Feds: Nonprofit Botched Teacher Incentive Grant

Feds: Nonprofit Botched Teacher Incentive Grant
Director replaced after Education Department halted grant spending
By Lou Mattei

SUN News Editor
Published: Thursday, April 12, 2012 10:07 AM MDT

A Rio Rancho nonprofit may be mostly to blame for the collapse of a grant program that owes Española School District teachers hundreds of thousands of dollars in promised incentive payments, according to correspondence released last month under the federal Freedom of Information Act.
The federal Education Department found flaws in the Northern New Mexico Network’s administration of a multimillion-dollar federal grant dating back to 2007. Correspondence shows the Department documented misspending, confusion and “high-risk” indicators in former executive director Carlos Atencio’s oversight of the grant.

It also raises questions over Network-initiated cuts to teacher evaluations that were supposed to be tied to the incentive payments — cuts the Department ultimately deemed illegal. The Network claimed these cuts were due to budget constraints, but the Department said its records showed the Network should have had over $1.5 million in federal funding to pay for the required evaluations.

“Thus, even considering the incentive payouts and other programmatic costs, we fail to see how your project lacked sufficient funds to conduct the required multiple observations of teachers as specified in the approved application,” Department director Sylvia Lyles wrote.

The Department decided last fall to place new restrictions on the Network’s ability to spend its grant money in fiscal year 2011, the grant’s fifth and final year. The restrictions prompted a letter from the Network telling teachers they wouldn’t be receiving incentive payments from the 2010-11 school year, a decision the District’s teachers union has said it may challenge in court.

Atencio, the Network’s executive director from 2004 through 2011, told the District last August the Department’s decision to restrict the grant funds was “unexpected,” a claim that years of correspondence from the Department calls into serious question.

In February 2008, Department group leader Jim Butler wrote a six-page monitoring report to the Network based on a December 2007 visit with Network and District officials, as well as officials from other school districts that later dropped out of the incentive fund program. The report begins by chiding the Network for unallowable food purchases.

“The grantee should work to keep these expenses to a minimum, and in the future should only use (teacher incentive fund) funds for working lunches when there is no viable alternative and the meeting is imperative to the project,” Butler wrote.

The report goes on to criticize the Network for a lack of written policies regarding the distribution of surplus funds. This criticism was repeated in a similar report issued in June 2009 based on a May 2009 visit with Atencio.

The 2009 report also questions the Network’s decision to allow the District to pay teacher incentive fund stipends to its assistant superintendent and parents involved in an incentive fund leadership team. The Department deemed both the assistant superintendent and the parents ineligible to receive these stipends.

The Rio Grande SUN first questioned the Network’s spending habits in November 2009, pointing out more than a third of the Network’s revenue between fiscal years 2007 and 2009 went to administrative expenses such as travel and management salaries.

Atencio alone earned more than $600,000 since the incentive fund program began, receiving raises each year of the program’s existence in Española, and he paid at least two high-ranking administrators six-figure salaries, according to federal tax records. He also hired his son-in-law Carlos Pagan as an $83,000 a year consultant in 2007 and 2008 without disclosing their relationship to the IRS.

A Department official contacted for this story gave a response similar to the one issued in 2009, saying no one in the Department is allowed to speak about specifics of the program or to give information attributed to his or her name. But the official did say the Network is still on the Department’s radar.

“The Department is awaiting a complete final performance report from Northern New Mexico Network that accounts for their use of grant funds for the entire grant period,” the official wrote. “In the meantime, the Department is reviewing options to address the grantee’s failure to comply with program requirements.”

The Department awarded the Network a total of $7.6 million in grant money since fiscal year 2008, according to an online Department database. A majority of that money — $5.7 million — was for the incentive fund program.

Warning Signs

The 2008 and 2009 Department reports both give voice to concerns about the sustainability of the incentive fund project after the grant funding ends. The Department requested specific time lines and plans to explore outside sources of funding, but these were never provided, according to the documents provided by the Department.

“There was confusion among all four of the district leadership teams regarding particular components of the program and reward structure,” the 2008 report reads.

A section of the 2009 report details a disagreement between Española teachers and administrators and what this might mean for the program’s future.

“The monitoring team is concerned about the sustainability of the performance-based compensation program in one of the districts due to animosity caused by a change in the leadership team,” the report states. “Teachers interviewed in Española expressed frustration about a change in the leadership team that would result in teachers who had previously served on the team being replaced by principals.”

The 2009 report also highlighted other areas of concern that were ultimately factors in the Department’s decision to restrict the Network’s funding, including the lack of a “rigorous” process for reviewing whether teachers met the criteria for receiving incentive payments.

“The grantee should re-visit the Skills and Knowledge component with the districts to ensure that it is of appropriate rigor,” the report states. “The grantee noted that it already had plans to increase the rigor of this component for the upcoming year.”

But by the 2010-11 school year, the Network had removed any teacher monitoring from the incentive program, despite having promised this in its grant application, correspondence states. Instead, it began deeming teachers eligible for incentives based on them attaining more advanced teaching licenses through the state.

Moreover, it began counting the statutorially mandated raises that come with a more advanced teaching license as the District’s contribution to the grant’s matching requirement, correspondence shows.

None of this sat well with the Department, which had never approved the changes, correspondence states.

“We do not accept the notion that all teachers who move up the licensure ladder under New Mexico’s 3-Tiered Licensure System are thereby eligible for (teacher incentive fund) performance-based compensation or that such additional salary that they earn is performance-based compensation under (the teacher incentive fund),” Lyles wrote to Atencio on Aug. 5, 2011.

As a result, the Department last August told the Network it could spend the remaining grant money on a reimbursement basis “only after (the Network) first documents and justifies to the Department’s satisfaction each expenditure for which drawdown is requested.” The Department also told the Network it must present documentation that the incentive payments were based on multiple classroom observations — which the Network admits never happened — and that the District is able to pick up 75 percent of the incentive, both of which were included as terms of the original grant agreement.

Atencio wrote to the District 10 days later stating it was “obvious” the Network would not be able to meet either of these criteria.

“Thus I am informing you that you must not award performance-based compensation to your employees because we will not be able to reimburse you for those costs,” Atencio wrote.

‘Everybody’s At Fault’

But the Network’s ability to reimburse the District is only part of the picture.

Española teachers union liaison Charles Goodmacher said the union’s lawyers are about 90 percent finished with the paperwork for a lawsuit against the Española School District regarding the botched incentive program. Goodmacher said the lawsuit may eventually include the Network, but the decision to mainly target the District stems from the contracts its teachers signed to enroll in the incentive program.

“Hundreds of individual teachers signed agreements with the District saying, ‘I will do X, Y and Z extra and if I meet these standards, the District will pay me extra,’” Goodmacher said. “Those agreements established it in black and white. They’re contracts between the District and all of these employees.”

The conditions the Department placed on the incentive fund grant pertain mostly to the Network’s ability to spend and draw down the remainder of its grant money, not to the District’s promised 75 percent match. The Department’s August 2011 letter states the Network must prove it followed the agreed-upon terms of the grant and that the District is able and willing to pay at least 75 percent of the incentive payments before any payments are made.

“These must be in place before incentives are paid to teachers and principals for the fifth year of the project,” the letter states.

There is no language explaining whether this passive-voice mandate applies to the Network, the District or both.

Calls to Atencio’s cell phone were not returned, and attempts to reach him or other Network staff at the Network’s office in Rio Rancho were unsuccessful. The office had no machine on which to leave messages.

The Network’s current executive director Adan Delgado, who is also the superintendent of the Pojoaque School District, placed the responsibility for the incentive fund grant on his predecessor.

“Carlos was completely in charge of closing out that grant,” Delgado said. “The only information I have I got from him.”

Delgado took over for Atencio in January 2012 and said he’s being paid $48 an hour for his work. He attributed the problems with the grant to “miscommunication” between the Network and the Department.

While District officials have previously said the District cannot afford to provide the 75 percent match, Española School Board member Coco Archuleta said the Department’s letter leaves the District in a catch-22, unable to make the incentive payments even if it were willing.

“I think everybody’s at fault right now,” he said.

Española Superintendent Arthur Blea said he’s discussed the situation with Goodmacher, talks the union liaison characterized as “positive.” Blea also said he wrote Delgado a letter stating the District’s position that the Network is at fault for not giving the District enough warning about the problems with the grant to prevent the District from entering into the incentive fund contracts with its teachers.

“It’s going to be one of those hot-potato things,” Blea said.

Delgado said he hadn’t heard about the potential lawsuit.

If the fight does end up in court, it remains unclear what, if anything, the union or the District could get from the Network. Delgado said he puts in only two or three hours of work a week overseeing the Network’s severely scaled-back operations.

“It’s pretty much just me,” Delgado said. “Our activity is very minimal while we figure out where we’re headed. We’re still kind of balancing things out. We have funds to do some minimal activities until we find some new funding sources, but it isn’t going to be anything like it was in the past.”