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The Center for IDEA Fiscal Reporting, TA On-Demand. Part C Maintenance of Effort (or MOE): Calculations.
Please note: if you are unfamiliar with the Part C maintenance of effort requirement, please watch Part C Maintenance of Effort: The Basics, and then return to this video.
To comply with the maintenance of effort requirement, a state must make two financial comparisons using state and local funds at different points in time. One is a budget-to-expenditure comparison, where the budget for the upcoming fiscal year is compared to the final expenditure from the most recent state fiscal year for which information is available. This comparison typically occurs during the end of the current fiscal year when budgeting for the next year. The other is an expenditure-to-expenditure comparison after the fiscal year has ended to ensure effort was actually maintained.
To make the budget comparison, the state must show that the amount it will budget in state and local public funds for the upcoming state fiscal year is the same or more than the amount it’s spent in the most recent preceding fiscal year for which information is available.
To confirm that effort was actually maintained for the budgeted fiscal year, the state must be able to show that it spent the same or more than the amount it spent in the prior fiscal year. The two comparisons occur at different times.
The budget comparison happens when you are budgeting for the upcoming state fiscal year and the expenditure comparison happens after that fiscal year ends. Let’s take a closer look.
You will make the budget comparison during the current fiscal year and before the upcoming fiscal year begins to ensure that you know how much in state and local public funds to budget to maintain effort. Compare the total amount of state and local public funds budgeted for the upcoming year with the total state and local public funds that were expended during the most recent fiscal year for which final, audited information is available.
Here’s an example: the current fiscal year is state fiscal year 2023-24, and the state is budgeting for state fiscal year 2024-25. Because the state doesn’t have access to final, audited expenditure amounts for state fiscal year 2023-24, it will use data from the most recent preceding fiscal year for which information is available, or state fiscal year 2022-23. Why? Because 2022-23 expenditures are final and audited and the books are closed. Therefore, to meet MOE, the state must budget for state fiscal year 2024-25 the same or more than it expended in state fiscal year 2022-23.
Let’s look at a basic MOE budget calculation. The current state fiscal year is 2023-24, the state is budgeting for 2024-25, and the data it will use to determine how much to budget is from 2022-23. The sources of funds the state will include in the calculation are the Part C state appropriation, state Medicaid match funds and county tax levies.
The state’s fiscal year 2022-23 final, audited expenditures were $13 million from the Part C state appropriation, $1 million from state Medicaid match, and $400,000 from county tax levies. Together, these expenditures totaled $14,400,000. For state fiscal year 2024-25, the state has budgeted $13,050,000 from the state appropriation, $1,100,000 from state Medicaid match funds, and $400,000 from county tax levies. Together, the budgeted funds totaled $14,550,000.
The state then compares the amount it has budgeted for state fiscal year 2024-25 with the state fiscal year 2022-23 total expenditures. In this example, the $14,550,000 the state has budgeted for state fiscal year 2024-25 exceeds the $14,400,000 it spent in state fiscal year 2022-23. The state has met the MOE budget requirement.
The comparison between expenditures is made after the state fiscal year closes and expenditures are final and audited. It confirms that the MOE requirement was actually met. If effort was not maintained, it will reveal the amount of any shortfall. To calculate, compare the total amount of state and local public funds expended in the fiscal year for which MOE is being calculated to those expended in the prior fiscal year.
Here’s an example: the current state fiscal year is now 2025-26 and the state has access to final, audited expenditure amounts for both state fiscal years 2024-25 and 2023-24. To meet the expenditure MOE requirement, the state must demonstrate that it spent the same or more in 2024-25 as it did in 2023-24. In this example, the current state fiscal year is 2025-26. The state is calculating MOE for 2024-25 to confirm that MOE was maintained, and the comparison year is 2023-24.
The state’s fiscal year 2023-24 final, audited expenditures were $13,025,000 from the Part C state appropriation, $1,055,000 from state Medicaid match and $375,000 from county tax levies. Together, these expenditures totaled $14,455,000. The state’s fiscal year 2024-25 final, audited expenditures were $13,050,000 from the state appropriation, $1,050,000 from state Medicaid match funds and $378,000 from county tax levies. Together, the expenditures total $14,478,000.
In this example, the state’s expended amount of $14,478,000 across all state and local public funding sources for state fiscal year 2024-25 exceeds the amount spent in the comparison year. The state has met the MOE expenditure requirement.
What if the state does not meet MOE? If a state cannot demonstrate compliance with the Part C MOE requirements, the state would be required to develop a methodology to collect and track state and local public funds that are budgeted and spent. If a state does not meet MOE, it could be subject to liability, including repayment to the U.S. Department of Education in the amount by which it failed to meet the Part C MOE. The state’s repayment must come from non-federal funds or funds from which accountability to the federal government is not required.
Understanding how to calculate MOE for your state can seem overwhelming, and CIFR TA Liaisons are here to help and support you. We can answer questions and provide team training on the MOE requirement and allowances, review and provide guidance on your state’s MOE calculation methodology, and help you document and strengthen your state’s MOE procedures.
To find your assigned TA Liaisons, visit our website’s Contact page and select your state or territory from the drop-down menu. Click on any Part C TA liaison to send them a message.
To find more Part C MOE resources, visit our website’s Resource Library and select Part C and Maintenance of Effort from the filter list.
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].
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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.