I would be even more certain that X and Y don't make Z, and that you were mistaken. I would believe that you mixed X and Y and a and made Z, where a is the characteristic in the air which I was unaware of prior.

There is the very weak effect that I am more likely to understand how something happens if it is possible than if it is impossible, and things which are possible are more likely to happen than things that are impossible. Therefore I am more likely to be confused in general by things that didn't happen than by things that did- but not more likely to be confused by things that didn't happen but are possible than by things which did happen and are possible.

My biggest doubt comes from the fact that there should be trivial to reference to at least one grant which is literally as bad as the example given; this could be done without compromising anonymity, given that FOIA requests can originate from any source. Because the details of one grant as bad as the iPod/makeover grant would be fairly weak evidence that almost all grants are horrible, the absence of any in my research is fairly strong evidence that not almost all grants in the nation are horrible.

Which is not to say that there couldn't be districts where horrible grants are the norm, or clearly fraudulent grants.

Finally, the biggest inconsistencies I found in the original post were
A) That an apparently literate and intelligent person though that a state-standardized test was an accurate measure of literacy,
B) That a school with a test results problem would still have a 75% pass rate among lowest-class students, and
C) That he never mentions being told by his supervisor that his job was specifically not to evaluate if the goals were appropriate (that being the job of the department issuing the grant, prior to issuing the grant; if they said that giving students iPods was the goal of the grant, it was sufficient), but only to evaluate whether the goals written into the grant were met. Instead the author describes the conversation as being one of 'colluding'
D) (weak) By law, in every state, schools do not give out lists of students who are on free/reduced meal programs nor of students who failed tests. It is possible that the administrator in question simply violated the law; that the data was provided in a technically non-personally-identifiable manner, such as student ID numbers that qualified for meal programs; or some combination of the two.