[Federal Register: January 8, 2001 (Volume 66, Number 5)]
[Rules and Regulations]
[Page 1473-1478]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08ja01-12]
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Part VI
Department of Education
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34 CFR Part 300
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Assistance to States for the Education of Children With Disabilities;
Final Rule
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DEPARTMENT OF EDUCATION
34 CFR Part 300
RIN 1820-AB51
Assistance to States for the Education of Children With
Disabilities
AGENCY: Office of Special Education and Rehabilitative Services,
Department of Education.
ACTION: Final regulations.
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SUMMARY: The Secretary amends the regulations for the Assistance to
States for the Education of Children with Disabilities program under
Part B of the Individuals with Disabilities Education Act (IDEA; Part
B)). This amendment is needed to implement the statutory provision that
for any fiscal year in which the appropriation for section 611 ofthe
IDEA exceeds $4.1 billion, a local educational agency (LEA) may treat
as local funds up to 20 percent of the amount it receives that exceeds
the amount it received during the prior fiscal year. The amendment is
intended to ensure effective implementation of the 20 percent rule by
clarifying which funds under Part B of IDEA can be included in the 20
percent calculation, and, as a result, to reduce the potential for
audit exceptions.
DATES: These regulations are effective--February 9, 2001.
FOR FURTHER INFORMATION CONTACT: JoLeta Reynolds (202) 205-5507. If you
use a telecommunication device for the deaf (TDD), you may call the TDD
number at (202) 205-5465.
Individuals with disabilities may obtain this document in an
alternate format (e.g., Braille, large print, audiotape, or computer
diskette) on request to Katie Mimcey, Director of the Alternate Formats
Center. Telephone: (202) 205-8113.
SUPPLEMENTARY INFORMATION: On May 10, 2000, the Secretary published a
notice of proposed rulemaking (NPRM) in the Federal Register (65 FR
30314) to amend the regulations governing the Assistance to States for
the Education of Children with Disabilities program (34 CFR part 300).
The NPRM proposed to implement a statutory provision regarding the
permissive treatment of a portion of Part B funds by LEAs in certain
fiscal years, as added by the IDEA Amendments of 1997 (see section
613(a)(2)(C) of the Act and Sec. 300.233 of the regulations).
Under the new statutory provision, for any fiscal year (FY) for
which the appropriation for section 611 of the IDEA exceeds $4.1
billion, an LEA may treat as local funds up to 20 percent of the amount
it receives that exceeds the amount it received under Part B during the
prior year. By treating certain Federal funds as local funds, and LEA
will be able to meet the maintenance of effort requirement of
Sec. 300.231 even though it reduces the amount of other local or local
and State funds, as the case may be, by an amount equal to the amount
of Federal funds that may be treated as local funds. The fiscal year
ending September 30, 1999 was the first year that the Part B
appropriation exceeded $4.1 billion.
A key question the NPRM proposed to resolve was whether only LEA
subgrant funds under section 611(g) of the Act or LEA subgrant funds
and other Part B funding sources (i.e., subgrants to LEAs for capacity-
building and improvement under section 611(f), other funds the SEA may
provide to LEAs under section 611(f) or preschool grant funds under
section 619) would be affected by the 20 percent rule in section
613(a)(2)(C) of the Act (Sec. 300.233 of the regulations).
In the NPRM, we proposed that the 20 percent rule apply only to LEA
subgrant funds under section 611(g) of the Act (Sec. 300.712 of the
regulations), for the reasons described in the preamble to the NPRM. We
believe that the position taken in the NPRM is the most appropriate and
reasonable position to follow in implementing the 20 percent rule.
Therefore, we have retained proposed Sec. 300.233(a)(1), without
change, in these final regulations.
There are only two significant differences between the NPRM and
these final regulations:
First, we have amended proposed Sec. 300.233(a)(3) (which
provided that if funds are being withheld from an LEA, those funds
would not be included in the 20 percent calculation) to clarify that if
funds that have been withheld are subsequently released to the LEA, the
LEA may apply the 20 percent rule to those funds.
Second, we have added (in a new Appendix C to the
regulations for Part 300) information to assist LEAs in implementing
the 20 percent rule, including a full, substantive description of the
provision (with examples) that is similar to the information contained
in the Background section of the preamble to the NPRM.
Analysis of Comments and Changes
In response to the Secretary's invitation in the NPRM, six parties
submitted comments on the proposed regulations. An analysis of the
comments and of the changes in the regulations since publication of the
NPRM follows. In the analysis, we address substantive comments, but we
do not address comments that are not directly relevant to these
regulations.
Comment: The comments generally acknowledged the need for having
the proposed regulation, but were varied in their recommendations for
change. With respect to which funds under section 611 of the Act apply
in determining the amount of money that will be treated as local funds,
one commenter agreed with the position in the NPRM (i.e., that the
funds should be limited to LEA subgrants under section 611(g)
(Sec. 300.712 of the regulations)). Two commenters recommended that the
provision be expanded to also include funds for local capacity-building
and improvement under section 611(f) of the Act (Sec. 300.622 of the
regulations). Another commenter noted that States routinely flow
through additional Part B (section 611) funds beyond the required LEA
subgrants under section 611(g), and recommended that the regulations
clarify that the 20 percent rule applies to all section 611 funds LEAs
receive, including funds that are not retained by States for
administrative purposes and other State-level activities specified
under section 611(f).
Discussion: We believe that the position taken in the NPRM--that
the money that may be treated by LEAs as local funds under the section
611 appropriation should be limited to statutory subgrant funds under
section 611(g)--is the most appropriate and reasonable position to
follow in implementing section 613(a)(2)(C) of the Act (Sec. 300.233 of
the regulations). There were no compelling reasons presented by
commenters to do otherwise. Therefore, we have retained proposed
Sec. 300.233(a)(1), without change, in these final regulations. The
reasons for taking this position were specified in the preamble to the
NPRM (and are also included in a new Appendix C to these Part 300
regulations). We believe that the regulations clearly indicate that,
while States may provide additional funds to LEAs from their section
611(f) set-aside, only section 611(g) funds are subject to the 20
percent rule.
Changes: None.
Comment: A commenter noted that the NPRM did not indicate at what
point in the year an LEA should make its calculation (e.g., at the
beginning of the year or at another time), and added that the point in
time when the determination is made could have an impact on the LEA,
especially if the LEA has had funds withheld that are later restored.
The commenter further requested that the background section from the
NPRM be expanded to include more complex examples for calculating
[[Page 1475]]
the 20 percent formula, and to specify resources in the Department that
LEAs might turn to for assistance in this regard.
Discussion: The LEA may make its calculation--and spend the 20
percent of the increase in the Federal grant as local funds--at any
point from the time the LEA receives its grant under section 611(g) of
the Act (Sec. 300.712 of the regulations), to the end of the period
that these funds are available for obligation. Thus, if an LEA's
Federal fiscal year 2001 funds were withheld at the beginning of a
school year, but were subsequently released by the SEA on January 1,
2002, the LEA could do the calculation and spend those funds any time
between January 1, 2002 and September 30, 2003.
We agree with the commenter's request for additional examples. We
also believe that it is important to retain, on a permanent basis, the
background section from the NPRM related to the 20 percent rule (along
with the examples), so that school officials at both the State and
local levels will have a technical assistance source to turn to
regarding implementation of that provision. Thus, we have included the
basic content of the background section in the NPRM (with examples) in
a new Appendix C to the regulations for this part.
With respect to providing technical assistance on the 20 percent
rule at the Federal level, we believe that it would be more appropriate
for LEAs to seek advice and guidance from the SEA within each State
regarding implementation of the 20 percent rule, rather than directly
seeking assistance from the Department. Because each SEA is responsible
for monitoring an LEA's compliance with the Part B requirements
(including the 20 percent rule), it would not be appropriate for the
Department to provide direct assistance to individual LEAs on this
provision. On the other hand, if the SEA, in assisting an LEA to apply
the 20 percent rule, needs policy guidance regarding the provision, it
would be appropriate for the SEA to contact the Department for that
assistance.
Changes: A new Appendix C has been added to the regulations, as
described in the preceding discussion.
Comment: One commenter stated that the preamble to the NPRM
suggests that the 20 percent rule would be implemented beginning with
fiscal year (FY) 2000, even though FY 1999 was the first year in which
the section 611 appropriation exceeded $4.1 billion. The commenter
added that the statutory authority relating to this provision was
established by the IDEA Amendments of 1997, and, therefore, it would be
inappropriate for the regulation to exclude the FY 1999 appropriation.
Discussion: Because funds for FY 1999 had already been received
(and, in many cases already obligated by LEAs), we believed that it
would be inappropriate to apply this amendment to Sec. 300.233
retroactively to FY 1999 funds). Therefore, we proposed to apply the
amended regulation to FY 2000 funds and thereafter. In the NPRM, we
should have definitively stated that the FY 1999 appropriation was not
affected by the proposed regulations, and, therefore, States and LEAs
could apply a broader interpretation of section 613(a)(2)(C) of the Act
(Sec. 300.233 of the regulations) to the funds they received from that
appropriation.
Changes: None.
Comment: A commenter disagreed with the interpretation of the year
by year applicability of the 20 percent rule in the NPRM, and stated
that the provision should apply throughout the entire period of
appropriations availability, including the carryover year authorized by
the Tydings Amendment. The commenter further recommended that the
regulation be revised to allow for the 20 percent rule to be applied on
a cumulative basis, so that (for example) if there is no increase in
appropriations for FY 2002 from the prior year, an LEA that has not
used the 20 percent rule in fiscal years 1999, 2000, and 2001 would be
allowed to take advantage of the appropriations increases received in
those prior years for local budgetary relief.
Discussion: An LEA can take advantage of the 20 percent rule at any
point throughout the period in which the LEA can use its section 611(g)
funds, including the carryover year under the Tydings Amendment. (The
Tydings Amendment allows States to obligate their grant funds for one
additional year after the initial period of availability. See General
Education Provisions Act, section 421.) However, there is no statutory
authority to allow the provision to be applied on a cumulative basis.
The Act makes it clear that the provision applies only on a year to
year basis (i.e., section 613(a)(2)(C) specifies that, for any fiscal
year for which the amounts appropriated to carry out section 611
exceeds $4.1 billion, an LEA ``may treat as local funds * * * up to 20
percent of the amount of funds it receives under this part that exceeds
the amount it received under this part for the previous fiscal
year.''). Emphasis added.
Changes: None.
Comment: A commenter stated that Sec. 300.233(a)(3) of the NPRM--
which provides that an LEA is not eligible to receive funds that have
been withheld under Sec. 300.197 or Sec. 300.587--is overbroad, and
ignores the fact that funds that have been withheld may subsequently be
released when compliance has been achieved. The commenter recommended
that the provision be deleted, noting, further, that it does not
coincide with section 613(a)(2)(C)(ii) of the Act (Sec. 300.233(b) of
the regulations), which provides that an SEA may prohibit an LEA from
applying the 20 percent rule only if it is authorized to do so by State
constitution or statute.
Discussion: We agree with the commenter that proposed new
Sec. 300.233(a)(3) does not appropriately reflect the requirements of
the Act. It should have indicated that funds that have been withheld
may subsequently be released when compliance has been achieved, and
that the 20 percent rule may be applied to those funds during their
period of availability. This is consistent with our intent in the NPRM.
However, we continue to believe that it is necessary to provide
guidance in this area.
Upon further review of proposed Sec. 300.233(a)(3), we believe that
it needs to be revised to clarify that during any period in which Part
B funds are withheld from an LEA because of a finding of noncompliance
under Sec. 300.197 or Sec. 300.587, the LEA may not implement the 20
percent rule. However, if the funds are subsequently released to the
LEA during the grant award period, the LEA may spend those funds
consistent with the 20 percent rule.
Changes: Section 300.233(c) has been amended, consistent with the
preceding discussion.
Executive Order 12866
We have reviewed these final regulations in accordance with
Executive Order 12866. Under the terms of the order, we have assessed
the potential costs and benefits of this regulatory action.
The potential costs associated with the final regulations are those
we have determined as necessary for administering these programs
effectively and efficiently. Elsewhere in this SUPPLEMENTARY
INFORMATION section, we identify and explain any burdens specifically
associated with the information collection requirements. See the
heading Paperwork Reduction Act of 1995.
In assessing the potential costs and benefits--both quantitative
and
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qualitative--of this regulatory action, we have determined that the
benefits would justify the costs.
We summarized the potential costs and benefits of these final
regulations in the preamble to the NPRM (65 FR 30314).
We have also determined that this regulatory action would not
unduly interfere with State, local, and tribal governments in the
exercise of their governmental functions.
Regulatory Flexibility Act Certification
The Secretary certifies that these final regulations will not have
significant economic impact on a substantial number of small entities.
The small entities affected will be small LEAs. The regulations will
benefit the small entities affected by clarifying the statutory
requirements and reducing the possibility of audit exceptions. By
ensuring consistency, the regulations will promote more effective and
efficient program administration.
Paperwork Reduction Act of 1995
These final regulations do not contain any information collection
requirements.
Intergovernmental Review
This program is subject to the requirements of Executive Order
12372 and the regulations in 34 CFR part 79. The objective of the
Executive order is to foster an intergovernmental partnership and a
strengthened federalism by relying on processes developed by State and
local governments for coordination and review of proposed Federal
financial assistance.
In accordance with the order, we intend this document to provide
early notification of our specific plans and actions for this program.
Federalism
Executive Order 13132 requires us to ensure meaningful and timely
input by State and local elected officials in the development of
regulatory policies that have federalism implications. ``Federalism
implications'' means substantial direct effects on the States, on the
relationship between the National Government and the States, or on the
distribution of power and responsibilities among the various levels of
government.
Since these regulations relate solely to implementation of the
statutory 20 percent rule, we do not believe these regulations have
federalism implications as defined in Executive Order 13132. In
addition, these regulations do not preempt State law. Accordingly, the
Secretary has determined that these final regulations do not contain
policies that have federalism implications or that preempt State law.
Assessment of Educational Impact
In the NPRM, we requested comments on whether the proposed
regulations would require transmission of information that any other
agency or authority of the United States gathers or makes available.
Based on the response to the NPRM and on our review, we have
determined that these final regulations do not require transmission of
information that any other agency or authority of the United States
gathers or makes available.
Electronic Access to this Document
You may view this document, as well as all other Department of
Education documents published in the Federal Register, in text or Adobe
Portable Document Format (PDF) on the Internet at either of the
following sites:
http://ocfo.ed.gov/fedreg.htm
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To use the PDF you must have Adobe Acrobat Reader Program, which is
available free at either of the previous sites. If you have questions
about using the PDF, call the U.S. Government Printing Office (GPO),
toll free, at 1-800-293-6498; or in the Washington, DC area, at (202)
512-1530.
Note: The official version of this document is the document
published in the Federal Register. Free Internet access to the
official edition of the Federal Register and the Code of Federal
Regulations is available on GPO Access at:
http://www.access.gpo.gov/nara/index.html
(Catalog of Federal Domestic Assistance Number: 84.027 Assistance to
States for the Education of Children with Disabilities)
List of Subjects
Administrative practice and procedure, Education of individuals
with disabilities, Elementary and secondary education, Equal
educational opportunity, Grant programs-- education, Privacy, Private
schools, Reporting and recordkeeping requirements.
Dated: December 12, 2000.
Richard W. Riley,
Secretary of Education.
For the reasons described in the preamble, the Secretary amends
title 34, part 300, of the Code of Federal Regulations as follows:
PART 300--ASSISTANCE TO STATES FOR THE EDUCATION OF CHILDREN WITH
DISABILITIES PROGRAM
1. The authority citation for part 300 continues to read as
follows:
Authority: 20 U.S.C. 1411--1420, unless otherwise noted.
2. Section 300.233 is amended by revising paragraph (a)(1), and by
adding a new paragraph (a)(3), to read as follows:
Sec. 300.233 Treatment of Federal funds in certain fiscal years.
(a)(1) Subject to paragraphs (a)(2), (a)(3), and (b) of this
section, for any fiscal year for which amounts appropriated to carry
out section 611 of the Act exceed $4.1 billion, an LEA may treat as
local funds up to 20 percent of the amount of funds it is eligible to
receive under Sec. 300.712 from that appropriation that exceeds the
amount from funds appropriated for the previous fiscal year that the
LEA was eligible to receive under Sec. 300.712.
* * * * *
(3) For purposes of this section:
(i)(A) An LEA is not eligible to receive funds during any period in
which those funds under this part are withheld from the LEA because of
a finding of noncompliance under Sec. 300.197 or Sec. 300.587.
(B) An LEA is eligible to receive funds that have been withheld
under Sec. 300.197 or Sec. 300.587 but are subsequently released to the
LEA within the period of the funds availability.
(ii) An LEA is not eligible to receive funds that have been
reallocated to other LEAs under Sec. 300.714.
3. Part 300 is further amended by adding a new Appendix C--
Implementation of the 20 Percent Rule under Sec. 300.233, to read as
follows:
APPENDIX C TO PART 300--IMPLEMENTATION OF THE 20 PERCENT RULE UNDER
Sec. 300.233
This appendix is intended to assist States and LEAs to implement
the ``20 percent rule'' under Part B (section 613(a)(2)(C)) of the
Individuals with Disabilities Education Act (IDEA), and,
specifically, the regulation implementing that provision in
Sec. 300.233. The purposes of the appendix are to--(1) provide
background information about the 20 percent rule and its intended
effect, including specifying which funds under Part B of the Act are
covered by the provision (as described in Sec. 300.233), and the
basis for the Department's decision regarding those funds; and (2)
include examples showing how the 20 percent rule would apply in
several situations.
A. Background
1. Purpose of 20 Percent Rule. The IDEA Amendments of 1997 (Pub.
L. 105-17) added
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a provision related to the permissive treatment of a portion of Part
B funds by LEAs for maintenance of effort and non-supplanting
purposes in certain fiscal years (see section 613(a)(2)(C) of the
Act and Sec. 300.233). Under that provision, for any fiscal year
(FY) for which the appropriation for section 611 of IDEA exceeds
$4.1 billion, an LEA may treat as local funds, for maintenance of
effort and non-supplanting purposes, up to 20 percent of the amount
it receives that exceeds the amount it received under Part B during
the prior year.
Thus, under Sec. 300.233, an LEA is able to meet the maintenance
of effort requirement of Sec. 300.231 and the non-supplanting
requirement of Sec. 300.230(c) even though it reduces the amount it
spends of other local or local and State funds, as the case may be,
by an amount equal to the amount of Federal funds that may be
treated as local funds.
2. 20 Percent Rule Applies Only to LEA Subgrants. Following
enactment of the IDEA Amendments of 1997 (and publication of Part B
regulations on March 12, 1999), State and local educational agency
officials stated that it is not clear from the Act and regulations
whether the funds affected by the 20 percent rule are only those
that an LEA receives through statutory subgrants under section
611(g), or whether the provision also applies to other Part B
funding sources (i.e., subgrants to LEAs for capacity-building and
improvement under section 611(f)(4); other funds the SEA may provide
to LEAs under section 611(f); or funds provided under section 619
(Preschool Grants program)).
Further, because section 613(a)(2)(C) refers to an amount of
funds that an LEA ``receives'' in one fiscal year compared to the
amount it ``received'' in the prior fiscal year (and because
agencies may, at any one point in time, be using funds appropriated
in several Federal fiscal years), agency officials were uncertain as
to how to determine that an LEA had ``received'' Federal funds.
Because the statute and regulations were not sufficiently clear
with respect to which precise funds are affected by the 20 percent
rule, this could have resulted in the provision being interpreted
and applied differently from LEA to LEA. If that situation were to
occur, it could result in a significant increase in the number of
audit exceptions against LEAs.
Given the confusion about which funding sources are affected by
the 20 percent rule, there was a critical need to set out in the
regulations a clear interpretation of section 613(a)(2)(C) in order
to support its consistent application across LEAs and States, and to
reduce the potential for audit exceptions. Thus, on June 10, 2000,
the Department published a notice of proposed rulemaking (NPRM)
regarding this provision (65 FR 30314). The NPRM stated that--
In light of the statutory structure for distribution of Federal
funds to LEAs, we believe that the most reasonable interpretation is
to apply that provision only to subgrants to LEAs under section
611(g) of the Act (Sec. 300.712 of the regulations) from funds
appropriated from one Federal fiscal year compared to funds
appropriated for the prior Federal fiscal year. (Emphasis added.)
Thus, the NPRM proposed to exclude the other Federal funds under
Part B of the Act (i.e., Subgrants to LEAs for capacity-building and
improvement under section 611(f)(4) (Sec. 300.622); other funds the
SEA may provide to LEAs under section 611(f) (Sec. 300.602); and
preschool grant funds under section 619 (34 CFR part 301)) from the
funds that could be treated as local funds. The reasons for
excluding these other Part B funds were stated in the NPRM, as
follows:
If IDEA funds that States have the authority to provide
to LEAs on a discretionary basis (such as those identified in the
preceding paragraph) are included in the 20 percent calculation, it
would result in some LEAs receiving a proportionately greater
benefit from this provision than other LEAs, based on receipt of
funds that may be earmarked for a specific, time-limited purpose.
This would lead to inequitable results of the Sec. 300.233 exception
across LEAs in a State.
Including section 619 formula grant funds (34 CFR part
301) in the calculation does not appear to be justified as the
``trigger'' appropriation amount applies only with respect to the
amount appropriated under section 611.
The Department subsequently determined that the position taken
in the NPRM (that the provision under Sec. 300.233 should apply only
to LEA subgrant funds under section 611(g) of the Act) is the most
appropriate and reasonable position to follow in implementing the 20
percent rule. Therefore, the proposed provision in
Sec. 300.233(a)(1) was retained, without change, in the final
regulations.
B. Application of the 20 percent rule
1. Examples Related to Implementing the 20 percent rule
The following are examples showing how the 20 percent provision
would apply under several situations:
Example 1: An LEA receives $100,000 in Federal LEA
Subgrant funds under section 611(g) of the Act from the
appropriation for one fiscal year (FY-1), and $120,000 in section
611(g) funds from the appropriation for the following fiscal year
(FY-2). The LEA may spend and treat as local funds up to 20 percent
of the $20,000 in section 611(g) funds it receives from FY-2 (i.e.,
up to $4,000), since this is the amount that exceeds the amount it
received from the prior year.
Example 1-A: In Example 1, an LEA in FY-2 is uncertain
whether to exercise its option to treat as local funds during FY-2
up to $4,000 of its section 611(g) funds received from FY-2, and
wishes to wait until the carry-over year to make a decision. If the
LEA decides to exercise its option during the carry-over period
regarding the $4,000 from the FY-2 appropriation, it could do so as
long as those funds are used within the carry-over period for FY-2.
Example 1-B: An LEA receives $100,000 in section
611(g) funds from FY-1, $120,000 from FY-2 and $140,000 from FY-3.
The LEA may spend and treat as local funds up to 20 percent of the
$20,000 from FY-2 funds and $20,000 of FY-3 funds (i.e., up to
$4,000 for each year). Thus, if its FY-2 funds are not used until
FY-3, and the LEA so chooses, it may spend and treat as local funds
during FY-3 a total of up to $8,000 in section 611(g) funds (i.e.,
$4,000 from FY-2 and $4,000 from FY-3), provided those funds are
obligated by the end of FY-3.
Example 2: An LEA from one fiscal year (FY-1) receives
$100,000 in section 611(g) funds and $20,000 in SEA discretionary
funds under section 611(f) of the Act; and from the following year
(FY-2) receives $120,000 in section 611(g) funds, but does not
receive any funds under section 611(f). The LEA may spend and treat
up to 20 percent of the $20,000 in section 611(g) funds it receives
from FY-2 (i.e. up to $4,000), since $20,000 is the amount of
section 611(g) funds that exceeds the amount it received from FY-1.
Example 3: An LEA had all of its section 611(g) funds
($100,000) withheld from one fiscal year (FY-1); but in the next
fiscal year (FY-2), the LEA received a total of $220,000 in section
611(g) funds (i.e., $100,000 from FY-1, plus $120,000 from FY-2).
Because the LEA would have been entitled to $100,000 in FY-1, the
LEA may spend and treat as local funds up to 20 percent of the
$20,000 from FY-2 that exceeded the FY-1 allotment (i.e., up to
$4,000).
Example 4: An LEA received $100,000 under section
611(g) from one fiscal year (FY-1), and would have received $120,000
in section 611(g) funds for the next fiscal year (FY-2); but the LEA
has had all of its section 611(g) funds withheld in FY-2 because of
a finding of noncompliance under Sec. 300.197 or Sec. 300.587. The
LEA would have no section 611(g) funds that could be spent or
treated as local funds until those funds are released.
Example 4-A: In example 4, the SEA subsequently
determines that the LEA is in compliance, and releases the FY-2
funds to the LEA later in that fiscal year. The LEA could then spend
and treat as local funds up to 20 percent of the $20,000 that
exceeds the amount it received in FY-1 (i.e., up to $4,000). Those
funds could be used by the LEA for the remainder of FY-2 and through
the end of the carry-over period for FY-2 funding.
2. Auditing for Compliance with Sec. 300.231 and the 20 percent
rule in Sec. 300.233
The following provides guidance for use by auditors in
determining if LEAs are in compliance with the maintenance of effort
requirement in Sec. 300.231 and the 20 percent rule in Sec. 300.233:
a. Meeting the Maintenance of Effort Requirement. In order to be
eligible to receive an IDEA-Part B subgrant in any particular fiscal
year, an LEA is required to demonstrate that it has budgeted an
amount of State and local funds, or just local funds, to be spent on
special education and related services that equals or exceeds (on
either an aggregate or per capita basis) the amount of those funds
spent by the LEA for those purposes in the prior fiscal year, or in
the most recent prior fiscal year for which information is
available. 34 CFR 300.231.
b. Auditing Compliance with Sec. 300.231. Auditors, in
determining if an LEA has complied with Sec. 300.231 in any
particular fiscal year, review the actual level of expenditures of
State and local funds, or just local funds, on special education and
related services for the year in question and the prior
[[Page 1478]]
year. For example, consider an LEA that, in the LEA's FY-1, spent a
total of $1,000,000 of local funds on special education and related
services to serve 100 students with disabilities. (For this
discussion, assume that the LEA does not receive any State funds for
any year for special education and related services.) An auditor, in
trying to determine if the LEA, in its FY-2, had complied with
Sec. 300.231, would review the LEA's expenditure of local funds on
special education and related services. If, in the LEA's FY-2, the
LEA served 100 students with disabilities and spent $1,000,000 or
more in local funds on special education and related services, it
would have met the requirements of Sec. 300.231 for FY-2.
c. Application of the 20 percent rule to
Sec. 300.231. If the LEA in the preceding example had spent only
$996,000 of local funds on special education and related services
for its 100 students with disabilities in its FY-2 (not counting any
section 611(g) subgrant funds that could be considered local funds
under the 20 percent rule), then it would have failed to meet its
obligation under Sec. 300.231, and an auditor would question $4,000
of the LEA's IDEA-Part B subgrant expenditures in that year.
This questioned cost, however, could be avoided, if the LEA had
available, and spent, $4,000 of Federal funds under the 20 percent
rule during its FY-2. These funds may be available from a variety of
sources (see Examples in paragraph 1). If, as described in Example 1
of paragraph 1 the LEA had received from the Federal FY-2
appropriation, a section 611(g) subgrant that was $20,000 greater
than the subgrant it received from the Federal FY-1 appropriation,
then up to $4,000 of that subgrant could be treated as local funds.
The LEA, however, would have to spend at least $4,000 of its Federal
FY-2 section 611(g) subgrant during its FY-2 in order for those
funds to count as part of its local expenditures for that year for
purposes of Sec. 300.231.
In this example, if the LEA had carried over all of its Federal
FY-2 section 611(g) subgrant to the LEA's FY-3 (and thus did not
spend any of those funds during its FY-2), then none of the section
611(g) subgrant funds subject to the 20 percent rule could be
considered as local funds for purposes of determining compliance
with Sec. 300.231. (The reason for this is that auditors, in
determining an LEA's compliance with Sec. 300.231, examine State and
local, or local funds the LEA actually spent on special education
and related services, and not those funds that the LEA could, but
did not, spend for those purposes.)
If the LEA, in its FY-2, spent $4,000 of its Federal FY-2
section 611(g) subgrant, then the LEA could count those expenditures
and bring itself into compliance with Sec. 300.231 (i.e., $996,000
of the LEA's own local funds spent on special education and related
services plus the $4,000 of Federal FY-2 section 611(g) funds that
can be counted as local funds equals a total of $1,000,000 of local
expenditures on special education in its FY-2--the amount of local
expenditures needed to comply with Sec. 300.231). However, if the
LEA elected to take this step, it could not count any of the Federal
FY-2 section 611(g) subgrant funds that it will spend in its FY-3 as
local funds.
If the LEA, in its FY-2, spent only $3,000 of its Federal FY-2
section 611(g) subgrant funds, then those funds could be counted by
the LEA as local funds in calculating its compliance with
Sec. 300.231 for its FY-2. If the remaining $1,000 of Federal FY-2
funds available to be considered local funds were spent in the LEA's
FY-3, those funds could be considered in determining the LEA's
compliance with Sec. 300.231 for its FY-3. (Note, However, that if
in its FY-2 the LEA had only spent $996,000 of local funds and
$3,000 of its Federal funds, it would not have met the requirements
of Sec. 300.231. In this case the auditor would have $1,000 of
questioned costs ($1,000,000-[$996,000+$3,000]=$1,000) for FY-2).
[FR Doc. 01-431 Filed 1-5-01; 8:45 am]
BILLING CODE 4000-01-U