The California-based Center for Civic Education improperly spent taxpayer money to settle potential employment discrimination or harassment lawsuits, to print textbooks it sold to schools and to pay for unnecessary meals and travel, according to the report from the department's inspector general.

Charles Quigley, the center's executive director, acknowledged some errors in complying with federal regulations but disputed most of the report's findings.

"We have taken every step we possibly can to clean up our act and make sure we are in compliance," Quigley said.

The audit examined the center's operation of programs that provide textbooks and materials for civics classes in U.S. schools and to develop international civics education courses. The center spent $23 million in federal grants during the year covered by the audit, from August 2007 to July 2008.

This year's education spending bills pending in the House of Representatives and Senate would provide more than $25 million to the center, although President Obama's 2010 budget calls for eliminating the programs in favor of competitive grants.

The inspector general's report says the center couldn't properly account for $3.2 million in employee salaries. The report says the center's monthly time sheets were unreliable because most of the employees interviewed said they estimated the time spent on each project rather than log what they worked.

Quigley said the center believes its workers' time sheets were legitimate. Even so, the center "completely revised our time sheet procedure" to better comply with federal rules, Quigley said.

The report says other examples of the center's improper spending included:

•More than $29,700 for severance to two former workers that the report characterizes as settlements of possible lawsuits. Quigley said the payments were legitimate and although the workers had hired lawyers, they hadn't sued.

•More than $6,600 for improper travel and meal expenses, including $3,566 for Quigley's wife to accompany him on a trip to India. Quigley said the center reimbursed the government.