The Department of Education has released an audit of the Education Leaders Council that concludes the nonprofit group misused nearly a half-million dollars in federal grant money.
Released by the department’s office of the inspector general on Jan. 31, the audit found that the organization “drew down and expended federal funds it was not entitled to.” In the 2003 fiscal year, it says, the ELC overdrew its grant by $495,326, which the report blames on inadequate controls within the organization.
The council was founded in 1995 as a conservative-leaning national voice on school issues. In 2002, the organization launched Following the Leaders, a technology-based program designed to help educators meet the requirements of the federal No Child Left Behind Act. It offered both classroom and district-level tools to help incorporate standards-based curricula into classrooms, diagnose students’ strengths and weaknesses, and analyze and report student data.
Between July 1, 2002, and Dec. 31, 2004, the ELC received more than $23 million in grants from the Education Department’s Fund for the Improvement of Education for the project. Congress appropriated an additional $9.6 million for the project in fiscal 2005, prompting critics to question the group’s spending habits and effectiveness. (“Project Draws Federal Money, Despite Doubts,” Jan. 12, 2005.)
More than 28 percent of the grant costs reviewed in the audit, which covered calendar year 2004, were either questioned or unsupported, the report says. Among the $232,000 in questioned costs were expenditures for meals, entertainment, and travel that did not appear to be related to Following the Leaders. Also included were expenses that federal grants cannot be used for, such as alcoholic beverages, fund raising, and advertising. The organization spent $4,913 on ads that ran in Education Week, the audit says.
The report notes that “officials and employees responsible for incurring most of the questioned and unsupported costs were no longer employed by ELC” when the audit took place.
Indeed, since 2003, it says, eight members of the group’s board of directors, the chief executive officer, chief operating officer, chief financial officer, and president have resigned.
Late last year, the group changed its name to Following the Leaders and appointed the project’s director, Faye P. Taylor, as the new chief executive officer. It also moved its headquarters from Washington to Springfield, Tenn., in order to cut costs, Ms. Taylor said. She is a former member of the group’s board of directors and a former Tennessee state education commissioner.
The council’s other initiatives have been dropped. And the Following the Leaders project has narrowed its focus to helping create networks of schools to help smaller schools use student-performance data and technology to improve instruction, Ms. Taylor said in an interview last week.
In December, Following the Leaders submitted a response to the first draft of the audit. The group said that “while we concur with the findings concerning financial protocols, we have long since corrected many of the accounting entries, a fact which is given minimal attention in this report.”
Ms. Taylor said that the ELC originally notified the Education Department about the overdraw of money, and that the audit began before the organization made changes to its internal controls and finances.
Following the Leaders is working with the department to pay back the overdrawn grants, and to resolve any concerns about its spending, she said.
The organization is currently “financially sound,” she said, though “operating lean and mean.” For example, moving the headquarters to Tennessee cut operating costs to one-tenth the cost of being in the nation’s capital, she said. The organization also has significantly decreased its staff, she said, and now has two full-time and two part-time employees.
But, according to the audit, the “ELC’s current financial position is a cause for concern.”
The report says that in 2001, the ELC’s net assets were negative $25,033, and that in 2005, they were negative $547,000. In 2004, 93 percent of the ELC’s total revenue came from federal grants, the audit says, which makes it more at risk financially than organizations with multiple revenue sources.
The organization has submitted a business-recovery plan to the Education Department, Ms. Taylor said, and is working with vendors to continue providing services to schools. The organization continues to work with more than 550 schools in 11 states. As for the audit, she said, “it all depends on what the reader wants to read in the report.”