oversight

Minnesota Department of Education's Maintenance of Effort Under the Individuals with Disabilities Education Act of 1997, Part B, Program.

Published by the Department of Education, Office of Inspector General on 2005-08-16.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                  UNITED STATES DEPARTMENT OF EDUCATION
                               OFFICE OF INSPECTOR GENERAL
                                       Chicago/Kansas City Audit Region

                       111 N. Canal St. Ste. 940             8930 Ward Parkway, Ste 2401
                       Chicago, IL 60606-7297                Kansas City, MO 64114-3302
                       Phone (312) 886-6503                  Phone (816) 268-0500
                       Fax (312) 353-0244                    Fax (816) 823-1398



                                                                                       August 16, 2005

                                                              Control Number ED-OIG/A05F0012


Alice Seagren, Education Commissioner
Minnesota Department of Education
1500 Highway 36 West
Roseville, MN 55113-4266

Dear Ms. Seagren:

This Final Audit Report presents the results of our audit entitled Minnesota Department
of Education’s Maintenance of Effort Under the Individuals with Disabilities Education
Act of 1997, Part B, Program. Our audit objectives were to determine if the Minnesota
Department of Education (MDE) (1) maintained a total state-level maintenance of effort;
(2) considered all agencies that contribute to the provisions of the services that assist
students with disabilities; and (3) monitored local educational agencies’ (LEA)
maintenance of effort required by the Individuals with Disabilities Education Act
(IDEA), Part B (P.L.105-17).1 Our audit covered the period July 1, 2003, through June
30, 2004 (2003-2004 fiscal year). We also obtained information covering the 2002-2003
fiscal year, which was used as a basis for comparison.

                                          BACKGROUND
The State of Minnesota has 339 public elementary and secondary districts and 162
special, intermediate, charter school, and other districts. The Commissioner of MDE is
responsible for articulating and implementing educational policies for the entire K-12
system. During the 2003-2004 school year, 102,968 students, or about 12 percent,
received special education services.

IDEA, Part B, was enacted to ensure that all children with disabilities have available to
them a free appropriate public education, and to ensure that the rights of children with
disabilities and their parents are protected. While states, LEAs, and educational service
agencies are responsible for educating all children with disabilities, the federal
government has a role in assisting state and local efforts to educate children with
disabilities and to improve results for such children. IDEA, Part B, is a formula grant

1
 The Individuals with Disabilities Education Improvement Act Amendments of 2004 (P.L. 108-446),
which became effective on July 1, 2005, continue to include maintenance of effort requirements, at Section
612(a)(17)-(18) and 613(a)(2).
program that provides assistance to states, and through them to LEAs, to assist states and
localities in their efforts to provide special education and related services to children with
disabilities.

The U.S. Department of Education awarded MDE $96 million in IDEA, Part B, funds for
the 2003-2004 fiscal year. During the 2003-2004 fiscal year, LEAs reported
approximately $862 million of state and local special education and related services
expenditures to assist students with disabilities. To verify whether MDE was monitoring
local-level maintenance of effort, we judgmentally selected two LEAs for testing within
the State of Minnesota. The Burnsville Eagan Savage and Saint Paul Public Schools
districts’ special education expenditures for the 2003-2004 fiscal year totaled $13 million
and $56 million, respectively.

                                  AUDIT RESULTS
We could not determine if MDE maintained a total state-level maintenance of effort or
adequately monitored local maintenance of effort because it had not considered all
agencies that contribute to the provisions of the special education and related services
that are necessary for students with disabilities to receive a free appropriate public
education. MDE did not include non-educational agency data in its maintenance of effort
calculation. As a result, MDE cannot demonstrate, on either a total or per capita basis,
that total state financial support or LEA expenditures for special education and related
services were not reduced below the support for the preceding year. Therefore, children
with disabilities residing in Minnesota may not have available to them all the special
education and related services needed to ensure a free appropriate public education.

In response to the draft of this report, MDE concurred with the finding and the
recommendations. At MDE’s suggestion, we revised the total number of non-educational
agencies in the final report. MDE’s comments on the draft report are included in their
entirety as an Attachment.

Finding: MDE Cannot Demonstrate that Support for Special Education
Services was Not Reduced

MDE did not consider the state financial support used by non-educational agencies to
provide special education and related services specified in interagency agreements with
MDE or LEAs when determining compliance with both state and LEA maintenance of
effort IDEA, Part B, requirements. MDE had 21 interagency agreements with 11 non-
educational agencies to provide special education and related services at the state level.
In addition, one LEA received special education and related services from various non-
educational agencies that received state funding. MDE did not directly fund non-
educational agencies to provide the services specified in the agreements. The Minnesota
Governor's Office or another state agency provided funds to the non-educational
agencies.




Final Audit Report                            2                             ED-OIG/A05F0012
At least 2 of the 11 non-educational agencies at the state-level used a portion of these
state funds to fulfill their interagency agreements with MDE or the LEAs. During our
audit, we found 1 non-educational agency that used state funds to fulfill its agreement
with MDE. As a result of our finding, MDE contacted 3 additional non-educational
agencies that it believed may have received state funds. MDE discovered that 1 of the 3
agencies used state funds to fulfill an interagency agreement. MDE recalculated its state-
level maintenance of effort under IDEA, Part B, for the 2003-2004 fiscal year. However,
it only included the state financial support used to fulfill interagency agreements for the 4
non-educational agencies contacted. Other agencies may have also used state or local
funds to fulfill their interagency agreements with MDE or the LEAs.

According to 34 C.F.R. § 300.154(a),2 on either a total or per capita basis, the state will
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. In addition, 34 C.F.R § 300.231(a) states that funds provided to an LEA under
IDEA, Part B, may not be used to reduce the level of expenditures for the education of
children with disabilities below the level of those expenditures for the preceding fiscal
year. According to 34 C.F.R. § 300.154(b), the Secretary may reduce the allocation of
funds for any fiscal year following the fiscal year in which the state fails to comply with
the maintenance of effort requirement by the same amount by which the state fails to
meet the requirement.

MDE needs to consider all state financial support,3 whether provided to LEAs or non-
educational agencies, used to provide special education services when determining
compliance with state and local level maintenance of effort requirements. According to
MDE, it did not fully understand the IDEA, Part B, maintenance of effort requirements.
MDE stated that it did not receive specific instructions from the U.S. Department of
Education regarding the calculation of maintenance of effort under the IDEA, Part B,
program. Because MDE did not understand the requirements, it had not developed and
implemented a reporting system to obtain the data needed to accurately determine
compliance with maintenance of effort requirements.

If MDE or LEAs are not maintaining the level of effort required, children with
disabilities residing in Minnesota may not have available to them all services needed to
ensure a free appropriate public education. According to 34 C.F.R § 300.110(a), a state is
eligible for assistance under IDEA, Part B, for a fiscal year if the state demonstrates to
the satisfaction of the Secretary that the state has in effect policies and procedures to
ensure that it meets the conditions in §§ 300.121-.156. Therefore, for every fiscal year
MDE incorrectly calculated its maintenance of effort determinations, the U.S.
Department of Education may have awarded and/or MDE may have drawn down an
incorrect amount of federal funds under IDEA, Part B.



2
  All regulatory citations are as of July 1, 2003, unless otherwise noted.

3
  Under 34 C.F.R. 300.231(c), a local educational agency’s compliance with the maintenance of effort 

requirement can be based on the expenditure of local funds for special education and related services for 

students with disabilities or a combination of the expenditure of state and local funds for that purpose. 


Final Audit Report                                    3                                 ED-OIG/A05F0012
Recommendations

We recommend that the Assistant Secretary for Special Education and Rehabilitative
Services require MDE to

1.1. 	 Obtain training to ensure it understands all administrative aspects of the IDEA, Part
       B, program, including maintenance of effort requirements;
1.2. 	 Develop and implement systems to obtain data needed to ensure it can demonstrate,
       on either a total or per capita basis, that financial support for special education and
       related services for children with disabilities at both the state and local level meets
       the IDEA, Part B, maintenance of effort requirements; and
1.3.	 Recalculate its state and local-level maintenance of effort to include state financial
       support used by all non-educational agencies specified in interagency agreements
       with MDE or LEAs in accordance with IDEA, Part B, requirements for the 2002-
       2003 and 2003-2004 fiscal years and report the revised maintenance of effort levels
       to the U.S Department of Education. If MDE does not meet maintenance of effort
       based on its recalculation, it should return any required IDEA, Part B, funds to the
       U.S. Department of Education.

                   OBJECTIVES, SCOPE, AND METHODOLOGY
Our audit objectives were to determine whether MDE: (1) maintained a total state-level
maintenance of effort; (2) considered all agencies that contribute to the provisions of the
services that assist students with disabilities; and (3) monitored LEAs’ maintenance of
effort required by IDEA, Part B. Our audit covered the 2003-2004 fiscal year. We also
obtained information covering the 2002-2003 fiscal year, which was used as a basis for
comparison.

We performed the following to achieve the audit objectives.

1. 	 Reviewed audit reports and auditor documentation for MDE and the selected LEAs
     for our audit period.
2. 	 Judgmentally selected the Burnsville Eagan Savage and Saint Paul Public Schools
     districts to visit by determining the two LEAs that had experienced budget cuts and
     received the highest amount of federal funding for the 2002-2003 fiscal year4 under
     IDEA, Part B, out of 501 Minnesota school districts. Selecting the two receiving the
     highest amount of federal funding under IDEA, Part B, allowed us to test LEAs with
     the highest risk and exposure.
3. 	 Gained an understanding of MDE’s and the selected LEAs’ management control
     structure, policies, procedures, and practices applicable to the IDEA, Part B,
     maintenance of effort requirements.
4. 	 Determined the reliability of computer-processed data. We reviewed a random
     sample of 20 lines of expenditure data of the total 558 lines of data for Burnsville
     Eagan Savage and 100 lines of the total 2,038 lines of data for Saint Paul to determine


4
    This is the most current data available on state revenues.

Final Audit Report	                                      4                  ED-OIG/A05F0012
     if expenditures within MDE’s Electronic Data Reporting System (EDRS) were
     sufficiently reliable to meet the audit objectives.
5. 	 Tested state-level maintenance of effort by comparing special education and related
     services state expenditures for the preceding fiscal year with audit period
     expenditures.
6. 	 Determined whether MDE considered all agencies with interagency agreements that
     provided services to assist students with disabilities when monitoring compliance
     with the IDEA, Part B, maintenance of effort requirements.
7. 	 Determined how MDE monitored LEAs’ compliance with IDEA, Part B,
     maintenance of effort requirements.
8. 	 Tested MDE’s monitoring of LEAs’ maintenance of effort by determining if its
     calculations were complete and accurate.
9. 	 Determined if the selected LEAs reported complete and accurate expenditure data to
     MDE by tracing 20 randomly selected lines from 558 lines of data for Burnsville
     Eagan Savage District and 50 randomly selected lines5 from 2,038 lines of EDRS data
     for Saint Paul Pubic Schools District to the LEAs’ accounting records.

We relied, in part, on computer-processed special education expenditure data LEAs
recorded in MDE’s EDRS that MDE used to determine maintenance of effort. We also
relied on the special education child count data maintained in MDE’s Minnesota
Automated Reporting Student System (MARSS). To determine whether the systems’
data were reliable, we gained a limited understanding of the related computer system
controls and compared the data within EDRS to corresponding data in the selected LEAs’
financial systems. In addition, we compared the child count reported in MARSS for the
two LEAs to the child count in the actual maintenance of effort calculation. The data
generally appeared to be complete and accurate and had corroborating evidence on which
we could rely.6 Based on our assessment and tests, we concluded that the computer-
processed data we were provided was sufficiently reliable for the purposes of our audit.

We performed our fieldwork from February 22, 2005, through April 15, 2005. As part of
our audit, we visited MDE’s administrative offices in Roseville, Minnesota. We also
visited the Burnsville Eagan Savage and Saint Paul Public Schools districts’
administrative offices in Burnsville and Saint Paul, Minnesota, respectively. We
discussed the results of our audit with MDE officials on May 16, 2005. Our audit was
performed in accordance with generally accepted government auditing standards
appropriate to the scope of audit described above.




5
 These were the first 50 lines of the 100 lines of data used for the data reliability assessment.
6
 Corroborating evidence is evidence such as interviews, prior reports, and data in alternative systems.
MDE’s Special Education Fiscal Monitoring Team monitors the accuracy and consistency of computer-
processed data within its EDRS and MARSS. The monitoring team verifies the consistency across systems
and verifies the data in each system to source documents at the LEAs.


Final Audit Report	                                5                               ED-OIG/A05F0012
                        ADMINISTRATIVE MATTERS 

Statements that managerial practices need improvements, as well as other conclusions
and recommendations in this report, represent the opinions of the Office of Inspector
General. Determinations of corrective action to be taken will be made by the appropriate
Department of Education officials.

In accordance with the Freedom oflnformation Act (5 U.S.C. § 552), reports issued by
the Office oflnspector General are available to members ofthe press and general public
to the extent information contained therein is not subject to exemptions in the Act.

This report incorporates the comments you provided in response to the draft report. If
you have any additional comments or information that you believe may have a bearing on
the resolution of this audit, you should send them directly to the following Education
Department official, who will consider them before taking final Departmental action on
this audit:

                              John H. Hager
                              Assistant Secretary
                              Office of Special Education and Rehabilitative Services
                              U.S. Department of Education
                              Potomac Center Plaza
                              Room 5103
                              550 12th Street, S.W.
                              Washington, DC 20202-2510

It is the policy of the U. S. Department of Education to expedite the resolution of audits
by initiating timely action on the findings and recommendations contained therein.
Therefore, receipt of your comments within 30 days would be appreciated.



                                          '     ()
                                              Sincerely,

                                                      ~~
                                       t~J.DOWd
                                              Regional Inspector General
                                              for Audit

 Attachment




 Final Audit Report                           6                            ED-OIG/AOSF0012
                                                                               Attachment 

                                                                                Page 1 of 3 





July 20, 2005


Richard J. Dowd
Regional Inspector General for Audit
Office of the Inspector General
U.S. Department of Education
111 N. Canal Street, Suite 940
Chicago, IL 60606-7204

Dear Mr. Dowd:

Thank you for your draft audit report of June 27, 2005 for the audit entitled Minnesota
Department of Education’s Maintenance of Effort Under the Individuals with Disabilities
Education Act of 1997, Part B, Program.

Findings

The draft audit report includes one finding, which may be summarized as follows:

OIG Finding: MDE Cannot Demonstrate That Support For Special Education
Services Was Not Reduced. Because MDE did not include non-educational agency data
in its maintenance of effort calculations, MDE cannot demonstrate, either on a total or per
capita basis, that state total financial support or LEA expenditures for special education
and related services were not reduced below the support for the preceding year.

MDE Comments on OIG Finding: MDE concurs with this finding. Prior to the audit,
MDE did not understand that non-educational agency data must be included in the
maintenance of effort calculations. One correction should be made in the supporting data
for the finding: MDE did not have interagency agreements with 21 non-educational
agencies to provide special education and services at the state level; it had 21 interagency
agreements with 11 non-educational agencies. There was more than one agreement with
several agencies, as described in the list below:

Department of Corrections – 2 agreements
Department of Administration – 5 agreements
MN Satellite & Technology – 3 agreements
Department of Human Services – 2 agreements
MN Department of Health – 1 agreement
Department of Economic Development – 1 agreement
                                                                                 Attachment
                                                                                  Page 2 of 3
Moorhead State University – 1 agreement
MN State Academies – 2 agreements
Bemidji State University – 1 agreement
Department of Transportation – 1 agreement
St. Cloud State University – 2 agreements

Of the 11 agencies, MDE included data for the MN State Academies in its initial
maintenance of effort calculations, and added data for four other agencies in its
preliminary response to the audit finding. Data for the remaining six agencies will be
included in the calculations under the final corrective action plan as outlined below.

Recommendations

The draft audit report includes three recommendations, which may be summarized as
follows:

OIG Recommendations: OIG recommends that the Assistant Secretary for Special
Education and Rehabilitative Service Services require MDE to:

1.1 Obtain training to ensure that it understands all administrative aspects of the IDEA,
    Part B, Program, including maintenance of effort requirements;
1.2 Develop and implement systems to obtain data needed to ensure it can demonstrate,
    either on a total or per capita basis, that financial support for special education and
    related services for children with disabilities at both the state and local level meet the
    IDEA, Part B, maintenance of effort requirements; and
1.3 Recalculate its state and local-level maintenance of effort to include state financial
    support used by all non-educational agencies specified in interagency agreements
    with MDE or LEAs in accordance with IDEA, Part B, requirements for the 2002-
    2003 and 2003-2004 fiscal years and report the revised maintenance of effort levels
    to the U.S. Department of Education. If MDE does not meet maintenance of effort
    based on its recalculation, it should return any required IDEA, Part B, funds to the
    U.S. Department of Education.

MDE Comments on OIG Recommendations:

MDE concurs with these recommendations.

With regard to Recommendation 1.1, MDE will:
   (1) 	make staff time available to review current MDE procedures for administering
        the IDEA, Part B, Program with USDOE officials designated by the Assistant
        Secretary for Special Education and Rehabilitative Service Services, and receive
        training from USDOE to ensure that it understands all administrative aspects of
        the IDEA, Part B, Program, including maintenance of effort requirements, and
   (2) identify topics for training and request clarification of regulations that it believes
        would be particularly important in attaining this goal. For example, MDE has
        requested clarification from USDOE regarding whether maintenance of effort
                                                                                Attachment
                                                                                 Page 3 of 3
          calculations should be done based on services provided for all children with
          disabilities from birth - age 21, or just for children ages 3 – 21.

With regard to Recommendation 1.2, MDE will:

         Expand its data collection to annually collect written information from all of the
         non-education agencies with which it has interagency agreements to provide
         special education and services at the state level for state fiscal year 2003 and
         thereafter, and incorporate the information received from these agencies in its
         state and local-level maintenance of effort calculations.

With regard to Recommendation 1.3, MDE will:

      Recalculate its state and local-level maintenance of effort to include state financial
      support used by all non-educational agencies specified in interagency agreements
      with MDE or LEAs in accordance with IDEA, Part B, requirements for the 2002-
      2003 and 2003-2004 fiscal years and report the revised maintenance of effort levels to
      the U.S. Department of Education by September 30, 2005. While I do not believe
      that this will materially affect the calculations done earlier, if MDE does not meet
      maintenance of effort based on its recalculation, it will return any required IDEA,
      Part B, funds to the U.S. Department of Education.

Thank you for your audit of Minnesota’s State-level maintenance of effort under IDEA,
Part B. We appreciate your review of our State-level maintenance of effort procedures
and calculations, and the opportunity it has provided for us to better understand the
requirements of federal law in this area.

Should you have any questions, please contact Tom Melcher, Program Finance Director,
at (651) 582-8828 or tom.melcher@state.mn.us.


Sincerely,
/s/
Chas Anderson
Deputy Commissioner