Published Online: March 10, 2006
Published in Print: March 15, 2006, as Dept. Bent Grant Rules, GAO Finds

Dept. Bent Grant Rules, GAO Finds

Award tied to Bennett’s former firm questioned.

The U.S. Department of Education bypassed its own policies when officials awarded a grant early in President Bush’s first term that benefited a company founded by former Secretary of Education William J. Bennett, as well as others to groups with close ties to the administration, federal auditors have concluded.

The Government Accountability Office highlighted three cases in which Education Department officials skirted normal grant procedures, and it found several more in which the rules were bent.

In a reference to two of the grants, the GAO, the investigative arm of Congress, said the department “broke from established practice by altering its selection methodology after it had developed a list of grantees recommended for funding.”

New department procedures, however, will likely prevent future problems, the GAO says. It also concludes that the agency did not violate the law in awarding the grants in question.

The report, dated Feb. 21 but released early this month, was prompted by a request from Rep. George Miller of California, the ranking Democrat on the House Education and the Workforce Committee. He called for an investigation into the Education Department’s grantmaking process after a July 28, 2004, Education Week story raised questions about a two-year, $4.1 million federal grant to the Arkansas Department of Education.

The state used the money to partner with K12 Inc.—a for-profit online education company founded by Mr. Bennett—in establishing a virtual charter school.

The GAO’s findings show “what we had suspected: that the review process had been corrupted so they could take care of their cronies,” Rep. Miller said in an interview. “There’s no question they’ve been fully prepared to put their thumb on one side of the scale to benefit their friends.”

Expanding Grant Lists

Education Week reported in the 2004 story that the Education Department appeared to have bent its rules for the Arkansas grant because of the involvement of Mr. Bennett, who was education secretary under President Reagan.

“Anything with Bill Bennett’s name on it was going to get funded,” an Education Department employee with knowledge of the grant process said at the time.

Mr. Bennett left K12 last year amid controversy over racially charged comments he made about abortion and the crime rate.

Grants in Review

A recent Government Accountability Office report found that the Department of Education did not follow its own policies when it awarded three grants in 2001 and 2002.

Arkansas Department of Education
Received a $2.3 million grant in 2002 under a federal public school choice program. The federal department expanded the list of grantees from 10 to 13 to include 13th-ranked Arkansas, which planned to create a virtual school through an online-learning company founded by former U.S. Secretary of Education William J. Bennett.

America's Charter School Finance Corp.
Received a $4.9 million grant in 2001 related to charter school facilities. The GAO says a senior Education Department political appointee asked staff members to re-review grant applicants after only four were initially recommended. America's Charter School Finance Corp. improved its ranking and received its grant.

The National Council on Teacher Quality
Received a $5 million grant in 2001 to establish the American Board for Certification of Teacher Excellence based on an unsolicited grant proposal. The Education Department awarded the grant even though the council's proposal was not recommended for funding by two of three grant reviewers.

In a Feb. 8 response to a draft of the GAO report, Christopher J. Doherty, the acting assistant deputy secretary for the department’s office of innovation and improvement, said the department has taken “major steps” to improve grant-award procedures.

The GAO found that in 2001 and 2002, Education Department officials approved grants rejected by two out of three or all three peer reviewers; expanded grant awards to include lower-ranked proposals; or rescored grant proposals to fund a particular project.

In the Arkansas case, the department in 2002 originally planned to make 10 awards through its Voluntary Public School Choice Program. However, officials ultimately expanded the number of grantees to 13 to include the project proposed by the state education department, which planned to partner with McLean, Va.-based K12.

In addition to its connection with Mr. Bennett, K12 also had links to Rod Paige, President Bush’s first-term secretary of education, who had been an unpaid K12 advisory-board member for a year until he left to take his Cabinet position in 2001.

And Michael J. Petrilli, an associate deputy undersecretary in the department's innovation and improvement office at the time the grant was awarded, had been the vice president of community partnerships at K12 before taking his Bush administration job. Department officials have said that Mr. Petrilli did not play a role in the Arkansas grant.

With the department’s decision to expand that list of grantees from 10 to 13, the GAO found that each of the top 12 grantees received only 53 percent of the amount originally requested, while the Arkansas project received 77 percent of its request.

The Arkansas project received $2.3 million in the first year of the grant and will ultimately receive $7.8 million by 2007.

“This is an administration that prides itself on using peer-reviewed grants and scientifically based programs,” Rep. Miller said. “But when it came time to make grants, they swept all of that aside and chose their friends.”

Jeffrey J. Kwitowski, a K12 spokesman, said the virtual school program has been successful in Arkansas. “The audit was never about K12,” he said.

The 2004 Education Week story also raised questions about whether the Arkansas project fit the grant’s criteria of moving public school students from low- performing to higher-performing schools. About 60 percent of the virtual school’s students in 2004 were previously home-schooled, but had enrolled on paper in their local public school and then transferred to the virtual school.

Bill Keller, a GAO senior analyst who worked on the report, said in an interview that because the students had enrolled in a public school, the method was allowable.

Charters, Teacher Quality

A second grant examined by the GAO went to America’s Charter School Finance Corp., based in Braintree, Mass, which provides financing and other support for charter schools. It received a $4.9 million grant in 2001 under the Credit Enhancement for Charter School Facilities Program.

After four grantees were recommended for funding, the GAO says, the Education Department’s then-deputy secretary, William D. Hansen, asked his staff to re-review the fifth- and sixth-ranked applicants. Based on the additional review, the order of those two applicants was reversed, and America’s Charter School Finance Corp., which had been No. 6, was also awarded a grant.

“Program officials said that they had never before experienced a case whereby a senior political appointee selectively re-reviewed and rescored particular applicants after the peer-review process had been completed,” the GAO says in its report.

The third grant examined by the GAO involved the National Council on Teacher Quality, which received $5 million in 2001 for an unsolicited grant proposal to create the American Board for Certification of Teacher Excellence.

Ultimately, the ABCTE and the national council separated, after the ABCTE was buffeted by controversy over the handling of contracts, the exodus of board members, and the resignation of its president. ("Upheaval Hits Teacher-Credentialing Board," Oct. 19, 2005.)

The ABCTE has been closely aligned with the Education Leaders Council, a group of mostly conservative senior state policymakers co-founded in the 1990s by Eugene W. Hickock, who left the Education Department in January 2005 after serving as undersecretary and deputy secretary. The ELC helped found the ABCTE.

The Education Department funded the ABCTE project despite the fact that two out of three peer reviewers had recommended against it. In 2003, the group received an additional $35 million department grant.

“We really can’t comment on the procedures at the Department of Education,” said David W. Saba, the organization’s president. “We feel very confident we held up our end of the grant.”

The GAO also found that in 2001, the department funded eight other unsolicited grant proposals that at least two of three peer reviewers had opposed.

In 2003, the department adopted a more systematic plan for selecting unsolicited grants, Mr. Doherty wrote. He also agreed with GAO recommendations that the department finalize grant plans before a competition begins.

Other Inquiries

The grants reviewed by the GAO for the Feb. 21 report are not the only awards from the Education Department under investigation.

Both the GAO and the office of the department’s inspector general are scrutinizing contracts awarded under the $1 billion-a-year Reading First program. Critics have alleged that federal officials and their agents may have steered contracts to favored publishers and consultants. ("States Pressed to Refashion Reading First Grant Designs," Sept. 7, 2005.)

Meanwhile, a Jan. 17 inspector general’s audit found that the department did not follow its own procedures in 2002 for a four-year, $9.6 million unsolicited grant to the Austin, Texas-based Center for State Scholars to expand its program to encourage high school students to take rigorious curricula.

The audit found that “the application was not genuinely unsolicited because it was completed with the department’s endorsement and involvement.”

Such concerns can cause problems for the department, said Christopher T. Cross, who served as the department’s assistant secretary for research under President George H.W. Bush.

“The integrity of the … process is very important to the credibility of the department and the credibility of whatever program money is being used,” he said. “When you subvert that process, it is injurious to the credibility of the department.”

Vol. 25, Issue 27, Pages 1,28

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