oversight

Kansas State 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 2006-02-06.

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



                                                        February 6, 2006
                                                                                                 Control Number
                                                                                                 ED-OIG/A07F0016

Dale M. Dennis
Deputy Commissioner of Education
Kansas State Department of Education
120 SE 10th Avenue
Topeka, KS 66612-1182

Dear Mr. Dennis:

This Final Audit Report, entitled Kansas State Department of Education’s Maintenance of
Effort Under the Individuals with Disabilities Education Act of 1997, Part B, Program, presents
the results of our audit. The purpose of the audit was to determine whether the Kansas State
Department of Education (KSDE) can demonstrate that it is (1) maintaining state-level
maintenance of effort, including non-educational agencies that contribute to the provisions of the
services that assist students with disabilities and (2) monitoring the local education agencies’
(LEA) local-level maintenance of effort required by the Individuals with Disabilities Education
Act of 1997, Part B, (Pub. L. 105-17)1 (IDEA) for the 2003-2004 fiscal year. Our review
covered the period July 1, 2003, through June 30, 2004 (2003-2004 fiscal year). We also
obtained information covering the 2002-2003 and 2004-2005 fiscal years, which was used as a
basis for comparison.




                                                     BACKGROUND



KSDE oversees 301 unified school districts, serving 460,282 students. KSDE provided funding
for 62,016 special education students, or about 13 percent of the students, during the 2003-2004
school year.

IDEA was enacted to ensure that all children with disabilities have available to them a free and
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
providing an education for all children with disabilities, the federal government has a role in
1
 The Individuals with Disabilities Education Improvement Act Amendments of 2004 (Pub. 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).
            Our mission is to promote the efficiency, effectiveness, and integrity of the Department’s programs and operations.
Final Report
ED-OIG/A07F0016                                                                      Page 2 of 14
assisting state and local efforts to educate children with disabilities and to improve results for
such children. IDEA is a formula grant 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 (ED) awarded KSDE an estimated $94 million in IDEA funds
and KSDE expended $558.9 million for special education, which included state and local funds,
for the 2003-2004 fiscal year. As part of our work, we judgmentally selected two LEAs for
testing, Topeka Unified School District (Topeka) and Shawnee Mission Unified School District
(Shawnee Mission), with special education expenditures of $19.1 million and $27.5 million,
respectively, for the 2003-2004 fiscal year.




                                      AUDIT RESULTS



KSDE could not demonstrate that it adequately monitored local-level maintenance of effort or
maintained a total state-level maintenance of effort because the calculations used to determine
maintenance of effort were inaccurate and unsupported. KSDE did not monitor the LEAs to
ensure that all required edits made by LEAs to the local-level maintenance of effort calculations
were correct and complete. KSDE also could not demonstrate it maintained total state-level
maintenance of effort requirements because it did not use accurate data to compute its
calculation. Therefore, children with disabilities residing in Kansas may not have available to
them all the special education and related services needed to ensure a free appropriate public
education. In addition, KSDE may have drawn down an incorrect amount of federal funds from
ED and/or disbursed an incorrect amount of federal funds under IDEA to its LEAs.

In response to the draft of this report, KSDE concurred with the findings and the corresponding
recommendations. KSDEs’ comments on the draft report are included in their entirety as an
Attachment.

FINDING NO. 1 – KSDE Did Not Demonstrate That It Adequately Monitored the
                LEAs’ Maintenance of Effort

KSDE did not demonstrate that it adequately monitored the LEAs’ compliance with IDEA
maintenance of effort requirements. It could not demonstrate that funds provided to LEAs under
IDEA were not 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.

For the 2004-2005 fiscal year, KSDE compared the LEAs’ 2004-2005 budgeted expenses to their
2003-2004 actual expenses to establish the LEAs’ eligibility for the fiscal year award. KSDE
compared the LEAs’ 2003-2004 expenses for special education and related services to the LEAs’
2002-2003 comparative expenses to determine if they met local-level maintenance of effort
requirements on either a total or per student basis.



                                                                        .
Final Report
ED-OIG/A07F0016                                                                    Page 3 of 14
KSDE does not have the ability to identify the specific expenditures LEAs included in their
local-level maintenance of effort calculations. LEAs report the data used in local-level
maintenance of effort calculations to KSDE during the budget process. KSDE required that
LEAs report only the totals for each expenditure line item. As a result, the data LEAs reported
did not distinguish between special education expenditures for gifted students and special
education expenditures for disabled students. To compensate, KSDE instructed the LEAs to
alter the amount of special education expenditures the state originally reported for the LEAs by
subtracting out the amount of special education expenditures attributed to gifted students from
the maintenance of effort calculation. However, KSDE did not ensure that LEAs reported
correct and complete maintenance of effort data to KSDE and it did not ensure that the data
reported by the LEAs was adequately supported.

KSDE Did Not Ensure Required LEA Edits Were Correct and Complete

KSDE did not monitor the LEAs to ensure that all required edits made by LEAs to the local-level
maintenance of effort calculations were correct and complete. KSDE and the LEAs erroneously
excluded equipment from the calculations. KSDE also cannot ensure federal and gifted students’
expenditures were excluded from the calculations because it did not monitor or restrict the
LEAs’ access to the system data after local-level maintenance of effort calculations were
finalized.

KSDE and the LEAs erroneously excluded equipment from the 2002-2003 and 2003-2004 fiscal
years’ expenditures they entered into the local-level maintenance of effort calculations. In
addition, KSDE did not require LEAs to include 2004-2005 budgeted equipment costs in local-
level maintenance of effort calculations. An official for one of the LEAs we visited claimed that
the LEA excluded equipment expenditures from the data it reported to KSDE for the
maintenance of effort calculations based on instructions it received from KSDE.

KSDE could not ensure that federal expenditures were excluded from the local-level
maintenance of effort calculations that it computed for the individual LEAs or that the exclusion
was correctly calculated. During our audit, KSDE found that at least 2 of 301 LEAs had added
federal funds back into local-level calculations after KSDE deducted them. According to 34
C.F.R. § 300.231(c)(3), the state educational agency (SEA) may not consider expenditures made
from funds provided by the federal government in determining the LEA’s compliance with the
requirement of maintenance of effort.2 In addition, both LEAs we visited incorrectly reduced
reported expenditures by federal IDEA funds they received (revenue) instead of federal funds
they expended (expenditures). Reducing expenditures by the federal revenue may lead to a
misstatement of actual state and local special education expenditures because LEAs did not
always spend all federal funds received during the year.3

In addition, KSDE cannot be certain LEAs excluded expenditures for gifted children because it
did not monitor the LEAs’ access to the system data in local-level maintenance of effort
calculations. The LEAs were provided access by KSDE to the system data to remove
expenditures for gifted children from the total special education expenditures. However, KSDE
did not monitor when or if the LEAs completed the edits to the data. Therefore, KSDE could not


2
    All regulatory citations are as of July 1, 2003, unless otherwise noted.
3
    A review of excess cash was beyond the scope of this audit.
                                                                               .
Final Report
ED-OIG/A07F0016                                                                    Page 4 of 14
ensure that the LEAs removed the expenditures for gifted children from the total special
education expenditure data in the local-level maintenance of effort calculations.

KSDE did not restrict the LEAs’ access to system data after finalizing the local-level
maintenance of effort calculations. The unrestricted access allowed LEAs to correct, edit, or
manipulate special education data (including data for prior fiscal years) at any time, including
after KSDE finalized the local-level maintenance of effort calculations. Therefore, KSDE could
not substantiate the actual calculations used to monitor local-level maintenance of effort because
it did not ensure that LEAs did not change the data after determinations were made.

Maintenance of Effort Data Was Not Adequately Supported by LEAs

KSDE did not ensure the LEAs’ accounting records supported the data LEAs reported for local-
level maintenance of effort calculations. Because the LEAs only report the totals for each
expenditure line item to KSDE, the detailed information on the individual expenditure totals is
maintained at the LEA level. One of the two LEAs we visited could not support its 2002-2003
and 2003-2004 fiscal year special education expenditures for gifted children because it lost the
data during an accounting system conversion.

According to 34 C.F.R. § 300.180, an LEA is eligible for assistance under IDEA for a fiscal year
if it demonstrates to the satisfaction of the SEA that it meets the conditions in §§ 300.220-.250.
One of the conditions (34 C.F.R. § 300.231(a)), states that, to meet maintenance of effort, the
SEA is required to ensure LEAs do not use IDEA funds to reduce the level of an LEA’s
expenditures for the education of children with disabilities from local funds below the level of
those expenditures for the preceding fiscal year. In addition, 34 C.F.R. § 300.231(c)(1) states
that, to establish an LEA’s eligibility for the fiscal year award, the SEA must determine whether
the LEA budgets, for the education of children with disabilities, at least the same total or per-
capita amount from either local funds only or the combination of state and local funds as the
LEA spent for that purpose from the same source for the most recent prior year for which
information is available.

KSDE did not have adequate policies and procedures in place to ensure the LEAs were reporting
accurate and complete special education budget and expenditure data that it needed to calculate
and monitor local-level maintenance of effort as required by IDEA. A KSDE official stated that,
due to an oversight on their part, they did not verify data submitted by LEAs on the district
worksheets as well as they should have or against data provided by the LEAs’ CPA audits. A
KSDE official also stated that KSDE did not have a system in place to verify special education
expenditure data reported by LEAs for maintenance of effort purposes. The process used to
determine maintenance of effort was designed for Title I, which required that equipment costs be
excluded from maintenance of effort calculations, instead of for IDEA. Therefore, KSDE may
not have a thorough understanding of IDEA maintenance of effort requirements.

KSDE cannot determine if LEAs met maintenance of effort requirements, because it cannot
confirm that data entered by LEAs in the local-level maintenance of effort calculations is correct.
As a result of KSDE’s failure to adequately monitor the LEAs’ maintenance of effort, children
with disabilities residing in Kansas may not have available to them all the special education and
related services needed to ensure a free appropriate public education. According to 34 C.F.R. §
300.197(a), if the SEA, after giving reasonable notice and an opportunity for a hearing, finds that
                                                                       .
Final Report
ED-OIG/A07F0016                                                                                  Page 5 of 14
an LEA that has been determined to be eligible under this section is failing to comply with any
requirement described in §§ 300.220-.250, the SEA shall reduce or may not provide any further
payments to the LEA until the SEA is satisfied that the LEA is complying with that requirement.
Therefore, for every fiscal year KSDE failed to adequately monitor the LEAs’ maintenance of
effort, KSDE may have awarded LEAs, and/or the LEAs may have drawn down, an incorrect
amount of federal funds under IDEA.

Recommendations

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

1.1 	   Clarify the maintenance of effort requirements at 34 CFR §§300.231-.232 in writing to
        LEAs. Provide LEAs written guidance on the specific methodology KSDE requires of
        LEAs in performing the maintenance of effort calculations, including an explanation of
        what LEA expenditures are included in the calculation.

1.2 	   Develop and implement policies and procedures to verify LEA data and strengthen
        controls to ensure the LEAs report accurate and complete special education budget and
        expenditure data needed to ensure that on a total or per capita basis financial support for
        special education and related services for children with disabilities meets the IDEA local-
        level maintenance of effort requirements.

1.3 	   Recalculate local-level maintenance of effort calculations in accordance with IDEA
        requirements for the 2003-2004 fiscal year and report the revised maintenance of effort
        levels to ED. If KSDE does not meet maintenance of effort based on its recalculation, it
        should return any required IDEA funds to ED.


FINDING NO. 2 – KSDE Could Not Demonstrate It Maintained State-Level
                Maintenance of Effort Requirements

KSDE could not demonstrate that, during the 2004-2005 fiscal year (on either a total or per
capita basis), state financial support for special education and related services for children with
disabilities was not reduced below the support for the preceding years as required by IDEA.
KSDE could not demonstrate it maintained total state-level maintenance of effort requirements
because it included federal funds4 (not state financial support) and expenditures for gifted
children (not for children with disabilities) in its state-level maintenance of effort calculation.

KSDE did not use accurate data to compute its state-level maintenance of effort calculation.
KSDE uses the special education expense data LEAs reported during the budget process into
KSDE’s system, instead of the data LEAs entered into their local-level maintenance of effort
calculations to compute its state-level maintenance of effort calculation. The data reported in the
local-level maintenance of effort calculations was designed to exclude special education

4
  The federal funds KSDE incorrectly included in the calculation were not calculated properly. The funds included
in the calculation were federal funds the LEAs received (revenue) instead of federal funds the LEAs disbursed
(expenditures). However, the LEAs did not always expend all federal funds in the year received. A review of
excess cash was beyond the scope of this audit.
                                                                                   .
Final Report
ED-OIG/A07F0016                 	                                                                 Page 6 of 14
expenditures attributed to gifted students and federal aid. In addition, it is more current and
provides greater detail than the data KSDE used to compute its state-level maintenance of effort
calculation.5

According to 34 C.F.R. § 300.154(a), 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. § 300.110(a) provides that a state is eligible for assistance under IDEA 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.

KSDE did not develop and implement policies and procedures to ensure it accurately and
correctly determined if it met the state-level maintenance of effort requirements in IDEA. A
KSDE official stated KSDE did not have a system in place to verify special education
expenditure data reported by LEAs for maintenance of effort purposes.

We cannot determine whether KSDE met state-level maintenance of effort requirements because
the data reported by the LEAs is not correct, complete, and supported (as detailed in Finding No.
1). If KSDE is not maintaining the state-level of effort required, children with disabilities
residing in Kansas may not have available to them all the special education and related services
needed to ensure a free appropriate public education. 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. Therefore, for every fiscal year KSDE
incorrectly calculated its maintenance of effort calculations, ED may have awarded, and/or
KSDE may have drawn down, an incorrect amount of federal funds under IDEA.

Recommendations

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

2.1 	   Develop and implement policies and procedures to ensure KSDE obtains accurate and
        correct special education expenditure data from the LEAs to ensure that on a total or per
        capita basis financial support for special education and related services for children with
        disabilities meet the IDEA state-level maintenance of effort requirements.

2.2 	   Recalculate state-level maintenance of effort calculations in accordance with IDEA
        requirements for the 2003-2004 fiscal year and report the revised maintenance of effort
        levels to ED. If KSDE does not meet maintenance of effort based on its recalculation, it
        should return any required IDEA funds to ED.




5
 Although the data entered by the LEAs for the local-level maintenance of effort calculations is more current and
provides greater detail, edits made to the data are not always correct, complete, and supported as indicated in
Finding No. 1.
                                                                                    .
Final Report
ED-OIG/A07F0016                                                                   Page 7 of 14


                 OBJECTIVES, SCOPE, AND METHODOLOGY



The objectives of our audit were to determine whether KSDE can demonstrate that it is (1)
maintaining state-level maintenance of effort, including non-educational agencies that contribute
to the provisions of the services that assist students with disabilities and (2) monitoring the
LEAs’ local-level maintenance of effort required by IDEA for the 2003-2004 fiscal year. Our
review covered the period July 1, 2003, through June 30, 2004 (2003-2004 fiscal year). We also
obtained information covering the 2002-2003 and 2004-2005 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 KSDE and the selected LEAs for our
      audit period.
 2. 	 Judgmentally selected Shawnee Mission and Topeka to visit by identifying the two largest
      LEAs that had experienced budget cuts and difficulties providing services to students with
      disabilities out of 301 Kansas school districts. Selecting the two largest LEAs that had
      experienced budget cuts and difficulties providing services to students with disabilities
      allowed us to test LEAs with the highest risk and exposure.
 3. 	 Gained an understanding of KSDE’s and the selected LEAs’ internal control structure, 

      policies, procedures, and practices applicable to the IDEA maintenance of effort 

      requirements. 

 4. 	 Determined the reliability of computer-processed data. We reviewed a judgmental sample
      of 3 out of 16 budget codes to determine if expenditures within KSDE’s Mainframe were
      sufficiently reliable to meet the audit objectives. We also judgmentally selected 20 of 301
      LEAs for each of the three fiscal years we reviewed to determine if expenditure totals
      maintained in KSDE’s systems matched those entered by the LEAs into local-level
      maintenance of effort calculations.
 5. 	 Tested state-level maintenance of effort by comparing state special education and related
      services expenditures for fiscal year 2003-2004 with fiscal year 2002-2003 expenditures.
 6. 	 Determined whether KSDE considered all agencies with interagency agreements that
      provided services to assist students with disabilities when monitoring compliance with the
      IDEA maintenance of effort requirements.
 7. 	 Determined how KSDE monitored LEAs’ compliance with IDEA maintenance of effort 

      requirements. 

 8. 	 Tested KSDE’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 KSDE
      by tracing 6 of 83 randomly selected line totals of special education data for Topeka and 6
      of 145 randomly selected line totals of special education data for Shawnee Mission to the
      LEAs’ accounting records.

We relied, in part, on computer-processed special education expenditure data used to determine
maintenance of effort that the LEAs recorded in KSDE’s Mainframe and in their own systems.
We also relied on the special education child count data maintained in KSDE’s State Educational
Agency Management Information System (SEAMIS). To determine whether the systems’ data
                                                                      .
Final Report
ED-OIG/A07F0016                                                                                       Page 8 of 14
were reliable, we gained a limited understanding of the related computer system controls and
compared the data within KSDE’s Mainframe to corresponding data selected LEAs reported to
KSDE. In addition, we compared the child count reported by LEAs in SEAMIS to the child
count in the actual maintenance of effort calculation. Because KSDE received only totals for
special education expense line items from the LEAs, we could not complete logic tests on all
data maintained in KSDE’s Mainframe. Initial testing indicated that significant errors or
incompleteness existed in some of the key data elements and using the data would probably lead
to an incorrect or unintentional message. We 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 by KSDE was not sufficiently reliable, and, therefore, it was reported in our
findings. However, we concluded the data in the two LEAs’ systems that we tested was
sufficiently reliable to support the findings, conclusions, or recommendations of the audit.

We conducted our fieldwork from July 19, 2005, through September 16, 2005, at KSDE’s
administrative offices in Topeka, Kansas; Topeka’s administrative offices in Topeka, Kansas;
and Shawnee Mission’s administrative offices in Shawnee Mission, Kansas. We discussed the
results of our audit with KSDE officials on October 26, 2005. Our audit was performed in
accordance with generally accepted government auditing standards appropriate to the scope of
audit described above.




                                    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 of Information Act (5 U.S.C. §552), reports issued by the Office
of Inspector General are available to members of the 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:




6
    Corroborating evidence is evidence such as interviews, prior reports, and data in alternative systems.
                                                                                        .
Final Report
ED-OIG/A07FOO 16                                                                    Page 9 of 14
                              John H. Hager
                              Assistant Secretary
                              Office of Special Education and Rehabilitative Services
                              U.S. Department of Education
                              Potomac Center Plaza
                              Room 5107
                              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 [mdings and recommendations contained therein. Therefore,
receipt of your comments within 30 days would be appreciated.

                                             Sincerely,
                                                     ----
                                             Richard J. Dowd
                                             Regional Inspector General
                                             for Audit

Attachment
                                                                                                Attachment 

                                                                                               Page 10 of 14




                         Division of Fiscal & Administrative Services
                         785-296-3872
                         785-296-0459 (fax)
                         120 SE 10th Avenue x   Topeka, KS 66612-1182 x 785-296-6338 (TTY) x www.ksde.org




                                       January 13, 2006

                                                                            Control Number:
                                                                            ED-OIG/A07F0016

Richard J. Dowd
Regional Inspector General for Audit
U. S. Department of Education

Dear Mr. Dowd:

The Kansas Department of Education appreciates the opportunity this audit has provided to
review its policies, practices, and procedures regarding the IDEA maintenance of effort (MOE)
requirements. It has brought attention to detail and enhanced awareness between the KSDE and
LEA staff. Your clarification of the requirements and insight during the audit has been of value
to us in improving our practice. Please know that the last few years KSDE has worked to
improve oversight of the requirements for MOE. Since receiving the draft audit report, KSDE
has revised forms, processes, and procedures and incorporated the changes into practice.


Background:

KSDE has refined procedures and policies regarding MOE over the past several years based in
part on guidance provided by the Office of Special Education Programs.
For the 03-04 year, KSDE calculated MOE at the LEA level based on a comparison of actual
expenditures from 01-02 to 02-03. As part of the application process for VI-B funds, each LEA
was required to provide a report of gifted and special education expenditures to KSDE.
Significant revisions were implemented in 04-05, and LEAs reported actual expenditures of
gifted and special education for 02-03 and 03-04. In addition, LEAs provided to KSDE their
budgeted expenditures for 04-05. Further clarification and guidance was provided to LEAs prior
to the VI-B application process.

Each time KSDE has become aware of additional guidance regarding MOE requirements,
appropriate changes were implemented accordingly. Kansas has been compliant in meeting the
requirements of MOE.
                                                                                Attachment

                                                                               Page 11 of 14 



Finding #1 

KSDE did not demonstrate that it adequately monitored the LEAs Maintenance of Effort. 


   a) 	 KSDE did not monitor the LEAs to ensure that all required edits made by LEAs to
        the local-level maintenance of effort calculations were correct and complete.

   b) Maintenance of effort was not adequately supported by LEAs.

KSDE concurs with these findings.


Recommended Requirements:                  Corrective Actions:

1.1 Obtain a better understanding of the     KSDE has obtained a better understanding of the
    administrative aspects of the IDEA       administrative aspects of MOE in IDEA. As a
    program, including maintenance of        result, KSDE has edited the formula for
    effort requirements, and communicate     calculation of MOE to ensure compliance with
    this understanding to the LEAs           IDEA requirements.

                                             KSDE seeks OSEP clarification of the accuracy
                                             of these proposed procedures to ensure they meet
                                             the intent of the law but not exceed it. In
                                             addition, when IDEA 2004 Regulations are
                                             finalized, KSDE will seek OSEP clarification to
                                             the requirements upon their effective date.

                                             KSDE communicated the improved
                                             understanding of MOE requirements to LEAs.
                                             Written guidance and an interactive TV session
                                             with district staff were provided.

1.2 Develop and implement policies and       KSDE has developed and implemented policies
    procedures to verify LEA data and        and procedures to verify LEA data and strengthen
    strengthen controls to ensure the        controls to ensure the LEAs report accurate and
    LEAs report accurate and complete        complete special education budget and
    special education budget and             expenditure data. Specific procedures KSDE has
    expenditure data needed to ensure        improved/corrected include:
    that on a total or per capita basis
    financial support for special            Revised application program
    education and related services for          1. The application program used by LEAs to
    children with disabilities meets the            request VI-B funds was revised to prohibit
    IDEA local-level maintenance of                 LEAs from changing data provided by
    effort requirements.                            KSDE.
                                                2. KSDE edited the formula used to
                                                    calculate MOE to ensure compliance with
                                                    IDEA requirements.
                                                3. To ensure data accuracy, KSDE increased
                                                                   .
                                                                               Attachment

                                                                              Page 12 of 14 

                                                 the number of line items acquired from
                                                 the districts’ board approved/published
                                                 budgets submitted to KSDE. This
                                                 improves data reporting accuracy.
                                              4. If edits are necessary, districts must revise
                                                 their approved budgets prior to editing the
                                                 VI-B application. KSDE documents the
                                                 explanation for changes.
                                              5. Once the application is approved, districts
                                                 are locked out from making changes.

                                           These revisions were completed on November 1,
                                           2005.

                                           Maintenance of effort beginning 05-06
                                              1. During the application process for VI-B
                                                  funds, eligibility will include a
                                                  comparison of each LEA’s
                                                  projected/budgeted expenditures for the
                                                  current year to actual expenditures for the
                                                  previous year to ensure financial
                                                  commitment is maintained on either a
                                                  total or per capita basis.
                                              2. For auditing purposes on the application
                                                  KSDE will compare the actual
                                                  expenditures for the two years most
                                                  recently available to determine if the
                                                  LEA met MOE requirements based on
                                                  either a total or per capita basis.
                                              3. Within the application, LEAs assure,
                                                  “This LEA is prepared to justify, from
                                                  the CPA audit and other records, the
                                                  figures reported in this LEA Application
                                                  for Federal Funds.”
                                              4. As LEA applications are approved,
                                                  financial data will be verified by
                                                  comparing data reported to the KSDE
                                                  Finance and Auditing Departments.
                                              5. At the end of each annual year, KSDE
                                                  will randomly select LEAs for audits to
                                                  verify accuracy of the financial data
                                                  submitted on the VI-B application.

                                           The LEA-level MOE process for 05-06 should
                                           be completed by February 10, 2006.

1.3 Recalculate local-level maintenance    Maintenance of Effort for 03-04 and 04-05
    of effort calculations in accordance      KSDE will recalculate MOE at the LEA level
                                                                 .
                                                                                      Attachment

                                                                                     Page 13 of 14 

   with IDEA requirements for the                     for 03-04 at the request of the OIG using the
   2003-2004 fiscal year and report the               above auditing procedures and financial data
   revised maintenance of effort levels               on file with the KSDE Finance Department.
   to ED. If KSDE does not meet
   maintenance of effort based on its                 In addition, KSDE is in the process of
   recalculation, it should return any                recalculating MOE for 04-05.
   required IDEA funds to ED.
                                                  Recalculations should be completed by February
                                                  17, 2006.


Finding #2
KSDE could not demonstrate it maintained state-level maintenance of effort requirements

KSDE concurs with this finding.

Recommendation Requirements:                     Corrective Actions:

2.1 Develop and implement policies and            KSDE will determine state-level MOE using the
    procedures to ensure KSDE obtains             data reported and approved in the LEA VI-B
    accurate and correct special education        applications.
    expenditure data from the LEAs to
    ensure that on a total or per capita basis    Once all LEA financial data from the VI-B
    financial support for special education       applications have been verified for accuracy by
    and related services for children with        KSDE, it will be aggregated to determine state-
    disabilities meet the IDEA state-level        level MOE.
    maintenance of effort requirements.

2.2 Recalculate state-level maintenance of        Calculate state-level MOE using aggregated data
    calculations in accordance with IDEA          from VI-B applications.
    requirements for the 2003-2004 fiscal            1. KSDE will recalculate state-level MOE
    year and report the revised maintenance              for 03-04 and 04-05.
    of effort levels to ED. If KSDE does             2. Beginning 05-06 KSDE will calculate
    not meet maintenance of effort based                 annual state-level MOE based on the new
    on its recalculation, it should return any           procedures.
    required IDEA funds to ED.                       3. KSDE will submit final state-level
                                                         calculations to OSEP.

                                                  Calculations of state-level MOE for the three
                                                  years - 03-04, 04-05, and 05-06 - should be
                                                  submitted to OSEP by March 3, 2006.

                                                  KSDE seeks OSEP clarification of the accuracy
                                                  of these proposed procedures to ensure they meet
                                                  the intent of the law. Additionally, when IDEA
                                                  2004 regulations are finalized KSDE will seek
                                                  OSEP clarification as to the requirements upon
                                                  their effective date.
                                                                        .
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                                                                                     Page 14 of 14 

The Kansas State Department of Education concurs with the suggested revisions to the
procedures Kansas previously used for calculating MOE. In addition to the above actions
KSDE has begun to implement, a survey of methods used by states to meet the MOE
requirements for IDEA was conducted. It is apparent from this review that the interpretation of
IDEA statutes and regulations regarding how LEAs demonstrate MOE varies greatly among
states and it does not appear any one method is preferred over another.

KSDE believes it is critical that OSEP provide clarification of the federal law and regulations,
P.L. 108-446 § 613(a) and 34 C.F.R. § 300.231, ensuring all states are meeting the same
standard.

KSDE respectfully requests the Office of Special Education Programs to review this response to
ensure Kansas actions are considered compliant, but do not exceed federal requirements.
Furthermore, if another interpretation for determining MOE is made by OSEP, KSDE requests
this guidance be provided in a timely fashion to prevent any undue hardship. It should also be
noted that upon the passage of the final IDEA 2004 Regulations, KSDE will revise the MOE
requirements accordingly.


Sincerely,



Dale M. Dennis, 

Deputy Commissioner of Education 



c: 	   Ruth Ryder, Director, Division of Monitoring and State Improvement Planning, OSEP
       Alexa Posny, Deputy Commissioner, Learning Services Division, KSDE
       ZoAnn Torrey, Director of Student Support Services, KSDE
       Patty Gray, Assistant Director of Student Support Services, KSDE




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