ATLANTA --- The competition for $10.6 million in federally funded grants for after-school programs in local systems all over Georgia -- including Richmond and McDuffie counties -- was "severely flawed," a state audit of the Department of Education-administered program found.

The audit of the Twenty-First Century Community Learning Centers program for 2006-07 found evidence of "apparent collusion and management override of internal overrides" in the awarding of the grants for before- and after-school programs at community learning centers. At least two former state DOE employees, unnamed in the report, appear to have used their positions for personal gain in contracts awarded to "sub-grantees" of the local programs.

The audit by the Georgia Department of Audits was requested by state School Superintendent Kathy Cox after she learned of potential conflicts of interest among employees scoring the applications for the grants.

In the audit report, the DOE agrees with the findings and says substantial changes and controls have been made in the program, which the audit strongly suggested would be necessary for its continuation.

"Some irregularities were brought to our attention, and the superintendent thought that it deserved a thorough external examination," said Dana Tofig, director of communications for the state Department of Education.

The biggest flaw appears to be that the state's own system, and an external review panel for scoring applications for the grant money, was either circumvented or ignored. The result was that some school systems or community centers received more than they should have while others were excluded altogether.

The Richmond County Board of Education received a $527,700 grant for the 2006-07 program. If the correct scoring of the grant applications had been followed, Richmond would not have received a grant, the audit suggests. The Savannah-Chatham County Board of Education was granted $398,500 and also should have gotten nothing.

The City of Harlem did not receive a grant, yet it should have gotten $600,000, a chart in the audit suggests.

"During the course of our examination, we recovered evidence indicating a complex fraud scheme was in place to manipulate the outcome of the 2006-2007 community-based organizations," the report states.

The scheme involved several employees of the Department of Education, certain members of the independent external peer review panel and a number of community-based organizations, which aren't named.

Mr. Tofig refused to name the former employees or say which local programs might be implicated in the scoring of the applications, citing an ongoing federal investigation and state personnel policy.