Mr. HUNDEMER. I am not sure, but I can check it out.
Mr. FOUNTAIN. Do you know?

Mr. NAUGHTON. I am not certain on that myself. I think it is in the GAO report.

(Mr. Hundemer subsequently advised that the notices sent to local school districts did not contain a provision for negotiation downward. Mr. Hundemer further stated that: "Central Office Contracts Division procedures include the use of two types of telegrams, one for full award after negotiation; and the other for full award subject to negotiation downward when all details in the proposal have not been resolved. Since Central Office Contracts Division coordinates procedures with the regional officers, a copy of each telegram was furnished to the Atlanta contract officer for his use even though he is not under the supervision of the Director, Central Office Contracts Division. Inquiry of the Atlanta contract officer discloses that award was made without negotiation.")

Mr. NAUGHTON. Now in two of the three approved projects, as approved, the money was to go directly to Kettering under pretty much à 100-percent subcontract. Is it true that Kettering under two of the three proposals was to make a payment to the gentleman who submitted the proposal for the local school district?

Dr. ESTES. I haven't examined the proposals this carefully.

Mr. NAUGHTON. I think you will find that is true. As I understand it, in two of the three approved projects, the Kettering Foundation, under the approved proposal, was to pay $1,000, which of course would come from Federal funds received by Kettering under the subcontract, to a local official who happened to be the same one who submitted the project application. This payment was described in the application as a fee for local project administration. Do you know what services were to be performed?

Mr. HUNDEMER. We can check all of this out and make it available for the record.

(The following statement was subsequently supplied :)

The local representatives will make all local arrangements associated with inviting 750 conferees, arranging for conference rooms, scheduling, housing, and registration.

Mr. NAUGHTON. Essentially these projects call for 3-day seminars, conferences on innovation, to be run by the Kettering Foundation. Is it possible that the fact that the gentleman sending in the project was to be employed in connection with it could have influenced his judgment in deciding it would be a good proposal to send in?

Dr. ESTES. I think we should point out that these grants are made to a local educational agency, to a local public school board. Of course our interest is in local control of education and that insists we stay out of these matters as much as possible. It is quite possible the local board of education, in approving this proposal before it came in, examined this and felt that this was in line and consistent with a project director's duties. This, of course, was very appropriate.

Mr. NAUGHTON. Don't you raise questions when an application comes in for $25,000 and the superintendent or the man who signed his name as submitting the proposal, if you read through it, is also in line, according to the proposal, to receive $1,000 out of the $25,000?

Don't you believe this type of project should be examined more closely to determine whether the $1,000 is a part of the motivation for sending it in?

I don't want this question to be taken as reflecting personally on the gentlemen.

Dr. ESTES. As a normal process of examining the overall program, we do look at the budgetary considerations. This is one of the things as program officers that we look for. Of course we flag these kinds of items for further consideration, as does the contract officer. When it gets to that point, he will go over it.

Mr. FOUNTAIN. Who is paying the $1,000 fee?

Mr. NAUGHTON. The taxpayers.

Dr. ESTES. I am quite sure it comes out of the grant.

Mr. FOUNTAIN. Is it paid by you people directly to the individual official, or is it paid by Kettering?

Mr. Howe. All tranfers of funds from us are to the local school district.

Mr. FOUNTAIN. Not to the name of any individual?

Mr. HUNDEMER. It would go to the name of the board or the superintendent of the school district.

Mr. NAUGHTON. Do you know whether Tupelo turned their $25,000 over to Kettering Foundation?

Mr. HUNDEMER. I do not, but I can find out.

Mr. FOUNTAIN. Would you submit that for the record, please?

Mr. HUNDEMER. Yes.

(The following statement by the Atlanta regional contract officer was subsequently submitted:)

The $25,000 payment has been made to Tupelo, Miss., but no money has been paid to the Kettering Foundation or will any of the funds be paid to the Kettering Foundation until they perform those services required under the subcontracts which are still in negotiation and as of this date the subcontracts have not been submitted to this office for approval.

Mr. FOUNTAIN. I would like to know what kind of services the man furnishes who gets the $1,000 fee.

Dr. ESTES. As I understand it, he is the project director, who will coordinate the activities in the local school district.

Mr. FOUNTAIN. I got the impression from the memorandum you handed me that it might be for services for the conference.

Dr. ESTES. Setting up the conferences, making the arrangements, arranging the travel, as well as the necessary financial accounting. Mr. Howe. Following through on the conference, issuing the reports, writing up the results. This is a reasonable fee for planning an effectively run conference, which would easily take a month's work to do effectively, both in planning, execution, and followup.

Mr. NAUGHTON. Of course Kettering is running the whole show. This gentleman, as I understand it, is simply to make the local arrangements, as to facilities, and who is to attend. Don't you have dedicated people who want to get title III grants that would be willing to contribute their services and not need to be paid $1,000? And shouldn't the attitude as to whether they have to be paid to do this or not, be considered in determining whether this is the place you ought to put your money?

Mr. Howe. I have sort of given up telling people what their attitudes ought to be.

Mr. NAUGHTON. I am trying to ascertain your attitude on this point. Mr. Howe. I think we ought to be willing to make available, under a contract, sufficient funds to provide good managerial services. And I think we ought to report to you, as the chairman suggests, what the sort of managerial responsibilities are that these individuals are undertaking for this $1,000, and we will do that. It seems to me, just looking at it without knowing the details, a reasonable fee for working on this kind of an enterprise, if it is really well done.

(The following supplemental statement was subsequently provided by the Office of Education :)

OFFICE OF EDUCATION POSITION ON HIRING OF PROJECT APPLICANTS AS PROJECT DIRECTORS

During the hearings of the Intergovernmental Relations Subcommittee of the House Committee on Government Operations, concern was expressed that in many instances local school officials were submitting applications for support, primarily under title III of the Elementary and Secondary Education Act, and then becoming project directors, at an increase in salary, on the projects' approval. Mr. Naughton, subcommittee counsel, questioned whether the probability that a local official might be employed under a title III grant should not be taken into consideration when funding decisions are made. Commissioner Howe, on the other hand, expressed a willingness to make available, under contract, sufficient funds to provide good managerial services. He also stated that, although he knew of no specific instances, he was sure that local school or university officials had in some cases received a grant from the Office of Education, had a change in responsibility, and had received a considerable increase in compensation.

The Department of Health, Education, and Welfare grant terms and conditions for title III and for research grants are identical in their guidelines for grants officers.

"The current policies of the local institution, with respect to administration of salary and wage scales, shall be applied to salaries and wages payable under this grant. The term 'administration of salary and wage scales' is interpreted to mean hours of work, overtime rates, outside activities, general wage increases, and individual promotions."

Thus, in negotiating contract terms, grant officers attempt to assure that the salary to be paid for administering the grant is commensurate with salaries in the area and for equivalent services. In many instances, a salary is negotiated before a local project director has been named. Therefore, no comparison with a prior salary level would be possible.

We share the concern of the committee that a local official might submit a project application, primarily motivated by a desire for financial aggrandizement. However, the screening procedures used by both the Bureau of Elementary and Secondary Education and the Bureau of Research-internal readers, field readers, advisory committees are designed to provide the greatest assurance that projects supported by Federal funds have educational merit. The local official seeking personal gain would, except for participating in the decision to submit the project application, have no further control over the proposal's approval. And, according to the negotiated contract, the salary he would receive as director of the federally funded project would be totally consistent with the duties he would be expeced to perform.

It is difficult to see how any other arrangement would be administratively feasible. A local school district cannot be required to have secured the services of a project director before it negotiates the amount he will be paid. The Federal Government should not be forced to dictate salary policies to local school districts. Rather, a negotiated salary, based on local policies and wage scales, would appear to be the most equitable. In addition, it seems only reasonable to assume that local personnel should be eligible to perform various duties in connection with a grant, including managerial duties.

Mr. NAUGHTON. Of course your title III grants are supposed to recognize local needs, aren't they?

Mr. Howe. That is right.

Mr. NAUGHTON. Are local needs the same in all eight of these Mississippi communities which sent in requests for title III grants?

Dr. ESTES. The need for strengthening and improving the program of instruction at each level in each district of course would be somewhat consistent. There would be a need for improvement.

Mr. NAUGHTON. Isn't it true, since all of these eight applications were identical, that all the gentlemen sending in the applications really had to do was fill in a couple of blanks which had spaces for the name of the school district?

Dr. ESTES. I understand from the report furnished you that this was the case.

Mr. NAUGHTON. Kettering did the rest. They supplied the forms and said, "You just sign here."

Dr. ESTES. The institutes developed the form for the school districts and they had simply to supply the information at the local level. Mr. NAUGHTON. The project called for someone to be a project coordinator on the local level. Are you familiar with how many IDEA consultants would be associated with each of these under the approved project and how much they would be paid.

Dr. ESTES. No, I don't. I think the overall plan is a very good one. They would hope to bring into the three school districts that will be receiving these grants, teachers, administrators, supervisors from innovative school districts all over the Nation. Mrs. Dwyer will understand this instead of an outside consultant coming in and talking to a first-grade teacher for instance, about what she ought to be doing, about new ideas, they are proposing to bring in a first-grade teacher to talk to a first-grade teacher, a senior high math instructor to talk to a senior high math instructor, a principal from an innovative school district in New Jersey or North Carolina to talk to his counterpart.

Mrs. DWYER. To give them the advantage of their experience?

Dr. ESTES. Firsthand experience, that is right. It is a great idea. They will have the advice and assistance of outstanding leaders, educators from all over the country, who will be brought into the local school district to assist them in improving and developing their program.

Mrs. DWYER. How do you choose these people that come in? How do you go about choosing the right people?

Dr. ESTES. Actually the Institute will be responsible for working with the local school people in selecting the people that come in from St. Louis, from Shaker Heights and some of the outstanding school districts around the country. The Institute and the local school people will be responsible for this.

Mrs. DWYER. Thank you.

Mr. NAUGHTON. The budget proposal for each 3-day conference calls for the Kettering Foundation to furnish a project coordinator to be paid $1,000, plus 10 IDEA consultants, who will be paid $100 per day each, for 4 days each, plus, I assume, travel and expenses.

Dr. ESTES. I don't think the Institute has that many people on its staff. When they talk about IDEA consultants, they are talking about

people in other public schools, who will be serving for them in this capacity.

Mr. NAUGHTON. These minigrants, of course, had to be considered and recommended for approval or disapproval by the advisory committee, as do all other grants.

Dr. ESTES. That is right.

Mr. NAUGHTON. Can you tell me whether or not Mr. Kettering voted to approve these?

Dr. ESTES. Mr. Kettering voted to approve, or he reacted to-he affixed his name to all of the minigrant proposals that went out, including these.

I might add, if I might, Mr. Chairman, that although he did this, he had no way of knowing which of the 539 minigrants actually were related to the institute proposals.

I think we probably should submit for the record the forms that we sent out and the material that we sent out to each of our advisory committee members, showing that there really wasn't any way he could identify which of the proposals we were submitting for approval were institute-developed proposals or from some other source.

(The following statement was subsequently submitted:)

These minigrant proposals were reviewed by one reader outside the U.S. Office of Education, by a specialist in the U.S. Office of Education, by the Mississippi State Department of Education, and by a staff member of the ESEA title III area desk in Atlanta. Based upon these recommendations, the Area Desk Chief in Atlanta recommended approval of three proposals to the National Advisory Committee. This recommendation, which included the title of the proposal and the recommendations made by each reviewer, was mailed to all members of the Advisory Committee. There was no indication in the proposal titles that IDEA would become a subcontractor if the proposals were approved. Charles Kettering II had no way of knowing, from the information transmitted to him that IDEA would be involved in the projects. Since he was not aware of a possibility of a conflict of interest, he recommended that the staff recommendations be accepted by the Commissioner of Education.

Mr. NAUGHTON. These proposals were included in a long list. In fairness to Mr. Kettering, I might mention that I talked with him, and he assured me he did not know that the Kettering Foundation was involved.

Of course, this may give some evidence as to the nature of the approval process. You are turning out a lot of grants.

Mr. ESTES. He is no longer on the staff of the institute, he is no longer directly connected with it, so he would have no way of being directly in touch with the activities of the institute.

Mr. NAUGHTON. This is no reflection on Mr. Kettering, since I doubt that he knew the foundation was involved, but it seems to me his approval of the grants raises a question under the ruling in the Mississippi Valley case as to the legality of benefits accruing to the Kettering Foundation from the $25,000 that has been sent to Tupelo, and the additional $50,000 that presumably you are planning to send to the other communities in Mississippi. So I would suggest you have your lawyers examine that also.

(The following statement was subsequently supplied by the Office of General Counsel, Department of Health, Education, and Welfare :)

If, as appears to be the case, Mr. Kettering did not know of IDEA's involvement when he recommended approval of these grants, which were to local public school