July 7, 2003

Honorable Joel S. Gilbertson

Commissioner

Department of Health and Social Services

P.O. Box 110601

Juneau, Alaska 99811-0601

Dear Commissioner Gilbertson:

We have determined that your State's application for Federal Fiscal Year
(FFY) 2003 funds, under Part C of the Individuals with Disabilities
Education Act (Part C), can be approved. Therefore, I am enclosing your
State's Part C grant award.

The approval is based upon our receipt of your assurances for FFY 2003.
This includes the assurance from the Department of Health and Social
Services that the statewide system of early intervention services
required by Part C and its implementing regulations is in effect.

This year, a number of states have either established systems of
payments or are considering establishing or revising their systems of
payments. Under 34 CFR §303.173(a), each State's Part C application must
include the State's policies and procedures that identify: (1) how it
will pay for early intervention services (under 34 CFR §303.520(a)); (2)
any system of payments that the State chooses to establish (under 34 CFR
§303.521(a)); and (3) all funding sources (under 34 CFR §303.522).
Although a State is not required under Part C to access public and
private insurance available to a family, if a State requires parents
under Part C to access their public and/or private insurance, the State
must include this information in its Part C application as well as an
assurance, under 34 CFR §303.520(b)(3)(ii), that the inability of a
parent to pay will not result in the denial of any service under Part C.

States must ensure that all of the functions and early intervention
services under 34 CFR §303.521(b) are carried out at public expense
(i.e., no cost to the family). Additionally, under 34 CFR §303.521(c),
States that provide children with disabilities under age 3 with a free
appropriate public education (FAPE) under State law (i.e., birth-mandate
States) must ensure that no fees are charged for the FAPE services
provided to these children and their families. If a State has a system
of payments under 34 CFR §303.521(a), any parent fees collected

(for co-payments or other fees for services charged and received by the
State's Part C program) are "program income" under 34 CFR §80.25.
Program income is not included as part of total "State and local
expenditures" for purposes of a State's meeting the non-supplanting
requirements under Part C at 20 U.S.C. §1437(b)(5)(B) and 34 CFR
§303.124.

Your State has on file with the Secretary a system of payments under 34
CFR §303.521(a). As noted above, fees for services charged and received
by your State's Part C program are "program income" under 34 CFR §80.25.
This letter authorizes your State to add "program income" to its Part C
FFY 2003 grant such that the amount of program income received by your
State does not need to be deducted from the net allowable costs that can
be charged to the Part C grant (as would ordinarily be required under 34
CFR §80.25(g)(1)). When the State adds program income to the net
allowable costs charged to the Federal Part C grant, then, under 34 CFR
§80.25(g), all program income funds must be spent on FFY 2003 Part C
grant application purposes.

Part III of the FFY 2003 application for Part C funds requested updated
information about each State's restricted indirect cost rate. Based on
that form, it is our understanding that you do not currently have an
indirect cost rate as required under 34 CFR §76.563-76569. By accepting
Part C funds, your agency (as the lead agency designated under Part C)
is agreeing either to use a restricted indirect cost rate or cost
allocation plan as required by the Education Department General
Administrative Regulations (EDGAR) or to not charge indirect cost rates
to the Part C program. Since you do not have an approved rate, the
Department has determined that it is necessary to impose a temporary
restricted indirect cost rate until such time as you have obtained an
approved restricted rate from your cognizant Federal agency, and provide
documentation to that effect. Therefore, for the FFY 2003 Part C grant,
you may use an indirect cost rate not to exceed 7.95%. This rate is a
50% reduction from you current approved indirect cost rate of 15.9%; the
Department has calculated this percentage reduction as the average
reduction for Part C lead agencies that have gone from an unrestricted
rate to a restricted rate. This rate will remain in effect until we
receive evidence of an approved restricted rate.

## OSEP is aware that you are in the process of negotiating a restricted indirect cost rate with your cognizant agency, the Department of Health and Human Services. If you have questions, or need further assistance, please contact our indirect cost office in order to ensure that your use of Part C funds is consistent with EDGAR and OMB Circular A-87. Please forward to us any restricted indirect cost rate once it is approved by your cognizant agency. 

The enclosed grant award for FFY 2003 is made with the continued
understanding that this Office may, from time to time, require
clarification of information within your application and appendices, if
necessary. These inquiries are needed to allow us to appropriately carry
out our administrative responsibilities related to Part C.

We appreciate your ongoing commitment to the provision of quality early
intervention services to infants and toddlers with disabilities and
their families.

> Sincerely,

/S/ Patricia J. Guard for

Stephanie S. Lee

> Director
>
> Office of Special Education Programs

Enclosure

cc: Jane Atuk

Part C Coordinator