UNITED STATES DEPARTMENT OF EDUCATION

OFFICE OF SPECIAL EDUCATION AND

REHABILITATIVE SERVICES

REHABILITATION SERVICES ADMINISTRATION

WASHINGTON, D.C. 20202

[INFORMATION MEMORANDUM]{.underline}

RSA-IM-91-17

RSM-1050 [1]{.underline}/

DATE: April 17, 1991

TO : STATE VOCATIONAL REHABILITATION AGENCIES (GENERAL)

STATE VOCATIONAL REHABILITATION AGENCIES (BLIND)

RSA SENIOR MANAGEMENT TEAM

SUBJECT : SUBMISSION OF FINANCIAL STATUS REPORTS (SF-269) AND
CALCULATION OF MAINTENANCE OF EFFORT (MOE)

CONTENT : This information outlines the procedures that will be followed
by the Rehabilitation Services Administration (RSA) in calculating the
MOE levels in the Title I Vocational Rehabilitation (VR) Services
Program. It also revises the procedures for submission of SF-269s. All
references to the submission of the SF-269 are consistent with the
procedures outlined in Program Policy Directives (PPDs) 89-1, 90-6
(initially issued as PPD 90-10), and 90-5 (initially issued as PPD
90-6), except that submission of all SF-269 reports will be made to the
RSA Regional Offices, as outlined in Section A of this Information
Memorandum.

Section 111(a)(2)(B) of the Rehabilitation Act of 1973, as amended,
stipulates that state expendi- tures from non-Federal sources in any
fiscal year must be at least equal to the average of the prior three
fiscal years\' expenditures from non-Federal sources. RSA uses the
non-Federal expenditures, as reported on the SF-269, to calculate the
State\'s MOE level. Expenditures under the Title I VR Program are
defined as outlays plus unliquidated obligations.

[1]{.underline}/ Under Development

A state\'s MOE level is the average of the three prior years\'
non-Federal expenditures, as reported on the year-end, final, or fifth
quarter SF-269 (for those states which are reporting reallotment funds
that were obligated between October 1 and November 15 of the following
fiscal year). In the absence of final SF-269s, RSA must use the most
current information available to determine the MOE levels.

Beginning with FY 1990, a state\'s failure to meet the previous year\'s
MOE level results in the reduction of the current year\'s allotment by
the amount of the shortfall calculated from the previ- ious year. This
mandatory withholding is required by an amendment to the Rehabilitation
Act made by the Handicapped Program Technical Amendments Act of 1988
\[Section 111(a)(2)(B)\].

A. [Reporting Cycle]{.underline}\--As a condition of grant award,
financial reports [must]{.underline} be submitted by the grantees
according to the following schedule:

1\. [Quarterly SF-269s]{.underline}\--Submitted by the grantee within
thirty days of the end of each grant quarter, for the first three
quarters of the grant period. These reports are submitted to the RSA
Regional Offices (RO). The ROs use these reports to monitor the spending
patterns of the grantees. Reports for the first three quarters are never
used in the calcula- tion of MOE. Also, grantees will con- tinue to
submit to the RO quarterly reports after the year-end, until all
obligations are liquidated and a final SF-269 can then be submitted.
These quarterly reports are also due thirty days after the end of the
quarter \[34 CFR 80.41(b)(3) and (4)\].

2\. [Year-end SF-269]{.underline}\--Submitted by the grantee to the RSA
RO within ninety days of the end of the grant period. Since the grant
period ends on September 30, the report is due December 31. \[34 CFR
80.41(b)(4)\] These reports must be final unless (1) the grantee
requests and receives a waiver to the 90-day liquidation require-

ment \[34 CFR 80.23(b)\] or (2) the grantee received reallotted funds,
which were not obligated by September 30.

3\. [Fifth Quarter SF-269 Report]{.underline}\--Submitted to the RSA RO
by January 31 by any grantee that received reallotment funds, which were
not obligated until the beginning of the following fiscal year. These
re- allotment funds must be obligated by November 15 and be reported on
the fifth quarter report \[34 CFR 80.41(b)(4)\]. The report must be
final, unless a waiver of the 90-day liquidation rule has been granted
\[34 CFR 80.23(b)\].

4\. [Final SF-269s]{.underline}\--Submitted by the grantee to the RSA RO
when all obligations have been liquidated. Final reports must be (1)
submitted by December 31 by those grantees that either did not receive
reallotment funds or obligated all re- allotment funds by September 30
or (2) submitted by January 31 by those grantees that received
reallotment funds which were obligated between September 30 and November
15. A grantee may submit a final report after these two deadline dates
(December 31 or January 31, as appropriate) only if a waiver has been
granted to the 90-day liquidation re- quirement. If a waiver is granted,
the waiver specifies a new deadline date by which all obligations must
be liquidated and a final SF-269 must be submitted. A final report,
which shows an increase or decrease in the unobligated balance from that
reported on the year-end report, will require an explanation, as
outlined in A.5.

5\. [Explanation of Changes]{.underline}\--Some states may submit
revised reports. Revised reports should be sent to the RSA RO. For
[any]{.underline} revised or final SF-269s, a written explanation of
increases or decreases to previously reported unobligated balances or
non-Federal expenditures must be submitted by the state agency. RSA will
review the explanation of the changes and seek additional information,
if neces- sary. RSA will accept revisions which correct errors in
previous reports, adjust for disallowed costs, or liquidate obligations.
RSA will notify the grantee when a revised SF-269 has not been accepted.

B. [The Computation of the MOE Level for the Current
Year]{.underline}\--To compute the MOE level, RSA will use the SF-269,
either the year-end, fifth quarter, or final report received for each of
the three prior fiscal years (base years). The final report will always
be used, when available. If not available, the year-end or fifth quarter
will be used. The calculation of the current year\'s MOE level will be
based upon the average of the non-Federal share of expenditures reported
for the three base years. RSA will report to the grantees what the MOE
level will be for the current year.

RSA will continue to use those same reported non-Federal expenditures in
the MOE calculations for future years, until the final SF-269 is
received for any of the three base years. Upon submission of a final
SF-269 that is approved, RSA will then make any necessary adjustments in
the calculation of a State\'s current or future MOE level.

C. [Determination of Compliance with MOE levels for the Previous
Year]{.underline}\--RSA will compare reported expenditures to determine
if the previous year\'s MOE has been met.

1\. Meeting MOE\--If RSA has not received and approved a State\'s final
SF-269, a deter- mination of MOE compliance will be made using either
the year-end or fifth quarter report. Subsequently submitted and
approved SF-269s may alter a previous determination of compliance. RSA
may also change its determination that a State has complied with MOE in
any year if (1) RSA concludes that its original determination was made
in error, or (2) if through audit, including on-site monitoring, or
other means, it is found that the expenditure reports, upon which RSA
relied in making its determination, were inaccurate, or if expenditures
are otherwise disallowed. If an audit or other monitoring finding
results in a disallowance decision, which subsequently reduces
expenditure levels below those required, funds will be recovered in
accordance with the procedures set forth in 34 CFR Part 81.

2\. Not Meeting MOE\--If a state fails to meet its previously-computed
MOE level and has submitted a final SF-269 report for one or more of the
previous years that has been accepted by RSA, RSA will make any
necessary readjustments in the computa- tion of the MOE level. If the
recomputed MOE level shows that a state still fails to meet its previous
year\'s MOE level, RSA will notify the state of its short- fall by
letter and will provide the state an opportunity to respond. The state
may present evidence that it has, in fact, met the MOE requirement and
that the penalty action, reduction of the current year\'s allotment,
should not be assessed. This evidence must clearly explain the reasons
why the state believes it has met its MOE. RSA will review any
information submitted and make a determination on a case-by-case basis.
The MOE requirement applies to the state. If there are two state
agencies in a state, the expendi- tures are combined and if the state
fails to meet its MOE, any penalty will be assessed against a state
agency in pro- portion to its share of the shortfall \[34 CFR
361.86(b)(3)\].

If a state has a pending request for waiver of its MOE (see RSA Program
Policy Directive 90-5, originally issued as PPD 90-6), RSA will postpone
any penalty action of reduction of the current year\'s allocation until
action on the waiver request has been completed. All waiver requests
must be submitted as soon as the state has knowledge of its need and
believes it is eligible for a waiver, but no later than March 31 in the
year fol- lowing the grant, as outlined in Program Policy Directive
90-5.

If it is determined that a penalty must be assessed, the state\'s
current allocation will be reduced by the amount of its previous year\'s
MOE shortfall. Funds reduced through the penalty pro- vision become
available for reallotment. A state which has been penalized is still
eligible to participate in the regular reallotment of funds given up by
other States, but will not be eligible to receive a portion of the funds
withheld from that state. Because all funds available under the Program
must be awarded by RSA by September 30, [no adjustment to restore funds
can be made after that date]{.underline}.

D. [Failure by the State to Submit the Required SF-269]{.underline}\--If
a State fails to submit a SF-269, needed for the computation of the
current MOE level or to determine that the prior year MOE level has been
met, RSA may initiate one or more of the enforce- ment actions outlined
in 34 CFR 80.43. These actions include: (1) temporarily withholding cash
payments; (2) suspension or termination under the current award; (3)
withholding further awards for the program to include third or fourth
quarter allotment or reallotments; or (4) other legal remedies.

INQUIRIES : Director of Management Services\--(202) 732-1358.

Nell C. Carney

Commissioner