ATLANTA (CN) – An 11th Circuit panel on Wednesday ordered the Georgia Department of Education to repay $2.1 million in federal funds after auditors discovered the department hosted a rigged competition to distribute the funds.
In 2017, the U.S. Department of Education awarded Georgia a $10.7 million federal grant under the 21st Century Community Learning Centers program to help students at low-income, underperforming schools.
Georgia held a competition to award subgrants to schools and local nonprofits that help these students.
After Georgia awarded the subgrants to various organizations, a local bank representing one of the grant recipients reported suspicious activity.
“State auditors ultimately uncovered evidence of a ‘complex fraud scheme’ involving several Georgia Department of Education employees as well as members of the independent external peer review panel and some of the subgrant recipients who manipulated the outcome of the grant competition,” U.S. District Judge Anne Conway, sitting by designation from the Middle District of Florida, wrote for the 3-judge 11th Circuit panel.
The auditors discovered that the grant competition was “severely flawed,” as three Georgia Department of Education employees overrode internal controls to alter the results so that 17 lower-scoring applicants received subgrants and applicants with higher scores were dismissed.
Originally, the feds demanded $5.7 million back from Georgia, the full amount allotted to impoverished schools. They later agreed to $2.1 million after visiting the relevant statute of limitations.
Georgia appealed the refund order and asked for an equitable offset, “arguing it had spent nonfederal grant funds that aided beneficiaries in the same manner Congress had intended in enacting the legislation governing the grant program,” according to the opinion.
The U.S. Education Secretary denied the offset request, which Georgia said was unfair because it ignored “proportional-to-harm” requirements. The 11th Circuit panel disagreed because of the extent of the fraud, and denied Georgia’s appeal
“We do not find the secretary’s decision to deny the equitable offset based on the nature and scope of the complex fraud scheme initiated by petitioner’s employees to be arbitrary, capricious or an abuse of discretion,” Conway wrote for the panel. “Substantial deference must be shown to the secretary’s decision ordering the state department of education to refund disallowed grant funds.”
Circuit judges Julie Carnes and Jill Pryor joined Conway’s opinion.
The Georgia department declined to comment, while a U.S. Department of Education representative said the department does not comment on ongoing litigation.