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Office of Elementary and Secondary Education; Charter Schools Facilities Financing Demonstration Program; Notice Inviting Applications for New Awards for Fiscal Year (FY) 2001 funds

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Information about this document as published in the Federal Register.

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Purpose of Program: Charter schools provide parents and students with options that can lead to better student achievement. However, many of these schools have insufficient revenue and lack access to private financing for facilities. This program will provide one-time grants to eligible entities to permit them to demonstrate innovative credit enhancement initiatives that assist charter schools in accessing private sector and other non-Federal capital to address the cost of acquiring, constructing, and renovating facilities. Grant projects awarded under this program will be of a sufficient size, scope, and quality so as to ensure an effective demonstration of the proposed strategies.

Eligible Applicants: (A) A public entity, such as a State or local governmental entity; (B) A private nonprofit entity; or (C) A consortium of entities described in (A) and (B).

Applications Available: November 8, 2001.

Deadline for Transmittal of Applications: January 4, 2002.

Deadline for Intergovernmental Review: March 6, 2002.

Estimated Available Funds: $25,000,000.

Estimated Range of Awards: $2,500,000-$10,000,000.

Estimated Average Size of Awards: $8,333,000.

Estimated Number of Awards: 3-5. The Secretary will make, if possible and appropriate, at least one award in each of the three categories of eligible applicants.


The Department is not bound by any estimates in this notice.

Project Period: From the start date indicated on the grant award document until the Federal funds and earnings on those funds have been expended for the grant purposes or until financing facilitated by the grant has been retired, whichever is later.

Page Limit: We have found that reviewers are able to conduct the highest-quality review when applications are concise and easy to read. Applicants are encouraged to limit their applications to no more than 50 double-spaced pages (not including the required forms and tables), to use a 12-point or larger size font with one-inch margins at the top, bottom, and both sides, and to number pages consecutively.

Applicable Regulations: (a) The Education Department General Administrative Regulations (EDGAR) in 34 CFR parts 74, 75, 77, 79, 80, 82, 85, 86, 97, 98, and 99.

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Application Content

Each Charter Schools Facilities Financing Demonstration Program application must include the following specific program elements:

1. A statement identifying the activities proposed to be undertaken with grant funds (the “grant project”) and the timeline for the activities, including how the applicant will determine which charter schools will receive assistance, how much and what types of assistance these schools will receive, and what procedures the applicant will use for documenting grant project procedures and results.

2. A description of the involvement of charter schools in the application's development and the design of the proposed grant project.

3. A description of the applicant's expertise in capital markets financing and organizational capacity to implement the proposed grant project successfully. (Consortium applicants must list information for each of the participating organizations.)

4. A description of how the proposed grant project will leverage the maximum amount of private sector and other non-Federal capital relative to the amount of Charter Schools Facilities Financing Demonstration Program funding used, the type of schools to be served, and the type of assistance to be provided, and how the proposed activities will otherwise enhance credit available to charter schools.

5. In the case of an application submitted by a State governmental entity, a description of current and planned State funding policy and other forms of financial assistance that will help charter schools meet their facility needs.

Use of Funds: Grant recipients must, in accordance with State and local law, directly or indirectly, alone or in collaboration with others, deposit the grant funds received under this program (other than funds used for administrative costs) in a reserve account established and maintained by the grantee for this purpose. Amounts deposited in such account shall be used by the grantee for one or more of the following purposes to assist charter schools in accessing private sector and other non-Federal capital:

(1) Guaranteeing, insuring, and reinsuring bonds, notes, evidences of debt, loans, and interests therein;

(2) Guaranteeing and insuring leases of personal and real property;

(3) Facilitating financing by identifying potential lending sources, encouraging private lending, and other similar activities that directly promote lending to, or for the benefit of, charter schools; and

(4) Facilitating the issuance of bonds by charter schools, or by other public entities for the benefit of charter schools, by providing technical, administrative, and other appropriate assistance (such as the retention of bond counsel, underwriters, and other advisors, attracting potential investors, the procurement of bond counsel, and the consolidation of multiple charter school projects within a single bond issue). Start Printed Page 56545

Funds received under this program and deposited in the reserve account shall be invested in obligations issued or guaranteed by the United States or a State, or in other similarly low-risk securities. Investments shall be designed to preserve principal.

Any earnings on funds received under this program shall be deposited in the reserve account and be used in accordance with the requirements of this program.

An eligible entity receiving a grant under this program shall use the funds deposited in the reserve account to assist one or more charter schools in accessing capital to accomplish one or both of the following objectives:

(1) The acquisition (by purchase, lease, donation, or otherwise) of an interest (including an interest held by a third party for the benefit of a charter school) in improved or unimproved real property that is necessary to commence or continue the operation of a charter school.

(2) The construction of new facilities, or the renovation, repair, or alteration of existing facilities, necessary to commence or continue the operation of a charter school.

Grantees must ensure that all costs incurred using funds from the reserve account are reasonable. The burden of proof is upon the grantee, as a fiduciary under its agreements with the Secretary, to establish that costs are reasonable. Each grantee must also clearly indicate with respect to each financial obligation it enters into pursuant to this grant program that the full faith and credit of the United States is not pledged to the payment of funds under such obligation.

Grantee Performance Agreements and Reporting Requirements

Applicants that are selected to receive an award must enter into a Performance Agreement with the Department prior to receiving their award. A key element of the Performance Agreement is the performance goals. In developing performance goals, Department staff and each applicant will rely on the applicant's annual projections submitted under the Business/Organizational Capacity section of the application and the objectives established in the approved application. The Performance Agreement will also describe the ways in which the Department and the grantee will work together to accomplish the purposes of the program.

The Secretary, in accordance with applicable authorities, shall collect all of the funds in the reserve account established with grant funds (including any earnings on those funds) if the Secretary determines that the grantee has permanently ceased to use all or a portion of the funds in such account to accomplish the purposes described in the authorizing statute and the Performance Agreement or, if not earlier than 2 years after the date on which the entity first received these funds, the entity has failed to make substantial progress in undertaking the grant project.

During each fiscal year that the grantee's obligation to the Federal government remains in effect, grantees will submit reports (as detailed below) to the Department. The grantee's commitment continues for the duration of the Project Period.

Applicants selected for funding will be required to submit the following reports to the Department:

1. An annual report that includes:

a. a copy of the most recent financial statements and any accompanying opinion on such statements prepared by the independent public accountant reviewing the financial records of the grantee;

b. a copy of any report made on an audit of the financial records of the grantee conducted during the reporting period;

c. an evaluation by the grantee of the effectiveness of its use of the Federal funds in leveraging private sector and other non-Federal funds;

d. a description of characteristics of lenders and other financial institutions participating in activities undertaken by the grantee during the reporting period;

e. a narrative description of the grantee's activities in support of the objectives of the program and its performance goals including a listing and description of the charter schools served during the reporting period; and

f. such other information as the Secretary may require.

2. Semiannual reports that include internal financial statements and such other information as the Secretary may require in the Performance Agreement.

Grantees must also cooperate and assist the Department with any periodic financial and compliance audits of the grantee, as determined necessary by the Department. The specific grant agreement between the grantee and the Department may contain additional reporting requirements.

Grantees must maintain and enforce standards of conduct governing the performance of its employees, officers, directors, trustees, and agents engaged in the selection, award, and administration of contracts or agreements related to this grant. The standards of conduct should, at a minimum, require disclosure of direct and indirect financial or other interests, mandate disinterested decision-making, and indicate corrective actions to be taken in the event of violation.

Limitation on Administrative Costs

A grantee may use not more than 0.25 percent (one quarter of one percent) of the grant funds for the administrative costs of the grant.

Charter Schools Eligible to Benefit From This Program

The charter schools that a grantee selects to benefit from this program must meet the definition of a charter school, as defined in the Public Charter Schools Program authorizing statute in section 10310 of the Elementary and Secondary Education Act of 1965. This definition is repeated as follows in this application notice for the convenience of the applicant.

(1) A charter school is a public school that—

(A) in accordance with a specific State statute authorizing the granting of charters to schools, is exempted from significant State or local rules that inhibit the flexible operation and management of public schools, but not from any rules relating to the other requirements of this paragraph;

(B) is created by a developer as a public school, or is adapted by a developer from an existing public school, and is operated under public supervision and direction;

(C) operates in pursuit of a specific set of educational objectives determined by the school's developer and agreed to by the authorized public chartering agency;

(D) provides a program of elementary or secondary education, or both;

(E) is nonsectarian in its programs, admissions policies, employment practices, and all other operations, and is not affiliated with a sectarian school or religious institution;

(F) does not charge tuition;

(G) complies with the Age Discrimination Act of 1975, title VI of the Civil Rights Act of 1964, title IX of the Education Amendments of 1972, section 504 of the Rehabilitation Act of 1973, and part B of the Individuals with Disabilities Education Act;

(H) is a school to which parents choose to send their children, and that admits students on the basis of a lottery, if more students apply for admission than can be accommodated;

(I) agrees to comply with the same Federal and State audit requirements as do other elementary and secondary schools in the State, unless such requirements are specifically waived for the purpose of this program; Start Printed Page 56546

(J) meets all applicable Federal, State, and local health and safety requirements;

(K) operates in accordance with State law; and

(L) has a written performance contract with the authorized public chartering agency in the State that includes a description of how student performance will be measured in charter schools pursuant to State assessments that are required of other schools and pursuant to any other assessments mutually agreeable to the authorized public chartering agency and the charter school.

Methods for Applying Selection Criteria

The Secretary gives distinct weight to the listed criteria and the maximum score for each criterion is indicated in parenthesis. Within each criterion, the Secretary evaluates each factor equally. The maximum score that an application may receive is 100 points. In making final funding decisions, the Secretary intends to make, if possible and appropriate, at least one award in each of the three eligible applicant categories.

In evaluating applications for grants under this program competition, the Secretary will use the following project selection criteria. The selection criteria address two important questions:

A. Does the applicant have the capacity to carry out the proposed grant project?

B. Has the applicant proposed a grant project that will make a significant contribution toward meeting the purpose of the Charter Schools Facilities Financing Demonstration Program and thereby increase charter schools' access to facilities financing?

A. The selection criteria related to the applicant's capacity to carry out the proposed grant project include:

1. The business and organizational capacity of the applicant to carry out the grant project (25 points).

—The amount and quality of experience the applicant has with the activities it proposes to undertake in its application, such as enhancing the credit on debt issuances, guaranteeing leases, and facilitating financing;

—The applicant's financial stability;

—The adequacy of the applicant's policies and procedures regarding loan underwriting, portfolio monitoring, and financial management to protect against unwarranted risk; and

—The adequacy of standards of conduct to prevent conflicts of interest.

2. The grant project team (20 points).

—The qualifications, including relevant training and experience, of the project manager and other members of the grant project team, including consultants or subcontractors; and

—The adequacy of the applicant's staffing plan for the grant project.

—For non-profits only, the qualifications, including relevant training and experience, of members of the board of directors holding key positions.

3. The adequacy of resources (5 points)

—The resources to be contributed by each co-applicant (consortium member), partner or other grant project participant to the implementation and success of the grant project; and

—The extent to which the requested grant amount is reasonable in relation to the objectives, design, and potential significance of the proposed grant project.

—For State governmental entities, the extent to which steps have or will be taken to help charter schools within the State obtain adequate facilities.

B. The selection criteria related to the potential contribution of the proposed grant project to achieving the purpose of the Charter Schools Facilities Financing Demonstration Program include:

1. The quality of the design and potential significance of the proposed grant project (35 points).

—The extent to which the grant project goals and objectives are clearly specified, measurable, and appropriate for the purpose of the Charter Schools Facilities Financing Demonstration Program;

—The extent to which the grant project implementation plan and activities, including the partnerships established, are likely to achieve the objectives sought by the project.

—The extent to which the proposed grant project is likely to produce results that will be documented and helpful to others nationally in providing facilities financing assistance to charter schools;

—The extent to which the grant project will use appropriate criteria for selecting charter schools for assistance and for determining the type and amount of assistance to be given;

—The importance or magnitude of the results or outcomes likely to be attained by the proposed grant project (e.g., the number and variety of charter schools assisted and the amount of capital leveraged).

2. The quality of the services (15 points).

—The extent to which the services to be provided by the proposed grant project are appropriate to the needs of the charter schools to be served;

—The extent to which charter schools and chartering agencies were involved in the design of and demonstrate support for the grant project;

—The extent to which the technical assistance and other services to be provided by the proposed grant project involve the use of cost-effective strategies for increasing charter school access to facilities financing; and

—The extent to which the services to be provided by the proposed grant project are focused on quality charter schools with the greatest needs.

Waiver of Proposed Rulemaking

It is the Secretary's practice, in accordance with the Administrative Procedure Act (5 U.S.C. 553), to offer interested parties the opportunity to comment on proposed rules. Section 437(d)(1) of the General Education Provisions Act (GEPA), however, allows the Secretary to exempt from rulemaking requirements rules governing the first grant competition under a new or substantially revised program authority (20 U.S.C. 1232(d)(1)). Funding for this new initiative was provided in the Department's FY 2001 appropriations act, enacted December 21, 2000. The Secretary, in accordance with section 437(d)(1) of GEPA, has decided to forego public comment in order to ensure timely grant awards.

For Applications Contact: Education Publications Center (ED Pubs), P.O. Box 1398, Jessup, MD 20794-1398. Telephone (toll free): 1-877-433-7827. FAX: (301) 470-1244. If you use a telecommunications device for the deaf (TDD) you may call (toll free): 1-877-576-7734.

You may also contact ED Pubs at its Web site:​pubs/​edpubs.html; or you may contact ED Pubs at its e-mail address:

If you request an application from ED Pubs, be sure to identify this competition as follows: CFDA number 84.354A.

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Jennifer Ryan McMahon, U.S. Department of Education, 400 Maryland Avenue, SW, Room 3E239, Washington, DC 20202. Telephone: (202) 260-9738 or via Internet:

Electronic Access to This Document: You may view this document, as well as all other Department of Education documents published in the Federal Register, in text or Adobe Portable Start Printed Page 56547Document Format (PDF) on the Internet at the following site:​legislation/​FedRegister

To use PDF you must have Adobe Acrobat Reader, which is available free at this site. If you have questions about using PDF, call the U.S. Government Printing Office (GPO), toll free, at 1-888-293-6498; or in the Washington, DC area at (202) 512-1530.

The Department intends to offer further information about the program at the following Internet site:​offices/​OESE/​goals/​progresp.html

Individuals with disabilities may obtain this document in an alternative format (e.g., Braille, large print, audiotape, or computer diskette) on request using the contact information provided under FOR APPLICATIONS CONTACT.


The official version of this document is the document published in the Federal Register. Free Internet access to the official edition of the Federal Register and the Code of Federal Regulations is available on GPO access at:​nara/​index.html.

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Program Authority: Elementary and Secondary Education Act of 1965, title X, part C, subpart 2, as amended by the Department of Education Appropriations Act, 2001, section 322.

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Dated: November 5, 2001.

Susan B. Neuman,

Assistant Secretary for Elementary and Secondary Education.

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[FR Doc. 01-28087 Filed 11-7-01; 8:45 am]