UNITED r"l' Uh? 
OFFICE OF SPECIAL EDUCATION AND SERVICES

 

JUL '3 2018

Honorable Diane Douglas
Superintendent for Public Instruction
Arizona Department of Education

15 35 West Jefferson Street

Phoenix, Arizona 85007

Dear Superintendent Douglas:

The purpose of this letter is to provide you a summary of the resnits of the monitoring and
support activities conducted by the Office of Special Education Programs (OSEP) during an on- 
site visit monitoring activity, the week of September 12-14, 2017 to the Arizona Department of
Education (ADE). Participants during the visit included staff from the Exceptional Student
Services (ESS) office and the Grants Management office.

In 2016, OSEP began providing differentiated monitoring and support (DMS) to States as part of
its Results Driven Accountability (RDA) framework. Under RDA, OSEP made a shift from
monitoring based solely on compliance to monitoring and support focused on both compliance
and improving results for children with disabilities. OSEP differentiates its approach for each
State based on the State?s unique progress, challenges, and needs.

As part of the DMS process, OSEP conducts an organizational assessment (0A) of risk factors to
identify States? progress in meeting performance standards and complying with the requirements
of Part of the Individuals with Disabilities Education Act (IDEA) and its implementing
regulations, the Education Department General Administrative Regulations, and the Uniform
Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards.
OSEP uses the information from the OA and an Engagement Decision Tree to make designations
of universal, targeted, or intensive monitoring and support that a State will receive for the ?scal
year. For 2016-2017, OSEP identified ?ve areas for DMS: 1) results; 2) compliance; State
Systemic Improvement Plan 4) correctional education; and 5) fiscal.

On October 20, 2016, OSEP issued DMS notice. That notice provided a designation of
universal, targeted, or intensive engagement for each of ?ve areas OSEP identified for DMS.
The information in the notice was based on FFY 2014 data in the corresponding five areas, along
with information about the factors contributing to elevated need for monitoring and support, the
support the State has accessed, the State?s capacity to improve results and compliance, and
additiOnal contextual information. The notice also identi?ed the monitoring and support
activities that would be carried out to address the factors contributing to the elevated need for
monitoring and support in each of the areas that were designated for intensive engagement. We
have attached a copy of the DMS notice for your convenience.

As part of its DMS activities with Arizona, including the on-site monitoring and support visit,
OSEP discussed issues related to the SSIP and ?scal areas. Attached is a summary of the results
ofthe specific areas that were the subject of monitoring and support activities. If OSEP
identified ?ndings of noncompliance with IDEA requirements, you will ?nd speci?c

MARYLAND AVIS. SAM. 

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Page 2 - Superintendent Diane Douglas

information, within the attachments for the speci?c DMS area, regarding the corrective actions
ADE must take to address the noncompliance. Speci?cally regarding the SSIP, OSEP notes that
in April 2018 ADE submitted the SSIP Phase Year 2. Feedback on the latest submission will
be provided over the summer.

We appreciate your efforts to improve results for children with disabilities. If you have any
questions, please contact Kathleen Heck, your OSEP State Lead, at 202-245-6465.

Sincerely,

deg/W

Ruth B. Ryder
Acting Director
Of?ce of Special Education Programs

cc: Alissa Trollinger, Part 1388 Director

Attachments:

- DMS Notice
- SSIP summary of support activity
- Fiscal monitoring documents:
LEA Allocations narrative
Subrecipient Monito?ng FMI
Fiscal monitoring letter and FMI (May 5, 2016)

 

Arizona Part 
September 12-14, 2017

 

DMS Area: SSIP DMS Designation: Intensive

 

Background:

On October 20, 2016, Differentiated Monitoring and Support (DMS) notice was issued to
Arizona Department of Education (ADE). The DMS notice indicated level of engagement
with the State across five areas: results, compliance, State Systemic Improvement Plan (SSIP),
correctional education, and fiscal. The leve! of engagement for the SSIP was intensive.

Since its initial SSIP submission, ADE has experienced significant turnover and has made multiple
changes to its plan resulting in implementation delays. The factors that led to ADE's level of

engagement included its ability to effectively engage stakeholders, identify evidence based practices,
and develop an evaluation plan. 

 

 

h?Purpose of Monitoring Activity

The purpose of on site visit was to provide ADE with technical assistance and support in the
i areas of stakeholder engagement, identification of evidenced based practices, and the development
of its evaluation plan.

Visit Sur?n?ary

 

 

 

OSEP engaged with representatives of the State to discuss its SSIP and activities ADE has
undertaken since its April 2017 submission. In addition, ADE provided further clarification regarding
its revised State identified Measurable Result implementation timelines, and how the SSIP is
integrated into the State's revised monitoring system.

The State reported revisions to its baseline, and targets in its April 201 i? submission. The
State's revised SIMR is: ?Targeted sites will increase the performance of students with
disabilities in grades 3-5 on the EnglishfLanguage Arts (ELA) state assessment from 6.4% to
12.99%.? ADE staff reported that the revisions to the were made in response to infrastructure
and capacity concerns, and believe that focusing on a targeted group of districts will enable the ADE
to implement the SSIP work more effectively. However, at the time of the visit, the target districts had
not been selected. The State?s implementation timeline was reviewed and OSEP emphasized that
the State is required provide data, for the identified districts, in its Phase Year 2 submission,
due April 2018.1 OSEP also recommended that the State consider identifying additional data sources
(Le. progress monitoring data) to track and report progress toward the 

and the State ?3 Monitoring Cycle

The State explained that it has integrated SSIP activities into the newly-revised monitoring cycle
which is now being utilized throughout the State. According to ADE, using this model will assist the
State in leveraging their resources, both personnel and fiscal, while providing support to improve
results for children with disabilities. OSEP encouraged the State to provide more specific information
regarding alignment of the monitoring elements with required SSIP elements, including identification
of evidenced based practices, implementation of coherent improvement strategies, and evaluation.

Stakeholder Engagement
The SSIP Phase Year 1 submission included limited references to stakeholder groups and their

input into SSIP revisions. The discussion during visit confirmed that stakeholder engagement
had been limited. OSEP informed the State that, due to its limitegcapacity to reach a broader group,

 

 

 

 

 

 

This submission Is unticr rcvicw. (JEEP will provide feedback TU the State inter [his summer.

 

 

Page 2 ??Arizona Department of Education

 

 

it is acceptable for them to use their Special Education Advisory Panel (SEAP), which is already in
place. However, in its Phase ill, Year 2 submission, OSEP encouraged the State to consider
providing more detailed information regarding how it engages its stakeholder group including: how
input is solicited and used for decision making, the mechanisms for dissemination of information, and
a description of various stakeholder roles and responsibilities in the implementation and evaluation of
SSIP activities through the next several years of Phase 

Next Steps for SSIP implementation and Evaluation:

1. According to the revised plan shared by ADE, activities will occur in 20-30 school
districts based on the monitoring cycle. in order to achieve successful implementation and
evaluation of the the State is building capacity to ensure compliance as well as work on
outcomesiresults. According to ADE, training is currently being provided to designated
personnel with a focus on monitoring, compliance, and coaching. The State is also
considering the incorporation of specific activities identified in the State Personnel
Development Grant (SPDG). ADE is creating a professional development plan and action
plan for personnel.

2. The State is developing a menu of assessment tools to address progress monitoring
challenges. The State assessment will be a benchmark of progress; however ADE plans to
individualize progress and fidelity measures throughout the targeted districts. Under the
current plan submitted by ADE, 28 possible interventions were listed to support improvement
activities; if utilized, each of these interventions will need to be evaluated and analyzed for
fidelity.

Outcome of Engagement Activity
In an SSIP debrief provided to ADE on September 14, 2017, OSEP shared the following:

1. The State needs to more clearly articulate how monitoring and implementation of the current
SSIP (April 3, 2017) connect to the Theory of Action, the Logic Model, and improved
outcomes on all levels, including improved reading outcomes for students at targeted schools.
In addition, further clarification and detailed description of how the integrates with the
ADE monitoring system needs to be provided.

2. Additional focus areas for ADE to work on and further clarify include: an implementation
timeline, data collection, stakeholder engagement, roles and responsibilities of personnel
involved in monitoring and implementation of coherent improvement activities, progress and
monitoring data, fidelity measures, and development of a workable evaluation plan. Aiso,
consideration should be given to what happens after the monitoring cycle ends for the local
educational agencies involved.

3. The State was encouraged to work closely with TA Providers to further develop the evaluation
plan and the implementation plan. ADE stated (due to time and priority constraints) they
will include TA providers in the work once a monitoring coach has been hired.

4. OSEP reminded the State that there are requirements that need to be fulfilled according to the
Indicator, and that all areas of the Indicator must be addressed in the April 2008 submission
of the SSIP submission. The State needs to include FFY 2016 data and discuss progress in
all areas of the SSIP should also be noted.

5. ADE mentioned that the person designated as the current SSIP lead for ADE will be the main

 

 

 

Page 3 Arizona Department of Education

 

 

contact for further S?l?discussions with OSEP.
Use of Technical Assistance and Professional Development Resources:

National Center for Systemic Improvement (NCSI) technical assistance providers had previously
worked with ADE and provided suppert in SSIP planning, implementation and evaluation activities,
however the State has chosen not to access OSEP-funded TA assistance regarding the at this
time. ADE stated at some point they will again request additional support from NCSI to assist in their
efforts.

 

Next Steps

 

 

During FFY 2018, OSEP and ADE will use regular TA calls to discuss resources and materials that
may be helpful in supporting Arizona?s efforts to implement and evaluate infrastructure
changes, coherent improvement strategies, evidence-based practices, evaluation activities, and
stakeholder engagement that will lead to improved educational outcomes for children with disabilities.

 

 

 

 

Office of Special Education Programs
(OSEP) Fiscal Monitoring instrument
FY 2016

Arizona Department of Education (ADE)

Please note the following abbreviations are used in the Fiscal Monitoring instrument
(FMI):

 

FFY Federal fiscal year

IDEA Individuals with Disabilities Education Act
LEA local educational agency

MFS maintenance of State financial support
OMB Office of Management and Budget

Office of the Inspector General

SEA State educationai agency

Uniform Guidance Uniform Administrative Requirements, Cost Principles and Audit
Requirements for Federai Awards codified in 2 CFR Part 200

 

Scope of Monitoring:

201T Fiscal Monitoring examined the status of ADE's corrections of noncompliance
involving: 1) LEA Ailocations, and 2) Subrecipient Monitoring. in conducting the monitoring,
OSEP reviewed information from FFYs 2014. 2015 and 2015. including State-submitted
documentation and other available information; audits conducted under the Uniform Guidance
and those conducted through the Department's Office of Inspector General (OIG). 
conducted both onusite and telephone interviews with State staff.

The LEA Allocations topic is addressed in a separate enclosure. This FMI addresses the
Subrecipient Monitoring topic.

 

Arizona Department of Education (ADE), page 2 of 3

IDEA Part 
Summary of Monitoring Criteria

 

Monitoring Area 2, IDEA Part B: SUBRECIPIENT MONITORING

Under the IDEA and Uniform Guidance, SEAS are responsible for oversight of the operations of IDEA supported activities. Each
SEA must monitor its own activities, and those of its LEAs, to ensure compliance with appiicable Federal requirements and that
performance expectations are being achieved. Monitoring must cover each program, function, or activity. Subrecipient monitoring is
at the core of the genera! supervisory responsibilities, and can heip the SEA ensure that its LEAs are in compliance with IDEA
and related requirements, as well as aligned with SEA priorities designed to improve results for children with disabilities. The focus
of this activity was to review the State's fiscal sub-recipient monitoring.

 

 

 

 

Criterion Number Description Noncompliance Applicable
identified? Requirement

Criterion 2.1 The SEA ensures that every subaward is cleariy identified to Yes 2 CFR ?200.331(a)
the subrecipient as a subaward and includes required
information at the time of the subaward. If any of the data
elements change, the SEA includes the changes in
subsequent subaward modification. 5

Criterion 2.2 The SEA evaluates each subrecipient?s risk of No 2 CFR ?200 331(b)
noncompliance with Fedora: statutes, regulations, and the
terms and conditions of the subaward for purposes of
determining the appropriate subrecipient monitoring.

Criterion 2.3 The SEA monitors the activities of the sub-recipient as No 2 CFR 34
necessary to ensure that the subaward is used for CFR ??300 149 and
authorized purposes, in compliance with Federal statutes, 300.600

regulations, and the terms and conditions of the subaward;
and that subaward performance goals are achieved.

Criterion 2.4 Depending upon the assessment of risk posed by the No 2 CFR 
subrecipient, the SEA has poiicies and procedures that
consider monitoring activities of LEAs ranging from technical
assistance to cn-site monitoring or conducting agreed-upon-
procedures engagements {audits}.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Arizona Department of Education (ADE), page 3 of 3

 



Criterion 2.5 The SEA conducts monitoring activities that verify that every No 2 CFR ?200.331(f)
subrecipient is audited in accordance with the Uniform
Guidance.

 

 

Criterion 2.6 The SEA considers enforcement actions against No 2 CFR ??200.338 and
noncompliant subrecipients as required under the Uniform 34 CFR
Guidance and ??300.i40, 300.222,
300.600, and 300.604.

 

 

 

 

 

 

 

 

 

 

 

Finding: Criterion 2.1: Based on the review of documents and interviews with ADE staff on September 14, 201?, ADE does not
ensure that each section 611 and section 619 subaward is clearly identified to the subrecipient as a subaward and includes the
required information at the time of the subaward as specified in 2 CFR OSEP made requests to review 
notifications to subrecipients to ensure their consistency with 2 CFR ADE did not provide the requested documentation.

Citation: As a pass-through entity, ADE must, under 2 CFR ensure that every subaward is clearly identified to the
subrecipient as a subaward and includes the information specified in at the time of the subaward, and if any of
these data elements change, include the changes in subsequent subaward modification. There are 13 required items that must be
included in the Federal subaward notification.

Further Action Required: Within 90 days of receipt of this letter, the State must submit to OSEP documentation demonstrating that
section 611and 619 subaward notifications include the information as required by 2 CFR 

Arizona Department of Education Fiscal Monitoring Activity: LEA Allocations
Visit Summary

OSEP conducted on-site fiscal monitoring of Arizona Department of Education (ADE) on
September 13-14, 2017, as part of OSEP's system of Differentiated Monitoring and Support
The monitoring activities were conducted by members of Fiscai Accountability
Impiementation Team. in consultation with the OSEP State lead for Arizona and the OSEP
Associate Division Director (ADD) with responsibility for the team working with Arizona.

OSEP's Fiscal Monitoring in 201? examined the status of ADE's corrections of noncompliance
involving: 1) local educational agency (LEA) Allocations, and 2) Subrecipient Monitoring. During
the visit, OSEP met with representatives of the State to review the State's fiscal processes for
LEA allocations and subrecipient monitoring. The ADE officials who participated in the
monitoring activity related to LEA allocations included the Associate Superintendent for Highly
Effective Schools, the Deputy Associate Superintendent for Exceptionai Student Services
and the Director of Operations for E88. The ADE officials who participated in the
monitoring activity related to subrecipient monitoring included the Deputy Associate
Superintendent for Grants Management, the Director of the Fiscal Monitoring Unit {part of the
Grants Management office), and the E88 Program Support Monitoring staff representative. At
the State's invitation, staff from the Center for IDEA Fiscal Reporting (CIFR) also participated in
the monitoring activities.

This document addresses the status of corrections of noncompliance involving LEA
Allocations, based on OSEP's May 5, 2016 fiscal monitoring letter and fiscal monitoring
instrument (FMI). Subrecipient Monitoring is addressed in a separate 

OSEP did not make additionai findings of noncompliance related to LEA allocations as a result
of the September 2-01? monitoring activity. However, the information submitted by ADE at the
time of the monitoring visit did not resolve the findings identified in May 2016. The list at the
end of this report reflects actions the State is required to take to resolve the findings identified in
May 2016, taking into account the current status of those findings and the additional information
submitted by ADE as part of the September 2017 monitoring activity and in the letter dated
February 21, 2016 from the Arizona Superintendent of Public Instruction and received by OSEP
on April 26, 2018.

Background

On May 5, 2016, OSEP issued a fiscal monitoring letter and to ADE. The FMI included
nine findings of fiscal noncompliance and 17 corrective actions to be taken by the State.

On October 19, 2016, OSEP issued Arizona a DMS document that specified engagement
activities that OSEP would conduct with the State across five areas during FFY 2016 (2016-
20170: results, compliance, State Systemic improvement Plan correctional education,
and fiscal. For the fiscal area, OSEP assigned Arizona a designation of intensive engagement
due to factors identified as changes in ieadership, audits, and unresolved fiscal monitoring.

 

Arizona Department of Education (ADE), page 2 of 5

During FFY 2015, DSEP monitored States with intensive fiscal designations, including Arizona,
in two areas: LEA allocations and subrecipient monitoring.

To address the findings identified in the May 5. 2016 Flv?ll and intensive designation, ADE
staff worked actively with and OSEP?funded technical assistance centers in resolving the
identified noncompliance. Technical assistance activities included muitiple phone calls, emails,
and a face?tosface meeting held in Denver in November 2016. in addition, ADE sought
technical assistance from the Center for IDEA Fiscal Reporting and the National Center
for Systemic improvement (NCSI). Throughout this time, ADE submitted additional documents
in draft and final formats to address the noncompliance, and also submitted written questions
based on specific fiscal scenarios. for which OSEP provided written responses. In the midst of
the work to resolve the fiscal monitoring findings, staff retirements and changes resulted in
several key positions in ADE's Exceptional Student Services (ESS) unit being filled by new
personnel. ADE reported that these personnel changes contributed to delays in their correction
of the identified noncompliance.

Subsequently, on August 201?, OSEP notified ADE that the State had provided the required
documentation to resolve five of the nine findings identified in the May 2016 FMI. Specifically,
OSEP determined that the State had demonstrated correction of the identified noncompliance in
the following areas: maintenance of State financial sUpport, excess cost, LEA maintenance of
effort, and prior approval procedures for use of IDEA funds for equipment, construction or
alteration of facilities. ADE was unable to demonstrate correction of noncompliance for the four
findings related to LEA allocations of IDEA section 611 and section 619 subgrants based upon
the correct formulas as required at 34 CFR 300815-3008?, 34 CFR Part T6
Subpar't (the US. Department of Education (Department?s) Charter School Expansion Act
regulations), and the Department?s December 2000 guidance titled ?How Does a State or Local
Educational Agency Allocate Funds to Charter Schools that are Opening for the First Time or
Significantly Expanding their 

Status of the LEA Allocations Findings

To address the noncompliance regarding LEA allocations identi?ed in ADE was
required to recalculate its previous LEA allocations and to make whole any LEA that received
less than the amount of IDEA section 611 or section 619 funds to which it was entitled in FFY
2014. FFY 2015, andfor FFY 2016; alternatively, the State was to provide to by August
2010, a plan outlining how the State intended to make the required corrections during FFY
2016. In addition, ADE was required to provide revised State policies and procedures that
demonstrate ADE will allocate the IDEA section 611 and section 619 funds to eligible LEAs in
accordance with requirements. During the September 201? monitoring visit, ADE
provided documentation that it had made the required recalculations, but had not yet made
whole the affected LEAs. At this time, ADE also did not provide updated policies and
procedures for its allocation process consistent with the relevant requirements. The Deputy
Associate Superintendent for E83 and the Associate Superintendent for Highly Effective
Schools indicated that they had researched options to make whole the affected LEAs, but that
no funds were available to the State for this purpose. ADE asked OSEP to waive the
requirement to make whole the affected LEAs, reduce the amounts the State needs to repay the
LEAs, or offer other flexibilities to the State. in a follow-up phone call between DSEP and ADE
on October 26, 2017, OSEP explained that it could not reduce the amount by which the State

 

Arizona Department of Education (ADE), page 3 of 5

needed to make the affected LEAs whole or waive the requirements to ensure LEA allocations
are made in accordance with IDEA requirements, but provided an additional option involving the
timelines for making LEAs whole. The originai corrective action had included a provision
allowing the State to use any remaining FFY 2014, FFY 2015, andior FFY 2016 section 611
and/or section 619 State set-aside funds that were available to the State, for the purpose of
making whole any LEAs that received iess than the amount of section 611 or section 619 funds
to which they were entitled in in FFY 2014, FFY 2015, andfor FFY 2016. To provide additional
?exibility to complete the corrective action in response to the State's request, OSEP informed
the State that it could also consider the use of FFY 201?, FFY 2018, and FFY 2019 State set?
aside funds for this purpose.

in a letter dated February 21, 2018 and received by OSEP on April 26, 2018, Diane Douglas,
the Arizona Superintendent of Public Instruction, requested "a five-year period to smooth out
allocations for LEAs, from FY 2016 through FY 2022." ADE stated that using State-level funds
?creates a marked hardship for ADE to continue to be compliant with the State-level
administration requirements for In addition, ADE stated that it would "lose[s] its
opportunity to embark on State-led initiatives and activities related to development,
implementation, and scale?up of evidenceabased literacy and universal design professional
development initiatives to support results-driven accountability needs around increasing
achievement outcomes." The State therefore proposed a plan to use a portion of its FFYs 2016',
2019, 2020, 2021, and 2022 IDEA Part State set?aside funds to make whole any LEA that
received less than the amount of section 611 or section 619 funds to which it was entitled in
FFY 2014, FFY 2015, andlor FFY 2016. As reflected in the updated corrective action iist below,
taking into account the circumstances described in the State's February 2018 letter, OSEFJ has
determined that it will allow ADE to use FFY 2018 through FFY 2022 State setwaside funds for
this purpose.

Unresolved Findings of Noncompliance from May 2016 

At the time of the September 13-14, 201? monitoring visit,1 the foliow'ing required actions from
the May 5, 2016 fiscal monitoring letter remained unresolved:

Further Action Required: Within 90 days of the receipt of this letter [the May 5, 2016 letter], the
State must submit to OSEP:

1. Policies and procedures that demonstrate that the SEA will ensure that each LEA has
submitted a plan that provides assurances to the SEA that the LEA meets each of the
conditions in 34 CFR ??300201 through 300.213 before it determines that an LEA is
eligibie for assistance under Part of 'the IDEA for a fiscal year.

2. Documentation ofthe section 611 and section 619 allocation that each LEA was entitled
to receive in FFY 2014, FFY 2015, andlor FFY 2016 and the amount ofthe section 611
and section 619 allocation each LEA actually received in FFY 2014, FFY 2016, andror
FFY 2016.

3. For any LEA whose section 611 or section 619 allocation was less than the amount to
which it was entitled in FFY 2014, FFY 2015, andlor FFY 2016, a calculation of the

 

1 For details of the original findings, see that attached May, 5, 2016 ?scal monitoring letter and FMI.

 

Arizona Department of Education (ADE). page 4 of 5

difference between the amount the LEA actuali?y received and the amount of the
allocation the LEA should have received.

4. Documentation demonstrating that any LEA that received less than the amount of
section 611 or section 619 funds to which it was entitled in FFY 2014, FFY 2015, andror
FFY 2016 was made whole or a plan outlining how the State will make these LEAs
whole during FFY 2018. The State may use any remaining FFY 2014 or FFY 2015
section 511 andi'or section 619 State set?aside funds or any FFY 2016 section 611
andror section 610 State set?aside funds that become available on July 1, 2016 for this
purpose.

5. Revised State policies and procedures that demonstrate the SEA will ailocate the 
section 611 and section 619 subgrants to eligible LEAs in accordance with 34 CFR
and 300.816.

6. Revised State policies and procedures that demonstrate the SEA will allocate FFY 2015
and subsequent years? section 611 and section 619 funds that the State originaliy set
aside for LEAs that do not submit an approvable appiication during a Federal fiscal year
in accordance with the allocation procedures under 34 CFR and 300.815
to the LEAs that established in the initial Federal fiscal year in accordance with
the formula used in that ?scal year, or retain those funds for use at the State level to the
extent the State has not reserved the maximum amount it is permitted to reserve for
State?level activities pursuant to 34 CFR ??300 704 and 300.812, and for those LEAs
that elect not to apply for IDEA Part funds, use the payments that would have
otherwise been available to such an LEA to provide special education and related
services directly to children with disabilities residing in the area served by that LEA, as
required by 34 CFR 

7. A copy of the correspondence in which the State has informed its State audit office that is
responsible for conducting audits in accordance with the Single Audit Act and Subpart 
of the Uniform Guidance (former OMB Cirdular of this finding of noncompiiance
and required corrective actions.

Within 30 days of notification to the State that it has approved the revisions made to
the policies and procedures, the State must provide documentation that it has notified the
LEAs of the revisions.

Based upon the review of additional documentation, OSEP has determined that required actions
2, 3, and 7 have been met, and no further action is required. Because required actions 1, 4, 5,
and 6 remain unresoived, and because considers ADE's letter of February 21, 2018 to be
a plan outlining how the State make the affected LEAs whole, OSEP is requiring the
following:

1. Within 90 days of the date of this letter, the State must submit to OSEP documentation
of its plan to ensure that any LEA that received less than the amount of section 611 or

 

2 Effective July 2015, for Part FFY 2015 grant awards, Part funds are subject to the Uniform
Administrative Requirements, Cost Principles, and Audit Requirements for Federai Awards, codi?ed in 2 CFR Part
200 and commonly referred to as the Uniform Guidance. The Uniform Guidance provisions in 2 CFR Part 200
replace provisions previously found in EDGAR in 34 CFR Parts 74 and 30 and prior OMB Circulars and A4133.

 

Arizona Department of Education (ADE), page 5 of 5

section 019 funds to which it was entitled in FFYs 2014, 2015, andror 2016 will be made
whole. Consistent with the request made in the State's February 21, 2018 letter, the
State may use any available FFY 2018, FF?rr 2019, FFY 2020, PW 2021, and FFY 2022
section 611 andror section 619 State set-aside funds for this purpose.

2. Within 90 days of the date of this letter, the State must submit to OSEP revised State
policies and procedures that describe how ADE attocates IDEA section 61?! and section
619 funds to eligible LEAs, consistent with statutory and regulatory formulas in 
sections 6? ?l and section 619(g) and 34 CFR ??300 705 and 300.815. The policies
and procedures must document how ADE fulfills its responsibilities for each of the
following actions, consistent with statutory and regulatory requirements: a) determines
the LEA's eligibility to receive a subgrant based on the submission of a plan that
includes required assurances; b) calculates base payments; c) calculates base payment
adjustments, when required; d) calcuiates the allocation of remaining funds based on
population and poverty; e) calculates subgrants to eligible charter school LEAs that open
or significantly expand their enrollment; f) reallocates funds to eligible LEAs, inciuding
charter school LEAs, consistent with requirements and in the appropriate year3; and g)
ensures that section 019 allocations are made consistent with IDEA requirements,
including when allocations to States for section 619 grants are below the 1907'
appropriation level. In addition, the policies and procedures must include relevant
policies and procedures of any ADE organizational units that have a role in calculating,
issuing, or otherwise ensuring the distribution of section 511 andfor section 519 funds to
eligible LEAs, including eligible charter school LEAs.

 

3 After receipt of OSEP's May 2015 Ftvil, ADE submitted to OSEP questions regarding charter school LEAs that ciose
mid?year after establishing to receive an IDEA subgrant, as opposed to ciosing mid-year but before
establishing eligibility to receive a subgrant, as well as two questions regarding the differences between the
reallocation provisions at 34 CFR and 300.813?, and the requirements at 34 CFR ?300.22?. Because
ADE personnel indicated that the responses to these questions were critical to its future actions and the
development of its policies and procedures, DSEP expects that the reallocation policies and procedures will reflect
February 28, 201? response to these specific questions.

 

UNITED STATES DEPARTMENT OF EDUCATION
OFFICE or SPECIAL soucwrlo-s AND ssuvicss

 

May 5. 2016

Honorable Diane Douglas
Superintendent of Public Instruction
Arizona Department ol? Education
1535 W. Jef?srson Street, Bin 2
Phoenix. Arizona 85007

Dear Superintendent Douglas:

This letter is to inform you oi?the results of the Of?ce ol?Speeial Education Programs? (OSEP's)
monitoring oi?the Arizona Department of Education?s (ADE) procedures for ensuring
compliance with the ?scal requirements of Part of the Individuals with Disabilities Education
Act (IDEA). the American Recovery and Reinvestment Act (A RRA) and related
statutes and regulations. In conducting its monitoring. OSEP reviewed publicly available

in limitation. State-submitted documentation. and Of?ce of Management and Budget 
Circular A-133 and Of?ce of Inspector General (01(3) audits. OSEP also conducted 13 on-site
visits as part ofthe Continuous Improvement Visits (Cle) and conducted telephone interviews
with all States in 2012. The reviews were conducted between the fall ot'2010 and the fall of
2012.?

The conclusions summarized in the enclosure are based primarily on a review of the State's
procedures For speci?c l'iscal requirements and other State-reported information collected by
OSEP through the tollowing: the AREA Monitoring Inventory t2) the Critical
Elements Analysis Guide discussed during CIVs or telephone interviews; and (3)
Maintenance of State Financial Support discussions during C?le or telephone interviews. As
warranted. OSEP referenced open ?ndings made under OMB Circular or 010 audits that
relate to a criterion in the attached enclosure and were sustained in a program determination
letter (PDL).

The enclosure reports the results review of your State?s ?scal procedures. It is
organized by monitoring area and the criteria reviewed for each area. Each criterion includes the
applicable regulatory or statuton requirements. and for any finding made, includes the source of
intonnation used in identifying noncompliance. and any required corrective actions. Because
OSEP did not review data at the local level and all State?level data. OSEP cannot determine
whether the State?s systems are l'uily effective in ensuring that the State educational agency
(SEA) and local educational agencies (LEAs) in yOur State meet all fiscal requirements of the

 

AREA monitoring occurred between September 2010 and September 2012. conducted Cl?v?s during the
summer and tall ot'ZUl 'l'elephone interviews for both and Maintenance ofStatc Financial Support
occurred throughout 2012. EUI 3. 2014 and. in some cases. 2015.

400 MARYLAND AVE, SW. WASHINGTON. D.C. 20202-2600
gov

The Department of'EdIrcnriou Zr mission is to promote .rnm?em achievement and pi'epnmrioalfor globe! commentaries";
educationaf Larcetr'mtce and ensuring equoi (recess.

 

Page 2 Honorable Diane Douglas

IDEA. If no ?ndings are indicated for a particular monitoring area, OSEP did not identify
noncompliance in that area and did not provide any further comment.

OSEP identi?ed noncompliance in the review of the ?scal systems as detailed in the
enclosure, and has required corrective action. OSEP recognizes that, given the length of time
between monitoring and this letter, the State may have changed policies andz?or
procedures. If you believe that the State has corrected the noncompliance identi?ed in the
enclosure, please inform us and provide any relevant documentation, and OSEP will follow up in
writing with your State.

Elfective July 1, 2015, ibr IDEA Part FFY 2015 grant awards, IDEA Part funds are subject
to the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for
Federal Awards, codi?ed in 2 CFR Part 200 and commonly referred to as the Uniform Guidance.
The Uniform Guidance provisions in 2 CFR Part 200 replace provisions previously found in
EDGAR in 34 CFR Parts 24 and 8t} and prior OMB Circulars and In addition,
effective July 1, 2015, IDEA Part funds are subject to the revised LEA maintenance of effort
(MOB) regulations that were published in the Federal Register on April 28, 2015. See 80 Fed.
Reg. 23644 (Apr. 28, 2015). The major changes in the revised LEA MOE regulations include:
(1) clari?cation of the eligibility standard; (2) clari?cation of the compliance standard; (3)
explanation of the Subsequent Years rule; and speci?cation of the consequences for an
failure to maintain efihrt. In conducting its monitoring, OSEP reviewed State procedures
that were in effect prior to July 1, 2015. Therefore, the ?Finding? and ?Citation? sections of the
enclosure include citations to the provisions in the Education. Department General
Administrative Requirements (EDGAR) in 34 CF Parts 74 and 80, prior 0MB Circulars A-87
and A-l33, and the LEA MOE regulations in effect prior to July 1, 2015. However, because the
?Further Action Required? section of the enclosure addresses corrective actions the LEA must
take after July I, 201 S, that section includes citations to the Uniform Guidance and the revised
LEA MOE regulations.

With respect to the State?s procedures for calculating the amount of State ?nancial support made
available for special education and related services, OSEP has identified noncompliance.
However, based on our review of the documents and information provided by the SEA after the
State revised its procedures, .it appears that the State currently has procedures for ensuring
compliance related to the requirement in the IDEA to maintain State ?nancial support.
Neveitheless, OSEP has learned through monitoring, audits, and the review of requests for
waivers of the requirement in section of the IDEA to maintain State ?nancial
support, that staff within the SEA may not have access to all relevant information related to the
State?s method for calculating the amount of State ?nancial support made available for special
education and related services. Therefore, OSEP is unable to conclusively determine that your
State?s method for calculating the amount of State ?nancial support made available for special
education and related services is in. compliance with the requirements of the IDEA. OSEP is
available to provide technical assistance.

 

Page 3 - Honorable Diane Douglas

0813'? appreciates the cooperation and assistance provided by your State staff on our monitoring
of the State?s procedures for ensuring compliance with ?scal requirements related to IDEA Part
funds. If you have any questions or wish to request technical assistance, please do not hesitate
to call your OSEP State Lead, Kathleen Heck, at (202) 245-6465.

Sincerely,

fs/

Ruth B. Ryder

Acting Director

Of?ce of Special Education Programs

Enclosure

cc: Karol Basel
State Director of Special Education

 

Office of Special Education Programs
Fiscal  

Arizona Department of Education (ADE)

 

Scope of Review:

The Office of Special Education Programs (OSEP) monitored procedures for ensuring
compliance with the fiscal components of the individuals with Disabilities Education Act 
and other related Federal fiscal requirements. In performing this review, USER reviewed
publicly available information, State-submitted documentation, and Of?ce of Management and
Budget Circular A-133 and Of?ce of inspector General audits, and conducted both on
site and telephone interviews with State staff.

Effective July 1, 2015, for Part FFY 2015 grant awards, IDEA Part funds are subject
to the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for
Federal Awards, codified in 2 CFR Part 200 and commonly referred to as the Uniform
Guidance. The Uniform Guidance provisions in 2 CFR Part 200 replace provisions previously
found in the Education Department Generai Administrative Regulations (EDGAR) in 34 CFR
Parts 7?4 and 80 and prior OMB Circulars and A433. In addition, effective July 1, 2015,
IDEA Part funds are subject to the revised local educational agency (LEA) maintenance of
effort (MOE) regulations that were published in the Federal Register on April 28, 2015. See 80
Fed. Reg. 23644 (Apr. 28, 2015). The major changes in the revised LEA MOE 
include: (1) clarification of the eligibility standard; (2) clari?cation of the comptiance standard; (3)
explanation of the Subsequent Years rule; and speci?cation of the consequences for an
faiiure to maintain effort. in conducting its monitoring, OSEP reviewed State procedures
that were in effect prior to July 1, 2015. Therefore, the ?Finding? and ?Citation? sections of the
enclosure include citations to the provisions in the EDGAR in 34 CFR Parts T4 and 80, prior
OMB Circulars A-87 and A-133, and the LEA MOE regulations in effect prior to July 1, 2015.
However, because the ?Further Action Required? section of the enclosure addresses corrective
actions the LEA must take after July 2015, that section inciudes citations to the Uniform
Guidance and the revised LEA MOE regulations.

Please note the following abbreviations are used in the Fiscai Monitoring Instrument:

AMI The American Recovery and Reinvestment Act (ARRA) of 2000 Monitoring Inventory
Critical Elements Analysis Guide

Department - US. Department of Education

EDGAR Education Department General Administrative Regulations

FFY Federai Fiscal Year

FS - fiscal systems element of the 

GEPA General Education Provisions Act

 

LEA local educational agency
MFS - maintenance of financial support

SEA State educational agency

 

 

IDEA Part 

Summary of Monitoring Criterion

?Monitoring Area 1, EDEA Part B: Obligation/Liquidation

 

G-riteritin?liiumber

Description

ENone-om piianCe
identified?

Applicable
Requirements

 

 

Criterion 1.1

The SEA has procedures to allocate the IDEA section 611
and section 619 subgrants to eiigible LEAs based upon
the correct formula.

Yes

34 CPR ??300.200.
300.3154
300.816

 

 

Criterion 1.2

The SEA has procedures to ensure that LEAs are
provided 27 months to obligate funds

 

Yes

34 CFR 

 

 

Criterion 1.3

 

 

. The SEA has procedures to obiigate funds solely during

the 2? month period of availability and iiquidate funds not
later than 00 days after the end of the funding period or an
extension of that timeline authorized by the Department.

No

 

34 CFR ??re.703,
rams, 30.23

 

 

Criterion 1.4

 

The SEA has procedures to ensure that LEAs obligate
funds soier during the 27 month period of availability and
liquidate funds not later than 90 days after the end of the
funding period or an extension of that timeline authorized
by the Department.

 

 

No

 

34 can ??rerca
30.23

 

 

Criterion 1.5

 

 

The SEA has procedures to reallocate IDEA section 611
and section 01.9 subgrants, when appropriate, consistent
with the regulations.

Yes

34 CFR 
300.817

 

Criterion 1.6

 

 

The SEA has procedures to draw down funds based on
immediate needs; any interest accrued by the SEA or
LEAs in excess of $100 per year per account is returned
to the Department.

 

No

 

 

 

34 CFR 

 

Finding: Criterion 1.1: Based on the review of documents, analysis of data, and interviews with State personnel, OSEP finds that
the State does not have procedures to allocate the IDEA section 611 and section 619 subgrants to eligibie LEAs in accordance with
the IDEA. First. OSEP ?nds that while the State required some of the individual assurances, the State was not ensuring that each
LEA had submitted a plan that provides assurances to the SEA that the LEA meets each of the conditions in 34 CFR ??300 201
through 300.213 as part of its determination that an LEA is eligible for a Part subgrant. Specifically, the State did not require
assurances for all of the conditions in 34 ??300 201?300.211 and 300.213. Second, based on email correspondence provided

 

 

by the State on May 22, 2014 and November 26, 2014, and telephone interviews conducted with State personnel on October 22,
2014 and May 19, 201-5. OSEP finds that the State does not have procedures in place to alienate the IDEA section 611 and section
610 subgrants to eligible LEAs in accordance with the required formuia in 34 CFR 300.815 and 300.816, which
consists of a base, population, and poverty payment. Specificaily:

?i .

The SEA reported that it annually changes the totalramonnt it uses for base payments and the amount of the- base payment
each LEA receives under section 611 and section 619. Generally, when distributing the base payment to LEAs under section
611 and section 619, the SEA assigns a per child dollar value by dividing the total amount of funds available for base
payments by the totai number of chiidren with disabilities ages three through 21 for section 611', or ages three through five for
section 619, in. all LEAs. The SEA reported that it then multipiies this amount by the number of children in each LEA based
on the child count data from December 1, 1.908 for section 611 and December 1, 1996 for section 610. Based on the State?s
FFY 2014 allocation tabies, this approach resulted in the SEA increasing the totai amount available for base payments under

section 611 and reducing the amount available for base payments under section 6193, thereby resulting in adjusted base

payment amounts for each LEA. This approach results in LEAs not receiving base payments, base payment adjustments,
population, and poverty payments in accordance with the required formuia for allocating section 611 and section 61.9 funds.
As a result. LEAs may not have received the amount of section 811 and section 619 funds that they were entitled to under 34
CFR 300.815 and 300.816.

For LEAs that received a base payment of zero under section 611 and section 619 in theirfirst year of operation, the SEA
does not have a process :in place to adjust the base payment for the first fiscal year after the first annual child count in which
the LEAs report that they are serving children with disabilities.

Because the SEA does not have an application submission deadline, the SEA determines the amount of the section 611 and
section 619 subgrants all LEAs operating in the State are entitled to receive for a fiscal year, regardless of whether or not they
have submitted an approvable application by duly 1 of each year. For LEAs that do not submit an approvable application
during a Federal fiscal year, due to closure or a decision not to request Federal funds under Part of the IDEA, the SEA
places the funds that woutd have been allocated to those LEAs if they had submitted an approvable application into an
account of carryover funds. The SEA adds the ?carryoverfunds? to the funds available for allocation to all LEAs in the
subsequent Federal fiscal year, instead of distributing those funds to the LEAs that established eligibility in the initial Federal
?scal year. as required under 34 CFR and 300.815; retaining those funds for use at the State level to the extent
the State has not reserved the maximum amount it is permitted to reserve for State-level activities pursuant to 34 CFR
??300.?04? and 300.812; or for LEAs that elect not to apply for Part funds, using the payments that would have
otherwise been availabte to such an LEA to provide special education and related services directly to children with disabilities
residing in the area served by that LEA, as required by 34 CFR 

Citation: Under 34 CFR ?300.200, an LEA is eligible for assistance under Part of the IDEA fora fiscal year ifthe agency submits
a plan that provides assurances to the SEA that the LEA meets each of the conditions in 34 CFR ??300.201 through 300.213. Under
34 CFR and 300.815, each State that receives a grant under section 611 or section 61.9 of the IDEA for any fiscal year
must distribute any funds the State does not reserve under 34 CFR ??300704 or 300.81'2to LEAs in the State that have estabtished

 

their eligibility under section 613 of the IDEA. These funds must be distributed in accordance with the formuia specified in 34 CFR
and 399.816. U'nder 34 CFR and 390.81.6(aj, the State first must award each LEA the amount the LEA
would have received under section 911 for fiscal year 1999, or under section 61.9 for fiscal year 1997, if the State had distributed 75
percent of its grant for that year. Under 34 CFR and 399.816ib), base payment adjustments must be made if one or
more of the following. conditions exist: 1) a new LEA is created; 2) one or more LEAs are combined into a single new 3) for two
or more LEAs, geographic boundaries or administrative responsibility for providing services to children with disabilities ages 3
through 21 change; or 4) an LEA received a base payment of zero in its first year of operation, and it reports in a subsequent year
that it is now serving children with disabilities. If an LEA received a base payment of zero in its first year of operation, the SEA must
adjust the base payment for the first fiscal year after the first annual child count in which the LEA reports that it is serving any children
with disabilities. The State must divide the base allocation determined under 34 CFR and 399.816(a) for the LEAs
that would have been responsible for serving children with disabilities now being served by the LEA, among the LEA and affected
LEAs based on the relative numbers of children with disabitities ages 3 through 21 under section 911 and ages three through five
under section 919. currently provided special education by each of the LEAs. (34 CFR and In
addition, the requirements for allocating federal funds to new and significantiy expanding charter schools are detailed in 34 CFR
and in the Department?s December 2999 guidance titled ?How Does a State or Local Educational Agency Allocate
Funds to Charter Schools that are Opening for the First Time or Significantly Expanding their Enroilment?" (December 2999
Guidance). When making base payment adjustments for new or significantly expanding charter school LEAs, States must use the
method described in 34 CPR and for section 611 and 61.9 funds, respectively, for making base
payment adjustments when new LEAs are created. (See Responses to Questions 78-89 in the December 2999 Guidance.)1 Under
34 CFR an SEA must use the payments that would otherwise have been availabte to an LEA or to a State agency
to provide special education and related services directly to children with disabilities residing in the area served by that LEA, or for
whom that State agency is responsible, if the SEA determines that the LEA or State agency has not provided the information needed
to estabiish the eligibility ofthe LEA or State agency, or elected not to appiy for its Part allotment. under Part of the Act.

Further Action Required: Within 99 days of the receipt of this letter, the State must submit to OSEP:

1. Policies and procedures that demonstrate that the SEA ensure that each LEA has submitted a plan that provides
assurances to the SEA that the LEA meets each of the conditions in 34 CFR ??399 291 through 399.213 before it determines
that an LEA is eligihie for assistance under Part ofthe for a ?scal year.

2. Documentation of the section 911 and section 619 allocation that each LEA was entitied to receive in FFY 2914, FFY 2915.
andror FFY 2916 and the amount of the section 911 and section 619 allocation each LEA actually received in FFY 2914, FFY
291-5, andi?or FFY 2-916.

 

Although the regulatory citations have not been updated to reflect the IDEA Part regulations issued on August, 14, 2996 and December 1. 2998, the substance
ofthe December 2999 Guidance remains applicabic and is posted on the Department?s Web site. {Sec


 

3. For any LEA whose section 611 or section 61-0 allocation was less than the amount to which it was entitled in FFY 2014, FFY
201:5, andior FFY 2016, a calculation of the difference between the amount the LEA actually received and the amount of the
allocation the LEA should have received.

4. Documentation demonstrating that any LEA that received less than the amount of section 611 or section 619 funds to which it
was entitled in FFY 2014, FFY 2015, andi?or FFY 2016 was made whoie or a- plan outlining how the State wit! make these
LEAs whole during FFY 2016. The State may use any remaining FFY 2014 or FFY 2015 section 611 andior section 619
State set-aside funds or any FFY 2016 section 611 andior section 610 State set?aside funds that become available on Juiy 1,
2016 for this purpose.

5. Revised State policies and procedures that demonstrate the SEA will allocate the IDEA section 611 and section 619 subgrants
to eligible LEAs in accordance with 34 CFR and 300.616.

6. Revised. State poiicies and procedures that demonstrate the SEA will allocate FFY 201.5 and subsequent years? section 611
and: section 619 funds that the State originally set aside for LEAs that. do not submit an approvable application during a
Federal fiscal year in accordance with the allocation procedures under 34 CFR and 300.615 to the LEAs that
established in the initial Federal ?scai year in accordance with the formula used in that fiscal year, or retain those
funds for use at the State ievei to the extent the State has not reserved the maximum amount it is permitted to reserve for
State-level activities pursuant to 34 CF ??300.?04 and. 300.812, and for those LEAs that elect not to apply for Part E:
funds, use the payments that would have otherwise been availabie to such an LEA to provide special education and related
services directly to children with disabilities residing in the area served by that LEA, as required by 34 CFR 

T. A copy of the correspondence in which the State has informed its State audit office that is responsible for conducting audits in
accordance with the Single Audit Act and Subpart of the Uniform Guidance (former OMB Circutar of this finding of
noncompliance and required corrective actions.

Within 30 days of notification to the State that it has approved the revisions made to the policies and procedures, the
State must provide documentation that it has notified the LEAs of the revisions.

Finding: Criteria 1.1, 1.2 and 1.5: Based on the review of documents, analysis of data, email correspondence dated March 20.
2016, and a teiephone interview conducted with State personnel on May 19, 201.6, OSEP finds that the SEA's policy for shifting
funds, when an LEA has not requested reimbursement for all of its Federal funds before another LEA requests reimbursement from a
subsequent year?s Federal funds, is not consistent with the requirements for atiocating and reallocating funds to LEAs in 34 CFR
??300.?05, 300.816 and 300.8172 Specifically, the SEA's poiicy is that the SEA must draw down all of the States? oldest Federal
IDEA Part funds before it draws down Federal IDEA Part funds from a subsequent year. As a result, IDEA Part funds that are

 

3 Effective July I, 20i5, for IDEA Part FF?rr 2015 grant awards, IDEA Part funds are subject to the Uniform Administrative Requirements, Cost Principles,
and Audit Requirements for Federal Awards, codi?ed in 2 CFR Part 200 and commoniy referred to as the Uniform Guidance. The Uniform Guidance provisions
in 2 CFR Part 200 replaco provisions previously found in EDGAR in 34 CFR Parts 74 and 30 and prior OMB Circuiars A-ST and A433.

 

aliocated to one LEA are drawn down to pay for Part E: expenditures incurred by another LEA from a subsequent year's
allocation. When the initial LEA requests to draw down the funds, the SEA draws down funds from subsequent year Federai funds to
reimburse the LEA for its previous year expenditures.

Citation: Under 34 CFR and 300.815. each State that receives a grant under section 011 or section 819 of the IDEA
for any fiscal year must distribute any-'funds-the State does not reserve under 3'4 CFR ??300.704 or 300.812 to LEAs in the State
that have established their eiigibility under section 8t3 of the These funds must be distributed in accordance with the formuia
specified in 34 CFR ??300 705(0) and 300.818. Under 34 CFR LEAs have 27 months to obligate the funds. Under 34
and 300.817, in order to reallocate IDEA Part funds, the SEA must first determine that an LEA is adequately
providing FAPE to ail children with disabilities residing in the area served by that LEA with State and local funds. Once this is
determined, the SEA may reallocate any portion of the IDEA Part funds that are not needed by that LEA to provide FAPE, to other
LEAs in the State that are not adequately providing special education and related services to ail children with disabilities residing in
the areas served by those other LEAs. The SEA may also retain those funds for use at the State level to the extent the State has not
reserved the maximum amount of funds it is permitted to reserve for State-level activities pursuant to 34 CFR ??300.704 and
300.812. Under 34 CFR ?70.7-02, State and a subgrantee shaii use fiscal controi and fund. accounting procedures that insure
proper disbursement of and accounting for Federal funds." In addition, under 34 CFR fiscal control and accounting
procedures of the State, as weil as its subgrantees, must be sufficient to permit the tracing of funds to a level of expenditures
adequate to establish-that such funds have not been used in violation of the restrictions and prohibitions of applicabie statutes.3 The
SEA may not draw down funds that have been atlocated to one LEA and use them to reimburse another LEA uniess the SEA follows
the reailocation process under 34 CFR and 300.817. The only permissible way to allow an LEA to use Part 
funds allocated to another LEA is through the reallocation procedures in 34 CFR and 300.817.

Further Action Required: Within 00 days from the date of this letter, the State must develop and submit to OSEP policies and
procedures that demonstrate the SEA will conduct any realiocations cf Part funds in accordance with the requirements in 34
CFR and 300.817. See also further action required under Criterion 1.1.

Monitoring Area 2, IDEA Part 3: Use of Funds
 I Applicable.
Criterion Number I Requirement

 

 

 

 

 

Criterion 2.1 The SEA has procedures to ensure that funds are expanded No 34 CFR 
in accordance with the requirements of the IDEA Part B. 

[Criterion 2.2 ?The SEA has procedures to ensure that LEAs use IDEA  Yes H34 CFR ??300.1.0,

 

 

 

 

 

 

 

 

 

 

3 See footnote 2. Effective July 1, 20i 5 for Part FFY 2015 grant awards, the Uniform Guidance provision governing ?nancial management in 2 CFR
?200.302 replaces the provision previously found in 34 CFR ?80.20.

 

 

fiNoncompliance :Agpplicable
Criterion is! umber Description  identified? Requirement

 

 

funds only to pay the excess costs of providing special 
education and related services to children with disabilities in
accordance With 

 

 

 

 

 

 

 

Criterion 2.3 The SEA has procedures to ensure that LEAs spend the No 34 CFR ?300 133
required amount on providing special education and related
services to private schooi chiidren with
disabilities.

Criterion 2.4 The SEA has procedures to :provide an approved restricted No 34 CFR 
indirect cost rate (RICH) for its LEAs. 76.569

 

 

 

 

 

 

Criterion 2.5 The SEA has procedures to provide IDEA funds to- LEA No 34 CFR 
charter schools in accordance with IDEA and EDGAR. 300.209tc),

300.815-300616

 

 

Criterion 2.6 The SEA has procedures to ensure that each LEA provides No 34 CFR 
funds to charter-schools that are part cfthe LEA in the same 
manner it provides funds to its other schools.

 

 

 

 

 

 

 

Finding: Criterion 2.2: During the telephone interviews conducted on March 1:8, 2014 and lC?rctober 22, 2014, the State reported that
its excess cost computations are inconsistent with requirements set forth in 34 CFR ?300.16 and Appendix A to 34 CFR Part 300.
Specifically, the State?s procedures do not ensure that LEAs compute the excess costs separately for elementary school and
secondary school students.

Citation: Under 34 CPR and an LEA must-use IDEA Part funds only to pay the excess costs of providing
special education and related services to children with disabilities. Excess costs are those costs that are in excess of the average
annual: per-student expenditure in an LEA during the preceding school year for an elementary school or secondary school student, as
appropriate. and that are computed using the method described in 34 CFR and Appendix A to 34- CFR Part 300. As part of
its genera! supervisory responsibilities under 34 CFR ??300 149 and 300.600, the SEA must ensure that each LEA computes excess
costs in accordance with the requirements in 34 CF-R and Appendix A to 34 CFR Part 300. Further guidance explaining this
computation is availabie on the GRADS3ESO website at 

 

 

Further Action Required: Within 90 days of the date of this letter, the State must submit to 

1. Revised State policies and procedures that demonstrate the SEA wiil ensure that LEAs comply with excess cost
computation requirements, including computing the excess costs separately for elementary and secondary schooi students,
as set forth in 34 CFR ?300.16 and Appendix A to 34 CFR Part 300; and

2. A copy of the correspondence in which the State has informed its State audit office that is responsible for conducting audits in
accordance with the Single Audit Act and Subpart of the Uniform Guidance (former OMB CircuiarA-133), of this finding of
noncompliance and required corrective actions.

Within 30 days of OSEP's notification to the State that it has approved the revisions made to the policies and procedures, the State
must provide documentation. that it has notified the LEAs of the revisions.

Monitoring Area 3, IDEA Part B: ARRA

 

Criterion
Number

5 ?eserintion.

N'o'ncon'ipiiancez
identifies?

- Applicable
5 Requirement

 

Criterion 3.1

 

The SEA ensures that infrastructure investments are No
properly-certified and posted.

 

 

 

 

ARRA 511

 

 

Criterion 3.2

The SEA has procedures to ensure that LEAs comply with No
the "Buy American" requirements.

2 CFR ??1rseo
176.170

 

Criterion 3.3

 

The SEA has procedures to ensure that LEAs cornva with I No
the prevailing wage requirements.

2 CFR ??176.i80,
noise

 

 

Criterion 3.4

 

The SEA has procedures to ensure that it prevents and No
detects fraud, waste, and abuse.

 

 

 

 

 

 

inspector General Act
of 198? (PL. 100-504)

 

Finding: None.

Monitoring Area 4, Part B: Levei of Effort

 

Criterion
Number

N'on'co'n?ipiiance
Description; ide ratified?

Applicable
I Requirement

 

 

Criterion 4.1

 

The State has procedures to calculate its ?nancial support Yes
for special education and rotated services for children with
in accordance with the 

 

 

 

 

 

34 CFR ?300 163(3)

 

 

 

 

 

 

Criterion. - Noncompliance applicable
Number i Deacription identified? Requirement

 

 

 

 

 

Criterion 4.2 The SEA has procedures to ensure that each LEA budgets, No 34 CFR ?300.203(b)
for the education of chiidren with disabilities, at least the
Same amount as the-LEA spent for that purpose in the most
recent prior year for which information is available.

Criterion 4.3 The SEA has procedures to ensure that each LEA expands Yes 34 CFR 
at least the same amount as it expended in the immediate 300204600205

prior year for the education of children with disabilities,
unless the LEA has allowable exceptions or adjustments.

Criterion 4.4 The SEA's procedures for reviewing LEA MOE consider Yes 34 CFR ?300.203(b)
each of the following ways to calculate MOE: total local
funds; per capita local funds; total local and State funds; or
per capita local and State funds. The procedures for
reviewing LEA MOE find an LEA to have met MOE it the
LEA met MOE based on one or more of those comparisons.

 

 

 

 

 

 

 

 

 

 

 

 

Finding: Criterion 4.1: During the-telephone interview conducted on March 27, 2015, and confirmed in email correspondence dated
March 27, 2015, the State reported that its procedures for calculating the amount of State financial support made available for special
education and related services had not included the fuli amount of funds made available for special education and related services in
Arizona. Specifically, the State reported that, due to a calculation error, it had been subtracting the amount of local property tax levy
funds generated by districts from the total amount of funds it reported as made available through the State?s annual appropriation.
The local tax levy funds neither were not should have been inctuded in the amounts made avaitable by the State for special
education and related services. As a result, the reported amounts made available were tower than the amount of State ?nancial
support actually made available for special education and related services. The State self-identified this calculation error and
confirmed with OSEP that the local property tax levy amounts shouid not be factored into the State MFS calculation.

Citation: Under 34 CFR the State must not reduce the amount of State ?nancial support for special education and
related services for children with disabilities, or otherwise made available because of the excess costs of educating those children,
below the amount of that support forthe preceding fiscal year. The reference to ?State financiai support? in 34 CFR 553300.163 inctudes
the State ?nanciai support provided to or through the SEA, as welt as the financial support of ali State agencies that provide or pay for
special education and related services, as those terms are de?ned under the IDEA, to children with disabilities. See OSEP
Memorandum 105, Maintenance of State Financial Support under the Individuals with Disabilities Education Act, December 2, 2009
at 

 

 

Further Action Required: Subsequently, in the March 2015 email correspondence, the State provided documentation that
demonstrates the State corrected the identified noncompliance. In addition, in email correspondence dated May 8, 2015, the State
provided a revised version of Section of its FFY 2014 Part application to reflect this correction.

Finding: Criterion 4.3: Based on the review of documents, analysis of data, email correspondence from the State on May 22, 2014,
and interviews-with. State personnel conducted-on March 18, 2014, OSEP ?nds that the SEA does not have policies that are
consistent with the requirements in 34 CFR Specifically, the written policies allow LEAs to take the LEA MOE
red'uction in 34 CFR based on the departure of special education or reiated services personnei only if they reptace the
departing personnel with qualified, lower-salaried personnei.

Citation: Under 34 CFR except as provided in 34 CFR ??300.204 and 300.205, funds provided to an LEA under Part
must not be used to reduce the level of expenditures for the education of children with disabilities made by the LEA from local
funds below the level of these expenditures for the preceding fiscal year. Under 34 CFR ?300.204, an LEA may reduce the level of
expenditures by the LEA-under Part of the Act below the level of those expenditures for the preceding fiscal year if the reduction is
attributable to any of the exceptions in 34 CFR ?300.204(a) through Under 34 CFR the LEA may reduce the level
of expenditures if the reduction is attributable to the voluntary departure, by retirement or otherwise, or departure for just cause, of
special education or related services personnel. The LEA is not required to replace the personnel with quaiified, lower-salaried
personnel to take the reduction to LEA MOE.

Further Action Required: Within 90 days of the date of this letter, the State must submit to OSEP:
1. Revised State policies that are consistent with the ailowable exception under 34 CFR 

2. A copy of the correspondence in which the State has informed its State audit office that is responsibie for conducting audits in
accordance with the Single Audit Act and Subpart of the Uniform Guidance {former OMB Circular of this finding of
noncompliance and required corrective actions.

Within 30 days of notification to the State that it has approved the revisions made to the policies, the State must provide
documentation that it has notified the LEAs of the revisions.

Finding: Criterion 4.4: During the fiscal monitoring telephone interview conducted with State personnel on March 18, 2014, the SEA
reported that, when determining whether an LEA is eligible for a Part subgrant and when determining whether the LEA is in

 

4 On April 28, 2015, the Departmentpuhlished ?nal regulations on LEA MOE, which took effect on Juiy 1,2015. 30 Fed. Reg. 23644 {Apr. 23, 2015}. [n the
?nal regulations, the eligibility standard precedes the compliance standard in order to provide clarity. Therefore, the eligibility standard is set out in 
and the compliance standard is set out in The ?nal regulations clarify that an LEA meets the contpiiance standard ifil does not reduce the level of
expenditures for the education ofchildren with disabilities made by the LEA from local or State and local funds, on a total or per capita basis, below the level of
those expenditures from the same source for the preceding ?scal year, except as provided in ??300 204 and 300.205. Under both the prior and new LEA MOE
regulations, States must ensure LEAs are in compliance with the requirement to maintain effort.

 

compliance with the requirement to maintain effort in 34 CFR ?300.203, the State does not permit the LEA to demonstrate that it has

met either the eligibility or compliance standard based on a comparison of iocal tunds only on a total or per capita basis; consistent
with- 34 CFR and 

Citation: Under 34 CFR ?300.203{a) and except as provided in 34 CFR ??300.204 and 300.205, funds provided to an LEA
under-Part-Et-must not be used to reduce the-levei of expenditures for the education of children with disabilities made by the LEA
from local funds beiow the level of those expenditures for the preceding fiscal year. The regulation in 34 CFR ?300.203 includes
both a standard to be used as part of determining an eligibitity for an IDEA Part subgrant (eligibility standard) and a separate
standard for determining whether an LEA in fact spent as much local; or State and local, funds as required on the education of
children with disabilities (compliance standard). The SEA must provide LEAs the opportunity to meet the eligibility and the
compliance standard based on a comparison of: State and local funds on a total basis; (2) State and local funds on a per capita

basis; (3) local funds only on a total basis; or local funds oniy on a per capita basis, consistent with 34 CFR ?300.203(ai and
(bitiitii-

Further Action Required: Within 90 days of the date of this ietter; the State must submit to OSEP:

1. Revised State policies and procedures that demonstrate the SEA will permit LEAs to demonstrate that they meet their MOE
obligation (both eligibility and compliance} based on a comparison of local funds only; on a total or per capita basis;
consistent with 34 CFR and 

2. An assurance that the State will not take any recovery actions against an or deny an LEA eligibility for IDEA tunds; due
to an failure to maintain effort as required by 34 CFR ?300.203, unless the LEA was provided an opportunity to
demonstrate that it met its MOE obligation based on a comparison of locai funds only on a total or per capita basis; and

3. A copy of the correspondence in which the State has informed its State audit office that is responsible for conducting audits in
accordance with the Single Audit Act and Subpart of the Uniform Guidance (former OMB Circular A-133), of this finding of
noncompiiance and-OSEP?s required corrective actions.

Within 30 days of OSEP's notification to the State that it has approved the revisions made to the policies and procedures; the State
must provide documentation that it has notified the LEAs of the revisions.

 

5 See footnote 4 regarding new LEA MOE regulations. in order to clarify that LEAs may meet the eligibility standard and the compliance standard using any of
the four methods {Li} local funds oniy; (ii) the combination ofState and local funds, locai funds only on a per capita basis, or (iv) the combination of State
and iocal funds on a per capita basis}; the ?nal LEA MOE regulations list the four methods individually in both the eligibility standard in and the
compliance standard in The ability to use any ofthe four methods is not a change in the final LEA MOE reguiations, as the prior LEA MOE
regulation also provided for the use ofthe four- methods

Monitoring Area 5, man Part B: Procurement, Property, and Record

Retention

 

Critericm
Numbers?

 inscription-=-

Noncompliance
identified?

Applicable

 Reaui'rement

 

 

Criterion 5.1

The SEA obtains approval from the Department prior to Yes
using its State-level funds for equipment, construction
or alteration of 

34 CPR ?300.?158

 

 

Criterion 5.2

 

The SEA has procedures to ensure that an LEA obtains its No
approval prior to using funds for equipment.
construction or alteration of facilities.

34 are ?300.?18

 

 

Criterion 5.3

 

 

 

has procedures to ensure that its procurement No
mechanisms, and those used by its LEAs, conform to
applicable Federai law and State procurement rules.

 

 

34 CFR ?80.36

 

 

Criterion 5.4

The SEA has procedures to ensure that each LEA maintains No
'a physical inventory of property acquired with IDEA funds

and conducts inventories to reconcile with property records

at least once everyr two years.

34 CFR 

 

 

Criterion 5.5

The SEA has procedures to ensure that it, and its LEAs, do No
not award or obligate fonds toany party that has been
debarred or suspended.

34 one ?80.35

 

 

 

Criterion 5.6

 

 

 

 

The SEA has procedures to ensure it, and its maintain No
financial and programmatic records for the period of time
required by Federal law.

 

 

 

 

34 one @3042

 

Finding: Criterion 5.1: During the fiscal monitoring telephone interview conducted with State personnel on March 18, 2014, the SEA
reported that it did not have a process in place to obtain approval from the Department prior to using its State-level Part 
funds for equipment, construction, or atteration of and had used its State-levei Part funds for alteration of facilities
without obtaining such approval.

 

 

Citation: Under 34 CFR ?300.?1.8, it the Secretary determines that a programauthcrized under Part of the Act will be improved
by permitting funds provided to the SEA under Part to be used to acquire appropriate equipment,5 or to construct new or
alter existing facilities, the Secretary may allow the use of Part funds for those purposes. Therefore, the State must seek prior
approval from the Secretary before using Part Statedevel funds for these purposes.

Further Action Required: Within '90-days of the date of this ietterr the State must submit to 

1. Revised State policies and procedures that demonstrate the SEA wiil obtain approval from the Department prior to using its
Staterlevel IDEA Part funds for equipment, construction, or alteration of facilities, consistent with 34 CFR and

2. A copy of the correspondence in which the State has informed its State audit office that is responsible for conducting audits in
accordance with the Single Audit Act and Subpart ofthe Uniform Guidance (former OMB Circular ofthis finding of
noncompliance and OSEP's required corrective actions.

 

Monitoring Area 6, EDEA Part B: Fiscal Monitoring
criterion  I  I  glil'oncomplianee. :Applicable
[slumber .. 5 tireserietien- . identified? . {seamen-ant

 

 

 

The SEA has a reasonabiy designed system to monitor No 34 CFR ??80.26,
Criterion 6.1 subgrantees to ensure compliance with applicable Federal 80.40, 300.149,
fiscal requirements. 300.600

 

 

 

 

 

 

 

 

 

Finding: None.

 

5 2 CFR $00.33 de?nes equipment as tangible personal property {including information technology systems) having a useful life of more than one year and a
per-unit acquisition cost which equals or exceeds the lesser ofthe capitalization ievel established by the non-Federal entity for ?nancial statement purposes, or
$5,000. See also Capital assets, 200.20 Computing devices, 200.43 General purpose equipment, 200.53 information technology systems. 200.39
Special purpose equipment, and 200.94 Suppiies.

3 OSEP notes that subsequent to the March IS, 2014 interview with State personnel, ADE submitted requests for approval under 34 CPR ?300.?i?i8, which are
currently under review in}; the Department. OSEP appreciates attention to this matter.

FFY 20.16 Differentiated Monitoring and Support Engagement (EMS) Decisions
Arizona

Results Driven Accountability System for differentiated monitoring and support is designed to
provide differentiated ievels and types of monitoring and support based on each State?s unique 
progress, chalienges, and needs. To implement this system, OSEP developed a multi~tiered model for
monitoring and providing support that is based on the principle that supports are first provided at a core or
universal level to effectiver address the needs of all States and is focused on prevention to minimize the
need for more targeted or intensive engagement. Targeted monitoring and support is based on 
identification of common needs among multiple States, and intensive monitoring and support is reserved
for those State educational agencies and Lead agencies experiencing the most intense or complex
challenges to implementation.

To guide our designations for State monitoring and support at the universal, targeted and intensive levels in
the areas of results, compliance, the State Systemic Improvement Plan correctional education, and
fiscal management, DSEP developed an organizational assessment of States? progress in meeting
performance standards and compliance with the legal requirements ofthe Individuals with DiSabilities
Education Act, the Ed'Ucation Department General Administrative Regulations and the Uniform
Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Using Federal
Fiscal Year 2014 data for results, compliance, and the SSIP, and the most current data available for
correctional education and fiscal management, along with information about the factors contributing to
elevated needs, the support the State has accessed, the State?s capacity to improve results and compliance,
and additional contextual information about the State, OSEP determined the level of monitoring and
support necessary to meet the needs of each State.

As you are aware, we recently completed our first round of DM5 for Part B. For the current year?s process,
we once again examined results, compliance and fiscal data. In addition, we substituted correctional
education for dispute resolution as the special focus area, and added in the SSIP. Our analysis of the SSIP is
based on our review ofthe required elements within the Phase II submission, as well as information
obtained through follow up conversations with the State. Dur anaiysis of correctional education is based
on data from the EDFact?s Consolidated State Performance Reportl, the Civil Rights Data Collectionz, each
State?s Annual Performance Report, and each State?s data submitted under section 618 of the IDEA3. The
charts below list your designation and anticipated level of engagement in each area.

 

1? EDFacts Consolidated State Performance Report number of children with disabilities who were served
in a local juveriile corrections orjuvenlle detention program. The number of students in a local education agencyjuvenile
corrections or detention facility who obtained a high school diploma or GED In Facility.

2 Civil Rights Data 2013a2014: The total number of hours per year that educational program is offered during the reguiar school
year in a juvenile justice or detention facility.

3 618 Data 2013?2014: {1?1 The percentage of students with disabilities in a State that dropped out of school. The percentage
of students with who were suspended or expelled from school within a State.

 

 

Results

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9 Evaluation Plan

 

information and TA resources
available, and provide universal
support to all States. In addition,

 

Designation Factors" Existinngurrent Engagement New Engagement
Intensive Participation of children with DEEP continues to make DSEP will provide
disabilities on regular information and technical intensive support on
statewide assessments: assistance resources available, improving math and
0 4th grade reading - and provide universal support to all reading proficiency,
89.43 States. In addition, the State participation of CWD
0 8th grade reading receives technical assistance from on regular statewide
86.?2 the National Center for svstemic assessments,
4th grade math - Improvement (NCSI), the Earlv graduation, and drop?
90.34% Childhood Technical Assistance out rates.
8th grade math Center (ECTA), and the IDEA Data
87.66 
Performance of on the
National Assessment of
Educational Progress 
0 4th grade reading 
2.4%
8th grade reading -
25%
?lth grade math ?38 
8th grade math -25 
0 Percent dropped out
- 24%
a Percent of who
graduated with a regular HS
diploma-lists
Compliance
_Resignation Factors Existinngurrent Engagement New Engagement
Universal DSEP continues to make DSEP will provide
information and TA resources universal support.
available, and provide universal
support to all States. in addition,
the State is receiving technical
assistance from NCSI, IDC, and
CEEDAR.
SSIP
Designation Factors ExistinglCurrent Engagement New Engagement
intensive a 'Euidence?ased Practices DEEP continues to make will provide

intensive support to
improve the State?s
ca pacity to develop,

 

 

?1 Factors are only listed if 'a State has been designated as targeted or intensive in a particular area.

 

 

 

 

 

 

 

the State receives technical
assistance from NCSE, ECTA, and
IDC.

implement and
evaluate the SSIP.

 

 

 

Correctional Education

 

 

 

 

 

 

 

 

 

 

Designation Factors ExistingICuri-ent Engagement New Engagement
TargEiEd The percentage of students O-SEP continues to make OSEP will provide
with disabilities that dropped information and TA resources targeted support on
out of school available, and provide universai correctional education.
support to all States.
?Fiscal
Designation Factors ExistinglCurrent Engagement New Engagement
Intensive a Change in leadership DSEP continues to make OSEP will provide
a Audits information and TA resources intensive monitoring
a Unresolved fiscal monitoring available, and provide oniversai and support using
Findings; support to all States. OSEP has protocols on LEA

a Late liquidation request

 

provided TA on unresolved fiscai
findings. NCSI and CIFR have
provided TA on allocations, excess
cost and LEA MOE.

 

allocations and fiscal
monitoring.