[Federal Register: November 8, 2001 (Volume 66, Number 217)]
[Page 56544-56547]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]



[CFDA No. 84.354A]

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

    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 
    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.

    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.
    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 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; 
    (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).

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    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 
    (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 

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 
    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 
    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 
    (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;

[[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 
    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 

    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 

    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 

    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 
--The extent to which charter schools and chartering agencies were 
involved in the design of and demonstrate support for the grant 
--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: http://www.ed.gov/
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.

FOR FURTHER INFORMATION CONTACT: 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

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    The Department intends to offer further information about the 
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    Note: The official version of this document is the document 
published in the Federal Register. Free Internet access to the 
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Regulations is available on GPO access at: http://

    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.

    Dated: November 5, 2001.
Susan B. Neuman,
Assistant Secretary for Elementary and Secondary Education.
[FR Doc. 01-28087 Filed 11-7-01; 8:45 am]