	Background

Education administers discretionary grants both through competitions and  through consideration of unsolicited proposals. A budget analysis is also required to be conducted to ensure  that no grant funds are awarded for unallowable purposes. Process for Making Awards Based on Unsolicited Proposals

Education’s policy is to award the vast majority of discretionary grant  funds through the competitive process, however it may also fund grants  based on unsolicited proposals. In 2001 and 2002, Education Made Exceptions to Its Policies in Awarding the Three Grants

Education made progress since 2003 in improving its policies for awarding  discretionary grants; however, prior to these improvements we found that  Education made exceptions to its policies that benefited the grantees in  question. For the two competitive grants, we found that Education  officials reduced funding to all of the grantees to accommodate awards to  lower-rated grantees and did not conduct analyses to assess the impact of  these reductions on the ability of the applicants to achieve the goals of  their projects. In doing so, Education broke from established practice by  altering its selection methodology after it had developed a list of grantees  recommended for funding. With regard to the third grant, which was an  unsolicited proposal, we found that Education made the award with  approval from only one of three independent reviewers and lacked a  process for reconciling differences among peer reviewers’ ratings. Furthermore, Education awarded four unsolicited grants in 2001 that had  not been recommended for funding by any one of the three reviewers,  contrary to departmental regulations. In addition, we found many of the grant files lacked documentation  documented evidence that Education had conducted three standard  procedures for screening potential grantees: (1) a review of the applicant’s  compliance with audit requirements; (2) a review of the applicant’s  eligibility for the program; and (3) a review of requested costs and  expenses to determine whether they were allowable. Nor did we find any instances in which  Education officials re-reviewed peer reviewers’ initial assessments. Formal Plans That Govern Grant Competitions Frequently Were Not Finalized As Required

In 2003 and 2004 we found no evidence that competition plans—the  procedural and scoring blueprint for each grant competition and a key  management control—were changed after the expert reviews were  completed. Education Selected Unsolicited Proposals That Varied Greatly in Content and Provided Extensive Technical Assistance

While Education has taken steps to centralize and improve its process for  reviewing unsolicited proposals, it based its screening decisions on  proposals that varied greatly and frequently provided extensive technical  assistance. We also found that OII provided extensive technical assistance to some  applicants. In 2004,  10 of the 27 applicants failed to garner the reviewers’ support. Of those   10 grantees, 2 declined to resubmit their applications—citing time  constraints—and were not approved. The remaining eight applicants  revised their proposals and were subsequently recommended for approval  by peer reviewers after the revisions were submitted. Appendix I: Scope and Methodology

This appendix discusses in detail our scope and methodology for   (1) reviewing Education’s grant award decisions for the 2001 and 2002  grants in question to determine whether the department had followed its  policies in place at the time, (2) assessing the department’s policies and  procedures in place in 2003 and 2004 for the competitive awards process  and determining whether Education followed them in making such awards  in those years, and (3) assessing Education’s process for reviewing  unsolicited proposals in 2003 and 2004. During this   2-year period, a total of 521 grants were awarded. Department of Education Grant Award.
Why GAO Did This Study

In the past 3 years, Education awarded an average of $4.8 billion annually in discretionary grants through its competitive awards process and through consideration of unsolicited proposals. GAO assessed Education's policies and procedures for both competitive awards and unsolicited proposals awarded by its Office of Innovation and Improvement in 2003 and 2004 and determined whether it followed them in awarding grants in those years. GAO also reviewed Education's grant award decisions for several 2001 and 2002 grants to determine whether the department followed its own policies.

What GAO Found

In 2003 and 2004, Education took steps to improve its procedures for awarding discretionary grants through competitions but certain procedures were not always followed. During this time, after Education introduced some new management controls to its competitive grants procedures, we found it generally adhered to these new policies. For example, GAO did not find evidence that Education reduced any applicant's request without first conducting a budget analysis, as required, or that Education rescored applications after they had been peer reviewed. However, certain procedures were not always followed; for example, Education frequently did not finalize its plans for conducting competitions before starting the competitions--a step that would help ensure transparency in making awards. In addition, many files lacked documentation that the department screened the applicants, as required, to identify incompetent applicants, ineligible grantees, or unallowable expenditures. Since 2003, Education has also taken steps to reform its process for awarding grants based on unsolicited proposals, but it based its screening decisions on proposals that vary greatly and frequently provided extensive technical assistance. Following a departmental reorganization, Education established a centralized process for reviewing unsolicited proposals. However, these proposals, which Education used as a basis to certify that there is a substantial likelihood that the application will meet regulatory requirements, varied greatly in content and detail. GAO also found that Education provided extensive technical assistance to applicants, in some instances, providing applicants with the notes of peer reviewers and allowing applicants to revise and resubmit applications. Specifically, in 2004, 10 of the 27 applicants did not get reviewers' support and were provided a chance to re-apply. Of those 10 applicants, 8 revised their proposals, received favorable recommendations, and were subsequently funded. Prior to 2003, Education made exceptions to some of its policies in awarding three grants, totaling about $12.3 million, where particular allegations were raised. Two of the grants were awarded through a competitive process, but GAO found that Education reduced funding to all of the grantees to expand the number of grantees funded and to accommodate awards to lower rated grantees. In doing so, Education altered its selection methodology after it developed and recommended a list of grantees. In one case, Education rescored and reversed the order of selected grantees after the peer reviewers had completed their assessments. Education awarded the third grant based on an unsolicited proposal and regulations require that the department seek recommendations from peer reviewers prior to funding. In this case, the peer reviewers could not agree on a recommendation. GAO found that Education lacked a process to reconcile disagreements among reviewers and awarded a grant that two of three reviewers did not recommend. Moreover, Education awarded four grants in 2001 for unsolicited proposals that had not been recommended for funding by any one of the three reviewers.