. Sec.  1304.11(c) and (g) to ensure we identify grantees where 
competition is most warranted, more effectively hold grantees 
accountable, and increase the transparency of DRS. Specifically, we 
propose to raise the absolute threshold for each CLASS domain and 
remove the lowest 10 percent criterion. We also propose to add a second 
criterion to the fiscal condition related to audit findings.

Section 1304.11 Basis for Determining Whether a Head Start Agency Will 
Be Subject to an Open Competition

    Section 1304.11 establishes the conditions that require a grantee 
to compete for continued funding under the DRS. Congress established 
the basis for the DRS and we published a final rule codifying these 
requirements in 2011. If a grantee meets any one of the seven 
conditions described in this section, an open competition is conducted 
to determine whether the incumbent grantee or another entity in the 
community is best qualified to run the Head Start program. This section 
institutes effective dates for various conditions. Since all grantees 
have transitioned through DRS and now have five-year grant periods, the 
various effective dates are no longer relevant. Throughout this part of 
the NPRM, we describe revisions to remove the outdated language.
1304.11(b) School Readiness Goals
    This paragraph establishes requirements for grantees developing and 
using school readiness goals as required in the Act. Grantees are 
required to establish school readiness goals, aggregate and analyze 
child-level assessment data three times a year, and analyze individual 
child-level assessment data to inform progress on the goals. We propose 
to maintain this requirement and only remove dates that are no longer 
relevant. Paragraph (b)(1) sets ``December 9, 2011'' as the date by 
which grantees must establish school readiness goals. We propose to 
remove the phrase, ``After December 9, 2011'' because it is outdated.
    In paragraph (b)(1)(ii), we propose to remove the phrase ``Birth to 
Five Head Start Child Outcomes Framework,'' and replace it with ``Head 
Start Early Learning Outcomes Framework: Ages Birth to Five.'' In 2015, 
OHS issued a new framework to include children from birth to age five. 
Additionally, the new framework now has indicators of what children 
should know and be able to do at 36 and 60 months of age and the 
developmental progressions that leads to those outcomes.
    For the same reason discussed earlier, we propose to remove the 
phrase, ``After December 9, 2011'', in paragraph (b)(2).
1304.11(c) CLASS Condition
    This paragraph establishes the use of the CLASS: Pre-K tool to 
assess a grantee's designation status. This condition is a two-part 
criterion that consists of both an absolute threshold and a relative 
threshold. With the absolute threshold, grantees must compete if their 
CLASS scores fall below the following minimum quality thresholds for 
each of the three domains: 2 for Instructional Support, 3 for Classroom 
Organization, and 4 for Emotional Support. The relative threshold 
requires grantees to compete for continued funding if their average 
scores across classrooms fall in the lowest 10 percent on any of the 
three CLASS domains for grantees observed in that year. Additionally, 
the 10 percent criteria includes a high-quality threshold, or 
``standard of excellence,'' across all domains that would exempt 
grantees that score a 6 or above from competition.
    Based on our experience implementing the CLASS condition since 
2012, analysis of our monitoring data, findings of the implementation 
evaluation, and comments we received in response to the December 2017 
Federal Register notice, we have determined three challenges with the 
current condition. First, the results of the lowest 10 percent 
criterion show we are identifying relatively high performing grantees 
demonstrating high quality in Emotional Support and Classroom 
Organization to compete for continued funding, but we are not 
identifying some grantees with Instructional Support scores that fall 
below the mid-range of quality.
    Second, the relative threshold in the current CLASS condition means 
there is no clear target grantees can aim to achieve. Instead of a 
transparent system where grantees know the standard for which they are 
being held accountable, a relative threshold results in informing 
grantees of the expectations after all grantees have been reviewed. The 
lowest 10 percent criterion also results in a moving target where the 
expectation of quality changes year to year. The cut-off for a group of 
grantees monitored in one year is different from the standard for 
another group of grantees monitored in another year. Recent cut-off 
scores are as follows; in 2015: Emotional Support 5.6563; Classroom 
Organization 5.2708; Instructional Support 2.2262; in 2016: Emotional 
Support 5.5952; Classroom Organization 5.2500; Instructional Support 
2.2222; in 2017: Emotional Support 5.7024; Classroom Organization 
5.3264; Instructional Support 2.3095.\8\ This lack of transparency was 
a concern highlighted in ACF's evaluation of DRS.\9\
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    \8\ https://eclkc.ohs.acf.hhs.gov/data-ongoing-monitoring/article/national-overview-grantee-classr-scores-2017.
    \9\ https://www.acf.hhs.gov/opre/research/project/evaluation-of-the-head-start-designation-renewal-system-drs.
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    Third, the current condition creates implementation problems. To 
determine which grantees score in the lowest 10 percent each year, we 
must complete all monitoring reviews before we can analyze the full set 
of data and identify the 10 percent cut-off point. During this waiting 
period, Head Start programs know their CLASS scores, but do not know 
whether they are in the lowest 10 percent and will be required to 
compete.

[[Page 40000]]

In the DRS evaluation, programs reported uncertainty associated with 
the waiting period and not knowing whether they would be designated for 
competition has led to stress and turnover among staff. We know 
stability and consistency from nurturing responsive caregivers are 
important for children's development. Research suggests stress 
compromises the quality of teacher-child interactions and staff 
turnover disrupts continuity of care and reduces the stability programs 
can provide to children.10 11
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    \10\ Whitaker, R.C., Dearth-Wesley, T., & Gooze, R.A. (2015). 
Workplace stress and the quality of teacher-children relationships 
in Head Start. Early Childhood Research Quarterly, 30(1A), 57-69.
    \11\ Cassidy, D.J., King, E.K., Wang, Y., Lower, J.K., & 
Kintner-Duffy, V.L. (2017). Teacher work environments are toddler 
learning environments: Teacher professional well-being, classroom 
emotional support, and toddlers' emotional expressions and 
behaviours. Early Child Development and Care, 187(11), 1666-1678.
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    Given the emphasis on teacher-child interactions as a critical 
ingredient of a high quality classroom experience, the CLASS tool has 
been the observational tool used to address research questions in many 
studies. Evidence suggests children learn more in well-organized 
classroom environments that are characterized by sensitive and 
responsive interactions that promote autonomy, conversation, literacy 
skills, and executive functioning.\12\ Children gain these skills when 
they experience higher quality teacher-children interactions and 
instruction.\13\ Research suggests there is a ``threshold range,'' \14\ 
or ``active range,'' \15\ where we begin to see outcomes related to 
children's school readiness. For example, research demonstrates that 
when teachers were more responsive and sensitive and were rated as 
providing high-quality emotional support, children showed better social 
adjustment and fewer behavior problems.\16\
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    \12\ Hatfield, B.E., Burchinal, M.R., Pianta, R.C., & Sideris, 
J. (2016). Thresholds in the association between quality of teacher-
child interactions and preschool children's school readiness skills. 
Early Childhood Research Quarterly, 36, 561-571.
    \13\ Ibid.
    \14\ National Center for Research on Early Childhood Education 
In Focus: Increasing knowledge in early childhood (February 2010, 
NCRECE in Focus Vo. 1 Issue 2). Learning how much quality is 
necessary to get good results for children.
    \15\ Burchinal, M., Xue, Y., Tien, H., Auger, A., & Mashburn 
A.J. (2011, March). Secondary data analysis looking for thresholds 
in child care quality. PowerPoint presentation at the Biennial 
Meeting of the Society for Research in Child Development, Montreal, 
Canada.
    \16\ National Center for Research on Early Childhood Education 
In Focus: Increasing knowledge in early childhood (February 2010, 
NCRECE in Focus Vo. 1 Issue 2). Learning how much quality is 
necessary to get good results for children.
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    Additionally, children showed more advanced academic and language 
skills when their preschool teachers provided instruction rated in the 
mid- to high-quality range.\17\ In addition to suggesting a ``threshold 
range'' rather than a specific threshold, there is also general support 
from the research that classroom quality needs to be out of the low-
range (above a 2) to support children's development.\18\
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    \17\ Ibid.
    \18\ HHS (2012) report from the Secretary's Advisory Committee 
on Head Start Research and Evaluation. https://www.acf.hhs.gov/sites/default/files/opre/eval_final.pdf.
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    Lastly, there is no national average for CLASS scores, but we can 
look to numerous studies and settings to tell us how early childhood 
preschool classrooms typically score across the CLASS domains. Aside 
from Head Start monitoring, 19 states use CLASS as the classroom 
observation tool in their state Pre-K programs,\19\ and 23 states have 
adopted it as part of their Quality Rating and Improvement System.\20\ 
We acknowledge there are some differences in the way CLASS is 
implemented across different settings (e.g., the number of classroom 
observations, whether the scores are averaged at the program or 
classroom level), but the data are nonetheless useful for understanding 
the landscape of how classrooms and programs score on the CLASS.
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    \19\ Friedman-Krauss, A.H., Barnett, S.W., Weisenfeld, G.G., 
Richard Kasmin, R., Nicole DiCrecchio, N., & Horowitz, M. (2018). 
The state of preschool 2017: State preschool yearbook, Appendix A. 
New Brunswick, NJ: National Institute for Early Education Research.
    \20\ Teachstone. CLASS: A Leading QRIS Standard. Retrieved from 
https://teachstone.com/class/.
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    We know the average preschool classroom scores are higher in the 
domains of Emotional Support and Classroom Organization (5.0-6.0) than 
in the domain of Instructional Support (2.0-3.0).21 22 CLASS 
scores in the three domains appear consistent across a variety of 
settings, even when settings include children of diverse backgrounds 
and income levels.23 24 25 26 27 While these data do not 
point to the ``right'' threshold, it provides the range in which 
classrooms and programs typically score.
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    \21\ Early, D., Barbarin, O., Bryant, D., Burchinal, M., Chang, 
F., Clifford, R., Crawford, G. & Weaver, W. & Howes, C. & Ritchie, 
S., & Kraft-Sayre, M., & Piata, B., & Barnett, S. (2005). Pre-
Kindergarten in Eleven States: NCEDL's Multi-State Study of Pre-
Kindergarten & Study of State-Wide Early Education Programs (SWEEP).
    \22\ Moiduddin, E., Aikens, N., Tarullo, L., West, J., Xue, Y. 
(2012). Child Outcomes and Classroom Quality in FACES 2009. OPRE 
Report 2012-37a. Washington, DC: Office of Planning, Research and 
Evaluation, Administration for Children and Families, U.S. 
Department of Health and Human Services.
    \23\ Early, D., Barbarin, O., Bryant, D., Burchinal, M., Chang, 
F., Clifford, R., Crawford, G. & Weaver, W. & Howes, C. & Ritchie, 
S., & Kraft-Sayre, M., & Piata, B., & Barnett, S. (2005). Pre-
Kindergarten in Eleven States: NCEDL's Multi-State Study of Pre-
Kindergarten & Study of State-Wide Early Education Programs (SWEEP).
    \24\ Burchinal, M., Mokrova, I., Bratsch-Hines, M., Peisner-
Feinberg, E. (2018). Pre-K classroom characteristics and Pre-K gains 
of children living in rural areas. PowerPoint presentation at the 
National Research Conference on Early Childhood on the Early 
Learning Network Year 1 Results: Preschool Educational Practices and 
Child Outcomes.
    \25\ Moiduddin, E., Aikens, N., Tarullo, L., West, J., Xue, Y. 
(2012). Child Outcomes and Classroom Quality in FACES 2009. OPRE 
Report 2012-37a. Washington, DC: Office of Planning, Research and 
Evaluation, Administration for Children and Families, U.S. 
Department of Health and Human Services.
    \26\ Tout, K., Cleveland, J., Li, W., Starr, R., Soli, M. & 
Bultinck, E. (2016). The Parent Aware Evaluation: Initial Validation 
Report. Minneapolis, MN: Child Trends.
    \27\ Swanson, C., Carran, D., Guttman, A., Wright, T., Murray, 
M., Alexander, C., & Nunn, J. (2017). Maryland EXCELS Validation 
Study. Johns Hopkins University, Baltimore, Maryland.
---------------------------------------------------------------------------

    For these reasons, we propose to eliminate the lowest 10 percent 
criterion of the CLASS condition and raise the absolute thresholds to 
2.5 for Instructional Support, 5 for Classroom Organization, and 5 for 
Emotional Support which we believe will improve quality, address all 
the concerns previously identified and ensure all grantees are held to 
the same standard year to year. Since research does not specify an 
exact threshold for each domain, our proposal uses guidelines from the 
CLASS manual to set thresholds that align with the broad research 
principle that programs need to be out of the low-range on quality 
(i.e., above a 2). These proposed thresholds are higher than our 
current minimums, and we believe this would strengthen the quality of 
teacher-child interactions in Head Start classrooms.
    In paragraph (c), we propose to remove the colon ``:'' from the 
stem sentence. In paragraph (c)(1), we propose to remove the phrase 
``After December 9, 2011,'' because it is outdated and we propose to 
move the remaining text to the stem sentence. We propose to re-
designate paragraph (c)(1) as paragraph (c) and re-designate paragraphs 
(i) through (iii) as paragraphs (1) through (3).
    In new paragraph (c)(1), for the minimum threshold for Emotional 
Support, we propose to remove ``4'' and replace it with ``5.'' We 
believe this change will increase the standard of quality and move 
programs closer to the high-quality range. At a score of 5, we would 
expect to see with more frequency and consistency the behaviors and 
interactions that matter for

[[Page 40001]]

children's social emotional development. For example, we would see more 
evidence of warm and supportive relationships between the teacher and 
child; more examples of teacher responsiveness and sensitivity to 
children's needs; and more interactions where the teacher supports the 
child's interests, motivations, and autonomy.
    In new paragraph (c)(2), for Classroom Organization, we propose to 
remove ``3'' and replace it with ``5.'' Like the change we propose as 
the minimum threshold for Emotional Support, we believe this proposed 
change will also set a much higher standard that moves programs closer 
to the high-quality range. At a score of 5, we believe we would see 
many more consistent examples of classroom processes and management 
that support children's learning. For example, we would see more 
instances of clear behavioral expectations and use of effective methods 
to prevent and redirect misbehavior. We would see more teacher 
preparation for activities, more evidence of classroom routines, and 
more ways in which the teacher maximizes children's engagement and 
interest.
    In new paragraph (c)(3), for Instructional Support, we propose to 
remove ``2'' and replace it with ``2.5.'' We believe this proposed 
change would set an expectation that moves programs out of the low 
range and toward the mid-range of quality. At this higher score, we 
would expect to see with greater frequency more of the behaviors and 
interactions that matter for children's learning. For example, we would 
expect to see more activities that encourage analysis and reasoning, 
more use of advanced language, and more evidence of teachers expanding 
on children's learning. Setting the threshold at 2.5 would drive 
quality improvement and set an achievable and transparent target.
    Finally, we propose to remove the existing paragraph (c)(2) in its 
entirety to eliminate the lowest 10 percent criterion and the standard 
of excellence. With the proposed use of absolute thresholds, this 
paragraph is no longer applicable. Additionally, we propose to replace 
this paragraph with the newly designated paragraph (c)(2) to reflect 
the proposed new threshold for Classroom Organization.
1304.11(e) Suspension by OHS
    Paragraph (e) requires a grantee to compete for continued funding 
if they have been suspended by OHS. When DRS became effective, grantees 
had an opportunity to appeal a suspension by OHS. However, the 
grantees' opportunity to appeal a suspension was removed in the 
performance standards, so we propose to remove references to appeal. 
For this reason, we are updating this paragraph but not changing the 
requirement.
    Specifically, we propose to remove the phrase ``there is a pending 
appeal and'' in the second sentence. In the third sentence of paragraph 
(e), we propose to add the phrase ``and the suspension remains in 
place,'' and remove the phrase, ``regardless of the appeal status.'' 
Additionally, we propose to remove the incorrect reference to 
``1304.16,'' and replace it with ``1304.15.''
1304.11(g) Fiscal Condition
    Currently, the fiscal condition of DRS requires a grantee to 
compete if an audit has indicated the grantee is at risk of ceasing to 
be a going concern, in other words at risk of liquidation, in the near 
future. The going concern condition under-identifies grantees with 
fiscal challenges documented in their annual audit data. Based on our 
analysis of the last six DRS cohorts, this condition has identified 
very few grantees for competition. However, our analysis of grantee 
annual audit reports shows fiscal concerns related to grantees' Head 
Start funds is a more prevalent issue. For example, numerous grantees 
had audit findings related to their Head Start grant in two or more 
audits during their five-year grant period. In focusing only on fiscal 
viability rather than broader audit findings in DRS, we are missing an 
opportunity to compete grantees who have other strong indicators of 
potential fiscal risks. We believe grantees with indicators pointing to 
a lack of fiscal viability (going concern) must be required to compete, 
as well as grantees with challenges in fiscal capacity identified 
before their viability is at risk. Specifically, the current condition 
does not capture valuable information to inform us of an organization's 
fiscal processes, systems and management. Since the implementation of 
this condition in 2011, it has become increasingly evident that we need 
an earlier predictor to ensure we identify and mitigate potential 
fiscal risks to an organization prior to facing the threat of a 
liquidation.
    Fiscal challenges may result in operational challenges that create 
reduced program quality and stability of services to the children and 
families grantees serve. While we can only speculate on how many 
grantees would be impacted by this revised condition, we have 
experiential knowledge that it is best to prevent fiscal emergencies. 
In recent years, multiple grantees have been terminated or relinquished 
their grants due to their inability to correct fiscal problems. 
Unaddressed fiscal challenges can lead to a grantee's inability to 
purchase supplies, pay teachers, or ultimately serve children. If a 
Head Start grantee is terminated or relinquishes the grant due to a 
fiscal crisis, a disruption in services to children and families may 
occur. Therefore, we want to compete grantees before their fiscal 
challenges escalate. Competition allows the incumbent grantee and other 
entities in the community an opportunity to demonstrate they are best 
qualified fiscally and programmatically to run the Head Start program. 
Each community deserves to have a fiscally responsible grantee 
administering the Head Start program.
    Therefore, we propose to add a second criterion to the existing 
condition based on grantees' annual independent audit findings. In 
examining options for the proposed condition, we worked with the ACF 
Office of Grants Management and other ACF divisions. Initially, we 
considered requiring grantees to compete if they were not deemed a low 
risk auditee in their audit filing. The determination of low risk 
auditee considers elements that indicate fiscal soundness, strong 
internal controls, and prudent financial management. A low risk 
determination includes the following elements: (1) Less than five 
percent total costs questioned, (2) continues as a going concern, and 
(3) no material weaknesses. A ``material weakness'' is a deficiency, or 
a combination of deficiencies, in internal control over financial 
reporting, such that there is a reasonable possibility that a material 
misstatement of the entity's annual or interim financial statements 
will not be prevented or detected on a timely basis.
    After analyzing this option, we decided that a not low risk 
determination could indicate potential fiscal risk at the agency level. 
However, it does not necessarily indicate major ongoing problems in 
financial management of a Head Start grant. Instead, we propose to 
focus on audit findings specifically related to the Head Start grant. 
We believe a grantee should be required to compete if it had any audit 
findings associated with Head Start funds in two or more annual audit 
reports within the first three fiscal years of its five-year grant 
cycle. We believe adding this second criterion to the fiscal condition 
addresses the current weaknesses in two ways.
    First, examining additional audit data gives a more comprehensive 
picture of the grantee's fiscal management

[[Page 40002]]

capacity relative to Head Start funding. This process identifies 
grantees with known multiple fiscal weaknesses and requires them to 
compete for continued funding. Using additional audit findings allows 
us to assess more information about potential risk to Federal Head 
Start funds or Head Start property caused by ineffective financial 
management systems. These findings demonstrate a pattern and indicate 
significant fiscal concern that should require these grantees to 
compete. This Head Start-specific use of audit findings in DRS 
determinations allows us to identify indicators of fiscal management 
weaknesses and oversight risks earlier and consistently in DRS.
    Second, going concern does not directly target fiscal challenges in 
managing the Head Start grant. We believe the proposed additional 
criterion would ensure that we use specific Head Start data in making 
DRS determinations. Many Head Start grantees manage grants from 
multiple Federal agencies and the annual audit report encompasses all 
the programs run by a grantee. We would only consider audit findings in 
any Head Start grants for purposes of DRS to specifically mitigate 
fiscal risks to the Head Start program.
    Our proposal changes the timeframe for using a finding of going 
concern but maintains the existing requirement for competition. Instead 
of competing a grantee that has been found at risk of failing to be a 
going concern in the previous 12 months, we believe that a finding of 
going concern at any time during the five-year grant period is 
significant and we revise the regulatory text accordingly.
    This proposed revision to the fiscal condition does not impose a 
new requirement on Head Start grantees. Conversely, it allows OHS to 
use existing requirements and data more effectively for ongoing 
oversight and improvement of grantees' fiscal systems. We believe this 
proposal is in line with the goal of DRS to promote accountability and 
continuous improvement of grantees. Competition is not an adverse 
action. It requires the current grantee to demonstrate that renewal of 
their grant is warranted, while providing other entities in the 
community an opportunity to apply for funding.
    Specifically, we propose to revise paragraph (g) and add new 
paragraphs (g)(1) and (g)(2). The proposed new paragraph (g) outlines 
the two fiscal criteria and would read as follows, ``An agency meets 
one of the two criteria of this fiscal requirement:'' Existing 
paragraph (g), the current criteria requiring a grantee to compete if 
it is at risk of failing to be a going concern, will be redesignated as 
(g)(1). We propose to amend new paragraph (g)(1) by changing the 
timeframe from within the twelve months preceding the designation 
determination to a timeframe within the five-year grant period.
    Proposed new paragraph (g)(2) will establish a second fiscal 
criterion that a grantee with audit findings associated with its Head 
Start funds (CFDA 93.600) in two or more audit reports in the first 
three years of the grant period will be required to compete.
1304.12 Grantee Reporting Requirements Concerning Certain Conditions
    This section requires grantees to report to OHS when certain events 
have occurred. Grantees are required to report to OHS within 10 working 
days in the case of the following events: (1) Revocation of a license; 
(2) bankruptcy; (3) debarment; and (4) audit finding of at risk for 
ceasing to be a going concern. We do not propose any policy changes, 
but propose to remove dates that are no longer relevant. We propose to 
remove paragraph 1304.12 (a) in its entirety and in paragraph (b) we 
propose to remove the phrase ``following December 9, 2011.'' Because 
paragraph (a) is removed, we propose to redesignate paragraphs (b)(1) 
through (4) as paragraphs (a), (b), (c), and (d) respectively.
1304.15 Designation Request, Review and Notification Process
    This section creates the processes for a grantee requesting non-
competitive renewal, for OHS determining designation, and for OHS 
notifying grantees of their designation renewal status. In this 
section, we propose to remove the language that refers to the 
transition to five-year grants and the process before and after the 
transition. This language is no longer relevant as all grantees have 
transitioned through DRS to five-year grants. Our proposal seeks to 
simplify, clarify, and update this section. We also revise language to 
make it clear that only data from the grantee's current grant period 
will be reviewed for designation determinations. In addition, we no 
longer send communication to grantees via certified mail and therefore 
we propose to remove that language.
    We propose to remove paragraph (a)(1) entirely. In existing 
paragraph (a)(2), we propose to remove the phrase ``After the 
transition period,'' at the beginning of the first sentence because it 
is out of date. Next, we propose to redesignate paragraph (a)(2) as 
paragraph (a). The newly redesignated paragraph (a) will read: 
``Grantees must apply to be considered for Designation Renewal. A Head 
Start or Early Head Start agency wishing to be considered to have its 
designation as a Head Start or Early Head Start agency renewed for 
another five-year period without competition must request that status 
from ACF at least 12 months before the end of their five-year grant 
period or by such time required by the Secretary.'' In paragraph (b), 
we propose to add the phrase ``during the current grant period,'' at 
the end of the sentence since all grantees are now on five-year grant 
periods and only data from the current grant period will be reviewed. 
We also propose to remove the colon ``:'' and replace it with a period 
``.''. We propose to remove paragraphs (b)(1), (2) and (3) in their 
entirety because they are out of date.
    We propose to amend paragraph (c) by deleting the colon ``:'' at 
the end and replacing it with a comma ``,''. At the end of paragraph 
(c), we propose to add the phrase ``at least 12 months before the 
expiration date of a Head Start or Early Head Start agency's current 
grant stating:'' Further, due to the mention of the transition period, 
we propose to eliminate paragraphs (c)(1), (c)(2) and (c)(3) entirely. 
Consequently, we propose to redesignate paragraph (c)(3)(i) as 
paragraph (c)(1) and paragraph (c)(3)(ii) as paragraph (c)(2). In 
paragraph (c)(2), we propose to remove the reference to ``(c)(3)(i),'' 
and replace it with ``(c)(1).''

Section 1305.2 Terms

    Section 1305.2 defines the terms used in the performance standards. 
We propose to add to Sec.  1305.2 a definition of ``denial of 
refunding'' which was referenced in Sec.  1304.13 and accidentally 
omitted from the performance standards published in 2016.
    Effective Dates: Current Head Start CLASS standards remain in 
effect until this NPRM becomes final. We propose for this rule to 
become effective with the fiscal year immediately following the 
publication of the final rule, but not less than 30 days after the 
publication date. We specifically request comments on this proposed 
effective date.

IV. Regulatory Process Matters

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA),\28\ as amended by the Small 
Business Regulatory Enforcement Fairness Act, requires Federal agencies

[[Page 40003]]

to determine, to the extent feasible, a rule's economic impact on small 
entities, explore regulatory options for reducing any significant 
economic impact on a substantial number of such entities, and explain 
their regulatory approach.
---------------------------------------------------------------------------

    \28\ See 5 U.S.C. 605(b).
---------------------------------------------------------------------------

    The term ``small entities,'' as defined in the RFA, comprises small 
businesses, not-for-profit organizations that are independently owned 
and operated and are not dominant in their fields, and governmental 
jurisdictions with populations of less than 50,000. Under this 
definition, some Head Start grantees may be small entities. However, in 
accordance with the RFA, we certify this proposed rule would not have a 
significant economic impact on a substantial number of small entities.
    In this NPRM, we are not imposing a negative impact on small 
entities so we do not need to consider relief. The action we propose 
here is intended to ensure accountability for Federal funds is 
consistent with the purposes of the Head Start Act and is not 
duplicative of other requirements. If you think your business, 
organization, or governmental jurisdiction qualifies as a small entity 
and this rule would have a significant economic impact on it, please 
submit a comment (see ADDRESSES) explaining why you think it qualifies 
and how and to what degree this rule would economically affect it.

Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act of 1995 (UMRA) \29\ was enacted to 
avoid imposing unfunded Federal mandates on state, local, and tribal 
governments, or on the private sector. Section 202 of UMRA requires 
that agencies assess anticipated costs and benefits before issuing any 
rule whose mandates require spending in any one year of $100 million in 
1995 dollars, updated annually for inflation. In 2019, that threshold 
is approximately $154 million. This rule does not contain mandates that 
will impose spending costs on state, local, or tribal governments in 
the aggregate, or by the private sector, in excess of the threshold.
---------------------------------------------------------------------------

    \29\ See 2 U.S.C. 1501 et seq.
---------------------------------------------------------------------------

Treasury and General Government Appropriations Act of 1999

    Section 654 of the Treasury and General Government Appropriations 
Act of 1999 requires Federal agencies to determine whether a policy or 
regulation may negatively affect family well-being. If the agency 
determines a policy or regulation negatively affects family well-being, 
then the agency must prepare an impact assessment addressing seven 
criteria specified in the law.
    We believe it is not necessary to prepare a family policymaking 
assessment, because the action we propose in this NPRM will not have 
any impact on the autonomy or integrity of the family as an 
institution. However, if you think this action would have a negative 
effect on family well-being, please submit a comment explaining why 
(see ADDRESSES).

Federalism Assessment Executive Order 13132

    Executive Order 13132 requires Federal agencies to consult with 
state and local government officials if they develop regulatory 
policies with federalism implications. Federalism is rooted in the 
belief that issues that are not national in scope or significance are 
most appropriately addressed by the level of government close to the 
people. This proposed rule will not have substantial direct impact on 
the states, on the relationship between the Federal Government and the 
states, or on the distribution of power and responsibilities among the 
various levels of government. Therefore, in accordance with section 6 
of Executive Order 13132, it is determined that this action does not 
have sufficient federalism implications to warrant the preparation of a 
federalism summary impact statement.

Congressional Review

    The Congressional Review Act (CRA) allows Congress to review 
``major'' rules issued by Federal agencies before the rules take 
effect.\30\ The CRA defines a major rule as one that has resulted or is 
likely to result in (1) an annual effect on the economy of $100 million 
or more; (2) a major increase in costs or prices for consumers, 
individual industries, Federal, state or local government agencies, or 
geographic regions; or (3) significant adverse effects on competition, 
employment, investment, productivity, or innovation, or on the ability 
of United States-based enterprises to compete with foreign-based 
enterprises in domestic and export markets.\31\ This action is not 
expected to be a major rule.
---------------------------------------------------------------------------

    \30\ 5 U.S.C. 802(a).
    \31\ 5 U.S.C. 804.
---------------------------------------------------------------------------

Paperwork Reduction Act of 1995

    This proposed rule establishes new information collection 
requirements under the Paperwork Reduction Act of 1995 (44 U.S.C. 
3507). As required by the Paperwork Reduction Act of 1995, we will 
submit a copy of these sections to the Office of Management and Budget 
(OMB) for review and they will not be effective until they have been 
approved and assigned an OMB control number.

----------------------------------------------------------------------------------------------------------------
                                                                                      Average
                                                                                   annual burden   Total annual
                  Requirement                          Annual respondents         per respondent   burden hours
                                                                                      (hours)
----------------------------------------------------------------------------------------------------------------
1304.15(a): Each Head Start or Early Head       Total grants 2,000, 400 grants              0.25             100
 Start agency wishing to be renewed for five     impacted annually.
 years without competition shall request that
 status from ACF. (Existing).
1304.13: Agencies required to compete will      120 Grants......................              60           7,200
 have to complete an application for each
 grant competed. (Existing).
Revisions to 1304.11 CLASS and fiscal           14 Grants.......................              60             840
 conditions (New).
----------------------------------------------------------------------------------------------------------------


[[Page 40004]]

Annual Burden Hours for Existing Requirements
    45 CFR 1304.15(a) requires Head Start grantees to submit a letter 
requesting renewal for a new non-competitive 5-year grant and the 
estimated burden to submit a letter is 15 minutes for 400 grants. The 
non-competitive renewal request consists of filling in a template 
letter and sending it through OHS system, so the burden is small. This 
calculation assumes in any given year, about one-fifth of all 2,000 
grants, or 400 grants, are nearing the end of their current 5-year 
project period and therefore a designation under DRS will be made for 
these grants. Head Start grantees may hold more than one grant (Head 
Start, Early Head Start, EHS--CC Partnership, Migrant Seasonal Head 
Start, and American Indian Alaska Native Head Start) and each grant is 
considered separately in DRS.
    When a Head Start grant meets any of the conditions outlined in 45 
CFR 1304.11 the grantee is designated for competition and must submit 
an application during competition to be considered for continued 
funding as required under 45 CFR 1304.13. The burden to submit an 
application is estimated at 60 hours for an estimated 120 grants each 
year. This figure assumes that about one-third of the 400 grants, or 
120 grants, are required to compete. The total annual burden for 
existing requirements is 7,300 hours.
Annual Burden Hours for Proposed Revisions
    We estimate the proposed revisions to the CLASS and fiscal 
conditions will increase the number of grants required to compete by 70 
over five years, or 14 annually. The total burden hours for the 
additional 14 grants is 840 hours.
Annual Cost for Existing Requirements
    The total annualized cost for existing requirements is estimated at 
$345,874. This figure is based on job code 11-9031 and wage data from 
May 2017 at $23.69 per hour. To account for fringe benefits and 
overhead the rate is multiplied by two, which is $47.38. The estimate 
of annualized cost to respondents for hour burden is $47.38 times 7,300 
or $345,874; https://www.bls.gov/oes/2017/may/oes119031.htm (child day 
care services).
Annual Cost for Proposed Revisions
    The total annualized cost for revisions to the CLASS and fiscal 
conditions is $47.38 times 840 or $39,799. This is using the same job 
code and wage data used for existing requirements.
    We invite comments on: (1) Whether the proposed collection of 
information is necessary for the DRS, including whether the information 
will have practical utility; (2) the accuracy of our estimate of the 
burden of the proposed collection of information, including the 
validity of the methodology and assumptions used; (3) ways to enhance 
the quality, utility, and clarity of the information to be collected; 
and (4) ways to minimize the burden of the collection of information on 
respondents, including through the use of automated collection 
techniques, when appropriate and other forms of information technology.
    OMB is required to make a decision concerning the collections of 
information contained in these proposed regulations between 30 and 60 
days after publication of this document in the Federal Register. 
Therefore, a comment is best assured of having its full effect if OMB 
receives it within 30 days of publication. This does not affect the 
deadline for the public to comment to the Department on the proposed 
regulations. Written comments to OMB for the proposed information 
collection should be sent directly to the following: Office of 
Management and Budget, Paperwork Reduction Project, Fax: 202-395-7285, 
or [email protected], Attention: Desk Officer for the 
Administration for Children and Families. All comments should be 
identified with the title, ``NPRM for Proposed DRS Rule.''

Regulatory Planning and Review Executive Order 12866, Executive Order 
13563, and Executive Order 13771

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 is supplemental to and reaffirms the principles, 
structures, and definitions governing regulatory review as established 
in Executive Order 12866, emphasizing the importance of quantifying 
both costs and benefits, of reducing costs, of harmonizing rules, and 
of promoting flexibility.
    Section 3(f) of Executive Order 12866 defines a ``significant 
regulatory action'' as an action that is likely to result in a rule: 
(1) Having an annual effect on the economy of $100 million or more in 
any 1 year, or adversely and materially affecting a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or Tribal governments or communities 
(also referred to as ``economically significant''); (2) creating a 
serious inconsistency or otherwise interfering with an action taken or 
planned by another agency; (3) materially altering the budgetary 
impacts of entitlement grants, user fees, or loan programs or the 
rights and obligations of recipients thereof; or (4) raising novel 
legal or policy issues arising out of legal mandates, the President's 
priorities, or the principles set forth in the Executive Order. This 
rule is significant under the meaning of section 3(f); accordingly, it 
has been reviewed by OMB.
    Executive Order 13771, entitled ``Reducing Regulation and 
Controlling Regulatory Costs,'' was issued on January 30, 2017 (82 FR 
9339, February 3, 2017) and requires that the costs associated with 
significant new regulations ``shall, to the extent permitted by law, be 
offset by the elimination of existing costs associated with at least 
two prior regulations.'' This rulemaking is not expected to be subject 
to the requirements of E.O. 13771 because it would result in no more 
than de minimis costs.

V. Regulatory Impact Analysis

Estimated Impact of These Proposed Changes on Competition

    Based on our analysis of our data, this proposed policy change 
would have little to no impact on the number of grantees competing due 
to the CLASS condition. The increase in the number of grantees 
competing for their Instructional Support scores would offset any 
decrease in the numbers of grantees competing for their Emotional 
Support or Classroom Organization scores.
    Based on our analysis of our fiscal data from 2015 through 2017, 
this proposed policy change to the fiscal condition would significantly 
increase the number of grantees that would be required to compete due 
to the condition. Approximately 70 grantees (four percent) had audit 
findings related to its Head Start funds in two or more audit reports 
covering years one, two, and there of the current five-year grant 
period. By comparison, in the first six cohorts of DRS, very few 
grantees competed because of the going concern fiscal condition. We 
believe this increase in the number of grantees that will be required 
to compete is warranted to ensure we are competing grantees with fiscal 
concerns. Competing grantees before known fiscal challenges escalate to 
a crisis point could prevent potential termination or relinquishment of 
the grant. A disruption in services to

[[Page 40005]]

children and families may occur if a Head Start grantee is terminated 
or relinquishes the grant.
    These changes proposed in this NPRM would revise policies 
promulgated in a prior rule. In the case of CLASS revisions, grantees 
have discussed revisions since the initial requirements were 
implemented. This proposed regulation does not impose new requirements 
on grantees. For the CLASS condition, it streamlines the requirement. 
For the fiscal condition, it uses an existing requirement to make 
designation renewal decisions.
    We do not believe there will be a significant economic impact from 
this regulatory action. We estimate that roughly one-third of grantees 
reviewed in each review cycle will be affected by the regulation. The 
costs of implementation of these rules for the subset of grantees that 
would be required to compete in any year (estimated to be approximately 
$1,500 for each grantee) is well under $1 million. The estimated $1,500 
per-grantee cost is based on the time to complete a competitive 
application. It assumes 60 hours per application at a cost of $25 per 
hour in staff time. Applications would likely be completed by a 
combination of the Head Start Assistant Director and other managers in 
the program (i.e., Child Development Manager or Family and Community 
Partnership Manager). The average annual salary for these positions is 
$50,000 or $25 per hour. As a reference point, even if every grantee 
reviewed each year were required to compete, the costs still would not 
exceed $100 million.

List of Subjects

45 CFR Part 1304

    Audit, Classroom Assessment Scoring System (CLASS), Competition, 
Designation renewal system, Education of disadvantaged, Fiscal, Grant 
programs, Head Start, Monitoring, Social programs.

45 CFR Part 1305

    Administrative practice and procedure.


    Dated: June 13, 2019.
Lynn A. Johnson,
Assistant Secretary for Children and Families.
    Approved: June 20, 2019.
 Alex M. Azar II,
 Secretary.

    For reasons stated in the preamble, we propose to amend 45 CFR 
parts 1304 and 1305 as follows:

PART 1304--FEDERAL ADMINISTRATIVE PROCEDURES

0
1. The authority citation for part 1304 continues to read as follows:

    Authority: 42 U.S.C. 9801 et seq.

Subpart B--Designation Renewal

0
2. Revise Sec.  1304.11 paragraphs (b)(1) introductory text, 
(b)(1)(ii), (b)(2) introductory text, (b)(2)(i) and (ii), (c), (e), and 
(g) to read as follows:


Sec.  1304.11  Basis for determining whether a Head Start agency will 
be subject to an open competition.

* * * * *
    (b) * * *
    (1) Established program goals for improving the school readiness of 
children participating in its program in accordance with the 
requirements of section 641A(g)(2) of the Act and demonstrated that 
such goals:
* * * * *
    (ii) Align with the Head Start Early Learning Outcomes Framework: 
Ages Birth to Five, state early learning guidelines, and the 
requirements and expectations of the schools, to the extent that they 
apply to the ages of children participating in the program, and at a 
minimum address the domains of language and literacy development, 
cognition and general knowledge, approaches toward learning, physical 
well-being and motor development, and social and emotional development;
* * * * *
    (2) Taken steps to achieve the school readiness goals described 
under paragraph (b)(1) of this section demonstrated by:
    (i) Aggregating and analyzing aggregate child-level assessment data 
at least three times per year (except for programs operating fewer than 
90 days, which will be required to do so at least twice within their 
operating program period) and using that data in combination with other 
program data to determine grantees' progress toward meeting its goals, 
to inform parents and the community of results, and to direct 
continuous improvement related to curriculum, instruction, professional 
development, program design, and other program decisions; and
    (ii) Analyzing individual ongoing, child-level assessment data for 
all children participating in the program and using that data in 
combination with input from parents and families to determine each 
child's status and progress with regard to, at a minimum, language and 
literacy development, cognition and general knowledge, approaches 
toward learning, physical well-being and motor development, and social 
and emotional development, and to individualize the experiences, 
instructional strategies, and services that best support each child.
    (c) An agency has been determined during the relevant time period 
covered by the responsible HHS official's review under Sec.  1304.15 to 
have an average score across all classrooms observed below the 
following minimum thresholds on any of the three CLASS: Pre-K domains 
from the most recent CLASS: Pre-K observation:
    (1) For the Emotional Support domain the minimum threshold is 5;
    (2) For the Classroom Organization domain, the minimum threshold is 
5;
    (3) For the Instructional Support domain, the minimum threshold is 
2.5.
* * * * *
    (e) An agency has been suspended from the Head Start or Early Head 
Start program by ACF during the relevant time period covered by the 
responsible HHS official's review under Sec.  1304.15 and the 
suspension has not been withdrawn. If the agency did not have an 
opportunity to show cause as to why the suspension should not have been 
imposed, or why the suspension should have been lifted if it had 
already been imposed under part 1304, the agency will not be required 
to compete based on this condition. If an agency has received an 
opportunity to show cause and the suspension remains in the place, the 
condition will be implemented.
* * * * *
    (g) An agency meets one of the two criteria of this fiscal 
requirement:
    (1) Has been determined within the first four years of the five-
year grant period to be at risk of failing to continue functioning as a 
going concern. The final determination is made by the responsible HHS 
official based on a review of the findings and opinions of an audit 
conducted in accordance with section 647 of the Act; an audit, review 
or investigation by a state agency; a review by the National External 
Audit Review (NEAR) Center; or an audit, investigation or inspection by 
the Department of Health and Human Services Office of Inspector 
General; or,
    (2) Has been determined by the responsible HHS official within the 
first four years of the five-year grant period to have audit findings 
associated with its Head Start funds (CFDA 93.600) in two or more audit 
reports covering years one, two, and three of the current project 
period submitted to the Federal Audit Clearinghouse (in accordance with 
section 647 of the Act).
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3. Revise Sec.  1304.12 as follows:

[[Page 40006]]

 Sec.  1304.12  Grantee reporting requirements concerning certain 
conditions.

    Head Start agencies must report in writing to the responsible HHS 
official within 10 working days of occurrence any of the following 
events:
    (a) The agency has had a revocation of a license to operate a 
center by a state or local licensing entity.
    (b) The agency has filed for bankruptcy or agreed to a 
reorganization plan as part of a bankruptcy settlement.
    (c) The agency has been debarred from receiving Federal or state 
funds from any Federal or state department or agency or has been 
disqualified from the Child and Adult Care Food Program (CACFP).
    (d) The agency has received an audit, audit review, investigation, 
or inspection report from the agency's auditor, a state agency, or the 
cognizant Federal audit agency containing a determination that the 
agency is at risk for ceasing to be a going concern.
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4. Revise Sec.  1304.15 to read as follows:


Sec.  1304.15  Designation request, review and notification process.

    (a) Grantees must apply to be considered for Designation Renewal. A 
Head Start or Early Head Start agency wishing to be considered to have 
its designation as a Head Start or Early Head Start agency renewed for 
another five-year period without competition must request that status 
from ACF at least 12 months before the end of their five-year grant 
period or by such time required by the Secretary.
    (b) ACF will review the relevant data to determine if one or more 
of the conditions under Sec.  1304.11 were met by the Head Start and 
Early Head Start agency's program during the current grant period.
    (c) ACF will give notice to all grantees on Designation Renewal 
System status, except as provided in Sec.  1304.14, at least 12 months 
before the expiration date of a Head Start or Early Head Start agency's 
current grant stating:
    (1) The Head Start or Early Head Start agency will be required to 
compete for funding for an additional five-year period because ACF 
finds that one or more conditions under Sec.  1304.11 were met by the 
agency's program during the relevant time period described in paragraph 
(b) of this section, identifying the conditions ACF found, and 
summarizing the basis for the finding; or,
    (2) That such agency has been determined on a preliminary basis to 
be eligible for renewed funding for five years without competition 
because ACF finds that none of the conditions under Sec.  1304.11 has 
been met during the relevant time period described in paragraph (b) of 
this section. If prior to the award of that grant, ACF determines that 
the grantee has met one of the conditions under Sec.  1304.11 during 
the relevant time period described in paragraph (b) of this section, 
this determination will change and the grantee will receive notice 
under paragraph (c)(1) of this section that it will be required to 
compete for funding for an additional five-year period.

PART 1305--DEFINITIONS

0
5. The authority citation for part 1305 continues to read as follows:

    Authority: 42 U.S.C. 9801 et seq.

0
6. Section 1305.2 is amended by adding, in alphabetical order, the 
definition ``Denial of Refunding'' to read as follows:


Sec.  1305.2  Terms.

* * * * *
    Denial of Refunding means the refusal of a funding agency to fund 
an application for a continuation of a Head Start program for a 
subsequent program year when the decision is based on a determination 
that the grantee has improperly conducted its program, or is incapable 
of doing so properly in the future, or otherwise is in violation of 
applicable law, regulations, or other policies.
* * * * *

[FR Doc. 2019-17024 Filed 8-12-19; 8:45 am]
 BILLING CODE 4184-01-P