In fiscal year 2004, the Congress appropriated $6.8 billion to serve 919,000 poor children through 1,680 Head Start grantees nationwide. Recent reports of financial improprieties at a number of Head Start programs around the country raised questions about the effectiveness of the oversight provided by the Department of Health and Human Services' (HHS) Administration for Children and Families (ACF) in identifying and resolving financial management weaknesses in Head Start grantees. This testimony discusses: (1) the processes ACF uses to assess the programs' risks; (2) whether those processes could be improved to ensure the accuracy and reliability of the information ACF collects on its Head Start grantees; and (3) whether ACF ensures that grantees with financial management weaknesses correct those problems in a timely manner. The analysis of the data shows that more than half the grantees cited for failure to comply with rules related to financial management were out of compliance again with one or more financial management standards during their next review. Poor linkages between grantee performance and funding were also found. Opening competition to qualified applicants to replace a poorly-performing grantee may be a necessary step toward ensuring that as many eligible children as possible are provided with services that meet Head Start's standards. (Contains 1 table and 4 figures.)