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Schedule of Federal Audit Findings and Questioned Costs

Monroe School District No. 103 Snohomish County September 1, 2006 through August 31, 2007
1. Monroe School District No. 103 did not comply with procurement requirements for its federal Special Education grant.
CFDA Number and Title: Federal Grantor Name: Federal Award/Contract Number: Pass-through Entity Name: Pass-through Award/Contract Number: Questioned Cost Amount: 84.027/84.173 Special Education Grants to States/ Preschool Grants U.S. Department of Education 301056 Office of Superintendent of Public Instruction NA $0

Background
The purpose of the Individuals with Disabilities Education Act is to ensure public special education services are available to all children who qualify for them; and to provide related services to parents and others and to assess and ensure the effectiveness of special education programs.

Description of Condition
The District spent $1,236,824 in federal special education money in fiscal year 2007. It paid $93,939 to a contractor to deliver services such as monitoring students while at school. While using federal money to pay for these services is allowable, the District did not keep documentation on how it selected the contractors. When procuring professional services, federal grant recipients are required to obtain price or rate quotations from an adequate number of qualified sources for purchases up to $100,000 and to advertise for bids for purchases over $100,000. Grantees may solicit services from only one vendor if they determine the services are available only from that vendor or if the number of vendor responses is determined to be inadequate. Grantees must keep documentation to show how this conclusion was reached.

Cause of Condition
The Districts staff was unaware of federal procurement requirements.

Effect of Condition
The District cannot demonstrate no other providers could have supplied the necessary services. It is possible other providers were not provided an opportunity to compete for the contract, which can affect contract price and quality of service.

Recommendation
We recommend the District comply with federal regulations for its special education grants.

Districts Response
The District concurs with the finding that sufficient documentation was not retained to demonstrate compliance with federal procurement requirements for this service. The District contracted with a Special Education service provider which was the sole source in our area for the required services. As the State Auditors Office noted, the services obtained were necessary and allowable. However, documentation to support the sole source assertion for this provider was not retained. Complicating compliance with this requirement is the uncertainty of using federal funds at the outset of a contract, such as when federal safety net funds are awarded late in the fiscal year. It is also not clear how to weave a bid process into the work of an IEP team with the students parent. However, our corrective action plan is as follows: The District will implement procurement procedures to ensure that all professional service providers that will be paid through Federal funds are selected through a competitive bidding process. The District will retain documentation to support the sole source determination for all professional service providers that are not subject to the competitive bidding process.

Auditors Remarks
We appreciate the Districts cooperation and assistance during the audit. We will review the corrective action taken during our next regular audit.

Applicable laws and Regulations


Title 34, Code of Federal Regulations, Section 80.36 Procurement, states in part: (b) Procurement standards. (1) Grantees and subgrantees will use their own procurement procedures which reflect applicable State and local laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this section . . . (9) Grantees and subgrantees will maintain records sufficient to detail the significant history of procurement. These records will include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price . . . (d) Methods of procurement to be followed 18. Procurement by small purchase procedures. Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the simplified acquisition threshold fixed at 41 U.S.C. 403(11) (currently set at $100,000). If small purchase procedures are used, price or rate quotations shall be obtained from an adequate number of qualified sources . . . (4) Procurement by noncompetitive proposals is procurement through solicitation of a proposal from only one source, or after solicitation of a number of sources, competition is determined inadequate . . . .

Schedule of Federal Audit Findings and Questioned Costs


Monroe School District No. 103 Snohomish County September 1, 2006 through August 31, 2007
2. Monroe School District No. 103 did not comply with student application requirements for its special education safety net grant.
CFDA Number and Title: Federal Grantor Name: Federal Award/Contract Number: Pass-through Entity Name: Pass-through Award/Contract Number: Questioned Cost Amount: 84.027/84.173 Special Education Grant to States/ Preschool Grants U.S. Department of Education 336555 Office of Superintendent of Public Instruction NA $182,413

Background
Through the state Office of Superintendent of Public Instructions (OSPI) Special Education Safety Net Committee, school districts may apply for federal money to assist in paying special education costs that are three times the statewide per pupil average. Districts applying for this money must comply with federal and state requirements for Individualized Education Plans (IEP) for special education students. IEPs are written programs that explain students educational needs, goals and services to be provided.

Description of Condition
During our audit, we identified errors in the IEP process. We examined 12 of the 14 student files submitted for safety net funding in 2006-07. Two were not examined because the students attended school at another District where their needs were better met and their documentation was maintained at the other district. In 11 of the 12 files, we found differences in the list of services provided to the student as shown on the original IEP in the student file and the IEP submitted with the safety net application.

Cause of Condition
The District believed the changes were clarifications to the IEP, not revisions. However, OSPI does not make a distinction between clarifications and revisions to an IEP. We found insufficient documentation to show an amendment had been done and that the IEP team, including the parents, were informed of the changes prior to the changes being made.

Effect of Condition and Questioned Costs


The safety net application process relies on the District to ensure proper IEP amendment procedures are followed. Since these procedures, as established by OSPI, were not followed, we

are questioning costs totaling $182,413 for 11 students including $63,186 of federal funds and $119,227 of state funds.

Recommendation
We recommend the District follow proper procedures for amending IEPs as codified by OSPI in Washington Administrative Code. We also recommend the District contact OSPI to determine the amount of funds that should be repaid, if any.

Districts Response
The District respectfully disagrees with this finding. The finding questions costs totaling $182,413 for eleven students based upon the Districts alleged failure to follow proper procedures in amending the students Individualized Education Programs (IEPs). The District maintains that making minor clarifications to reflect services that the students were actually receiving from the District did not require a formal amendment and therefore the IEPs were procedurally appropriate and supported the questioned costs. Alternatively, even if the clarifications required formal amendments, the District provided parents with prior notice of its actions and did not violate their right to participate in the development of the students IEPs. The District believes it is unfair to question costs resulting from the Districts undisputed delivery of services to students where the District has not substantively violated the Individuals with Disabilities Education Act (IDEA). The finding identified differences between the lists of services provided to the students on their original IEPs and the copies of their IEPs submitted by the District to the Office of Superintendent of Public Instructions (OSPI) Special Education Safety Net Committee. The finding suggests that the District did not maintain any documentation regarding these differences. The District did, however, provide and maintain a copy of a notice to the parents of the eleven students. This notice, in the form of the letter, informed the parents that the District was proposing to make minor clarifications to the IEP regarding the para-educator support the District was providing to the students. The District did not propose nor did it make any changes to the amount, nature, or frequency of those services, or otherwise change any substantive portion of the IEPs. The District believes it provided the parents a copy of the proposed clarifications. Because these clarifications did not involve substantial or material changes to the students IEPs, the District did not convene an IEP meeting or propose a formal IEP amendment. The finding questions costs totaling $182,413 based on the Districts alleged failure to follow proper procedures for amending the eleven IEPs, pursuant to 34 CFR 300.324. The District, however, does not believe that the clarifications were of the nature or type that required a formal IEP amendment. The federal Office of Special Education Programs (OSEP) has previously interpreted the IDEA as only requiring school districts to revise an IEP when the District is making a substantial or material alteration of a childs educational program. Letter to Fisher, 21 IDELR (OSEP 1994); Letter to Green, 21 IDELR 639 (OSEP 1995). The Ninth Circuit Court of Appeals upheld the appropriateness of a districts decision to make non-material changes to a childs educational program without amending the childs IEP. Clyde K. and Sheila K. v. Puyallup Sch. Dist., 21 IDELR 664 (9th Cir. 1994) (finding that the hiring of an aide to observe the student did not require prior written notice to the parents where no additional services were being provided to the student and that the districts proposed relocation of the student to a new school did not require a revised IEP, where the students primary goals and objectives would not be altered). Here, the District did not propose any substantial or material alterations to the childrens educational programs that required a formal IEP amendment. The District was not altering the amount, nature, or frequency of the students actual services, or otherwise changing any substantive portion of the students IEPs. The District was simply clarifying within the document the description of the para-educator services the District was providing to the students. Under these circumstances, the District believes that the IEPs it submitted were appropriate, properly and efficiently prepared and formulated pursuant to WAC 392-140-609.

Moreover, even if the District did fail to properly document amendments to the eleven IEPs, the District believes that it is unfair to question costs expended by the District in serving the students. Courts have consistently upheld the appropriateness of a school districts IEP where a procedural violation did not result in any lost educational opportunities or impede a parents opportunity to participate in the IEP development process. See, e.g., Gray v. ORourke, 37 IDELR 272 (4th Cir. 2002) (upholding districts program where failure to review IEP did not result in loss of educational opportunity); Hjortness v. Neenah Joint Sch. Dist., 48 IDELR 119 (7th Cir. 2007) (finding that despite procedural violations, students IEP was appropriate and the district provided student a free, appropriate public education); Doe v. Alabama State Dept of Educ., 17 IDELR 41 (11th Cir. 1990) (rejecting procedural violation claims regarding proper documentation based upon parents actual notices of meetings and their full and effective participation in the IEP development process); see also 20 U.S.C. 1415(f)(3)(E)(ii) (codifying common law harmless error standard for procedural violations). Here, there is no dispute that the children received the para-educator services identified in the clarified IEPs submitted by the District to OSPI. Nor did the clarifications result in a loss of educational opportunity to the students. The written notice the District provided to parents regarding the proposed clarifications also fulfilled the Districts obligation to fully and effectively involve parents in the IEP development process. The District therefore believes that any failure on its part to document the IEP clarifications via a formal IEP amendment did not undermine the appropriateness of the IEPs submitted by the District to the Safety Net Committee. Based upon the foregoing, the District respectfully requests that the finding eliminate any questioned costs resulting from the eleven IEPs and that OSPI not seek to recover the funds identified in the finding. We will certainly adhere to all written guidance regarding the proper procedures for amending IEPs.

Auditors Remarks
We have considered the Districts response and reaffirm our finding. We appreciate the Districts cooperation and assistance during the audit. We will review the corrective action taken during our next regular audit.

Applicable Laws and Regulations


Title 34, Code of Federal Regulations, Section 300.324, Development, review, and revision of IEP. (a) Development of IEP(1) General. In developing each childs IEP, the IEP team must consider . . . (4) Agreement. (i) In making changes to a childs IEP after the annual IEP team meeting for a school year, the parent of a child with a disability and the public agency may agree not to convene an IEP team meeting for the purposes of making those changes, and instead my develop a written document to amend or modify the childs current IEP. (ii) If changes are made to the childs IEP in accordance with paragraph (a) (4) (i) of this section, the public agency must ensure that the childs IEP Team is informed of those changes . . . . Title 34, Code of Federal Regulations, Section 300.704, State-level activities: (4)(xi)(c)(i)for the purpose of assisting LEAs (including a charter school that is an LEA or a consortium of LEAs) in addressing the needs of high need children with disabilities, each State has the option to reserve for each fiscal year 10 percent of the amount of funds the State reserves for other State-level activities

WAC 392-140-609 Special education safety net -- Standards and criteria -- Appropriate and properly and efficiently prepared and formulated IEPs. Individualized education programs (IEPs) which are appropriate, properly and efficiently prepared and formulated are those IEPs that meet all of the following criteria: (1) The IEPs comply with federal and state procedural requirements. (2) The delivery of specially designed instruction identified on the IEP also complies with state and federal requirements (i.e., regularly scheduled teaching or training activities provided or designed by special education qualified staff). (3) The provision of special education services conforms with areas of need identified in the student's evaluation and/or reevaluation made pursuant to chapter 392-172A WAC. WAC 392-140-600 Special education safety net Applicable provisions. The provisions of WAC 392-140-600 through 392-140-685 apply to the determination of safety net allocations of Individuals with Disabilities Education Act (IDEA) federal funds for the 2005-06 school year and thereafter. WAC 392-140-602 Special education safety neteligible applicants . . . WAC 392-172-15700 Parent and general education teacher participation in IEP meetings. (1) Each school district or other public agency shall take steps to ensure (in the case of nonadult students) that one or both parents of the special education student are present at each IEP meeting or are afforded the opportunity to participate by: (a) Notifying the parent(s) of the meeting early enough to be sure that they will have an opportunity to attend . . . (2) The notice to the parent(s) shall include the purpose, time, location of the meeting and who will be in attendance. If the purpose of the meeting is to develop, review, or revise an IEP, the notice shall also inform the parents of the provisions relating to the participation of other individuals on the IEP team who have knowledge or special expertise about the student . . . (4) If neither parent can attend (in the case of a nonadult student), an IEP meeting may be conducted without a parent if the district or other public agency is unable to convince the parents that they should attend. In such a case the school district or other public agency must have a record of its attempts to arrange a mutually agreed upon time and place. The record shall contain such information as: (a) Detailed records of telephone calls made or attempted and the results of those calls; (b) Copies of correspondence sent to the parents and any responses received . . . WAC 392-172-159 Development, review, and revision of individualized education program consideration of special factors . . . WAC 392-172-160 Individualized education program . . . .