NARRATOR
This video contains audio descriptions for the visually impaired. The Center for IDEA Fiscal Reporting, TA On Demand.
ALLISON DAVEY
We are glad to have you with us today. I’m Allison Davey, and I am a Part C co-lead with the Center for IDEA Fiscal Reporting, or we like to say CIFR for short. This is part 2 of a two-part fiscal webinar series, An Introduction to IDEA Part C Fiscal Requirements. I’d like to welcome and introduce our presenters today, BETH COLE and Vera Stroup-Rentier. Beth and Vera are both CIFR Part C technical assistance liaisons. Beth and Vera, we appreciate you taking the time to walk us through these fiscal requirements today.
BETH COLE
So, as Allison said, I’m BETH COLE and I get to start us off. And for those of you who weren’t on last week, I want to give just a brief overview of what the Center for IDEA Fiscal Reporting, or CIFR, does. We help states improve the quality of their collection, reporting, analysis, and use of IDEA Part C and Part B fiscal data. So the Part C reporting requirements that are supported by CIFR include indirect costs and cost allocation plan information, maintenance of effort, and use of funds.
So the agenda for today is we’re going to review the fiscal requirements in the grant application. We’re going to talk about managing the Part C grant. We’re going to go over maintenance of effort briefly, and then we’ll look at some of the resources, and then we will stop the recording and open it up to have a state discussion. And now, I’m going to turn it over to Vera.
VERA STROUP-RENTIER
Good day, everyone. We’re going to talk about Section II and III of the grant application, and we’re going to start with Section II of the grant application and go through some of these terms.
NARRATOR
The slide on-screen reads as follows. Assurances: Section II.B of Grant Application. In addition to the Part C regulations, you assure adherence to the following in Section II.B of the grant application: Payor of last resort. System of payment. Control of funds and property. Reports and records on how funds are spent. Prohibition against supplanting maintenance of effort, or MOE. Fiscal controls, and indirect costs and rent.
VERA STROUP-RENTIER
I’m just going to spend a little bit of time so that we have a short definition of what they are and give you some examples as we talk about some of this terminology, and so we’ll start from there. Now, do keep in mind that last week when we talked about internal controls, some of that information also applies, you see on there, to the fiscal control in this part too. So as you have questions and as you think through this, you may think about your role and how that applies to these particular sections of the grant application. But first, we’re going to start with payor of last resort.
And payor of last resort means those funds provided through the privacy of IDEA that are utilized only if early intervention services cannot be covered by other federal, state, or local funds. So, if you’re a state that keeps all your federal dollars at the state level, this is not something you’re tracking down to the local level. That was true of the state that I came from. However, if you do use these funds locally, they need to be tracked and monitored so that you can assure OSEP that you know they are only being used as a last resort. And we’re going to go on now to system of payment. As most of you know, IDEA is a formula grant administered to the states to assist them in developing and implementing the system.
The system of payment and fees for Part C services must be in writing and must specify which function or services, if there are any, are subject to the systems of payments. Now, this includes things like fees that are charged to the family as a result of using one or more of the family’s public assurance or benefits or private insurance. So that could also include things like sliding scale fees or cross-participation if the fees are being charged to parents. So those would give you a couple of examples. So when we think about a sound system of payment, it is really, especially if you are on the Part C team, knowing how all the pieces work together and that what funds can also be used for what activities. Right?
Understanding your state system and how that looks fiscally, but then also understanding what funds you are using for what activities. The next is control of funds and property. Really, under this part is understanding that again, you need to keep track of what those federal Part C funds are being used for, kept separately so that they can ensure that that public agency is administering the funds or any properties appropriately. Beth and I, we’ll talk about the next one, reports and records on how funds are spent. We think this one, it is fairly self-explanatory, but you need to know these funds are spent and what the evidence is of that funding.
For example, even if you send your Part C dollars to the local level for professional development and technical assistance only, you still need to know how much these training costs are, what the specific federal funds were being spent on. And these reports actually may not be generated by your office, they may be in fact generated from a fiscal office or some other entity within your state agency or even another agency. So as the Part C state coordinator, you need to know what the reports are and then how often you get them. So that’s a really important piece. Again, making sure you’re making those connections and that you know how they look at the agency as well as when that trickles down to the local level.
Now, prohibition against supplanting is 303.225 in the law. We often talk about this as Part C maintenance of effort as all. When we talk about this, we typically say, “Part C MOE,” but in the law, in that 303.225, that’s really prohibition against supplanting. And that means that your federal Part C dollars are not going to be commingled with state funds and they’re only going to be used to supplement the federal, the state, and local funds for infants and toddlers with disabilities and their families, and in no case should they be supplanted. We’re going to talk a little bit more in detail about MOE toward the end of our presentation, but that in itself is the definitions.
Now when we talk about fiscal controls, I already talked about them a little bit, I talked about them last time too as we talked about and spelled out some of those key specific internal controls. But one of the things that is so important here is this is really a critical responsibility of the Part C agency. Looking at making certain that you have those strong fiscal policies and procedures there in place, that you’re using them, and also that there’s checks and balances to make sure that they’re working. Lastly, indirect costs and rent. Indirect costs are those things that you may not charge to the Part C grant, but can take care of things like your auditors or contracts, or other things that may not be included that certainly support that Part C program at the state level.
NARRATOR
The slide on screen reads as follows. Section III of Application. III.A, description of the use of federal IDEA Part C funds for the state lead agency, or LA, and the Interagency Coordinating Council, or ICC, personnel. III.B, maintenance and implementation activities for the LA and the ICC. III.C, direct services funded by federal Part C funds. III.D, activities by other state agencies. III.E, description of optional use of IDEA Part C funds, and III.F, totals.
VERA STROUP-RENTIER
So now I’m going to talk about Section III of the application, which is really the meat of the application and a lot of what you spend your time on. So as many of you know, the state lead agency must submit an annual grant application to the Office of Special Education Programs. And we know generally, Part C funds may be used for a variety of purposes, including but not limited to the provision of direct early intervention services. That is if they are not funded through other public or private sources. Also, the expansion and improvement of services that are otherwise available, such as funding to recruit diverse ICC or Interagency Coordinating Council representation, and then also to provide that support for the state lead agency’s role in supervision, monitoring, funding interagency coordination and the other responsibilities they have.
So we’re going to go through, again, each of the sections of the application, and I’m going to give you a little bit more information on each of those descriptions. So when we talk about the description and use of the IDEA funds for the lead agency as well as the Interagency Council for each position funded in whole or part with IDEA funds, we’re talking about the number of positions, the percentage of time positions spent on Part C activities, salaries and fringe benefits for each position. So for example, in our state we had a state ICC liaison, so from our Part C funds we would pay for half of that person’s position, and then from part of our 619 funds, at Education, we would pay for the other part of that position. And they worked with our ICC, which was a birth to five entity, but that gives you an example of what that could be used for.
For B, maintenance and implementation of activities for the lead agency and the ICC, that includes activities expenses, noting if the expense is for the state lead agency or the ICC. Seeing if, of those activities, any prior approval is required. And things that could be used in this category would be data systems, public awareness activities. If we’re talking about the ICC specifically, it could be like meeting expenses or special guests or facilitators who were doing some work with the ICC. The next section, III.C, are those direct services, and those are for early intervention services that the state lead agency expects to provide to eligible children and families with their IDEA Part C funds. In this case, we really want that approximate amount of those specific Part C funds that are going to be spent on each direct service.
Section III.D, activities by other state agencies. If we’re doing those shared allocations, we would include the name of the state agency receiving funds, the amount of funds to be provided to each state agency, and then the summary of how those funds will be used. So in the example that I used above, how would that work is that is the Department of Education going to give those funds to the Department of Health, where Part C is held? So some of those things need to be spelled out in your grant application.
Then Section III.E, that’s the description of optional use of IDEA Part C funds. These are really for funds for expanding and improving services and collaborative efforts, and often related to those at-risk infants and toddlers that you may choose to serve in your state. And then the state needs to articulate the major activity, the amount of Part C funds to be spent, and then some level of description of those activities. And then of course, the last part, F, are the totals. When you tally all of those areas up, what is the total cost?
NARRATOR
The slide onscreen reads as follows, Section III Budget Considerations. What data do you use to develop your Part C budget? When do you begin that process? What lead agency staff are involved in the budget development? Do you gather input from interested groups to make Part C budget decisions or revise the budget? And, in what ways do you consider equity when planning your budget decisions?
VERA STROUP-RENTIER
So, Section III, some of the things that we have here when you look at these questions, these budget considerations, I’m not going to go through each one but we really want you to think about that. When you’re developing your budget and you’re thinking about your budget, thinking about when you should plan for ongoing collection and analysis and use of your IDEA fiscal data to inform that planning throughout the year and to forecast future budget needs and resources. We really feel like if this is something that is happening throughout the year, that that’s going to make your budget planning much easier if you’ve been tracking and planning all along. Certainly, your state staff should provide your local staff adequate time to collect and report data, making sure that you have enough time for stakeholder input and any analysis that you want to do from last year’s budget so that you can have that information when you’re working on this year’s budget.
One of the things that I want to talk a little bit more to is that piece of gathering that information from interested groups and getting that input. States are required to post the annual application for IDEA funds, including the information on the use of funds in Section III for public comment no less than 60 days prior to the submission of the application to OSEP. In order for stakeholder groups like the ICC to provide that informed input, the state should have multiple ways of communicating those budget needs and soliciting feedback from your ICC. Now, when we think about this section of the grant application and those budget considerations, there are two CIFR tools I think that you’ll find very helpful. Our Part C budget calculator, so that you can really think through some of these questions, and then additionally, we have an ICC quick reference guide and an ICC practice guide around sharing your budget and think that will also be really helpful information as well.
NARRATOR
A slide titled Use of Funds Requirements That Impact Budget Development is shown.
VERA STROUP-RENTIER
So the next thing we’re going to talk about, because some of the things we’re going to talk about now that really do impact that process of budget development, is those prior approvals that you need from the Office of Special Education when you’re thinking about that. So one of the things that if your budget changes exceed more than 10% of the total grant award, those will have to be priorly approved by your OSEP state lead. So you need to reach out to them and explain what happened, and then get that prior approval from them. That would also be equipment with a per-unit cost of greater than $5,000.
NARRATOR
Equal to or greater than.
VERA STROUP-RENTIER
Now, currently there is a proposal with the Uniform Grant Guidance. We talked a little bit about one of their proposals last week, that that amount of $5,000 gets changed to $10,000, so stay tuned for any more information about that. Participant support costs, including training and travel costs, is another one that needs prior approval, as well as those construction or renovation, as well as rent, occupancy, or space maintenance costs.
We again talk about prohibition against supplanting and commingling here. That’s, again, what we just talked about relative to the Part C maintenance of efforts and I’m not going to go over that information again. But again, that could impact that budget development and I think it’s important that you should have a clear understanding of how to calculate that in your state, given the budget that you have because every state is required to calculate that or be able to calculate that Part C MOE.
And then lastly on this slide, indirect costs rates. Indirect cost rate is a method for determining the amount of indirect cost that can be charged to a grant or a project. IDEA Part C funds are intended to primarily support service and activities that benefit infants and toddlers with disabilities and their families. However, those indirect costs can cover things like your administrative or fiscal unit, contracts unit that can be paid out of there. Indirect costs are allowable, but they are not required.
VERA STROUP-RENTIER
Take it away Beth.
BETH COLE
Thank you, Vera. So, in Section III.F, the totals, there’s a line for indirect costs. However, the information about indirect costs is found in Section IV.B, and it’s titled Restricted Indirect Costs because the Department of Education wants most of their money going to services and not to administrative expenses. Indirect costs have to be calculated on a restricted basis. So that’s under the supplement and not supplant requirements of 34 CFR section 303.225(c). A state may not charge indirect costs to the Part C grant except through a restricted indirect cost rate, and that’s in 34 CFR subsection 76.560 through 569, or a cost allocation plan developed on a restricted basis. And that’s 34 CFR section 303.225(c). Now, I’m going to go through the five different options that you will find in Section IV.B because they correspond to what you put in Section III.F, the totals.
So the first option is really easy. That’s you don’t charge any indirect costs, and so what you put in Section III.F would be zero. The second option is if the lead agency is under a state education agency and you have an approved indirect cost rate agreement, all you need to do is put in the dates and make sure you attach a copy of that agreement. The third option is also fairly straightforward. If the lead agency is not under the state education agency, for instance, if it’s under the Department of Human Services or the Department of Health, but you also have an approved restricted indirect cost rate agreement, again, all you have to do is put in the dates and make sure you have a copy of that agreement to attach to your application.
The fourth option gets a little bit more complicated because this is where you have a provisional agreement or you have an agreement that isn’t quite yet finalized, or you have a current agreement that expires during the grant period. When that’s the situation, what you need to do is you need to include the expiration dates and the proposal that is being negotiated. And then when the proposal is finalized, you need to send the approved agreement to OSEP. But what you put in Section III.F for your indirect rate is calculated on what you currently have in your current agreement or what you currently have in your provisional agreement. Then the fifth option is if your lead agency is not unde the state education agency but they have a cost allocation plan. This is where the idea of the cognizant agency really comes into play.
As Vera mentioned, the cognizant agency is the federal agency that provides the most funding to your department, to your lead agency. So if your lead agency is under the Department of Health, the Federal Department of Health and Human Services is your cognizant agency. And if you have a cost allocation plan that has been approved, it needs to be approved not only by your cognizant agency, but it also has to be approved by the Department of Education indirect cost units. And then you have to put in your application the date that it is effective until, and you need to attach the approvals from both your cognizant agency and the Department of Education indirect cost unit.
In all cases, the Part C coordinator has to have a copy of these agreements or proposals, and the Part C coordinator needs to know where these proposals or agreements are kept and most importantly, who is negotiating new agreements when the current one expires. And oftentimes, this is someone from the lead agency’s fiscal unit. So it goes back to cooperation and collaboration within the lead agency departments.
So, next we’re going to talk about how you manage the Part C grant. So when you’re talking about managing the IDEA Part C grant, the states have to have a finance system that enables the Part C program to ensure that the funds are used appropriately and in a timely manner, to meet the supplement and not supplant, or MOE, and payor of last resort requirements. To effectively track the obligation and liquidation of federal funds, and to monitor and correct noncompliance.
So when thinking about the finance system and the tracking and obligating funds, that really falls to, in most part, the fiscal unit. And it depends on having strong written policies and procedures that address payment and fiscal reporting requirements for Part C funds. And the obligation of Part C funds also needs to include what fund disbursement procedures you have that include fiscal controls and checks and balances to ensure allowable, necessary, and reasonable use of Part C funds. So something is allowable if it can be tied to a line item in the grant budget. It’s considered necessary if it ties directly to the Part C program, and it’s reasonable if the amount that is being charged would be considered reasonable by any typical person. For instance, $50,000 for a toilet would not be considered reasonable.
So, the Part C coordinator also has to provide training and technical assistance to contractors to your local agencies and/or providers so that they also understand the use of funds and what the requirements are for the Part C funds. This is key that everyone in the lead agency who touches the funds–so the contract department, the fiscal department, and the Part C team–really understand how the Part C funds can be used and need to be used, and how they can be tracked and monitored to ensure that how they’re used is in accordance with the Part C regulations, and then that goes down to your local agencies and your contractors.
So now we’re going to be talking about timelines because when a Part C grant is first provided to the lead agency, it’s called forward funding. There are two phases to the grant. The first phase is called the period of performance, and that’s 27 months, and that starts July 1st even though the fiscal year it’s tied to begins October 1st. So it’s called forward funding, and so the budget period, which is the initial period of when you can use the funds, goes for 15 months. So in 2023, the 2023 grant goes from July 1st of 2023 to September 30th of 2024. And then there’s a 12-month tydings period, and this is where you can continue to use those funds for another 12 months, but by the end of that 12 months, all of the funds that were allocated in that grant must be obligated. So they can be obligated through the use of a contract, a purchase order, a memorandum of understanding. There are many ways to obligate the funds, but they all have to be obligated by the end of the tydings period.
One other thing that Vera mentioned is the Part C budget calculator that CIFR has available to you is really helpful for when after the end of the initial 15-month budget period, you can look at all of the funds that have been spent, and more importantly, what you still have to spend. And then you can look at where your needs are and you can move the budget around, you can move the amounts around in your budget for the tydings period. But you need to make sure that if what you’re moving is more than 10% of your overall grant budget, you do need to obtain prior authorization from OSEP. Then after the end of the tydings period, there’s 120 days of a liquidation period, which gives you an opportunity to pay all of the bills that have accumulated from what you obligated to pay for during the budget and tydings periods.
And next is the Part C grant funding cycle. This is a graphic that shows how three different budgets, three different grants are active at any one time. So the line in the middle, the blue line that says, “FFY 0 funds,” we’re going to consider that the current year, or 2023, grant budget. It just started in July, and everybody is in that budget period. The year before that, 2022, is in the green and as of October 1st, it started in the tydings period. So funding is still being spent from that budget, but the initial budget period has concluded. And then if you go back one more to budget 2021, the brown one, the tydings period has completed as of September 30th, and now that budget is in the liquidation period.
This is really important to understand that you have three budgets active in different phases at any one time, so that you can make sure that you’re using your oldest budget funds first to make sure that all of those budget funds get obligated and spent before you start using the other budgets because OSEP doesn’t want you to give money back, and you don’t want to give money back. And so understanding the flow of how budgets go from one to the next to the next is important. And I also want to point out that in this graphic, the very bottom line is FFY +1 funds, and this is showing that the budget period will begin July of 2024, but these are the grants budgets that you’re already starting to develop for your budget application for next year.
And I think now I’m going to turn it over to Vera for maintenance of effort.
VERA STROUP-RENTIER
We’re going to just do a quick overview of maintenance of effort. And we have a really great quick reference guide that I’ve looked at several times, and we take much of this information that I’m going to share with you today from and that’s just called the Maintenance of Effort Quick Reference Guide, and that was recently released. So as we discussed before, the Part C funds are used to supplement, not replace, the level of state and local public funds expended for infants and toddlers with disabilities and their families, and these funds may not supplant the state and local funds. Now, I’m going to talk about how MOE is measured or calculated, and in order to meet the supplement not supplant requirement, I’m going to just read this from the 34 CFR.
NARRATOR
Under 34 CFR, Section 303.225(b).
VERA STROUP-RENTIER
“The total amount of state and local funds budgeted for expenditures in the current fiscal year for early intervention services for children eligible under this Part and their families must be at least equal to the total amount of state and local funds actually expended for early intervention services for these children and their families in the most recent preceding fiscal year for which the information is available.” Now, I’m going to provide a little bit of clarification there. We also know implicit in these requirements is the obligation for the state to also ensure that the total amount of state and local funds actually expended from Part C was at least the same amount spent in the previous year.
And in order to demonstrate compliance with the Part C MOE requirement, you must budget at least the same amount of state and local public funds as it is expended in the most recent preceding fiscal year for which information is available. What we know is that the most recent year is not always available, right? Because of the way your state fiscal cycle works, so that’s the most available preceding fiscal year. And then you need to expend the same amount of state and local public funds as it expended the prior fiscal year. So when we think about the state demonstrating compliance, we are looking at budget to expenditures comparisons, as well as expenditures to expenditures comparison. These comparisons often occur at different points in time, first when budgeting for the upcoming state fiscal year and then after the fiscal year concludes, and these comparisons often use different information from different fiscal years.
The budget calculation typically compares budgeted state and local funds from the current fiscal year to the audited expenditures from two fiscal years ago. Again, not always, but typically. So now, to assist you in this, we have two different practice guides coming soon. One is MOE and really the policies and procedures and how you write about the policies and procedures that will help you in that part of both understanding and articulating MOE. And then we have a practice guide coming on the calculations, which I am actually very excited about. And it’s really important to know how your state calculates Part C MOE because remember, you are signing those assurances in Section II that you have met your Part C MOE.
Now, in terms of what should be considered MOE, those calculations look at the state appropriations for Part C, that’s included. If you have state matching funds for administration or direct services such as Medicaid, we see states using those TANF dollars, Temporary Assistance for Needy Families. And then state funds budgeted or expended by other state agencies to provide Part C early intervention services or implement Part C activities, perform Part C functions, and then any additional local public funds such as tax levies and funding from school districts.
What is not considered MOE or what should be excluded or not considered for MOE are those private funding sources. United Way, private insurance, private contributions, endowments. If you have a fundraiser, you cannot include the proceeds from the fundraiser. Any parental cost participation fees, that Federal Medicaid or SCHIP funds, and then there are some others that are unique to different states. When we look at allowances, you do have federal allowances, and that’s a decrease in the number of infants and toddlers who are eligible to receive early intervention services under this Part. And then the second allowance is the unusually large amount of funds expended for long-term purposes like the acquisition of equipment and construction of facilities.
NARRATOR
Under 34 CFR Section 303.225(b)(numbers 1 and 2)
VERA STROUP-RENTIER
If the state demonstrates that it meets criteria for one or both allowances, the state may reduce its required level of effort. This reduced level of effort becomes a state’s required level of effort going forward. And if the state reduces its budget or spends below expenditures of the comparison year, it does not meet the criteria for the allowances, as described, it has not met the Part C MOE requirements. Now, I’m going to spend a minute going over some of the resources we shared today. They’re going to be on the next slide. We didn’t really talk about this today, but the first one is that quick reference guide on the use of IDEA Part C funds that talks a lot about those things that are in Section III of the grant application and gives you that level of specificity that I talked about today.
And then we have the Understanding the IDEA Part C State Funding Cycle and Different Fiscal Years. That slide that Beth showed you was right from that particular resource. Then we have the quick reference guide that just came out that I just talked about, about IDEA maintenance of effort. The budget calculator that Beth talked about. Also, we have a quick reference guide on restricted indirect costs and cost allocation plans, and then we have a resource that I also mentioned around engaging the Part C ICC in fiscal discussions. So how to talk about them. We have a practice guide and a quick reference guide. How to make that experience be so that they can share and they’re informed of what’s happening in the budget process. And then we have one last resource from DaSy, and that is the Use of Fiscal Data for Fiscal Management in Part C Systems. And again, all those are available and you can click on them.
NARRATOR
Direct links to each resource can be found in the companion PowerPoint slides found on the CIFR website at tinyurl.com/5n7v88jy.
Thank you for watching this CIFR TA On Demand video. If you have any questions about the content of the video, please contact us at [email protected].
TEXT ON SCREEN
This video was developed under grant #H373F200001 from the U.S. Department of Education. It is not intended to be a replacement for the IDEA statute, regulations, and other guidance issued by OSEP and the U.S. Department of Education. The IDEA and the regulations are found at: https://sites.ed.gov/idea. The video does not necessarily represent the policy of the U.S. Department of Education, and you should not assume endorsement by the Federal Government.
