SPECIAL EDUCATION FISCAL COMPLIANCE REVIEW FINAL REPORT St. Paul Public School District #0625-01 Dr. John Thein, Superintendent Alecia Mobley, Director of Special Education Marie Schrul, Business Manager 06/30/2017 Report Prepared by: Darin Graf Special Education Fiscal Monitor Minnesota Department of Education
Table of Contents AUTHORITY...3 SCOPE...3 INTRODUCTION...4 RESULTS...4 COMPLIANCE ITEM #1 Time and Effort (Federal):...4 COMPLIANCE ITEM #2 Time and Effort (State):...5 COMPLIANCE ITEM #3 (Transportation):...5 COMPLIANCE ITEM #4 (Procurement):...6 COMPLIANCE ITEM #5 (Procurement):...7 COMPLIANCE ITEM #6 (Procurement):...7 COMPLIANCE ITEM #7 (Procurement):...8 COMPLIANCE ITEM #8 (Procurement):... 10 COMPLIANCE ITEM #9 (Equipment):... 10 COMPLIANCE ITEM #10 (Equipment):... 11 COMPLIANCE ITEM #11 (Third Party Billing):... 11 COMPLIANCE ITEM #12 (Coordinated Early Intervening Services):... 11 COMPLIANCE ITEM #13 (Participation of Private School Students):... 12 COMPLIANCE ITEM #14 (Participation of Private School Students):... 12 SUMMARY OF FINDINGS AND REQUIRED CORRECTIVE ACTION... 14
AUTHORITY The Minnesota Department of Education (MDE) is required by federal law to monitor the education of children with disabilities pursuant to the federal Individuals with Disabilities Education Act (IDEA), 20 U.S.C. 1412(a)(11) and 34 C.F.R. 300.600. The Uniform Grant Guidance (UGG) 200.331 requires States to ensure that recipients of funds are aware of federal requirements and Uniform Grant Guidance (UGG) 200.328(a) require States to monitor funded activities to assure compliance with the requirements. Minnesota Statute 16B.97 and Office of Grants Management (OGM) policy 08-10 require State agencies to regularly monitor funding recipients. Inherent in these requirements is the responsibility to ensure that both federal IDEA grant funds and state special education funds are spent in accordance with the purpose of the grant. They must also be spent in accordance with applicable laws, regulations and fiscal accountability standards such as those contained in EDGAR, UGG and the Federal Office of Management and Budget (OMB) Circulars. Each special education program within the state, including programs administered by any other public agency, is under the general supervision of the MDE. In order to evaluate these programs, MDE staff has the authority to review all relevant information necessary to enable MDE to carry out its oversight duties. SCOPE Desk and site reviews conducted in state fiscal year (SFY) 2017 focused on selected procedures and expenditures related to the use of federal and state special education funds during the fiscal year that ended June 30, 2016 and the first six months of the 2016-2017 school year and included the following areas: Time and Effort Transportation Procurement Equipment Participation of Private School Students Third Party Reimbursement Coordinated Early Intervening Services The fiscal monitoring process emphasizes a partnership between the local education agency (LEA) and MDE as the state education agency (SEA) in order to identify fiscal areas in need of training, technical assistance and corrective action. St. Paul Public School District #0625-01 3
INTRODUCTION MDE is required to monitor LEA use of special education funds and compliance with federal and state requirements related to fiscal accountability. A special education fiscal compliance review of St. Paul Public School District #0625-01 was completed during October 2016 through May of 2017. The process for initial review of compliance involved a site review of 20 specific items for the periods of July 1, 2015 through June 30, 2016 (SFY 2016) and July 1, 2016 through December 31, 2016 (part of SFY 2017). MDE Division of Compliance and Assistance staff reviewed information both from within MDE s financial reporting systems and provided by the district in response to MDE data requests. Selected information related to services identified in students Individual Education Plans (IEP) was also referenced. Specific documentation and information reviewed for each item are identified in the results section of this report. The following are the results of the fiscal compliance review. A finding of non-compliance has been issued if the information available to MDE does not sufficiently demonstrate the LEA s compliance in SFY 2016 or SFY 2017 with the fiscal requirements being monitored. For each finding of non-compliance, the LEA is required to provide evidence of compliance within the period specified for corrective action. In the event that an LEA demonstrates noncompliance for SFY 2016 or SFY 2017 but demonstrates subsequent and on-going compliance, the LEA s correction of the fiscal non-compliance is noted in this report and no fiscal corrective action will be required. As required by the federal Office of Special Education Programs (OSEP) Memo 09-02, completed corrective action and compliance for all findings must be demonstrated as soon as possible, and specifically within one year of the date of this report. RESULTS COMPLIANCE ITEM #1 Time and Effort (Federal): Did the LEA collect and maintain PARS and certifications for staff compensation paid with federal special education funds? UGG 2 CFR 200.430(i) EDGAR 34 CFR 75.702 UGG 2 CFR 200.302(b)(3) MDE requested personnel activity reports (PARS) applicable only to pay periods which ended in March 2016, and completed periodic certification for the period ending in June 2016, for an identified sample (N = 1) of employees paid all or in part with federal funds. MDE also requested the payroll report identifying expenditures for the special education employees in the identified sample for only pay periods that ended in March 2016 and any additional support for the special education time being claimed. Finding of Non-compliance: No St. Paul Public School District #0625-01 4
The LEA provided evidence of compliance with requirements to collect and maintain supporting documentation for compensation paid with federal special education funds for the employees reviewed in the sample. COMPLIANCE ITEM #2 Time and Effort (State): Did the LEA collect and maintain supporting documentation for staff compensation paid with state special education funds? UGG 2 CFR 200.430(i)(4) EDGAR 34 CFR 75.702 UGG 2 CFR 200.302(b)(3) MDE requested supporting documentation for time and effort applicable only to the pay periods which ended in March 2016 for an identified sample (N =2) of employees paid in part or in full with state special education funds (not federal funds). MDE also requested the payroll report identifying expenditures for the special education employees in the identified sample for only pay periods that ended in March 2016. Finding of Non-compliance: No The LEA provided evidence of compliance with requirements to collect and maintain supporting documentation for compensation paid with state special education funds to the employees reviewed in the sample. COMPLIANCE ITEM #3 (Transportation): Did the LEA demonstrate that transportation expenses charged to special education funds were based on transportation being identified as a related service in student IEPs? IDEA 34 CFR 300.202(a) IDEA 34 CFR 300.320(a)(4) MDE reviewed previously reported transportation expenditures and students identified as eligible to receive special education transportation services. MDE also requested the IEP service grids and related services summary for an identified sample of students (N = 3) receiving special education services. Finding of Non-compliance: Yes The LEA did not provide evidence in the student IEP to reasonably ensure that special education funds were used only to pay for the excess cost of transporting students with disabilities. Corrective Action Required: No later than November 1, 2017, the LEA must submit to MDE evidence that MARRS has been updated to reflect that the following student numbers are not eligible for special education transportation aid: St. Paul Public School District #0625-01 5
1. 0625000702656 Upon confirmation of corrective action, MDE School Finance Division may require a subsequent adjustment of funds. COMPLIANCE ITEM #4 (Procurement): Are LEA purchasing processes compliant with all EDGAR purchasing process requirements? EDGAR 34 CFR 80.36 UGG 2 CFR 200.317-200.319 MDE requested a description of the process or written procedures the LEA uses for making special education purchases, including how the LEA ensures that procurement charged to special education funds are eligible costs based on the needs of students with disabilities. Finding of Non-compliance: Yes The LEA did not provide evidence for state fiscal year 2016 of having procedures to ensure that procurements paid with special education funds were necessary (allowable and eligible expenditures based on the needs of students with disabilities), cost beneficial, included a standard practice for bid solicitation, or were compliant with all other EDGAR purchasing requirements. Corrective Action Required: No later than November 1, 2017, the LEA must submit to MDE: 1. its documented procurement procedure that reflects applicable State and local laws and regulations. The procedure must conform to applicable Federal law and the standards identified in the Uniform Grants Guidance. The description must include how the LEA ensures that each purchase or contract: a. is allowable, necessary and reasonable as defined by federal and state requirements; b. is an eligible cost of providing special education services and is not a cost the LEA would incur in the absence of special education services; c. complies with federal and state procurement and accounting standards; and d. is supported by adequate source documentation including approval by the appropriate LEA official(s). 2. a written code of standards of conduct governing the performance of their employees engaged in the selection, award and administration of contracts. 3. documented attendance at either a training or a workshop led by the MDE Special Education Fiscal Monitoring team. Dates of available trainings and workshops are announced late summer. St. Paul Public School District #0625-01 6
COMPLIANCE ITEM #5 (Procurement): Did the LEA establish a written code of conduct/conflict of interest? EDGAR 34 CFR 80.36(b)(3) UGG 2 CFR 200.318(c) MDE requested a written code of conduct/conflict of interest the LEA maintains to govern the performance of their employees engaged in the award and administration of contracts. Finding of Non-compliance: Yes The LEA did not provide evidence that it has a written code of conduct/conflict of interest to ensure that employees engaged in the award and administration of contracts using special education funds avoided any conflicts of interest, real or apparent. The conflict of interest submitted only included school board members and did not include steps of disciplinary action. Corrective Action Required: No later than November 1, 2017, the LEA must submit to MDE: 1. a written code of conduct governing the performance of their employees engaged in the selection, award and administration of contracts. It must define who or what is a conflict of interest, procedures for reporting this conflict to MDE, and steps for disciplinary action. COMPLIANCE ITEM #6 (Procurement): Did the LEA demonstrate a process that assured compliance with EDGAR financial management and procurement standards and LEA purchasing procedures? EDGAR 34 CFR 8036(d-f) EDGAR 34 CFR 80.20(b)(3) EDGAR 34 CFR 80.20(b)(6) EDGAR 34 CFR 80.36 (c-f) UGG 2 CFR 200.302 UGG 2 CFR 200.302 UGG 2 CFR 200.320 MDE requested a description of the process or written procedure the LEA uses for procurement charged to special education and evidence of its implementation during state fiscal year 2016. MDE also requested the general ledger for the period from July 2015 through June 2016 for finance codes 372, 419-499, 619-699, and 740-760 and object codes 300-399, 400-499, and 500-599 along with the supporting documentation required St. Paul Public School District #0625-01 7
for procurement in the form of requisitions, purchase orders or contracts, invoices, payments, etc. for an identified sample (N = 3) of contracts and purchases. Finding of Non-compliance: Yes The LEA did not demonstrate implementation of the process for state fiscal year 2016 as in written or described procedures. The LEA did not demonstrate the following steps as outlined in their procedure: The current amendment in the contract for sample A was not signed/approved by the vendor The contract for sample B was signed but not dated by the school The purchase order copy sent for sample C was not approved or dated Corrective Action Required: No later than January 31, 2018, the LEA must submit to MDE documentation of two separate purchases in SFY18 that demonstrate the LEA is fully complying with their entire purchasing processes. Supporting documentation should include items listed: Quotes, if applicable; Requisition; Approval for purchase; Purchase order: Signed contract, if applicable; Packing slips, if applicable; Invoice(s); Approval for payment; Cancelled check, EFT payment or bank statement showing payment; Description justifying the purchase as an eligible cost for special education; Page from IEP identifying need (i.e. Service Page, etc.); and Prior written approval from MDE, if applicable. Upon confirmation of corrective action, MDE School Finance Division may require a subsequent adjustment of funds. Note: If the LEA is out of compliance on compliance item #4, then that corrective action must be completed prior to completing this corrective action. COMPLIANCE ITEM #7 (Procurement): Did the LEA implement procedures to ensure that procurement for special education was based on the needs of students with disabilities and represented an additional cost of providing services to eligible students? IDEA 34 CFR 300.202(a) St. Paul Public School District #0625-01 8
IDEA 34 CFR 300.320(a)(4) MDE requested a description of the process or written procedure the LEA uses for ensuring that procurement charged to special education is an eligible cost based on the needs of students with disabilities. Evidence of its implementation such as IEPs or program descriptions was requested in relation to the samples chosen as described in the previous compliance item. Finding of Non-compliance: Yes The LEA did not provide evidence for state fiscal year 2016 of implementing procedures to ensure that procurement paid with special education funds: was an eligible cost based on the needs of students with disabilities as identified in the student IEP. [34 CFR 300.320(a)(4)] was an eligible cost of special education based on the needs of students with disabilities. [34 CFR 300.202(a)] Corrective Action Required: No later than January 31, 2018, the LEA must submit to MDE complete documentation of two separate purchases in SFY 2018 that demonstrate the LEA is fully complying with federal and state requirements. The documentation must ensure that each purchase or contract: 1. is allowable, necessary and reasonable as defined by federal and state requirements; and 2. is an eligible cost of providing special education services and is not a cost the LEA would incur in the absence of special education services; and 3. is identified as a special education need in the IEP if child specific; or 4. is identified as a part of a special education specific program fulfilling needs in special education student needs. Remember supporting documentation should include items listed: Quotes, if applicable; Requisition; Approval for purchase; Purchase order: Signed contract, if applicable; Packing slips, if applicable; Invoice(s); Approval for payment; Cancelled check, EFT payment or bank statement showing payment; Description justifying the purchase as an eligible cost for special education; Page from IEP identifying need (i.e. Service Page, etc.); and Prior written approval from MDE, if applicable. St. Paul Public School District #0625-01 9
Upon confirmation of corrective action, MDE School Finance Division may require a subsequent adjustment of funds. Note: If the LEA is out of compliance on compliance item #4, then that corrective action must be completed prior to completing this corrective action. Note: If LEA is out of compliance on compliance item #6, the purchases submitted for corrective action will be reviewed for compliance item #7 as well. COMPLIANCE ITEM #8 (Procurement): Did the LEA demonstrate that it received written prior approval when required for selected special education expenditures? OMB (A-87) 2 CFR PART 225, Attachment B, paragraphs 15 & 43 UGG 2 CFR 200.407 UGG 2 CFR 200.439 UGG 2 CFR 200.462 UGG 2 CFR 200.474 MDE requested the supporting documentation required for procurement in the form of requisitions, purchase orders or contracts, invoices, payments, etc. for an identified sample (N = 0) of contracts and purchases for lodging and/or out-of-state travel, construction, and equipment. Finding of Non-compliance: Not Applicable The LEA did not have any special education expenditures that required a prior written approval for purchase within the sample reviewed. COMPLIANCE ITEM #9 (Equipment): Did the LEA maintain property records of all equipment purchased with special education funds? UGG 2 CFR 200.313(d)(1) MDE requested a documented inventory of equipment purchased with special education funds. Finding of Non-compliance: Not Applicable This requirement does not apply to the LEA based on the LEA s assurance and subsequent verification that no equipment was purchased with federal special education funds that met the federal and/or LEA threshold for physical inventory. St. Paul Public School District #0625-01 10
COMPLIANCE ITEM #10 (Equipment): Did the LEA complete within the past two years a physical inventory of all equipment purchased with special education funds? UGG 2 CFR 200.313(d)(2) MDE requested a documented inventory of equipment purchased with special education funds. Finding of Non-compliance: Not Applicable This requirement does not apply to the LEA based on the LEA s assurance and subsequent verification that no equipment was purchased with federal special education funds that met the federal and/or LEA threshold for physical inventory. COMPLIANCE ITEM #11 (Third Party Billing): Did the LEA have in place and implement procedures to seek reimbursement for medical services from Medical Assistance and other insurers? Minn. Stat. 125A.21, subd. 2(a) IDEA 34 CFR 300.154(a) MDE reviewed the Medical Assistance reimbursement of eligible expenditures previously reported to MDE during state fiscal year 2016 and requested an explanation if the LEA received no reimbursement. Finding of Non-compliance: No The data previously reported to MDE and any supplemental information submitted provided reasonable assurance that the LEA implemented procedures to seek reimbursement from Medical Assistance for eligible expenditures. COMPLIANCE ITEM #12 (Coordinated Early Intervening Services): Did the LEA expend no more than 15% of its Part B allocation for the fiscal year and, if required, the maximum amount of 15% in order to provide coordinated early intervening services? IDEA 34 CFR 300.226(a)-(b) IDEA 34 CFR 300.646(b)(2) MDE reviewed expenditures for Coordinated Early Intervening Services reported to MDE during SFY 2016. St. Paul Public School District #0625-01 11
Finding of Non-compliance: Yes The data previously reported to MDE for SFY 2016 provided evidence that the LEA needed to expend 15% of its Part B allocation in order to provide early intervening services, but did not spend the required amount or document a carryover. Corrective Action Required: No later than November 1, 2017, the LEA must submit to MDE: 1. evidence of implementing internal controls to document expenditures for early intervening services; and 2. written assurance that it will expend the full 15% of its Part B allocation in order to provide early intervening services in SFY 2018. Prior to acceptance of the written assurance, monitors will review budgets submitted to MDE as support of the assurance. COMPLIANCE ITEM #13 (Participation of Private School Students): Did the LEA expend a proportional amount of its federal special education funds to provide special education services to eligible students enrolled in private schools? IDEA 34 CFR 300.133(a) MDE requested the general ledger or alternative documentation identifying the expenditures for providing special education services to eligible private school students, if a proportionate share of funds was required to serve such students during state fiscal year 2016. Finding of Non-compliance: No The LEA provided evidence that it expended the required proportional amount of its fiscal year 2016 federal special education funds for allowable expenditures to provide special education services to eligible students enrolled in private schools. COMPLIANCE ITEM #14 (Participation of Private School Students): Does the LEA have source documentation that supports the proportionate share amount required in their obligations to serving private school students? EDGAR 34 CFR 75.702 UGG 2 CFR 200.302(b)(3) St. Paul Public School District #0625-01 12
MDE requested the general ledger or alternative documentation identifying the expenditures for providing special education services to eligible private school students, if a proportionate share of funds was required to serve such students during state fiscal year 2015. Finding of Non-compliance: Yes The LEA provided some source documentation related to the SFY 2016 proportional share. However, the documentation was not adequate to support the proportional share amount. Corrective Action Required: No later than November 1, 2017, the LEA must submit to MDE: 1. evidence of implementing procedures to document all allowable and eligible expenditures in providing special education services to eligible students enrolled in private schools; and 2. Documentation showing the proportionate share expenses by student MARSS number related to the first quarter of the school year. Prior to acceptance of the documentation, MDE may request and review IEP page(s) that support expenditures. St. Paul Public School District #0625-01 13
SUMMARY OF FINDINGS AND REQUIRED CORRECTIVE ACTION Item # Description Corrective Action Required 1. Time and Effort (Federal) No 2. Time and Effort (State) No 3. Transportation (IEP Need) IDEA 34 CFR 300.202(a) Use of Amounts (Transportation) IDEA 34 CFR 300.320(a)(4) Related Service (Transportation) 4. Procurement (EDGAR) EDGAR 34 CFR 80.36 Procurement Standards UGG 2 CFR 200.317 State Procurement Standards UGG 2 CFR 200.318 Procurement Standards UGG 2 CFR 200.319 Competition 5. Procurement (Code of Conduct) EDGAR 34 CFR 80.36 (b)(3) UGG 2 CFR 200.318(c ) 6. Procurement (Internal Controls) EDGAR 34 CFR 80.36(d-f) Standards for Financial Management (Procurement) EDGAR 34 CFR 80.20(b)(3) Standards for Financial Management (Procurement) EDGAR 34 CFR 80.20(b)(6) Standards for Financial Management St. Paul Public School District #0625-01 14
Item # Description Corrective Action Required EDGAR 34 CFR 80.36(c-f) Standards for Financial Management UGG 2 CFR 200.302 Financial Management UGG 2 CFR 200.303 Internal Controls UGG 2 CFR 200.320 Methods of Procurement 7. Procurement (Eligible) IDEA 34 CFR 300.202(a) Use of Amounts (Procurement) IDEA 34 CFR 300.320(a)(4) Related Service (Procurement) 8. Procurement (Prior Approval) No 9. Equipment (Records) No 10. Equipment (Inventory) No 11. Third Party Billing (Reimbursement) No 12. Coordinated Early Intervening Services IDEA 34 CFR 300.226(a-b) Limits IDEA 34 CFR 300.646(b)(2) Required CEIS 13. Participation of Private School Students (Expenditures) No 14. Participation of Private School Students (Documentation) EDGAR 34 CFR 75.702 Fiscal Control UGG 2 CFR 200.302(b)(3) Financial Management St. Paul Public School District #0625-01 15
The deadline for submitting evidence of completed corrective action is specified at the end of each compliance item and finding. For clarification of the issues in this report or assistance needed to complete the corrective action, local staff may contact the monitor indicated below: Darin Graf, Fiscal Monitor Division of Compliance and Assistance 1500 West Highway 36 Roseville, MN 55113 651-582-8295 Darin.graf@state.mn.us Appeal of any finding in this report must be submitted to Marikay Canaga Litzau, Director of the Division of Compliance and Assistance at the address above. Appeals must be in writing and include the issues being challenged along with documentation to support the disputed issues. St. Paul Public School District #0625-01 16