1. 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.
Jennifer Castillo, Esq.

2. 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
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3. 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 -
Code of Federal Regulations: 34 C.F.R. Part 300
idx?tpl=/ecfrbrowse/Title34/34cfr300_main_02.tpl
OSEP Memos, Dear Colleague Letters
.html
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4. Local Maintenance of Effort
Education: The New Federalism! Spring Forum 2017 May 10-12, 2017
Local Maintenance of Effort
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5. 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 § (a))
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6. 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
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7. 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 §§ (a) and (b).
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8. 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 § (b))
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9. 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 § )
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10. 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 §§ (d) and (a))
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11. LEA MOE (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.
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12. LEA MOE (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
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13. Maintenance of State Financial Support
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14. Maintenance of State Financial Support
Under 34 C.F.R. § , 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).
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15. 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.
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16. 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
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17. Excess Costs
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18. 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. § (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.
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19. 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.
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20. 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.
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21. 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.
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22. 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.
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23. 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.
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24. 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. §§ and (a)(2)(ii)).
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25. Allowability Under the Individuals with Disabilities Education Act (IDEA)
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26. What Rules Apply? IDEA Statute IDEA Regulations EDGAR
Administrative Rules
Cost Principles
Audit Requirements
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27. Child Find
Identify, locate and evaluate all children with disabilities in the state
Includes public & private schools
Includes homeless, migrant & wards
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28. 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
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29. 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).
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30. OSEP Guidance: Use of Funds
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31. 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?
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32. 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
Consolidated in schoolwide school, 34 CFR
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33. 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 (a)
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34. 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.
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35. 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.
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36. 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
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37. Ensuring IDEA Costs Are Allowable Under EDGAR
EDGAR – 2 CFR
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
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38. Necessary EDGAR and IDEA
EDGAR – 2 CFR
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
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39. 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?
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40. Reasonable and Procurement
EDGAR – 2 CFR (a)
All nonfederal entities must have documented procurement procedures which reflect applicable Federal, State, and local laws and regulations.
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41. Reasonable and Procurement (cont.)
EDGAR – 2 CFR
Methods of procurement:
NEW: Micro-purchase
Small purchase procedures
Competitive sealed bids
Competitive proposals
Noncompetitive proposals
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42. 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.
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43. Small Purchase Procedures
EDGAR – 2 CFR (b)
Good or service that costs $150,000 or less
(Simplified Acquisition Threshold was raised under )
Organization may set lower threshold
Must obtain price or rate quotes from an adequate number of qualified sources
“Relatively simply and informal”
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44. Noncompetitive Proposals
EDGAR – 2 CFR (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.
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45. Allowability Documentation
EDGAR – 2 CFR (g)
To meet allowability requirements… costs must be adequately documented.
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46. Allowability Documentation (cont.)
EDGAR – –
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.
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47. Allowability Documentation (cont.)
Retention Requirements For Records EDGAR – 2 CFR
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…
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48. 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.’”)
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49. Allowability Documentation (cont.)
Methods for Collection, Transmission and Storage of Information EDGAR - 2 CFR
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.
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51. Legal Disclaimer
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