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Georgia Must Pay $2.1 Million to Feds for Grant Fraud

By William Vogeler, Esq. on March 02, 2018 | Last updated on March 21, 2019

A decade ago, the Georgia Department of Education won a federal grant for $10.7 million to help students at high-poverty, low-performing schools.

It was all good except for one thing: Georgia cheated when it distributed the grant. It held a competition to award the money to local organizations, but rigged the results.

Georgia agreed to pay back the federal government, but then asked a federal court for mercy in Georgia Department of Education v. United States Department of Education. It didn't work.

No "Equitable Offset"

The money was supposed to fund academic enrichment programs, such as after-school tutorial services. Applicants competed for the money, but three education department employees overrode the system to control the results.

After a local bank reported "suspicious activity," state auditors discovered 17 lower-scoring applicants were awarded subgrants and higher-scoring applicants were denied. The competition was "severely flawed," the auditors said.

Based on the unlawful diversion of funds, the federal government demanded the state repay $5.7 million. Georgia contested, based on statutes of limitations, but agreed to pay back $2.1 million.

The state then asked the U.S. Secretary of Education for an equitable offset, but she declined. Georgia petitioned the Eleventh Circuit Court of Appeals.

Proportionate to Harm

Georgia argued that the punishment was not proportionate to the harm, but the appeals court disagreed.

"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," Judge Anne Conway wrote for the unanimous panel.

"Substantial deference" must be given to the secretary of education, the judges said.

It was not the first time Georgia's education department has been caught in controversy. The year before the grant scandal, the state's former schools chief pleaded guilty to fraud and money laundering.

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