Background

In 2011, the U.S. Department of Health and Human Services (HHS), as required by Congress, established the Designation Renewal System (DRS). It holds Head Start agencies accountable for delivering high-quality and comprehensive services to the children and families they serve, while also meeting program and financial requirements.

The DRS establishes seven conditions to determine whether programs qualify for continued Head Start funding for five years without competing for those funds with other local agencies. Open competitions are held in communities where a program meets one or more specified conditions. In such cases, interested agencies may apply to provide Head Start services in that area through a notice of funding opportunity (NOFO). Agencies that do not meet one of the seven DRS conditions become eligible to receive a new five-year grant noncompetitively.

In 2020, HHS revised three of the seven DRS conditions that trigger an agency to compete for continued funding. These changes better identify the grants that would most benefit from competition and increase grantee focus on improving performance in important measures of quality.

Conditions in the DRS

The Head Start Program Performance Standards (HSPPS) specify seven DRS conditions that trigger competition of grant funding if identified within a five-year project period. As of Oct. 27, 2020, the conditions are:

1. Two or more deficiencies, defined as a systemic or substantial material failure of an agency in an area of performance
2. Score below a competitive threshold in one or more Classroom Assessment Scoring System (CLASS®) domains. Additionally, grantees that fall below a quality threshold on any CLASS^® domain receive support from the Office of Head Start (OHS) for the program to improve classroom learning environments.
3. Two or more audit findings of material weakness or questioned costs associated with Head Start funds, or a going concern finding
4. Failure to establish and take steps to achieve school readiness goals
5. License revocation
6. Suspension by OHS
7. Debarment by another federal or state agency or disqualification from the Child and Adult Care Food Program (CACFP)

CLASS® Condition

The CLASS^® quality thresholds represent OHS’s expectation for all grantees regarding the quality of classroom learning environments. The quality thresholds are: 

• Six for the Emotional Support domain
• Six for the Classroom Organization domain
• Three for the Instructional Support domain

If a grantee receives a score below one of the quality thresholds, OHS provides support for quality improvement by intentionally connecting the grantee to a variety of training and technical assistance resources that align with areas where improvement is needed.

The CLASS^® competitive thresholds trigger competition and represent OHS’ minimum expectations for all grantees regarding the quality of the classroom learning environment. The competitive thresholds are: 

• Five for the Emotional Support domain
• Five for the Classroom Organization domain 
• 2.3 for the Instructional Support domain for CLASS^® reviews conducted through July 31, 2025, and 2.5 for CLASS^® reviews conducted on or after Aug. 1, 2025.

Explore these resources for additional information on CLASS^®, including use of the tool to support professional development:

• Use of CLASS^® in Head Start
  Review a list of frequently asked questions and answers regarding the use of CLASS® in Head Start programs. Learn how programs can use CLASS^® for professional development and how OHS uses it for program monitoring purposes.
• Resources on CLASS^® Pre-K
  Explore these CLASS^® resources to help improve program quality and outcomes. They may be useful to Head Start directors, education managers, coaches, teachers, and others who work with preschoolers.
• Teacher-Child Interaction - Resources
  Explore these resources on improving teacher-child interactions and creating positive learning environments.
• Focus on Instructional Supports: Resources to Help Head Start Programs
  Hear from OHS Leadership and experts at the National Center on Early Childhood Development, Teaching, and Learning as they discuss strategies to improve teaching practices reflected in the Instructional Support domain of CLASS^®.
• National Overview of Grantee CLASS^® Scores by Year
  Find descriptive statistics of past and current grantee-level CLASS^® data.

Fiscal Condition

As federal grantees, Head Start programs must carefully use and account for their federal funding. Each grantee is required to have an annual audit, which provides OHS with data about a grantee’s management of their federal funds. The fiscal condition uses indicators of fiscal management and oversight risks in designation renewal determinations. Material weakness and questioned cost findings indicate potential challenges in a grantee’s internal controls, appropriate use of funds, financial management, or reporting related to Head Start funds. A going concern audit finding represents an agency being in such a dire financial situation that they are likely no longer to be a viable financial entity within 12 months.

Review management resources related to the fiscal condition:

• Fiscal Checklist: Policy and Regulation Compliance
  Use this tool to track compliance with Head Start fiscal policies and regulations and reporting requirements. 
• Financial Audits: Key Regulations and Tips
  Explore key Head Start regulations and expectations concerning financial audits. Find financial audit references in the Head Start Act, the Head Start Program Performance Standards, and related HHS Uniform Administrative requirements. Learn about the steps for selecting an auditor and related online resources.
• Apply Effective Internal Controls and Reporting
  Review a collection of tools and resources to strengthen internal controls and reporting of financial information.  
• Management Matters: Cost Allocation
  Use this training session to learn more about cost allocation. It is the process of assigning the shared cost of an item or service to two or more programs, and it's a key element of the fiscal management system. Organizations use cost allocation to ensure costs are shared equitably across different funding sources and programs.
• Management Matters: Non-Federal Match
  The federal government provides 80% of the actual costs of Head Start program services and grantees are required to provide 20% of the budget in non-federal match. This partnership with communities is a hallmark of Head Start that can present challenges to some grantees. These three Management Matters training sessions discuss non-federal match.

Tribal Government Consultation

When a tribal grantee meets a DRS condition, HHS engages in government-to-government consultation with the appropriate tribal government (called tribal government consultation) to establish and implement a plan to improve quality. If the grantee is still not delivering high-quality and comprehensive services based on a reevaluation, then the grant is subject to an open competition.

Last Updated: October 22, 2024