Education: The New Federalism! Spring Forum 2017 May 10-12, 2017 MFS, MOE, Excess Costs, and Allowability Under the Individuals with Disabilities Education Act (IDEA) Bonnie Graham, Esq. bgraham@bruman.com Jennifer Castillo, Esq. jcastillo@bruman.com

Agenda: IDEA Programmatic Fiscal Requirements Education: The New Federalism! Spring Forum 2017 May 10-12, 2017 Agenda: IDEA Programmatic Fiscal Requirements Maintenance of State Financial Support and MOE Excess Costs Allowable Use of Funds under IDEA BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

Education: The New Federalism! Spring Forum 2017 May 10-12, 2017 Legal Resources Education: The New Federalism! Spring Forum 2017 May 10-12, 2017 IDEA Website - http://idea.ed.gov/ Code of Federal Regulations: 34 C.F.R. Part 300 http://www.ecfr.gov/cgi-bin/text- idx?tpl=/ecfrbrowse/Title34/34cfr300_main_02.tpl http://idea.ed.gov/download/finalregulations.pdf OSEP Memos, Dear Colleague Letters http://www2.ed.gov/policy/speced/guid/idea/memosdcltrs/index .html BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

Local Maintenance of Effort Education: The New Federalism! Spring Forum 2017 May 10-12, 2017 Local Maintenance of Effort BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

Local-level Maintenance of Effort (MOE) An LEA may not use its Part B funds to reduce the level of expenditures for the education of children with disabilities made by the LEA from local funds below the level of those expenditures for the preceding fiscal year. (34 CFR §300.203(a)) BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

LEA MOE - 2 Parts: Eligibility Standard Compliance Standard SEA must determine LEA has budgeted same amount of local or state and local funds as it actually spent during most recent fiscal year for which info is available Compliance Standard LEA must maintain (or increase) amount of local or state and local funds it spends for education of SWDs when compared to the preceding fiscal year BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

OSEP Policy Letter, April 2008 Question Topic No. 2 - LEA Maintenance of Effort Requirement The local-level maintenance of effort requirement focuses on "the education of children with disabilities." The wording of this phrase could encompass not only special education and related services, or excess costs of educating children with disabilities, but also the basic cost of providing children with disabilities a public education. See IDEA section 613(a)(2)(A)(iii); 34 CFR §§300.203(a) and (b). BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

Local-level MOE (cont.) Four ways to calculate Local MOE: Comparison of total expenditures using local funds only, Comparison of total expenditures using State and local funds, Comparison of the per pupil amount using local funds only, or Comparison of the per pupil amount using State and local funds. (34 CFR §300.203(b)) BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

LEA MOE Reductions Allowable reductions: Voluntary departure of special education or related services personnel A decrease in the enrollment of children with disabilities The assumption of cost by the SEA’s high cost fund An exceptionally costly child has left the agency’s jurisdiction, aged out of the eligibility age-range, or no longer needs the program of special education, or The termination of costly expenditures for long-term purchases, such as the acquisition of equipment. (34 CFR §300.204) BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

LEA MOE Reductions (cont.) If the LEA receives an increase in its IDEA grant, it may reduce its MOE by half of the IDEA increase. Must use the reduction on ESSA-allowable activities However, the amount of LEA MOE reduction that an LEA can take is affected by an LEA’s use of Part B funds for coordinated early intervening services (CEIS). Therefore, if this reduction is used, the LEA must subtract any CEIS set-aside from the LEA MOE reduction amount! (34 CFR §§300.205(d) and 300.226(a)) BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

LEA MOE 300.203(c) Subsequent years. If LEA fails to meet MOE, level of expenditures required is the amount that would have been required in the absence of that failure and not the LEA’s reduced level of expenditures. Initially stated in the Boundy Letter (April 2012), overturning East letter (June 2011) Comparison Year. Because of subsequent years rule above, comparison year is, in effect, last fiscal year in which LEA met MOE. BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

LEA MOE 300.203(d) Consequence of failure to maintain effort. If LEA fails to meet MOE, the SEA is liable in a recovery action to return to ED, using non-federal funds, an amount equal to the amount by which the LEA failed to maintain its level of expenditures or the amount of the LEA’s subgrant in that fiscal year, whichever is lower GEPA appeal proceedings SEA seek reimbursement from LEA BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

Maintenance of State Financial Support BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

Maintenance of State Financial Support Under 34 C.F.R. §300.163, a state must not reduce the amount of State financial support made available for special education and related services for children with disabilities below the amount of that support for the preceding fiscal year. The SEA must include support provided by other State agencies, such as a State Department of Health or a State Vocational Rehabilitation Agency for special education and related services (see OSEP Letter to CCSSO, dated Dec. 2, 2009). BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

Failure to Meet State MFS Consequences for failure to maintain support: ED reduces allocation for any FY following the FY in which the State fails to comply. Reduction is the same amount by which the State fails to meet the requirement. Following year reverts back to previous level of effort Example: This means the State’s MFS will revert back to the amount when the State last met MFS. So, for example, if a State made $1 million available in FY 2011 for special education and related services, then in FY 2012 made only $900,000 available, the MFS support requirement in FY 2013 will be $1 million, even if the State received a waiver for its deficiency in FY 2012. BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

Exceptions The IDEA permits the secretary to waive the MFS requirement for one fiscal year due to exceptional or uncontrollable circumstances such as a natural disaster or a precipitous and unforeseen decline in the financial resources of the State. Case-by-case basis BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

Excess Costs BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

Excess Costs The IDEA requires LEAs to use Part B funds only to pay the “excess costs” of providing special education and related services to children with disabilities (see 34 C.F.R. §300.202(a)(2)).The purpose is to prevent LEAs from using Part B funds to pay for all the costs directly attributable to the education of a child with a disability. BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

What are Excess Costs Those costs in excess of the average annual per-student expenditure in an LEA during the preceding school year for an elementary or secondary school student. Before deriving the excess costs, deductions must be taken for any amounts received under IDEA Part B, the federal Title I program (ESSA, Part A), and Title III, as well as state or local funds expended for programs that would qualify for assistance under any of those federal programs. Any amounts for capital outlay or debt service must be excluded from the excess cost calculation. BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

General Excess Cost Requirement An LEA must spend at least the average annual per student expenditure on the education of an elementary school or secondary school child with a disability before Part B funds are used to pay the excess costs of providing special education and related services. LEAs must compute the minimum average amount separately for children with disabilities in their elementary schools and for those in their secondary schools. Computation of the minimum average may not be based on a combination of the enrollments in elementary and secondary schools. However, if two or more LEAs jointly establish eligibility for Part B, the minimum average amount is the average of the combined minimum average amounts determined in those LEAs for elementary or secondary school students. BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

To compute the minimum average amount: First: The LEA must determine the total amount of its expenditures for elementary school students from all sources – local, state and federal (including Part B) — in the preceding school year. Capital outlay and debt services are excluded. Second: The LEA must subtract from the total expenditures those amounts spent for the specific, identified programs, including IDEA Part B; ESEA, Title I, Part A; ESEA, Title III, Parts A and B; state and local funds for children with disabilities; and state or local funds for programs under the ESEA, Title I, Part A, and ESEA, Title III, Parts A and B. These must be funds that the LEA actually spent, not funds received in the preceding school year but carried over for the current school year. BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

To compute the minimum average amount: Continued… Third: The LEA must determine the average annual student expenditure for its elementary schools by dividing the average number of students enrolled in the elementary schools of the agency during the preceding year (including children with disabilities). The amount obtained through this computation is the minimum amount the LEA must spend (on average) for the education of each of its elementary school children with disabilities. BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

To compute the minimum average amount: Continued… Fourth: To determine the total minimum amount of funds the LEA must spend for the education of its elementary school children with disabilities (not including capital outlay and debt service), the LEA must multiply the number of elementary school children with disabilities in the current year’s child count times the average annual per student expenditure amount determined for elementary students for the previous year. Part B funds may be used only for costs above this minimum. The chart summarizes these mathematical steps. BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

Exceptions to Excess Cost Requirement If an SEA provides direct services to children with disabilities to make a FAPE available, it is generally treated as an LEA for this purpose. It may use Part B funds from its state set-aside or Part B payments that would otherwise have been available to an LEA, for the purpose of serving those children. However, unlike an LEA, the SEA need not comply with the excess cost requirement when expending those funds (see 34 C.F.R. §§300.175 and 300.227(a)(2)(ii)). BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

Allowability Under the Individuals with Disabilities Education Act (IDEA) BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

What Rules Apply? IDEA Statute IDEA Regulations EDGAR Administrative Rules Cost Principles Audit Requirements BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

Child Find Identify, locate and evaluate all children with disabilities in the state Includes public & private schools Includes homeless, migrant & wards BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

Coordinated Early Intervening Services 34 CFR § 300.226(a)(b) For Students: Who are NOT currently identified as needing special education or related services, and Who need additional academic and behavioral support to succeed in a general education environment Exception: New Significant Disproportionality regulations – CEIS may be used on identified SWDs if district is significantly disproportionate BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

CEIS (cont.) 34 CFR § 300.226(a)(b) An LEA may set-aside up to 15% of Part B funds to develop & implement CEIS: May include interagency financing structures, for students in kindergarten through Grade 12 (focus on K-3rd Grade) 15% is Required if Significant Disproportionality!!! New Federal Definition LEAs may not use Part B funds to provide CEIS to non- disabled preschool children (unless significantly disproportionate). BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

OSEP Guidance: Use of Funds BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

Use of IDEA Funds OSEP Policy Letter, WI March 2013 To what extent can IDEA be used to support personnel that work with students who are not students with disabilities? BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

Use of IDEA Funds OSEP Policy Letter, WI March 2013 “IDEA, Part B funds may not be used for non-special education instruction in the general education classroom, instructional materials for use with non-disabled children, or for professional development of general education teachers not related to meeting the needs of children with disabilities, subject to two exceptions:” CEIS set-aside, 34 CFR 300.226 Consolidated in schoolwide school, 34 CFR 300.206 BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

Use of IDEA Funds OSEP Policy Letter, WI March 2013 Can Sped Teacher provide interventions to small group of students with and without disabilities? Yes, if teacher must prepare the lesson/provide services to SWDs, other nondisabled students may attend the lesson and benefit from those services, BUT If fully funded by IDEA, Part B, teacher cannot grade papers, meet with parents or perform any other functions with nondisabled students 34 CFR 300.208(a) BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

Use of IDEA Funds OSEP Policy Letter, WI March 2013 Can Sped Teacher provide interventions as part of RTI to small group of students solely without disabilities? NO, teacher funded with IDEA, Part B funds cannot serve small group of students without disabilities. Can Sped Teacher co-teach in an inclusion classroom with general ed teacher and have equal responsibility for students with and without disabilities? Determined on case by case basis, however teacher funded with IDEA, Part B cannot perform functions beyond providing specialized instruction and related services. BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

Use of IDEA Funds OSEP Policy Letter, WI March 2013 Can Sped teacher work on child find team that determines whether to refer students for sped services? Yes, child find activities may be funded with IDEA, Part B. Can Sped Teacher assist teachers working with nondisabled students regarding interventions? To the extent the assistance is considered PD for general ed teacher to identify, locate and evaluate SWDs. Otherwise, cannot assist in interventions for general ed students. BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

Use of IDEA Funds OSEP Policy Letter, MN January 2013 Can CEIS funds be used to support students with disabilities? No, CEIS could not support services to children with disabilities or nondisabled students who do not need additional academic and behavioral support to succeed in a general education environment NEW EXCEPTION if significantly disproportionate. 34 CFR 300.226 BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

Ensuring IDEA Costs Are Allowable Under EDGAR EDGAR – 2 CFR 200.403 All Costs Must Be: Necessary, Reasonable and Allocable Conform with federal law & grant terms Consistent with state and local policies Consistently treated In accordance with GAAP Adequately documented BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

Necessary EDGAR and IDEA EDGAR – 2 CFR 200.404 Consideration must be given to: Whether cost is a type generally recognized as ordinary and necessary for the operation of the non-Federal entity or the proper and efficient performance of the Federal award. IDEA specific allowable uses of funds State Administration Other State-level Activities Child Find Coordinating Early Intervening Services Equitable Services BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

Reasonable Practical Questions Do I really need this? Is the expense targeted to valid programmatic/ administrative need? In your plan? Required in a student’s IEP? Is this the minimum amount I need to spend to meet my need? Do I have the capacity to use what I am purchasing? Did I pay a fair rate? If I were asked to defend this purchase, would I be able to? BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

Reasonable and Procurement EDGAR – 2 CFR 200.318(a) All nonfederal entities must have documented procurement procedures which reflect applicable Federal, State, and local laws and regulations. BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

Reasonable and Procurement (cont.) EDGAR – 2 CFR 200.320 Methods of procurement: NEW: Micro-purchase Small purchase procedures Competitive sealed bids Competitive proposals Noncompetitive proposals BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

Micro-Purchase EDGAR – 2 CFR 200.320(a) NEW: Acquisition of supplies and services under $3,500 or less. $2,000 for acquisitions for construction subject to the Davis-Bacon Act. Amount was updated per Federal Acquisition Regulations (FAR) 48 CFR Subpart 2.1 on October 1, 2015 (200.67) May be awarded without soliciting competitive quotations if nonfederal entity considers the cost reasonable. To the extent practicable must distribute micro-purchases equitably among qualified suppliers. BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

Small Purchase Procedures EDGAR – 2 CFR 200.320(b) Good or service that costs $150,000 or less (Simplified Acquisition Threshold was raised under 200.88) Organization may set lower threshold Must obtain price or rate quotes from an adequate number of qualified sources “Relatively simply and informal” BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

Noncompetitive Proposals EDGAR – 2 CFR 200.320(f) Appropriate only when: The item is only available from a single source; There is a public emergency for the requirement that will not permit delay resulting from competitive solicitation; The Federal awarding agency or pass-through expressly authorizes noncompetitive proposals in response to a written request from non- Federal entity; or After soliciting a number of sources, competition is determined inadequate. BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

Allowability Documentation EDGAR – 2 CFR 200.403(g) To meet allowability requirements… costs must be adequately documented. BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

Allowability Documentation (cont.) EDGAR – 76.730 – 76.731 A State and subgrantee shall keep records that fully show: The amount of funds; How funds were used; Total cost of the project; Share of the cost provided from other sources; and Other records to facilitate an effective audit. Shall keep records to show compliance with program requirements. BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

Allowability Documentation (cont.) Retention Requirements For Records EDGAR – 2 CFR 200.333 Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report. BUT, need to keep records for 5 years because… BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

Allowability Documentation (cont.) GEPA - Statute of Limitations 34 CFR 81.31(c) No recipient under an applicable program shall be liable to return funds which were expended in a manner not authorized by law more than 5 years before the recipient received written notice of a preliminary departmental decision. Case law established that the 5 year statute of limitations period ran from the date of obligation. Appeal of the State of Michigan, Dkt. No. 8(272)88 (Nov. 27, 1987) (“ED and the EAB have consistently held that ‘expended’ as used in the statute means ‘obligated.’”) BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

Allowability Documentation (cont.) Methods for Collection, Transmission and Storage of Information EDGAR - 2 CFR 200.335 When original records are electronic and cannot be altered, there is no need to create and retain paper copies. When original records are paper, electronic versions may be substituted through the use of duplication or other forms of electronic media provided they: Are subject to periodic quality control reviews, Provide reasonable safeguards against alteration; and Remain readable. BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.

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Legal Disclaimer This presentation is intended solely to provide general information and does not constitute legal advice or a legal service.  This presentation does not create a client- lawyer relationship with Brustein & Manasevit, PLLC and, therefore, carries none of the protections under the D.C. Rules of Professional Conduct.  Attendance at this presentation, a later review of any printed or electronic materials, or any follow-up questions or communications arising out of this presentation with any attorney at Brustein & Manasevit, PLLC does not create an attorney-client relationship with Brustein & Manasevit, PLLC.  You should not take any action based upon any information in this presentation without first consulting legal counsel familiar with your particular circumstances. BRUSTEIN & MANASEVIT, PLLC © 2017. ALL RIGHTS RESERVED.