The U.S. Court of Appeals for the 11th Circuit on Wednesday let stand an order requiring the Georgia Department of Education to repay $2 million in fraudulently spent federal grant money.

The case involves a $10.7 million grant that the U.S. Department of Education awarded to Georgia to be distributed to local education entities in 2007 under the 21st Century Community Learning Centers program, which targeted students at high-poverty, low-performing schools. The money was meant to fund academic enrichment opportunities such as after-school tutorial services, Judge Anne Conway of the U.S. District Court for the Middle District of Florida, sitting by designation, wrote in a 16-page opinion. The appeals court upheld a final decision by the U.S. secretary of education ordering the Georgia Department of Education to repay $2.1 million.

After a “suspicious activity report” in May 2007 from a local bank, state auditors ultimately uncovered evidence of a “complex fraud scheme” involving several Georgia education department employees, as well as members of the independent external peer review panel and some of the grant recipients who manipulated the outcome of the competition, Conway said. As “a result of apparent collusion and management override of internal controls,” the auditors found the grant competition was “severely flawed.”

Attorney General Chris Carr represented the Georgia Department of Education. Carr's spokesperson said he has no comment. The Georgia Department of Education did not have an immediate response.

The U.S. Department of Education was represented by Attorney General Jeff Sessions. His spokesperson could not be reached immediately.

The department initially ordered Georgia to repay $5.7 million diverted to lower-scoring applicants who won out over higher-scoring ones because of the manipulation, Conway wrote. “The parties subsequently stipulated to the reduced amount of $2.1 million based on the relevant statute of limitations,” the judge wrote. But then Georgia appealed that award, arguing the state should be given an offset for other funds spent on similar programs.

After reviewing Georgia's argument, the panel upheld the federal department's decision to enforce the $2.1 million payback.

Conway said the U.S. secretary of education determined that the nature and scope of the violation was “too serious to warrant an equitable offset,” given that Georgia education department employees “participated in a complex fraud scheme which led to the state improperly awarding $5.7 million to seventeen subgrantees who did not qualify to receive those funds.”

“As the Secretary determined, the violations unquestionably harmed federal interests,” Conway said. “An important objective” of the grant program is to make “grant money available to properly chosen subgrantees,” she added.

Contrary to Georgia's arguments, Conway said, “We do not find the Secretary's decision to deny the equitable offset based on the nature and scope of the complex fraud scheme initiated by Petitioner's employees to be arbitrary, capricious or an abuse of discretion.”

The case is Georgia Department of Education v. U.S. Department of Education, No. 16-17648.