Understanding IDEA Fiscal Monitoring and Allowability Rules

1. Individuals with Disabilities Education Act (IDEA)Hot Topics Tiffany Winters Brustein & Manasevit PLLC twinters@bruman.com

2. Agenda • OSEP Fiscal Monitoring • IDEA Allowability Rules • Property Management • How to Create CompliantPolicies and Procedures

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11. General Allowability Checklist • The proposed cost allowable under the relevant Federal grant program • The proposed cost is permitted under the Federal grant’s specific fiscal rules • The proposed cost is consistent with EDGAR Brustein & Manasevit, PLLC

12. Is the proposed cost consistent with program requirements?

13. Child Find • Identify, locate and evaluate all children with disabilities in the state • Includes public & private schools • Includes homeless, migrant & wards

14. Coordinated Early Intervening Services34 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 Questions and Answers on Response to Intervention (RTI) and Early Intervening Services (EIS) January 2007.

15. 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!!! (Defined by the State) • LEAs may not use Part B funds to provide CEISto non-disabled preschool children.

16. CEIS(cont.) Activities • Professional development for teachers/staff • Providing education and behavioral evaluations, services, and supports, • Includes scientifically based literary instruction • No Right to FAPE!!!

17. Parentally-Placed Private School Children w/ Disabilities 34 CFR§§ 300.130 – 300.144 • Who are these children? • Voluntarily enrolled by their parents in private schools • Not referred to private schools to receive FAPE

18. Equitable Participation Services • Must spend proportionate share of Part B subgrant funds on providing special education and related services • LEA makes final decisions – type, how, where, by whom • No individual right to Equitable Participation services • Cannot file due process complaint based on an individual right to services, BUT can file due process complaint on private school child find rights

19. Private School Consultation Requirements • “Timely and meaningful” consultation • Who? • Private school representatives • Representatives of parents of parentally-placed private school children with disabilities • About what? • Child find process • How can children equitably participate? • How will parents, teachers & private school officials be informed of process?

20. Private School Consultation Requirements About what? (continued) • Proportionate share of Part B funds • Determination of proportionate share • How calculated (Appendix B) • Consultation process • How it will operate throughout year to ensure parentally-placed private school children with disabilities can meaningfully participate? • Provision of special education & related services • How, where, by whom • Types of services – direct or alternative delivery mechanism • How apportioned if funds insufficient for all • How and when decisions will be made

21. Proof of Consultation • Signed, written affirmation after consultation occurs – from representatives of participating private schools • If no affirmation provided within “reasonable period of time” after consultation, forward to SEA documentation of consultation process

22. Is the proposed cost consistent with program specific fiscal rules?

23. Overview – IDEA Part B LEA Allocations • Base payments • Section 611 (Grants to States) – FY1999 • Section 619 (Preschool Grants) – FY1997 • 85% - Population-based • Relative numbers of children enrolled • Public & private • Elementary & secondary schools (not preschool) • Within LEA’s jurisdiction • 15% - Poverty-based • Relative numbers of children living in poverty as determined by SEA • Children living in poverty

24. LEA Reallocation (Recent Findings) IF a State determines: • That an LEA is adequately providing FAPE to all children with disabilities residing in the area served by the LEA with State and local funds, THEN the State MAY reallocate any portion of the funds under this part not needed by the LEA to provide FAPE to other LEAs in the State that are not adequately providing special education and related services to all children with disabilities residing in the areas served by those LEAs. • (34 CFR§§300.705(c) and 300.817).

25. Maintenance of State Financial Support (MFS) (Recent Findings) • A State must not reduce the amount of State financial support for special education and related services for children with disabilities below the amount of that support for the preceding fiscal year. • Includes ALL State funds!! (34 CFR§300.163)

26. 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

27. 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))

28. 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))

29. Local-level 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)

30. Local-level MOE Reductions (cont.) (Recent Findings) • If the LEA receives an increase in its IDEA grant, it may reduce its MOE by half of the IDEA increase. • 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))

31. NPRM – 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 BoundyLetter (April 2012), overturning East letter (June 2011) • However, this is current law (even without the final rulemaking!) Because language was included in H.R. 3547, the Consolidated Appropriations Act, 2014, 113th Cong. (2nd Sess. 2014)

32. NPRM – 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.

33. EDGAR Subpart E – Cost Principles

34. Factors Affecting Allowability of Costs 200.403 (pg143) 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 • Not included as match • Net of applicable credits (moved to 200.406) • Adequately documented

35. Reasonable 200.404 (pg143) • 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; • The restraints or requirements imposed such as: • Arms length bargaining (hint: procurement processes); • Federal, state and local laws; and • Terms of the grant award. • Market Prices for comparable goods or services in the geographical area; • Whether the individuals acted with prudence under the circumstances considering their responsibilities; and • No significant deviation from established prices.

36. Reasonable (cont.) • 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?

37. Allocable 200.405 (pg143) • A cost is allocable to a Federal award or cost objective if the goods or services involved are chargeable or assignable in accordance with relative benefits received. • Incurred specifically for the award; • Benefits both award and other work and can be distributed in proportions that may be approximated using reasonable methods; and • Necessary to the overall operation of the entity and assignable to the award in accordance with this Part. • Can only charge in proportion to the value received by the program • Example: Agency purchases a computer to use 50% on the Federal grant program and 50% on a state program – can only charge half the cost to the grant.

38. Factors Affecting Allowability of Costs (cont.)200.403 (pg 119) • Be consistent with policies and procedures that apply uniformly to both federally- financed and other activities of the non-Federal entity. • Be accorded consistent treatment • Can not charge cost as both direct and indirect • Be determined in accordance with GAAP • Not be included as a cost or used to meet cost sharing or matching

39. Factors Affecting Allowability of Costs (cont.)200.403(g) (pg143) Adequately documented • Amount of funds under grant • How the funds are used • Total cost of the project • Share of costs provided by other sources • Records that show compliance and performance • Other records to facilitate an effective audit (see 76.730 page 68)

40. Property Management BRUSTEIN & MANASEVIT, PLLC

41. Equipment and IDEA200.33 (pg99) and 200.313(a) (pg 127) Equipment: tangible, nonexpendible, personal property having a useful life of more than one year and an acquisition cost of $5,000 or more per unit. • Grantee may also use its own definition of equipment as long as the definition would at least include all equipment defined above. • NEW: Conditional Title vests with the non-Federal entity. Prior approval is required under IDEA for all equipment (34 CFR§300.718) BRUSTEIN & MANASEVIT, PLLC

42. Supplies 200.94 (pg106) • All tangible personal property other than equipment • NEW: Computing devices are supplies is less than $5,000 • NEW: Computing devices 200.20 (pg97) • Machines used to acquire, store, analyze, process, public data and other information electronically • Includes accessories for printing, transmitting and receiving or storing electronic information BRUSTEIN & MANASEVIT, PLLC

43. Use of Equipment 200.313(c)(1) and (2) (pg127) • Equipment must be used by the Non-Federal entity in the program or project for which it was acquired as long as needed, whether or not the project or program continues to be supported by the Federal award. • When no longer needed, may be used in other activities with the following priority: • Projects supported by Federal awarding agency • Project funded by other Federal agencies • When used it may be shared (according to the above priorities) provided such use will not interfere with work on the original projects/programs. • Exception – Private Schools 76.661 (page 61) BRUSTEIN & MANASEVIT, PLLC

44. Equipment Procedures200.313 (d) (pg127) Procedures for managing equipment must meet the following requirements: • Property records • Description, serial number or other ID, source of funding, title, acquisition date and cost, percent of federal participation, location, use and condition, and ultimate disposition date including sale price • Physical inventory at least every two years • Control system to prevent loss, damage, theft • All incident must be investigated • Adequate maintenance procedures • If authorized or required to sell property, proper sales procedures to ensure highest possible return. BRUSTEIN & MANASEVIT, PLLC

45. Disposition of Equipment 200.313(e) (pg127) • When property is no longer needed in any current or previously Federally-funded supported activity, must follow disposition rules: • NEW: Nonfederal entity must request disposition instructions from the federal awarding agency if required by the terms of the grant. • Otherwise, may be retained, sold or otherwise disposed as follows: • Over $5,000 – pay federal share • If equipment is sold: Federal awarding agency may permit non-Federal entity to deduct and retain $500 or 10% of the proceeds for selling and handling instructions. • Under $5,000 – no accountability (still must formally dispose) BRUSTEIN & MANASEVIT, PLLC

46. Disposition of Supplies200.314 (pg128) If there is a residual inventory of unused supplies exceeding $5,000 in total aggregate value upon termination or completion of the project or program and the supplies are not needed for any other federal award, must compensate the federal government for its share. BRUSTEIN & MANASEVIT, PLLC

47. How to Draft Compliant Policies and Procedures

48. Why? • Single Audits • Monitoring • Staff Changes and Transitions • New EDGAR requirements

49. Single Audits • Auditors ask about policies and procedures • Some tests specifically require written policies and procedures

50. Monitoring • Policies and procedures are evidence of compliance under all program monitoring tools