FR Doc 03-8133
[Federal Register: April 3, 2003 (Volume 68, Number 64)]
[Page 16267-16270]
From the Federal Register Online via GPO Access []

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[CFDA No. 84.354A]

Office of Innovation and Improvement; Credit Enhancement for 
Charter School Facilities Program; Notice Inviting Applications for New 
Awards for Fiscal Year (FY) 2003

    Purpose of Program: This program will provide grants to eligible 
entities to permit them to enhance the credit of charter schools so 
that they can access private-sector and other non-Federal capital to 
acquire, construct, and renovate facilities at a reasonable cost. Grant 
projects awarded under this program will be of sufficient size, scope, 
and quality to enable the grantees to implement effective 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: April 3, 2003.
    Deadline for Transmittal of Applications: June 3, 2003.
    Deadline for Intergovernmental Review: August 2, 2003.
    Estimated Available Funds: $25,000,000.
    Estimated Range of Awards: $2.5 million-$10 million.
    Estimated Average Size of Awards: $8.3 million.
    Estimated Number of Awards: 3-5.
    The Secretary will make, if possible, at least one award in each of 
the three categories of eligible applicants.

    Note: The Department is not bound by any estimates in this 

    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. Furthermore, 
applicants are strongly encouraged to include a table of contents that 
specifies where each required part of the application is located.
    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.


Application Content

    Each Credit Enhancement for Charter School Facilities 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, the type of schools to be served, 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 design of the proposed grant project.
    3. A description of the applicant's expertise in capital markets 
financing and its 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 Credit Enhancement for Charter School 
Facilities Program funding used, the definition of ``leverage'' the 
applicant has used in developing that description, the type of 
assistance to be provided, how the assistance would sufficiently reduce 
the costs that charter schools face so that it would enable them to 
obtain or improve school facilities that they would not be able to 
obtain or improve absent the assistance, 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, in accordance with State and local law, directly 
or indirectly, alone or in collaboration with others, must 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 
in order 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.
    (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 recruitment of bond counsel, underwriters, and potential investors 
and the consolidation of multiple charter school projects within a 
single bond issue).
    Funds received under this program and deposited in the reserve 
account must be invested in obligations issued or guaranteed by the 
United States or a State, or in other similarly low-risk securities. 
Investments must be designed to preserve principal.
    Any earnings on funds, including fees, received under this program 
must 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 must use 
the funds deposited in the reserve account to assist multiple charter 
schools in accessing capital to accomplish one or both of the following 
    (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 
    (2) The construction of new facilities, or the renovation, repair, 
or alteration of

[[Page 16268]]

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 

Grantee Performance Agreements and Reporting Requirements

    Applicants that are selected to receive an award must enter into a 
written Performance Agreement with the Department prior to drawing down 
funds, unless the grantee receives written permission from the 
Department in the interim to draw down a specific limited amount of 
funds. A key element of the Performance Agreement is the performance 
goals for the grant. These performance goals will include the program's 
two performance indicators: (1) The amount of funding grantees leverage 
for charter schools to acquire, construct, and renovate school 
facilities and (2) the number of charter schools served. 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 chapter 37 of title 31, United 
States Code, will 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 two 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 
    d. A description of the characteristics of lenders and other 
financial institutions participating in the 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 other information as the Secretary may require in the Performance 
    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 Performance Agreement between 
the grantee and the Department may contain additional reporting 
    Grantees must maintain and enforce standards of conduct governing 
the performance of their 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 must, 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 5210(1) 
of the Elementary and Secondary Education Act of 1965 (ESEA). 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 [paragraph (1) of ESEA section 5210];
    (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 
    (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 [the Public Charter Schools Program];
    (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

[[Page 16269]]

mutually agreeable to the authorized public chartering agency and the 
charter school.

Competitive Preference Priority

    Under 34 CFR 75.105(c)(2)(i) the Secretary awards additional points 
to an application that proposes to increase the capacity of charter 
schools to offer public school choice in those communities with the 
greatest need for this choice. The Secretary awards up to an additional 
15 points to an application, depending on how well the application 
addresses the following factors:
    [sbull] The extent to which the applicant would target services to 
geographic areas in which a large proportion or number of public 
schools have been identified for improvement, corrective action, or 
restructuring under Title I of the Elementary and Secondary Education 
Act as amended by the No Child Left Behind Act;
    [sbull] The extent to which the applicant would target services to 
geographic areas in which a large proportion of students perform poorly 
on State academic assessments; and
    [sbull] The extent to which the applicant would target services to 
communities with large proportions of low-income students.
    Selection Criteria: In evaluating applications for grants under 
this competition, the Secretary will use the following project 
selection criteria. The Secretary gives distinct weight to the listed 
criteria. Within each criterion, the Secretary evaluates each factor 
    The maximum score for all of the selection criteria is 100 points. 
The maximum score for each criterion is indicated in parenthesis.
    The selection criteria address two important questions:
    A. Does the applicant have the ability 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 Credit 
Enhancement for Charter School Facilities 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 (35 points).
    [sbull] The amount and quality of experience the applicant has in 
carrying out the activities it proposes to undertake in its 
application, such as enhancing the credit on debt issuances, 
guaranteeing leases, and facilitating financing;
    [sbull] The applicant's financial stability;
    [sbull] The adequacy of the applicant's policies and procedures 
regarding loan underwriting, portfolio monitoring, and financial 
management to protect against unwarranted risk;
    [sbull] The adequacy of the applicant's standards of conduct and 
organizational structure to prevent conflicts of interest; and
    [sbull] 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.
    [sbull] For State governmental entities, the extent to which steps 
have or will be taken to help charter schools within the State obtain 
adequate facilities.
    2. The grant project team (15 points).
    [sbull] The qualifications, including relevant training and 
experience, of the project manager and other members of the grant 
project team, including consultants or subcontractors; and
    [sbull] The adequacy and appropriateness of the applicant's 
staffing plan for the grant project.
    [sbull] For non-profits only, an IRS Form 990 and the 
qualifications, including relevant training and experience, and 
independence of members of the board of directors.
    B. The selection criteria related to the potential contribution of 
the proposed grant project to achieving the purpose of the Credit 
Enhancement for Charter School Facilities Program include:
    1. The quality of the design and potential significance of the 
proposed grant project (35 points).
    [sbull] The extent to which the grant project goals, objectives, 
and timeline are clearly specified, measurable, and appropriate for the 
purpose of the Credit Enhancement for Charter School Facilities 
    [sbull] 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;
    [sbull] 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 
    [sbull] 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;
    [sbull] 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 that would not have been able 
to meet their school facility needs absent the assistance and the 
amount of capital leveraged); and
    [sbull] The extent to which the requested grant amount and the 
project costs are reasonable in relation to the objectives, design, and 
potential significance of the proposed grant project.
    2. The quality of the services (15 points).
    [sbull] The extent to which the services to be provided by the 
proposed grant project reflect the needs of the charter schools to be 
    [sbull] The extent to which charter schools and chartering agencies 
were involved in the design of, and demonstrate support for, the grant 
    [sbull] 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 schools' access to 
facilities financing; and
    [sbull] The extent to which the services to be provided by the 
proposed grant project are focused on assisting quality charter schools 
that have the greatest needs for assistance under the program.
    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)). This 
program authority was substantially revised under the No Child Left 
Behind Act of 2001 and this would be the first grant competition under 
that revised authority. The Secretary, in accordance with section 
437(d)(1) of GEPA, has decided to forego public comment in order to 
ensure timely grant awards. These rules would apply to the FY 2003 
grant competition only.
    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:
    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.

[[Page 16270]]

Education, 400 Maryland Avenue, SW., room 3C140, Washington, DC 20202-
6140. Telephone: (202) 401-0307 or via Internet:    If you use a telecommunications device for the deaf (TDD), you may 
call the Federal Information Relay Service (FIRS) at 1-800-877-8339.
    Individuals with disabilities may obtain this document in an 
alternative format (e.g., Braille, large print, audiotape, or computer 
diskette) on request to the program contact person listed under FOR 
    Individuals with disabilities may obtain a copy of the application 
package in an alternative format by contacting that person. However, 
the Department is not able to reproduce in an alternative format the 
standard forms included in the application package.
    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 Document Format (PDF) on 
the Internet at the following site:
    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:

    Note: 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:

    Program Authority: Elementary and Secondary Education Act of 
1965, title V, part B, subpart 2, as amended by the No Child Left 
Behind Act, 2001 (20 U.S.C. 7223-7223j).

    Dated: March 31, 2003.
Nina S. Rees,
Deputy Under Secretary for Innovation and Improvement.
[FR Doc. 03-8133 Filed 4-2-03; 8:45 am]