Special report: 21st Century Community Learning Centers [Jan. 2008]

Special Report

January 2008

Why we did this Investigation

21st Century Community Learning Centers

The State Government Division of the Department of Audits and Accounts was petitioned by State School Superintendent Kathy Cox to conduct an independent investigation amid concerns of a potential employee conflict of interest related to the 21st Century Community Learning Centers program.

What is a 21st Century Community Learning Center?

A 21st Century Community Learning

Center is the physical location

where Federally grant-funded

services and activities are provided

to participating students and adults.

Community learning centers operate

during non-school hours (before or

after school) or periods when school

is not in session (including holidays,

weekends, and summer recess). The

objective of the 21st Century

Community Learning Centers

Program is to provide students with

academic enrichment opportunities

along with activities designed to

complement the students' regular

academic program. Services include

tutoring and mentoring, homework

help,

community

service

opportunities, technology programs,

as well as music, arts, sports, and

cultural activities.

The 2006-2007 Grant Competition was tainted by evidence of collusion and management override of internal controls.
What we found
Our examination of the Georgia Department of Education's (GDOE) Twenty-First Century Community Learning Centers (21st Century) program found the 2006-2007 grant competition to be severely flawed as a result of apparent collusion and management override of internal controls. The 2006-2007 grant competition provided new funding in the amount of $10,650,962.00 to various sub-grantees beginning with fiscal year 2007 that potentially could payout in excess of $46 million over a five year period. During the course of our examination, we recovered evidence indicating a complex fraud scheme was in place to manipulate the outcome of the 2006-2007 grant competition in favor of certain community-based organizations. The scheme involved several employees of the GDOE, certain members of the independent external peer review panel, and a number of community-based organizations. On June 8, 2006, the grant award process concluded when the State Board of Education approved 29 sub-grants recommended to them by the GDOE (one additional grant was subsequently approved on July 13, 2006). Our investigation, however, determined these grant awards were not determined by a competitive grant process, as required, but rather by an allocation methodology that appears to be materially noncompliant with applicable Federal laws and regulations (See Exhibit 7 on page 12).
Our investigation found the following deficiencies:
The methodology used to award funding to sub-grantees failed to follow applicable Federal regulations and established GDOE policies and procedures;

Website: www.audits.state.ga.us

Phone: 404-656-2180

Fax: 404-651-8842

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23 of 54 grant proposals appear to have been inappropriately excluded from funding consideration;

Scores of the independent external peer review panel do not appear to have been used to determine grant awards;

Grant awards to sub-grantees were not correctly determined. Lower-ranking applicants received funding to the detriment of higher-ranking applicants;

The actual methodology used to award funding to sub-grantees was not appropriately disclosed to the State School Superintendent or to the State Board of Education;

At least two GDOE former employees appear to have used their positions for personal gain through contractual arrangements with sub-grantees;

Cash management and on-site sub-grantee monitoring procedures used by the GDOE were insufficient; and,

Reimbursements were made to sub-grantees for improper program expenditures.

The GDOE should review the compliance issues associated with the 2006-2007 grant competition. In consultation with the U.S. Department of Education and the Attorney General of Georgia, management of the GDOE and the State Board of Education should evaluate the prudence of the continuation of the 2006-2007 grant awards beyond the present school year.

The State Government Division (SGD) of the Department of Audits and Accounts (DOAA) is responsible for planning and performing financial and compliance audits, as well as other procedures relating to the issuance of:
State of Georgia Comprehensive Annual Financial Report (CAFR) State of Georgia Single Audit Report
State of Georgia Budgetary Compliance Report
Pursuant to O.C.G.A. 50-6-4, the SGD performs special examinations at the request of the Governor, the Appropriations Committee of the House of Representatives, or the Appropriations Committee of the Senate. The SGD also conducts investigations pursuant to O.C.G.A. 50-6-28. The SGD coordinates the publication of the annual compilation reports:
Salaries and Travel Supplements Per Diem and Fees Supplements

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Table of Contents

Background

4

Findings

Finding 1 - Grant Competition

6

Finding 1 a Non-compliance with Federal Regulations/

Departure from GDOE Policies and Procedures

7

Finding 1 b 23 Grant Proposals Excluded from

Competition

10

Finding 1 c Scores of Independent External Peer Review Panel

Not utilized

11

Finding 1 d Lower-ranking Applicants Receive Funding

11

Finding 1 e Grant Award Process Not Appropriately

Disclosed

15

Finding 2 Positions used for Personal Gain

18

Finding 3 Insufficient On-site Monitoring Procedures

19

Finding 4 Sub-grantees Reimbursed Improper Expenditures

20

Appendix

23

GDOE Responses

28

Twenty-First Century Community Learning Centers

4

Background

The 21st Century Community Learning Centers Program (21st Century) began as a Federal discretionary grant program in 1998 and supported more than 1,600 grants to local education agencies (LEAs) to provide a wide range of out-of-school time services to children and community members. The 21st Century Program was amended under Title IV, Part B of the No Child Left Behind Act of 2001 Act (NCLB) and is now administered by the states through competitive grants. The primary purpose of the 21st Century program is to provide expanded academic enrichment and other services and programs that reinforce and complement the regular academic program of participating students.
One of the significant modifications detailed in the amended legislation was to expand eligibility of 21st Century funding to include public and private youth development organizations. Community learning centers operate during non-school hours (before or after school) or periods when school is not in session (including holidays, weekends, and summer recess).

Federal Regulations OMB Circular A-133 Compliance Supplement (March 2007), page 4-84.287-2, states: "The Secretary of Education awards 21st CCLC grants through a formula grant process to States; the States then award, through a competitive process, sub-grants to a Local Educational Agency (LEA), community-based organization, another public or private entity, or a consortium of two or more of such agencies, organizations, or entities."
Additional guidance on how State's are to conduct grant competitions for the 21st Century program can be found in Title 20 Chapter 70 of the United States Code. Section 7174, paragraph (e) states: "In reviewing local applications under this section, a State educational agency shall use a peer review process or other methods of assuring the quality of such applications."

"21st CCLC centers are defined as the physical location where grant-funded services and activities are provided to participating students and adults. A center is characterized by defined hours of operation; a dedicated staff that plans, facilitates, and supervises program activities; and an administrative structure that may include a position akin to a center coordinator."1 A 21st Century center can be located in elementary or secondary schools or other similarly accessible facilities. They provide a range of high-quality services to support student learning and development, including tutoring and mentoring, homework help, academic enrichment (such as hands-on science technology programs), and community service opportunities, as well as music, arts, sports and cultural activities.

1 Learning Point Associates "An Overview of the 21st CCLC Program: 2004-05-13"

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21st Century grants are awarded for a three to five year period. Each grant year begins on July 1 and concludes on June 30. For each grant competition, there is a potential for an annual renewal (continuation awards) for the 2nd and 3rd year at 100%, contingent upon future appropriations and approval by the Georgia State Board of Education.

To be eligible for continuation awards:
Grantees must progress towards meeting criteria as specified in the grant application; Submit required documentation; Maintain on-line data management reporting in a timely manner; Participate in statewide evaluation activities; and Demonstrate compliance with Georgia's child care licensing requirements. Applicants who are not local school systems are required to submit annual financial
audit reports.

In the fourth and fifth years, funds are reduced. In order to receive these reduced funding amounts, grantees must provide evidence that other sources of funding have been obtained or grant support will conclude at the end of the budget period. Replacement funds may be inkind funds.

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Findings

Finding 1 - Grant Competition
Our examination of the GDOE's 21st Century program, which provided new funding in the amount of $10,650,962.00 to various sub-grantees for fiscal year 2007 (and potentially for four additional years, See Exhibit 1), found the 2006-2007 grant competition to be severely flawed as a result of apparent collusion and management override of internal controls. During the course of our examination, we recovered evidence indicating a complex fraud scheme was in place, involving several employees of the GDOE, certain members of the independent external peer review panel, and a number of community-based organizations, to manipulate the outcome of the 21st Century grant competition in favor of these community-based organizations.

EXHIBIT 1 POTENTIAL COSTS OF THE 2006 - 2007 GRANT COMPETITION

Year Year 1 Year 2 Year 3 Year 4 Year 5

Fiscal Year 2007 2008 2009 2010 2011

% Funding 100% *100% *100% @*75% @*60%

Amount $10,650,962.00 $10,650,962.00 $10,650,962.00 $7,988,221.00 $6,390,577.00

Total Potential Cost of 2006-2007 Competition *Contingent on future appropriations & State Bd approval
@Contingent on grantee providing replacement funds

$46,331,684.00

The purpose of the competition was to award funding to the highest-ranking applications, as determined by an independent external peer review panel, until the total funds of approximately $10.7 million were expended. Initially, the grant competition, which began on or about February 1, 2006, appeared to follow Federal program guidelines and GDOE policies and procedures. Our investigation did reveal, however, evidence of improper contacts between GDOE employees and members of the independent external peer review panel during the competition in an apparent attempt to ensure that certain community-based organizations rated high enough to secure grant funding. GDOE's internal controls over the assignment of peer review members to grant proposals, however, were not circumvented. Because the assignment procedures were not circumvented, only limited matches of the suspected peer review panelist with certain suspected community-based grant proposals occurred. This apparent attempt to manipulate the outcome of the grant competition appears to have had minimal impact on the final results.

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EXHIBIT 2 21ST CENTURY GRANT PROGRAM
2006-2007 ORGANIZATION STRUCTURE

More radical deviations, however, in the competitive grant process began occurring on or about May 22, 2006 during the absence of the 21st Century

Deputy Superintendent

Interim Program Manager. The

Curriculum and Instruction

GDOE's internal controls appear to

have been inappropriately overridden

when the Grant Program Consultant

Director Innovative Academic Programs

left in charge, on or about May 22, 2006, made a management decision to

21st Century Interim Program Manager

exclude 23 grant proposals from funding consideration. Further, all 30 grant proposals deemed eligible by the

21st Century Grant Program Consultant

Grant Program Consultant received funding that did not seem to correlate with the scores of the independent

external peer review panel. These two

Source: GDOE 2006 Organizational Chart

decisions in essence changed the grant

competition to a grant allocation. In the absence of the 21st Century's

Interim Program Manager (on approved leave from May 22, 2006 through June 23, 2006), the

next two levels of upper management at GDOE did not seem to possess sufficient expertise to

recognize the ensuing departure from Federal program guidelines and GDOE policies and

procedures.

On June 8, 2006, the grant award process concluded when the State Board of Education approved 29 sub-grants recommended to them by the GDOE (one additional grant was subsequently approved on July 13, 2006). The actual methodology used to award funding to sub-grantees, however, was not appropriately disclosed to the State School Superintendent or to the State Board of Education. Based on our investigation, we believe the final grant awards were not determined by a competitive grant process, as required, but rather by an allocation methodology that appears to be materially non-compliant with applicable Federal laws and regulations as well as GDOE policies and procedures. As a result, the highest-ranking applicants, as determined by the independent external peer review panel, received reduced funding, and in some cases received no funding. Conversely, lower-ranking applicants received funding to the detriment of higher-ranking applicants.

Findings 1 a through 1 e provide additional information regarding the deficiencies of the 2006 2007 grant competition:

Finding No. 1 a

The methodology used to award funding to sub-grantees failed to follow applicable Federal regulations and established GDOE policies and procedures.

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8

Our investigation has determined that the GDOE's 2006-2007 grant competition did not follow its own policy of awarding sub-grants to the highest ranking applications as determined by the independent external peer review panel, until the total funds available had been expended (See Exhibit 5 on page 9). The failure to follow this policy caused the results of the 2006-2007 grant competition to be materially non-compliant with the overarching Federal regulations.
In addition to the Federal regulations (See Page 4) governing the 21st Century grant program, Exhibit 3 reflects additional United States Department of Education (USDOE) non-regulatory guidance which encourages fewer but larger awards rather than a larger number of small awards.
EXHIBIT 3 USDOE GUIDANCE
F-6: What is the minimum amount of 21st CCLC funds that an SEA may provide to a grantee?
By statute, a grant may not be made in an amount that is less than $50,000. The Department interprets this to mean that grants must be for at least $50,000 per year. In addition, the statute requires SEAs to ensure that awards are of sufficient size and scope to support high-quality, effective programs. The Department encourages SEAs to consider awarding fewer but more substantial awards large enough to fully implement comprehensive plans described in successful grant applications rather than a larger number of small awards unlikely to have any measurable impact on student achievement. Regardless of the size of the grant, proposed costs must be reasonable and necessary to carry out the program's purposes and objectives.
Source: Page 18 21st Century Community Learning Centers U.S. Department of Education Non-Regulatory Guidance

Our investigation revealed the 2006 -2007 21st Century grant competition did not follow the USDOE non-regulatory guidance as it did in the other four GDOE grant competitions (See Exhibit 4).

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EXHIBIT 4 CONTRAST 2006-2007 TO THE OTHER COMPETITIONS

Competitive Grant Applications Received Vs. Awarded

Spike reflects deviation

120

from GDOE guidelines.

100

80

60

Source: GDOE

40

20

0
Applications Received Applications Awarded % Awarded Vs. Received

2002 70 15 21.43%

2003 94 19 20.21%

2004 96 14 14.58%

2006 54 30 55.56%

60.00%

50.00%

40.00%

30.00%

20.00%

10.00%

2007 65 5 7.69%

0.00%

GDOE Policies and Procedures

State education agencies (SEAs), such as the GDOE, prescribe specific policies (Exhibit 5),

within the broader Federal regulations, for sub-grant competitions in order to outline the

EXHIBIT 5

structural features and

GDOE POLICIES & PROCEDURES

programming of the

grantees in their state.

1) At a minimum, a grantee shall be funded at least $50,000 per year. SEAs accomplish this by

2) Funding limit per Center = $175,000. 2006/2007 competition = $200,000

Beginning with the

specifying competitive priorities, defining lowincome schools, and

3) Grant proposals will be scored by an independent external peer review panel.

selecting performance indicators to which grantees must conform.

4) Sub-grants will be awarded to the highest ranking applications as determined by the independent external peer review panel, until the total funds available has been expended.

The grants are awarded to local eligible public or private organizations to fund local community learning centers for

5) Bonus points added to scores for joint applications

students and families in low-income communities

6) Bonus points added to scores for 1st time applicants

to accomplish these goals.

Recommendation Upper management of the GDOE should acquire the necessary program expertise to ensure Federal regulations and GDOE policies and procedures are followed.

Twenty-First Century Community Learning Centers

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Finding No. 1 b
23 of 54 grant proposals appear to have been inappropriately excluded from funding consideration.
The GDOE received 54 grant applications from Local Educational Agencies, community-based organizations and faith-based organizations requesting a total of $58,635,264.00 in funding requests, which far exceeded the approximately $10.7 million available to be awarded. Of the 54 applications, we found the following:
a. One applicant was eventually disqualified by the GDOE due to a conflict of interest.
b. The GDOE determined 30 grant applications were received without deficiencies; hereafter referred to the "A" list applicants (See Exhibit 7 on page 12).
c. The GDOE determined that 23 grant applications initially contained various submission deficiencies; hereafter referred to as the "B" list applicants (See Exhibit 7 on page 12).
We obtained evidence indicating the GDOE allowed the 23 applicants on the "B" list a brief period of time to resolve their submission deficiencies (primarily unsigned budget documents and timely submission issues) as a result of ambiguities in the submission instructions. It further appears that after each of the 23 applicants rectified their submission deficiencies, the GDOE determined that "B" list applicants would have an equal chance of receiving funding as the 30 "A" list applicants. Accordingly, all 53 grant applications were assigned to the independent external peer review panel for scoring, beginning on April 25, 2006.
On May 22, 2006, however, the 21st Century Grant Program Consultant reversed the Department's earlier decision and decided that only applicants on the "A" list should be funded.
On June 8, 2006, the State Board of Education approved grant awards to 29 applicants in the amount of $10,368,759.00. On July 13, 2006, the State Board of Education approved Sumter County Board of Education a grant award of $282,203.00 due to a coding error bringing the total awarded grants to 30 applicants in the amount of $10,650,962.00. Our examination revealed that 21st Century grant funds were awarded to all 30 applicants residing on the "A" list. No grant funds were awarded to any of the 24 applicants on the "B" list.
Recommendation The GDOE should review the compliance issues associated with the 2006-2007 grant competition. In consultation with the U.S. Department of Education and the Attorney General of Georgia, management of the GDOE and the State Board of Education should evaluate the prudence of the continuation of the 2006-2007 grant awards beyond the present school year.

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Finding No. 1 c
Scores of the independent external peer review panel do not appear to have been used to determine grant awards.
The GDOE paid a total of $29,415.60 (professional fees and travel expenses) to the independent external peer review panel for its review of the 2006-2007 grant proposals. Based on our investigation, however, the ratings of the independent external peer review panel do not appear to have been used in the final determination of sub-grantees or award amounts. The correlation of the scores of the independent external peer review panel to the applicants awarded funding has yet to be explained. Explanations offered by the Grant Program Consultant in charge of the 21st Century grant program from May 22, 2006 through June 8, 2006 indicated that the Department's primary objective shifted to funding as many grant applicants as possible. Prior to May 22, 2006, however, preliminary grant competition results seemed to be based solely on the results of the independent external peer review panel.
Recommendation As the results of the independent external peer review panel do not appear to have been used in awarding grant funds, the $29,415.60 is considered questionable program costs. The U.S. Department of Education should review these charges and determine if the GDOE should refund the $29,415.60 to the Federal government.

Finding No. 1 d
Grant awards to sub-grantees were not correctly determined. Lower-ranking applicants received funding to the detriment of higher-ranking applicants.

Because the GDOE did not rely on the results provided by the independent external peer review panel, lower quality applications were awarded funding, while higher-ranking applications received reduced funding or no final funding ("B" list). Had an appropriate grant competition process taken place until completion, it appears that 18 proposals would have been funded instead of 30.
We were able to conclude that 18 grant applications should have been funded only after we reconstructed portions of the grant competition. Numerous records pertaining to the 2006-2007 grant competition initially could not be located. After extensive efforts, we were able to obtain missing information through alternative means and re-create the outcome of the grant competition in a manner based on GDOE policies and procedures. As indicated in Exhibits 79, there are significant differences in the manner in which the 2006-2007 grants should have been awarded versus how they actually were awarded.

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EXHIBIT 7

2006 - 2007 Grant Competition A and B List

Peer

Review

Score

Grantee

How Grants were funded

192

Decatur County BOE

$ 200,000.00

191

Walton County BOE

$ 200,000.00

188

Douglas County BOE

$ 398,099.00

187

Bleckley County BOE

$ 182,700.00

185.3

DeKalb County School System $ 384,290.00

185

Gainesville City Schools

$ 669,488.00

183

Warren County BOE

$ 725,170.00

182

Boys & Girls Clubs of SE GA

$ 237,056.00

176.3

City of Harlem

$

-

174.7

Stephens County BOE

$ 367,646.00

173.3

Wheeler County BOE

$ 633,772.00

172.7

Floyd County BOE

$ 186,406.00

171.3

Laureate Training Center, Inc.

$

-

171.3

Rabun County BOE

$ 312,336.00

171.3

White County BOE

$ 400,000.00

168

Berrien County BOE

$

-

168

Webster County BOE

$ 198,000.00

167.3

Colquitt/Miller Arts

$

-

166.7

Monroe County BOE

$ 301,421.00

166.6

Pryor Road Community

$

-

165.7

Richmond County BOE

$ 529,700.00

164

Lite House Partners

$ 374,940.00

164

Pulaski County BOE

$

-

163.3

Marietta Schools

$

-

159.7

Banks County BOE

$ 390,000.00

159.6

Bibb County BOE

$

-

159.6

Bibb County BOE

$

-

159.3

Bibb County BOE

$

-

158.6

Bibb County BOE

$

-

157.7

Savannah-Chatham County BOE $ 398,500.00

157.6

Clarke County BOE

$

-

157.6

Thomasville Comm Resource

$

-

155.7

Morehouse College

$ 190,000.00

155

Future Foundation Inc.

$

-

151.7

Georgia State University

$

-

148

Bacon County BOE

$

-

145.3

Pickens County BOE

$

-

143.7

Youth Vibe Inc.

$ 399,500.00

143.7

Talbot County BOE

$ 358,979.00

141.6

Harvest Rain

$

-

141

Hancock County BOE

$

-

141

Brooks County BOE

$ 565,497.00

138

McDuffie County BOE

$ 276,396.00

133.3

Glascock County BOE

$ 199,786.00

132.3

YMCA of Atlanta

$

-

131

Sumter County Schools

$ 282,203.00

130.7

K4C Ministries, Inc.

$ 105,877.00

127.7

Wilkinson County BOE

$ 596,000.00

127

Bureau of Cultural Affairs

$ 396,000.00

125.3 Innovative Learning Concepts, LLC $

-

123

Shoot the Hoop, Inc.

$ 191,200.00

122.6

Cobb County BOE

$

-

116.6

Dougherty County BOE

$

-

80.6

Performing Arts and Life Skills

$

-

Totals

$10,650,962.00

Black = A List

Red = B List

Source: GDOE DATA

How grants should have been funded
$ 600,000.00 $ 400,000.00 $ 599,998.00 $ 200,000.00 $ 999,849.00 $ 799,768.00 $ 798,370.00 $ 530,417.00 $ 600,000.00 $ 394,286.00 $ 897,554.00 $ 200,000.00 $ 600,000.00 $ 200,000.00 $ 598,978.00 $ 1,185,996.00 $ 200,000.00 $ 563,543.00
Disqualified due to conflict
$10,368,759.00

Source: GDOE DATA

$1,000,000 $900,000 $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0

2006 - 2007 Grant Competition

Amount Requested Amount Awarded Percent Awarded Vs. Requested

SDRaWSGBvGeiWcaStuilBMelkaahkrBMnRWBKhuaDoipesDWMTSmionWFnnmWBlleyaa4hccLaeobaehenaeolssoheoDnCerobiuclatuorachbstoobreCnliknckuyoeteeg&uaorvYsnloo-odMertkrsldnesoCrlfthttioeefHkoatlfueCGCulCioCCCiCnyCTnhCesCCCseuCnrronouiooohaootoioCroooCuCCCoCCuCtsuChsluuetuyuuuusuuuutslohneoooooitnoornnnnnVnnetunnHSnaiuCtuyuuuutuetutttytCtitttyrtmynyyyynynbcynonnPnsyyanlySuoSthttotttBe,BlttBBBBayBByyyyBBycyblBByocIplArOOOhOIOeOOsOnOBOOBtBoBBBOhnB,BfngocEEflEEEoEEOcSEIEOOOOEOOsEEeaO.oneo.Er(iElE(E(c(E(E(E(E(((rE((sl((s11(1(11111s1s1111.111(2(7353((((6((77((786((1(471455(11111111711135109312541683537839498686.82.3.......2...7.27.377..733171733281758348737777))))))))))))))))))))))))))))))

100.00 90.00 80.00 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00

Exhibit 8 How grants were funded

Twenty-First Century Community Learning Centers

1 3

Source: GDOE DATA

$1,000,000 $900,000 $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0

2006 - 2007 Grant Competition

Amount Requested Amount Awarded Percent Awarded Vs. Requested

LDaSGeuWtBrekaeBRWChaDoipDWanWFWBlleyaohoebeetelsheeeeoblcauacqbsClirnkyuteg&ravsuTlretrldnsorilttoieCeieraluteGualCCnyCntCeCnsirrtnii/onoyoCrooCCCCCCtClMuyiuusuuoonooooioonnntnnifSguCyuuuuluuttltttenHynyynycnnnnylCSuthrttttattBByBByyyyBeycyboArOhnOOslOBOBBBoBBBerottElEEOSEeOmOOOsEOOsorEEEl(EEE(E(E((((s(1(11111111((7((((67((778(171171711111173254188619896688.......27.33.31772338588333))))))))))))))))))

100.00 90.00 80.00 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00

Exhibit 9 How grants should have been funded

Twenty-First Century Community Learning Centers

1 4

Twenty-First Century Community Learning Centers

15

Recommendation The GDOE should review the compliance issues associated with the 2006-2007 grant competition. In consultation with the U.S. Department of Education and the Attorney General of Georgia, management of the GDOE and the State Board of Education should evaluate the prudence of the continuation of the 2006-2007 grant awards beyond the present school year.

Finding No. 1 e
The actual methodology used to award funding to sub-grantees was not appropriately disclosed to the State School Superintendent or to the State Board of Education.
Our investigation revealed that the actual methodology used in awarding grants to subgrantees was not appropriately disclosed to the State School Superintendent or to the State Board of Education prior to the Board's approval of the grant awards on June 8, 2006. The Consent Agenda presented to the State Board of Education for approval on June 8, 2006 described a competitive grant process that was not utilized by the GDOE in determining subgrantees and award amounts. An excerpt of the approved Consent Agenda is stated in Exhibit 10 as follows:
Exhibit 10

Georgia Board of Education: Item Inspector
Georgia Board of Education

Page 2 of 2

Jun 08, 2006 : June State Board Meeting : CONSENT AGENDA
CI - Grant - Title IV, Part B, 21st CCLC Program Grant Awards
Date Presented as an Item of Information: 5/11/2006 How the Grant Recipient was Selected: Competitive Grant (FOGA Number 160-1-4-.262 ) Describe the competitive grant process: Seven (7) criteria will be used to evaluate applications for funding: Need for Project, Quality of Project Designs, Adequacy of Resources, Quality of Management Plan, Quality of Project Evaluation, and Quality of Partnerships & Collaborations. To ensure that only the best applications are funded, peer reviewers received formal training in the program's purpose, the selection criteria, and the scoring rubric. Reviewers independently reviewed and rated each application. The Department tallied and averaged the panel's scores to create an initial award slate. Funds were awarded accordingly, based on the high ranking scores until the total funding amount was expended.
http://www.gsbaeboard.Org/cgi-binAVebObjects/doeAgenda.woa/wo/28.0.7.1.3.0.0.7.2.0....
Source: GDOE E-Board

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16

It should also be noted that the Executive Assistant to the Deputy Superintendent for Curriculum and Instruction had the responsibility of posting information to the Consent Agenda on GDOE's website regarding the 20062007 21st Century grant competition. See Finding No. 2 for additional information regarding the apparent scheme to manipulate the outcome of the grant competition.
Grant award notification letters sent to sub-grantees, one day after State Board of Education approval, also contained false statements regarding the manner in which the grant awards were determined. Exhibit 11 on page 17 provides a copy of one of the grant award letters dated June 9, 2006.
Recommendation To reduce the risk that inaccurate or misleading information is posted to the Consent Agenda and the State Board of Education's E-Board, the GDOE should restrict access to those who are in a position to make critical changes to such information.

EXHIBIT 11 AWARD ANNOUNCEMENT LETTER

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EXHIBIT 11

Source: GDOE

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Finding No. 2

At least two GDOE former employees appear to have used their positions for personal gain through contractual arrangements with sub-grantees
During the course of our examination of the 21st Century grant program, we recovered evidence of a complex scheme to manipulate the outcome of the 2006-2007 grant competition in favor of certain community-based organizations. This fraudulent scheme appears to be responsible for the material non-compliance noted in findings 1 a through 1 e related to the 2006-2007 grant competition. The scheme appears to involve at least three high-ranking former employees of the GDOE, certain members of the independent external peer review panel, and four non-profit organizations. A general description of the evidence we acquired regarding the three GDOE employees is as follows:
Director of Policy Evidence was recovered indicating the Director of Policy prepared or was involved in the preparation of four 21st Century grant proposals submitted by community-based organizations. Appears to have used their GDOE position for personal gain as a result of a contractual relationship with a community-based organization receiving a 2006-2007 grant award. This particular community-based organization would not have received a 21st Century grant had the grant competition not been manipulated. Inappropriate contacts with a member of the independent external peer review panel. Evidence recovered indicating inappropriate distributions of GDOE material in advance of the 2006-2007 grant competition.
Executive Assistant to the Deputy Superintendent for Curriculum and Instruction Appears to have used their GDOE position for personal gain as a result of a contractual relationship with a community-based organization receiving a 2006-2007 grant award. This particular community-based organization would not have received a 21st Century grant had the grant competition not been manipulated. Inappropriate relationship with a member of the independent external peer review panel. Appears to have allowed materials to be remitted to the State Board of Education for the June 8, 2006 board meeting that misrepresented the methodology used for the 2006-2007 grant competition.
Grant Program Consultant 21st Century Grant Program Appears to have made radical changes in the 2006-2007 grant competition approximately two weeks prior to State Board of Education approval (while the Interim Program Manager was on an extended period of approved leave). These changes increased the number of sub-grantees from 18 to 30. Failed to disclose knowledge of the apparent conflict of interest between the Executive Assistant to the Deputy Superintendent for Curriculum and Instruction and a community-based organization (grant applicant).

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Inappropriate contact with a member of the independent external peer review panel.

During our investigation of the apparent scheme to manipulate the 2006-2007 grant competition, we also recovered evidence that suggests that certain members of the independent external peer review panel and certain community-based organizations were involved in the fraud scheme. Our investigation related to the independent external peer review panel and certain community-based organizations were not exhaustive due to limitations of the audit authority of the Department of Audits and Accounts.

Recommendation Additional investigations should be conducted by other authorities with broader investigative a uthority.

Finding No. 3

Cash management on-site sub-grantee monitoring procedures used by the GDOE were insufficient.

Our examination of the 21st Century program at the GDOE revealed material weaknesses in the Department's design of its cash management internal controls and monitoring of subgrantees. Cash payments to sub-grantees for reimbursement of program expenditures are initiated by requests made by sub-grantees through an on-line grants management system known as Grants Accounting On-line Reporting System (GAORS). The following deficiencies in the design of the internal controls over payments to sub-grantees are as follows:

1. Generally, amounts requested through GAORS are automatically reimbursed to subgrantees. Controls are limited to an analysis of the percent of the request cash draw to the total grant award. Only if a cash draw request is out of proportion with the total grant award does the GDOE require additional information. Minimal additional information is generally required, often coming in the form of verbal explanations from sub-grantees.
2. Reimbursement requests from sub-grantees are not required to be allocated by approved budgeted line items.
3. Site visits to the 21st Century program throughout the State were conducted; however, they did not include a review of supporting documentation of program expenditures. On-site visits did not include a review of any fiscal-related activities of the subgrantees.

Section 7502 of the Single Audit Act Amendments of 1996 provides that each pass-through entity shall monitor the sub-grantees use of Federal awards through site visits or other means to provide reasonable assurance that the sub-grantee administers Federal awards in compliance with laws, regulations, and provisions of contracts or grant agreements.

Due to material weaknesses in the internal controls described above, improper program costs may be reimbursed to sub-grantees and not be detected. Improper program costs may include unallowable costs as well as costs that are not reasonable or necessary. When improper program costs are charged to the 21st Century program, ultimately program objectives, which are to provide expanded learning opportunities for participating children, are compromised.

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Recommendation The GDOE should strengthen its internal controls over the 21st Century program by requiring sub-grantees to itemize their reimbursement requests by approved budgeted line-items. Further, internal controls should be implemented to ensure that sub-grantees are not reimbursed for any amounts in excess of budgeted line items.
The GDOE should expand its on-site monitoring procedures to include a review of subgrantee accounting records and underlying supporting documentation. Training should be provided to Regional Consultants performing the on-site visits to ensure they have the necessary skills to detect improper program costs.

Finding No. 4

Reimbursements were made to sub-grantees for improper program expenditures.

As a result of the internal control deficiencies noted in Finding No. 3, the GDOE reimbursed certain sub-grantees for questionable program costs. Our examination included procedures whereby we requested the GDOE to obtain accounting records from six non-profit organizations. Our review of the accounting records disclosed an array of questionable costs at four of the non-profit organizations which include evidence of:

Supplanting Related party transactions Expenditures indicative of conflicts of interest Costs in excess of budgeted line items Excessive administrative costs Unallowable program costs Costs appearing to not be reasonable or necessary

Questionable costs identified as a result of this investigation are summarized in Exhibit 12 total by non-profit organization as follows:

EXHIBIT 12 Non-profit Organization

Questioned Amount

Youth Vibe, Inc. Lite House Partners Shoot the Hoop, Inc. K4C Ministries, Inc.

Total Questioned Costs

$68,083.00 $155,719.12 $41,126.64 $21,340.11 $286,268.87

A detailed listing comprising the questioned costs reflected above has been provided to the GDOE. The GDOE should investigate these costs and make a final determination regarding their allowability as 21st Century program costs.

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Local Educational Agencies (LEA's) were excluded from our review of sub-grantee expenditures. We have, however, issued a high risk alert regarding 21st Century program to LEA auditors. We anticipate that a high percentage of these programs will receive audit coverage through their respective OMB Circular A-133 Single Audits.
Recommendation The GDOE should implement internal controls that will prevent and/or detect future improper program costs from being reimbursed for each of its sub-grantees. This will likely cause the GDOE to allocate additional resources to its monitoring function in order to reduce the risk of reimbursing its sub-grantees for unallowable program costs to a low level.

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APPENDIX

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STATUS PRIOR TO 2006 2007 COMPETITION

Source: GDOE

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Georgia Department of Education

21st Century Community Learning Centers

2006 - 2007 Competitive Grant Locations

Dade

Catoosa

Fannin

Walker

Whitfield Murray Gilmer

Towns Union

Rabun

Gordon

Lumpkin

White Habersham Stephens

Chattooga

Pickens

Dawson Hall

Banks Franklin

Hart

Floyd

Bartow

Cherokee Forsyth

Jackson

Madison

Elbert

Polk Haralson

Cobb Paulding
Douglas Fulton

Gwinnett Barrow

Clarke

DeKalb

Walton Rockdale

Oconee

Oglethorpe Wilkes

Lincoln

Carroll

Clayton

Newton

Morgan

Greene Taliaferro

McduCffoielumbia

Heard

Coweta

Fayette

Henry

Spalding

Butts Jasper

Putnam

Hancock

Warren Glascock

Richmond

Troup

Pike Meriwether

Lamar Monroe

Jones Baldwin

Jefferson Washington

Burke

Harris

Talbot

Upson

Bibb Crawford

Wilkinson Twiggs

Johnson

Jenkins

Screven

Taylor

Peach

Emanuel

Muscogee

Marion

Chattahoochee

Macon

Schley

Stewart Webster

Sumter

Houston Bleckley

Laurens

Treutlen

Candler

Montgomery

Bulloch

Effingham

Dooly

Pulaski Dodge

Wheeler

Toombs

Evans

Tattnall

Bryan Chatham

Quitman Randolph Terrell Lee

Crisp

Wilcox

Telfair

Turner

Ben Hill

Jeff Davis

Appling

Long Liberty

Clay

Calhoun

Dougherty Worth

Irwin Tift

Coffee

Bacon

Wayne

McIntosh

Early

Baker

Miller

Mitchell

Colquitt

Berrien Atkinson

Cook

Lanier

Pierce

Ware

Brantley

Glynn

Seminole Decatur

Grady

Thomas Brooks

Lowndes

Clinch

Charlton

Camden

Echols

North Georgia Banks County BOE Floyd County BOE Gainesville City BOE K4C Ministries,Inc. Walker County Rabun County BOE Stephens County BOE Walton County BOE White County BOE

Metro Area
Bureau of Cultural Affairs Fulton Co.
DeKalbCounty BOE

Douglas County BOE

Lite House

Clayton County

Shoot The Hoop Fulton County

Youth Vibe DeKalb Co.

West Georgia Bleckley County BOE Monroe County BOE Talbot County BOE Webster County BOE Wilkinson County BOE

East Georgia Glascock County BOE McDuffie County BOE Richmond County BOE Warren County BOE Wheeler County BOE
Savannah Chatham County BOE

South Georgia Boys & Girls Clubs SE GA. Glynn County Brooks County BOE Decatur County BOE Morehouse College Lamar County Sumter County BOE

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GRANT COMPETITION EXPENDITURE HISTORY

Grant

Fiscal

Fiscal

Fiscal

Fiscal

Fiscal

Total

Competition Year 2003 Year 2004 Year 2005 Year 2006 Year 2007 Spent

Year

Spent

Spent

Spent

Spent

Spent

2002 - 2003

2,693,713 8,424,185

9,185,051 4,274,621 7,083,402 $31,660,972

2003 - 2004

6,257,982 10,599,641 7,299,230 8,118,227 $32,275,080

2004 - 2005

6,865,811 7,001,278 8,962,238 $22,829,327

2005 - 2006 *

2006 - 2007

@8,742,773 $8,742,773

Total

2,693,713 14,682,167 26,650,503 18,575,129 32,906,640 $95,508,152

Source: GDOE

* Indicates no grant competition for 2005.

@ Indicates that the 2006 2007 grant awards exceeded actual grant expenditures

by $1,908,189.00 which became available for expenditure in FY 2008

(See Exhibit 1 on page 6).

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GDOE RESPONSES
Georgia Department of Audits and Accounts State Government Division
Audit of the Georgia Department of Education 21st Century Community Learning Center (CCLC) Federal Grant Program
Kathy Cox, State Superintendent of Schools, requested the State Government Division of the Department of Audits and Accounts to conduct an independent investigation amid her concerns of a potential employee conflict of interest related to the 21st Century Community Learning Centers program. The results of the Department of Audits and Accounts investigation and the Georgia Department of Education responses to the findings are below.
Summary of Findings The 2006-2007 Grant Competition was tainted by evidence of collusion and management override of internal controls.
Finding 1 Grant Competition Finding 1 a Non-compliance with Federal Regulations/Departure from GDOE Policies and Procedures The methodology used to award funding to sub-grantees failed to follow applicable Federal regulations and established GDOE policies and procedures.
Audit Recommendation Upper management of the GDOE should acquire the necessary program expertise to ensure Federal regulations and GDOE policies and procedures are followed.
GaDOE Response The GaDOE concurs with this finding. The GaDOE has taken the necessary steps to ensure that the 21st CCLC program is managed by staff with extensive experience in administering federal grant programs. In April 2007, the GaDOE was re-organized and the 21st CCLC program was moved to a newly formed division in Education Support Services. The Associate Superintendent for Education Support has over 17 years of experience with the GaDOE, over seven years of experience with administering Federal grants, and has worked with the U.S. Department of Education in the Goals 2000 Office and with the Title I Program Office.
Education Support Services has developed and implemented an operations manual that has been reviewed by the U.S. Department of Education's Management Improvement Team. Education Support staff has scheduled revisions in accordance with changes in regulations, guidance and in the relevant OMB circulars. Staff receives ongoing training on procedures outlined in the operations manual during monthly staff meetings. Staff meetings are held two days per month. The first meeting day is designed to discuss Department policies and procedures and to address issues staff may have encountered during monitoring and/or while providing technical assistance. The second meeting day is reserved for staff training and professional learning.

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In addition, program managers are required to attend program meetings sponsored by the U.S. Department of Education to ensure an understanding of program requirements and to implement new regulations as required.
The GaDOE has revised its job duties and responsibilities for the 21st CCLC program and is currently recruiting for a program manager and a grant program consultant. A data analyst was hired under the revised job duties and responsibilities on December 16, 2007. Candidates for employment must go through a rigorous hiring process including an initial interview with the Division Director and interview team, and a final interview with the Associate Superintendent for Education Support before a recommendation is made to the Deputy Superintendent for Education Support and Improvement.

Finding 1 b 23 Grant Proposals Excluded From Competition 23 of the 54 proposals appear to have been inappropriately excluded from funding consideration.
Audit Recommendation The GDOE should review the compliance issues associated with the 2006-2007 grant competition. In consultation with the U.S. Department of Education and the Attorney General of Georgia, management of the GDOE and the State Board of Education should evaluate the prudence of the continuation of the 2006-2007 grant awards beyond the present school year.
GaDOE Response The GaDOE concurs with this finding. The GaDOE has done a complete analysis of the application to which current grantees are bound. The current application lacks details that are clearly defined in the Education Support Services operations manual. This lack of clarity may result in some grantees misunderstanding their fiduciary responsibility and program accountability. It is critical to the successful implementation of the 21st CCLC program that a new application is developed in accordance with Federal regulations and Department policies and procedures. Future grantees must be trained in program requirements and fiscal accountability. Therefore, the GaDOE will consult with the U.S. Department of Education regarding the cessation of continuation grants and holding another competition to address the issues in this audit report. Upon approval, the GaDOE will develop a new application that complies with Federal regulations and conduct the review process in accordance with policy and procedures outlined in the Education Support Services operations manual. In addition, the Attorney General of Georgia will also be consulted on appropriate issues related to this finding.

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Finding 1 c Scores of Independent External Peer Review Panel Not Utilized Scores of the independent external peer review panel do not appear to have been used to determine grant awards.
Audit Recommendation As the results of the independent external peer review panel do not appear to have been used in awarding grant funds, the $29,415.60 is considered questionable program costs. The U.S. Department of Education should review these charges and determine if the GDOE should refund the $29,415.60 to the Federal government.
GaDOE Response The GaDOE concurs with this finding. The GaDOE concurs with the finding that the review panel results appeared to not have been used in determining the outcome of the grantees. However, the review panel members were paid in accordance with the work that was performed. The results were collected and used in the initial determinations but it was not used in the final determination. Future grant competitions will be conducted in accordance with policy and procedures outlined in the Education Support Services operations manual. The GaDOE has implemented additional internal controls and oversight of the competitive grant process. Scores of all grant reviewers must be included in the State Board of Education item for information and action item. In addition, the GaDOE has advertised an internal audit staff position whose primary function is to audit processes of grant competitions and fiscal records of grantees and report irregularities to the State Superintendent of Schools and the State Board of Education.

Finding 1 d Lower-ranking Applicants Receive Funding Grant awards to sub-grantees were not correctly determined. Lower-ranking applicants received funding to the detriment of higher-ranking applicants.
Audit Recommendation The GDOE should review the compliance issues associated with the 2006-2007 grant competition. In consultation with the U.S. Department of Education and the Attorney General of Georgia, management of the GDOE and the State Board of Education should evaluate the prudence of the continuation of the 2006-2007 grant awards beyond the present school year.
GaDOE Response The GaDOE concurs with this finding. Corrective actions outlined in 1b and 1c address the steps the GaDOE will take to ensure that grantees are selected in accordance with Federal legislation and Department policy.

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Finding 1 e Grant Award Process Not Appropriately Disclosed The actual methodology used to award funding to sub-grantees was not appropriately disclosed to the State School Superintendent or to the State Board of Education.
Audit Recommendation To reduce the risk that inaccurate or misleading information is posted to the Consent Agenda and the State Board of Education's E-Board, the GDOE should restrict access to those who are in a position to make critical changes to such information.
GaDOE Response The GaDOE concurs with this finding. SBOE items for information and action items must be approved in accordance with the GaDOE approval process that includes: 1) Initial review by Cabinet (State Superintendent of Schools, Chief Deputy, General
Counsel, Deputies, and Associates). Documentation (summary of scores from readers, readers' recommendations, etc.) supporting the program recommendation must be included as a part of the recommendation. 2) Final Cabinet review is required if changes were requested. Again, supporting documentation must be included. 3) Final review before action is taken by the SBOE occurs at Dry Run.
After Dry Run, changes to recommended grantees and amount of funding cannot be made to E-Board without the consent of the State Superintendent of Schools.
It is the policy of the GaDOE to make public all grantee recommendations and supporting documentation for SBOE consideration. In addition, changes to items/recommendations in e-Board is limited to the State Board of Education's authorized personnel. E-Board will automatically alert SBOE members when a previously posted item has been changed.
Finding 2 Positions Used For Personal Gain At least two GDOE former employees appear to have used their positions for personal gain through contractual arrangements with sub-grantees.
Audit Recommendation Additional investigations should be conducted by other authorities with broader investigative authority.
GaDOE Response The GaDOE concurs with this finding. The Superintendent of Schools held a mandatory meeting with all GaDOE employees to review the Department's ethics, conflict of interest and disclosure policies. While these policies are covered during employee orientation, the meeting was held as a reminder of GaDOE policy, the Governor's Executive Order Establishing a Code of Ethics for Executive Branch Officers and Employees, which was adopted by GaDOE, and statutory Code of Ethics for Government Service. General Counsel was available to answer specific questions and the meeting was video-taped for future reference. Each year GaDOE employees will be reminded of their obligation to file a State Business Transaction Disclosure report. In addition, conflict of interest and disclosure forms must be signed off by all grantees before funds can be released.

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Finding 3 Insufficient On-site Monitoring Procedures Cash management on-site sub-grantee monitoring procedures used by the GDOE were insufficient.
Audit recommendation The GDOE should strengthen its internal controls over the 21st Century program by requiring sub-grantees to itemize their reimbursement requests by approved budgeted line-items. Further, internal controls should be implemented to ensure that sub-grantees are not reimbursed for any amounts in excess of budgeted line items.
The GDOE should expand its on-site monitoring procedures to include a review of subgrantee accounting records and underlying supporting documentation. Training should be provided to Regional Consultants performing the on-site visits to ensure they have the necessary skills to detect improper program costs.
GaDOE Response The GaDOE concurs with this finding. The GaDOE has implemented the following steps to ensure that 21st CCLC grantees are reimbursed only for amounts approved in the grantee's budget. 1) The GaDOE Consolidated Application has been upgraded to accept scanned copies of
receipts and invoices from grantees. 2) The 21st CCLC budget analyst receives an alert when grantee invoices have uploaded to the
Consolidated Application. 3) The budget analyst downloads the invoices and receipts and compares to the line items in
the approved budget. 4) If expenditures are deemed appropriate based on program use of funds and approved
budgets, the request to submit to Grants Accounting for approval is sent to the Division Director. Once approved by the Division Director, a report is provided to the Associate Superintendent. 5) If expenditures are deemed inappropriate based on the same as above, a rejection notice is sent to the grantee. The grantee has the option of providing additional documentation to support requests for payments. The approval process would restart if this is the case. 6) Once the reimbursement request is approved by Education Support Services, the request is submitted to Grants Accounting. 7) Grants Accounting loads the budget amount by subgrantee from a listing approved by the State Board. Reimbursements are made once the approved request is submitted by Education Support Services and amounts are reimbursed up to the budget amounts approved.

The process to ensure that grantees are reimbursed only for amounts approved in the grantee's budget is a labor intensive process. One additional budget analyst will be hired to carry out this function.
An analysis of procedures and the job skills needed to appropriately manage and monitor the 21st CCLC program compared to existing and potential skills of current staff is ongoing. After a complete analysis, the GaDOE will restructure the 21st CCLC unit to ensure the program is implemented in accordance with Federal legislation, regulations, guidance and with GaDOE policy and procedures. Current staff is required to attend staff meetings, at a minimum, two

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days per month. The second day of each month is reserved for staff training on specific areas of weakness. While current staff is required to participate in staff training, restructuring of the unit will include a restructuring of how monitoring is done, development of new indicators to include fiscal reviews, and development of other quality program indicators.

Finding 4 Sub-grantees Reimbursed For Improper Expenditures Reimbursements were made to sub-grantees for improper program expenditures.
Audit Recommendation The GDOE should implement internal controls that will prevent and/or detect future improper program costs from being reimbursed for each of its sub-grantees. This will likely cause the GDOE to allocate additional resources to its monitoring function in order to reduce the risk of reimbursing its sub-grantees for unallowable program costs to a low level.
GaDOE Response The GaDOE concurs with this finding. The GaDOE began an intensive review of general ledgers for 21st CCLC grantees that were not local education agencies. To date, as a result of the intensive review, the following funds have been recovered:
Youth Vibe, Inc. = $7,693.92 for unallowable expenses. Kids 4 Christ = $8,507.24 for requesting funds for which there were not expenditures. Shoot the Hoop = $2,000 for unallowable expenses for an unapproved summer program.
The review is ongoing and will include a review of the LEA grantees as well. The GaDOE will continue to recoup funds owed as result of unallowable reimbursements.
In accordance with Education Support Services operations manual, grantees may not continue to receive payments from the GaDOE until all owed funds are repaid. In addition, 21st CCLC staff will adhere to Department procedures as described above, therefore, the risks of overpayment and payment for unallowable expenses are greatly reduced.
The GaDOE agrees that additional resources must be allocated to its monitoring function in order to further reduce risk. As mentioned above, one additional program budget analyst will be hired to assist with the review and approval of reimbursements based on the approved budget. In addition, the Department will modify Grants Accounting On-line Reporting System (GAORS) to accommodate more competent review and analysis of requested funds compared to allocated funds and approved budgets. The GaDOE will add a fiscal monitoring team to focus solely on monitoring the fiscal component of all grant programs (State and Federal). The fiscal monitoring team will work in tandem with program monitoring to ensure every aspect of grant programs complies with Federal and State laws and regulations.

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For additional information or for copies of this report call 404-656-2180.