Over the Past 10 Years, Head Start Administrative Spending Remained Relatively Steady and Always Below the 15 Percent Statutory Ceiling

KEY POINTS

• The Head Start Act sets a ceiling of 15 percent for development and administrative costs.
• The Head Start Act gives the HHS Secretary the flexibility to determine that administrative expenses are excessive below the 15 percent ceiling.
• Administrative expenses do not include program costs, which are those directly related to the provision of program component or direct service functions. Indirect costs comprise a large share of administrative expenses.
• In Fiscal Year 2025 (FY25), nearly one third of all grants (31.4 percent) operated at or below 10 percent administrative costs. Administrative spending as a share of total costs did not vary substantially by grant size.
• Across Head Start programs, the share of overall spending on administrative expenses remained relatively stable from FY16 to FY25, ranging from 10.9 percent to 11.2 percent.
• The 15 percent ceiling for Head Start sits at the high end of administrative limits used across related programs. Other federal human services and early childhood programs generally set a five percent or 10 percent administrative expense limit.
• Every dollar spent on general administrative expenses is a dollar unavailable for core program functions like classroom instruction or comprehensive services for children and families.

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BACKGROUND

Head Start provides comprehensive early learning and development, health, and family well-being services to children ages birth to five years. Head Start Preschool serves children ages three to five and their families, and Early Head Start serves children birth to age three and expectant mothers.

OHS awards about $11.9 billion in grant funding directly to about 1,600 public agencies, private nonprofit and for-profit organizations, Tribal governments, and school systems to operate Head Start programs in local communities. Head Start is a federal-to-local program, meaning funds flow directly from the federal government to local grant recipients.

The Head Start Act sets a ceiling for development and administrative costs at 15 percent. Section 1303.5 of the Head Start Program Performance Standards (HSPPS) re-states the Act in that "costs to develop and administer a Head Start program cannot exceed 15 percent of the total approved program costs," inclusive of both federal costs and the non-federal match. 

The Head Start Act allows HHS to determine excessive administrative costs

While the statutory ceiling is 15 percent, the Secretary of HHS has flexibility to determine that administrative expenses are excessive even below that threshold, and may require recipients to take steps to eliminate such excessive costs.

Administrative expenses are distinct from costs to provide direct services to children and families

Program costs include staff, training, Head Start centers' rent and utilities, educational materials, classroom supplies, children's transportation or meals, and related staff fringe benefits. Administrative expenses include administrative and executive personnel's salaries and benefits, organization-wide planning costs, accounting, auditing, human resources, administrative space costs, and membership dues for states' Head Start associations. Indirect costs comprise a large portion of administrative costs.

NEARLY ONE THIRD OF ALL HEAD START PROGRAMS CURRENTLY OPERATE AT OR BELOW 10 PERCENT ADMINISTRATIVE COSTS

In FY25, the share of spending on administrative expenses across all Head Start grants was 11.2 percent. Nearly one-third of all grants (31.4 percent) operate at or below 10 percent administrative costs. A higher percentage of Early Head Start programs have administrative costs below 10 percent compared to Head Start Preschool programs (Table 2).

About 3.8 percent of all grants currently operate at or below a five percent administrative cost threshold. Approximately eight percent of all grants operate with administrative costs between five and 7.5 percent, and about 19.7 percent of all grants operate with administrative costs between 7.5 and 10 percent. About one-third of all grants operate with administrative costs between 10 and 12.5 percent and another one-third between 12.5 and 15 percent.

Grantees in both Head Start Preschool and Early Head Start show a sharp concentration of administrative spending just below the 15 percent statutory ceiling: about 8.5 percent of all grants report administrative costs between 14.5 and 15 percent alone. A small percentage of all grants have administrative costs above 15 percent.

Table 2. Percent of Early Head Start and Head Start Preschool Grants at Administrative Cost Thresholds, FY25

Administrative spending does not appear to vary substantially based on grant size, as measured by funded enrollment. Across all Head Start grants, the share of administrative spending was 11.3 percent for small grants, 11.4 percent for medium grants, 11.0 percent for large grants, and 11.2 percent for very large grants.

HEAD START SPENDING ON ADMINISTRATIVE EXPENSES HAS REMAINED STABLE OVER TIME

At the national level, the share of spending on administrative expenses has remained relatively constant since FY16, ranging from 10.9 percent to 11.2 percent. Over the past 10 years, administrative spending has consistently operated below the 15 percent ceiling identified in statute and regulation.

Early Head Start programs tend to have a lower percentage of spending on administrative expenses compared to Head Start Preschool programs. Since FY16, Early Head Start spending on administrative expenses ranged from 10.3 percent to 10.8 percent, while Head Start Preschool spending on administrative expenses ranged from 11.1 percent to 11.5 percent. 

HEAD START ALLOWS A HIGHER CEILING ON ADMINISTRATIVE EXPENSES COMPARED TO OTHER HHS PROGRAMS

Other HHS human services and early childhood programs generally set a five percent or 10 percent administrative expense limit. The 15 percent ceiling for Head Start sits at the high end of administrative limits used across related programs. The Child Care and Development Block Grant (CCDBG), the second-largest HHS early childhood program after Head Start, limits State and Territory administrative activities to five percent, though allows up to 15 percent for Tribes. The Maternal, Infant, and Early Childhood Home Visiting (MIECHV) program uses a 10 percent default with a limited exception up to 15 percent for specified circumstances.

CONCLUSION

Since FY16, Head Start programs have consistently operated with administrative spending below the 15 percent ceiling identified in statute and regulation, and spending did not appear to vary substantially based on program size in FY25. The 15 percent limit functions as a ceiling, not a target, and HHS may determine that administrative costs are excessive even below that threshold, since every dollar spent on administration is a dollar unavailable for core program functions.

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