DMS

REPORT 

DIFFERENTIATED MONITORING AND SUPPORT

OFFICE OF SPECIAL EDUCATION PROGRAMS

U.S. DEPARTMENT OF EDUCATION

STATE MICHIGAN

DATE JANUARY 12, 2023 

IDEA PART C 

CONTENTS

LETTER ...................................................................................................................................1

MONITORING AND IMPROVEMENT ..........................................................................................4

FISCAL MANAGEMENT ...........................................................................................................7

DISPUTE RESOLUTION ..........................................................................................................12

APPENDIX .............................................................................................................................16
400 MARYLAND AVE., S.W., WASHINGTON, D.C. 20202-2600

www.ed.gov

The Department of Education’s mission is to promote student achievement and preparedness for global competitiveness by 

fostering educational excellence and ensuring equal access.

UNITED STATES DEPARTMENT OF EDUCATION

OFFICE OF SPECIAL EDUCATION AND REHABILITATIVE SERVICES

LETTER

Letter

January 12, 2023 

By E-Mail

Honorable Michael Rice, Ph.D.

State Superintendent 

Michigan Department of Education 

608 West Allegan Street

P.O. Box 30008 

Lansing, Michigan 48909 

Email: RiceM6@Michigan.gov 

Dear Superintendent Rice: 

The purpose of this monitoring report is to provide a summary of the results of the differentiated monitoring and 

support (DMS) activities conducted by the U.S. Department of Education’s (the Department) Office of Special 

Education Programs (OSEP). As part of its DMS process, States are monitored on their general supervision 

systems which encompasses the States’ responsibility to ensure that States and their subgrantees and contractors 

meet the requirements of the Individuals with Disabilities Education Act (IDEA). Those requirements include: 

1) Improving educational results and functional outcomes for all infants, toddlers, children, and youth with 

disabilities; and 2) Ensuring that public agencies meet the program requirements under Parts B and C of IDEA, 

with a particular emphasis on those requirements that are most closely related to improving educational results 

for infants, toddlers, children, and youth with disabilities. OSEP conducted its DMS monitoring in two phases: 

1) Document Request and Protocol Interviews; and 2) On-site/Virtual Visit.

1

 During Phase 1 of the DMS 

process OSEP examined the State’s policies and procedures regarding the following monitoring priorities and 

components of general supervision: 

• Monitoring and Improvement 

• Data including the State Performance Plan/Annual Performance Report (SPP/APR) 

• Fiscal Management: Single Line of Responsibility

• Dispute Resolution 

• Child Find 

This DMS monitoring report summarizes OSEP’s review of IDEA Part C requirements regarding these 

monitoring priorities and components. Specifically, OSEP conducted phone interviews with representatives 

from the State’s lead agency (LA), the Michigan Department of Education (MDE), January 1 through April 30, 

1 For additional information on DMS, see Resources for Grantees - Individuals with Disabilities Education Act. 
Page 2— State Superintendent 

2022, an onsite visit May 9 through May 11, 2022, and a virtual visit on May 16 and 17, 2022. Those interviews 

included staff from MDE’s Office of Great Start/Early Childhood Development and Family Education 

(OGS/ECD&FE) and MDE’s Office of Special Education (OSE).2 In addition to staff interviews, OSEP 

reviewed publicly available information, policies and procedures, and other related documents submitted to 

OSEP. Finally, in order to receive a broad range of perspectives on the State’s system of general supervision, 

OSEP also solicited feedback from a range of stakeholders and local early intervention service (EIS) providers. 

Based on its review of available documents and information and interviews conducted, OSEP has identified 

four findings of noncompliance in three areas of IDEA requirements at the conclusion of our monitoring 

activities. OSEP is making the following findings, listed below, and described in more detail further in the 

monitoring report, and has included required actions.

Finally, OSEP has not identified any noncompliance in the data component, therefore this section is not 

included in the narrative below. OSEP’s review of the data component did not examine implementation of the 

IDEA requirements by all the EIS providers within your State and OSEP cannot determine whether the State’s 

systems are fully effective in implementing these requirements without reviewing data at the local level.

Summary of Monitoring Priorities and Outcomes 

MONITORING COMPONENT FINDINGS SUMMARY

1. Monitoring and Improvement 1.1 OSEP finds that MDE does not have a general 

supervision system that is reasonably designed to 

monitor the provision of IDEA Part C services as 

required under 34 C.F.R. §§ 303.120, 303.342(e), 

303.344(d) and 303.700 through 303.702. 

2. Fiscal Management: Single Line of 

Responsibility

2.1 OSEP finds that the State does not conduct fiscal 

monitoring as required under 34 C.F.R. § 

303.120(a)(1) for two areas: payor of last resort 

requirements in 34 C.F.R. §§ 303.500 and 

303.510 and system of payment requirements in 

34 C.F.R. §§ 303.520 and 303.521. In addition, 

OSEP finds that the State does not consistently 

implement its Statewide system of payment 

(SOP) to ensure that IDEA Part C funds are not 

used for services that would have been otherwise 

paid for from another public or private source in 

its local service areas as required under the payor 

of last resort (POLR) requirements in 34 C.F.R. § 

303.510. 

2 MDE is the LA designated by the State’s Governor that receives funds to carry out their responsibilities under IDEA Part C. Within

MDE, the OGC/ECD&FE is the entity designated by the LA responsible for the implementation and monitoring of the Part C Early 

On early intervention service (EIS) providers.
Page 3— State Superintendent 

MONITORING COMPONENT FINDINGS SUMMARY

3. Dispute Resolution—Mediation 3.1 OSEP finds that the State does not select 

mediators on a random, rotational, or other 

impartial basis as required under 34 C.F.R § 

303.431(b)(2)(ii). 

3.2 OSEP finds that the State’s mediation policies 

and procedures are not consistent with the 

requirement under 34 C.F.R § 303.431(b)(7) that 

discussions that occur during the mediation 

process must be confidential.

We appreciate your efforts to ensure compliance and improve results for children with disabilities. If you have 

any questions, please contact your OSEP State Lead. 

Sincerely,

Valerie C. Williams

Director

Office of Special Education Programs

cc: Part C Coordinator 

Enclosure: 

DMS Monitoring Report 

Appendix 
OSEP DMS REPORT MICHIGAN | 2022 PAGE 4 

MONITORING AND IMPROVEMENT

MONITORING AND IMPROVEMENT

Background: 

During OSEP’s monitoring activities, OSEP and MDE staff discussed the DMS Integrated Monitoring and 

Sustaining Compliance and Improvement protocols which examine how MDE implements its general 

supervisory responsibility, including its policies and procedures to identify and correct noncompliance and 

improve educational results and functional outcomes for all infants and toddlers with disabilities. In addition, 

OSEP reviewed documents and other relevant materials provided by MDE.3 

MDE staff reported that the State coordinates the collection of data from a number of sources in order to report 

annually to the Department and the public. Data are collected through (1) the Michigan State Database System 

(MSDS), a web-based data system that is the main database for the collection of student records; and (2) the 

Catamaran system. Catamaran is used to track all monitoring activities in a single location, and helps service 

areas analyze and interpret data, including compliance and SPP/APR reporting requirements. Catamaran is 

managed by Public Center Consultants (PSC). PSC extracts data from the MSDS for all Federal student data 

reporting requirements. 

MDE is responsible for monitoring 56 service areas4 across the State and those service areas are responsible for 

the administration of the IDEA Part C program (Early On). Annually, MDE determines which service areas will 

be monitored by reviewing several risk factors including compliance rates, longstanding noncompliance, 

dispute resolution, and length of time since the previous monitoring visit. MDE reported that monitoring is 

completed on a cyclical schedule to ensure all service areas are monitored over a 6-year period. MDE monitors 

each service area through the Catamaran system, an interactive data system in which monitoring, and 

compliance activities are conducted. 

MDE reported that findings are issued in February of each year based on data collected within the MSDS during 

its October, February, and June data collections. During each data collection, MDE reviews MSDS data to 

verify compliance with IDEA requirements. If any noncompliance is identified, a written notification is sent to 

the service area through the Catamaran system to the service area within three months. The written notification 

includes the relevant State statute, the appropriate IDEA requirement, a description of the data supporting 

MDE’s conclusion, and the timeline required for correction. 

Once a finding is issued, the service area must develop and submit a corrective action plan (CAP) within 60 

days. MDE uses two types of CAPs to ensure the correction of noncompliance. The first type of CAP is the Fast 

Track CAP. The Fast Track CAP is issued when a service area has a high level of compliance (98% or higher) 

and “minor” noncompliance (no more than two findings have been identified). The second type of CAP is the 

Regular CAP, which is issued for all other noncompliance. After the initial CAP is received for approval by 

MDE, the CAP is either approved or sent back to the service area for revisions. 

While onsite, MDE demonstrated how the Catamaran system allows a service area to submit evidence of 

correction for each finding of noncompliance. When verifying the correction of all noncompliance, MDE 

requires the service area to submit a random sample of 10 percent of the most recent records from the service 

3 MDE provided its training materials, Catamaran Part C Monitoring Review Demo PowerPoint Presentation, Center for Educational 

Performance, and Information (CEPI) Student Data System District User Guide, Child Outcomes Data Manual, Monitoring and Data 

Document Inventory and other relevant materials.

4 MDE’s IDEA Part C services are provided by intermediate school districts (ISDs), also referred to as service areas.
OSEP DMS REPORT MICHIGAN | 2022 PAGE 5

MONITORING AND IMPROVEMENT

area files within the reporting period (i.e., a minimum of ten records but not more than 50 depending on the size 

of the service area, whichever is greater). MDE provided evidence that it uses a checklist based on the Federal 

IDEA and State requirements when reviewing each set of service area data to ensure that they are implementing 

the specific regulatory requirements and verifying correction for each individual instance of noncompliance. 

Legal Requirements:

In order to effectively monitor the implementation of IDEA Part C requirements, the State must have a system 

that is reasonably designed to ensure that the State can meet its general supervisory responsibility for 

monitoring the provision of IDEA Part C services as required under 34 C.F.R. §§ 303.120. 303.342(e), 303.344 

and 303.700 through 303.702. 

Under 34 C.F.R § 303.700(b), the primary focus of the State's monitoring activities must be on:

1. Improving early intervention results and functional outcomes for all infants and toddlers with disabilities 

and;

2. Ensuring that EIS providers meet the IDEA program requirements, with a particular emphasis on those 

requirements that are most closely related to improving EI results for infants and toddlers with 

disabilities.

As part of the State’s focus on improving results and outcomes, the State must monitor to ensure provision of 

IDEA Part C services to eligible children and families. Specifically, as a part of a State’s responsibilities under 

34 C.F.R. § 303.120(a)(2)(i) for monitoring and enforcement, the LA must monitor all EIS providers to ensure 

that IDEA Part C services are being provided consistent with the child’s Individualized Family Service Plan 

(IFSP). 

See Appendix I for a listing of additional legal requirements.

OSEP Analysis:

MSDS captures and reports data for the Early On program. MDE staff demonstrated that the Early On 

component of MSDS gathers service delivery data including length, frequency, and timeliness of all services 

provided for children with an IFSP. This includes all children with an active IFSP in Early On, and children 

who have exited Early On during the reporting period, regardless of eligibility for the State’s preschool special 

education program. The Early On component of MSDS also includes services provided for all children with an 

IFSP, including the initial, periodic, and annual IFSP. 

MDE staff acknowledged that it does not currently have a mechanism for verifying the EI service to ensure it is 

accurate or consistent with those planned on IFSPs at the local service area level. As of OSEP’s visit, the State 

was neither collecting data nor otherwise monitoring EIS providers to determine whether IDEA Part C services 

are being provided consistent with the IFSP. MDE staff stated that MSDS was recently enhanced to collect data 

related to EIS delivery but that, as of the date of OSEP’s visit, the data collected by that system was insufficient 

to ensure compliance with the IFSP implementation requirements across its service areas.

Conclusion and Action Required:

OSEP’s analysis is based on the documents and information provided by MDE and interviews with the State. 

MDE is responsible for the general administration and supervision of programs and activities administered by 

agencies, institutions, organizations, and EIS providers (service areas) receiving assistance under Part C. OSEP 

finds that MDE does not have a general supervision system that is reasonably designed to monitor the provision 
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MONITORING AND IMPROVEMENT

of IDEA Part C services as required under 34 C.F.R. §§ 303.120. 303.342(e), 303.344(d) and 303.700 through 

303.702. Specifically, MDE does not currently have a mechanism to verify implementation of IFSPs at the local 

level. 

Required Actions

Policies and Procedures—within 90 days of the date of this letter the State must submit: 

1. Updated policies and procedures documenting its process for monitoring or otherwise providing 

oversight of the provision of EI services consistent with the IDEA Part C IFSP requirements in 34 

C.F.R. § 303.344(d). This oversight should include the collection of information related to the length, 

duration, frequency, intensity, and method of EI services in MDE’s local service areas.

2. Evidence of any system updates and/or monitoring protocols that it has developed to provide oversight 

of IFSP implementation and provision of EI services. 

3. A timeline for monitoring or other oversight activities.

Evidence of Implementation—as soon as possible, but no later than one year from the date of this letter:

1. Actual monitoring reports or data demonstrating that MDE has implemented its revised policies and 

procedures and provided monitoring or other oversight of the requirements in 34 C.F.R. §§ 303.120, 

303.342(e), 303.344(d).
OSEP DMS REPORT MICHIGAN | 2022 PAGE 7 

FISCAL

FISCAL MANAGEMENT

Background:

During OSEP’s monitoring activities, OSEP and MDE staff discussed the IDEA Part C Single Line of 

Responsibility Fiscal Monitoring protocol. This protocol examines MDE’s role in specific fiscal areas including 

the general supervision, monitoring, funding, interagency coordination, and other responsibilities in meeting the 

requirements under Part C of IDEA. 

OSEP examined MDE’s general supervision system and fiscal monitoring activities to ensure that Early On has 

the necessary fiscal policies, procedures, and authority to verify compliance, issue findings of noncompliance, 

and take appropriate enforcement actions, where required. Early On is responsible for grant management, 

oversight, and fiscal accountability for the 56 service areas providing IDEA Part C services. 

OSEP also examined the Statewide system which implements the fiscal elements of the single line of 

responsibility under IDEA by interviewing staff from Early On and reviewing the following documents: The 

Early On Michigan Medicaid Agreement, State School Aid Act (SSAA) Section 54d Non-supplanting 

Requirement Q&A, Michigan’s Part C Fiscal Monitoring SOP, MDE Funding Flow Chart, the Single Line of 

Responsibility Mandated Activities and Interagency Projects Grant Management, the Early On Procedural 

Safeguards: Protecting Families’ Rights, Service Area Plans, Fiscal Review Reports, Budget Detail and Budget 

Summary Reports, OGS Steps for Reviewing Subrecipients, local service area Grant Award Notices, in addition 

to other documents related to their fiscal monitoring activities.

Michigan has been a birth mandate State since 1971. The State has a two-tiered system of eligibility that 

includes infants and toddlers eligible under the State’s Birth Mandate law, Michigan Mandated Special 

Education (MMSE), and infants and toddlers with disabilities found eligible for what MDE refers to as Part C 

Only services. Infants and toddlers eligible under both tiers of eligibility are served through Michigan’s Part C 

program, Early On. MDE communicated through interviews and document submissions that all Part C services 

are provided without fees or other out-of-pocket expenses to families. 

Prior to 2019, State funds were not allocated to support infants and toddlers served under the Part C Only tier. 

Through Public Act 58 of 2019 Michigan appropriated $7.15 million in State School Aid Act (SSAA) section 

54d funds to enhance Part C services beginning in fiscal year (FY) 2020. MDE reported that the amount of 54d 

funding has increased each year and that, in FY 2022 the State allocated $14.15 million in 54d funding for Early 

On. A portion of the 54d funds, based on determination of the service areas, now goes toward supporting EI 

services for eligible infants and toddlers under the Part C Only eligibility category. 

Prior to February 2021, MDE used the Michigan Electronic Grant System (MEGS+) and the MDE Cash 

Management System to track the use of IDEA Part C grant funds by Early On service areas. MDE reported that 

Early On service areas apply for IDEA Part C funds through an annual grant application. MDE reviews each 

service area’s application, including budget information, and analyzes “Service Area Plans” to ensure that they 

meet IDEA Part C requirements. Since February 2021, the functions of MDE’s MEGS+ and the Cash 

Management System have been moved to MDE’s NexSys system. MDE now uses NexSys to process IDEA 

Part C grant applications, track the use of Part C grant funds by Early On service areas, review expenditures and 

drawdowns against the grant applications, and provide State-wide access to grant-related data. MDE reported 

that all applications that were originated in MEGS+ will remain and be accessible for review. 

Early On is funded through Federal (including IDEA Part C and Medicaid reimbursement), State, and local 

funds. Michigan accesses School-Based Medicaid Services (SBS), which provides partial reimbursement to 

service areas for EI services including, but not limited to, evaluations, occupational therapy, physical therapy, 
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FISCAL

speech therapy, audiology, psychological services, social work, case management and assistive technology. 

MDE reported that accessing Medicaid through SBS does not affect a family’s Medicaid insurance benefits or 

result in costs to the family. Michigan Medicaid reimburses Early On for services that meet Medicaid 

requirements and are included in an IFSP. OSEP reviewed MDE’s Procedural Safeguards, Protecting Families’ 

Rights, which includes a section on voluntary consent. The voluntary consent section includes a requirement 

that prior to billing Medicaid or any other public benefit for Part C services, MDE must obtain written consent 

from parent or guardian. 

Michigan provides State funding for all children eligible under Part C. For infants and toddlers served under the 

birth mandate, State funding is provided to service areas through a reimbursement process. For infants and 

toddlers served under Part C only, 54d funds are allocated to service areas and available as a payor source for EI 

services.5

 To demonstrate eligibility for Part C Only, a child must demonstrate a 20 percent developmental 

delay or have an established condition.6 Infants and toddlers with greater developmental delays or more 

intensive needs may also qualify for services through MMSE. Eligibility for MMSE services is determined 

under one of the categories of eligibility within the Michigan Administrative Rules for Special Education 

(MARSE). About 40 percent of children who are eligible for Early On are also eligible for services under 

MMSE. Any child, birth to age 3, who qualifies under MMSE is also eligible for Early On. 

Legal Requirements:

Under 34 C.F.R. § 303.120(a)(1), each State’s system must include a single line of responsibility in a LA, 

designated or established by the Governor, that is responsible for the general administration and supervision of 

all EIS providers (regardless of whether they receive Federal IDEA funds), to ensure Statewide compliance with 

IDEA Part C requirements. As part of this responsibility, LAs must monitor and enforce the fiscal requirements 

under Part C of the IDEA, including the payor of last resort requirements in 34 C.F.R. §§ 303.500 and 303.510 

and the system of payment policies, such as use of public benefits or insurance or private insurance to pay for 

Part C services in 34 C.F.R. §§ 303.520 and 303.521. Further, under the payor of last resort requirements for the 

use of IDEA Part C funds in 34 C.F.R. § 303.510(a)(b), each State must ensure that IDEA Part C funds are not 

used for services that would have been otherwise paid for from another public or private source in its local 

service areas. Finally, under the requirements in 34 C.F.R. § 303.207, States must ensure that resources are 

made available under Part C for all geographic areas within the State. 

See Appendix I for explanation and listing of legal requirements. 

OSEP Analysis:

MDE reported that it utilizes Fiscal Review Reports as a monitoring mechanism to validate the assurances that 

Early On service areas make on IDEA Part C applications and certify the actual expenditures that have been 

made and reported by the service areas. MDE further reported that these reviews are performed by members of 

the MDE’s Office of Financial Management on a three-year cycle and are comprised of a general checklist 

(containing Federal and State requirements) and a component focused on particular areas of concern such as 

Single Audit findings, final expenditure report deviation, grant funds allocation, budget modification, timely 

submission of application, consultant response, turnover in staff, and last fiscal monitoring. MDE provided 

examples of its Fiscal Review Reports demonstrating that, as a part of its fiscal monitoring, The Fiscal Review 

Reports do not include payor of last resort, system of payment, or Medicaid billing. MDE reviews areas 

5 Note that 54d funding may be used for either EIS to children eligible under Part C Only or Michigan’s birth mandate.

6 List of established conditions.
OSEP DMS REPORT MICHIGAN | 2022 PAGE 9

FISCAL

including internal controls, policies and procedures, budgets, expenditures, equipment, and cash management. 

MDE also verifies the service areas final expenditure reports (FERs) as part of this process. MDE’s fiscal 

monitoring is limited to cross-cutting Federal fiscal requirements and does not include monitoring of IDEA Part 

C fiscal requirements. However, MDE reported that it uses NexSys and the Financial Information Database 

(FID) to collect budget and expenditure data from service areas in order to monitor the State’s compliance with 

IDEA Part C maintenance of effort requirements. 

In its Single Line of Responsibility Mandated Activities and Interagency Projects Grant Management document, 

MDE provided a description of its process to ensure oversight, track deliverables and provide supervision to 

contractors and interagency partners utilizing IDEA Part C funds to support infants and toddlers with 

disabilities and their families in Michigan. MDE walked OSEP through NexSys and Project Implementation 

Plans to demonstrate how it tracks deliverables and the supervision of contracts.

MDE reported that it distributes 80 percent of its IDEA Part C grant awards to service areas and reserves 20 

percent for State level activities. MDE further reported that it distributes IDEA Part C funds to service areas

using a methodology based on population. MDE’s funding formula for IDEA and 54d funds is based solely on 

population and does not account for the amount of local funding available (or other equity considerations). 

Based on this funding formula, MDE has created a structure that allows for an inequitable distribution of funds 

across service and geographical areas in the State. 

IDEA Part C funds reserved at the State Lead Agency level are used to administer several projects through the 

Clinton County Regional Educational Service Agency, including child find and professional development. 

MDE also contracts with the Inter-Tribal Council to provide child find activities. Many services areas use IDEA 

Part C funds to provide EI services to children eligible under the Part C Only category. The total amount of 

local, State, and Federal Funding sources (including Medicaid reimbursement) varies significantly across 

Michigan. 

MDE’s service areas report through NexSys on their use of funds, including IDEA Part C funds, through 

expenditure reporting, including the FERs. NexSys functions include:

• Expenditure Accounting

• Project/Program/Grant Accounting

• Payment Processing

• Cash Monitoring

• Financial Reporting

• Cost Accounting and Allocation

• Appropriation Accounting Inter-Agency Grant Accounting

• Budget Control/Monitoring

MDE provided examples of its Fiscal Review Reports, which examined a service area in the following areas: 

policies and procedures (including internal controls), budget, general expenditures, payroll expenditures, 

purchased services, equipment, capital outlay, cash management, and a FER verification. OSEP was not, 

however, able to verify that the fiscal monitoring being conducted by MDE includes monitoring for IDEA 

specific requirements, such as, payor of last resort and system of payments. Additionally, MDE does not ensure 

that service areas are monitoring their member districts on fiscal requirements. 

MDE also provided OSEP with examples of Service Plans that were submitted to MDE through NexSys. The 

Service Plans provided each service area with the option to select whether Medicaid is being used as a payor 

source. In the Service Plans submitted to OSEP, Medicaid is being accessed solely for children qualified under 

the birth mandate. Medicaid is not accessed for children found eligible under the Part C only category. As a 
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FISCAL

follow-up to its onsite visit, OSEP requested and received a list of service areas and that are using Medicaid as a 

payor source. MDE provided OSEP with an excel spreadsheet titled, Medicaid Billing by Local Service Areas, 

which included four years of data on when service area accessed Medicaid for the purposes of serving infants 

and toddlers under, the birth mandate (MMSE), Part C Only, and both MMSE and Part C Only. Based on the 

information in the spreadsheet there are currently 13 service areas that are not accessing Medicaid for either 

infants and toddlers served under the MMSE or its Part C Only designation. 

MDE stated that there are service areas that utilize 54d funds to provide direct services in their member 

districts. However, there were service areas that distributed the funds to their member districts and the districts 

provided the services. MDE reported that it does not conduct fiscal monitoring at the member district level. 

OSEP notes that MDE does not currently have a Method with its State Medicaid agency on file as part of its 

grant application with OSEP and has received conditional approval on its FFY 2021 and FFY 2022 Part C 

grants as a result. MDE submitted a draft of its proposed Method to OSEP on April 27, 2022. OSEP will review 

and respond to any methods the State is required to submit as part of the FFY 2023 application under IDEA 

sections 637(a)(2) and 640 to ensure financial responsibility for the provision of Part C services. OSEP's IDEA 

Part C Checklist for Fiscal Certification under 34 C.F.R. § 303.202, at http://osep-part-c.tadnet.org/materials, 

provides further guidance regarding this fiscal certification. 

Conclusion and Action Required:

OSEP’s analysis is based on the documents and information provided by Michigan and interviews with staff of 

MDE. Based on this analysis, OSEP finds that MDE does not have a Statewide fiscal monitoring system or 

effective internal controls in place to ensure compliance with the following requirements: 

OSEP finds that MDE is not monitoring to ensure consistent Statewide implementation of the payor of last 

resort requirements or its State system of payments. Under the payor of last resort requirements in 34 C.F.R. § 

303.510, Part C funds may not be used to satisfy a financial commitment for services that would otherwise have 

been paid for from another public or private source. Therefore, Part C funds may be used only for EI services 

that an infant or toddler with a disability needs but is not currently entitled to receive or have payment made 

from any other Federal, State, local, or private source. Under the requirements for a statewide system in 34 

C.F.R. § 303.500, each system must include written policies and procedures that meet the payor of last resort 

provisions in 34 C.F.R. §§ 303.510 through 303.521 (regarding the identification and coordination of funding 

resources for, and the provision of, early intervention services under part C of the Act within the State). 

Under 34 C.F.R. § 303.120(a)(1), each State’s system must include a single line of responsibility in a LA, 

designated or established by the Governor, that is responsible for the general administration and supervision of 

all EIS providers (regardless of whether they receive Federal IDEA funds), to ensure Statewide compliance with 

IDEA Part C requirements. As part of this responsibility, LAs must monitor and enforce the fiscal requirements 

under Part C of the IDEA, including the payor of last resort requirements in 34 C.F.R. §§ 303.500 and 303.510 

and the system of payment policies, such as use of public benefits or insurance or private insurance to pay for 

Part C services in 34 C.F.R. §§ 303.520 and 303.521. 

While MDE has a system of payments policy on file with OSEP, MDE has not ensured that its policy is being 

consistently implemented in all regions of the State. Consistent with the requirements in 34 C.F.R. § 303.207, 

OSEP is unclear how the lack of consistent implementation across the State regarding funding sources affects 

the State’s ability to ensure that resources are made available under Part C for all geographic areas within the 

State. Not accessing all payor sources may result in lower numbers of eligible children being served, reduction 

in the provision of EIS, and diminished outcomes for infants and toddlers in those service areas. The State does 
OSEP DMS REPORT MICHIGAN | 2022 PAGE 11

FISCAL

not have information on the length, duration, frequency, intensity, and method of EI services from their IFSPs. 

Therefore, OSEP is unable to assess the impact to services for those EI services not accessing Medicaid funds 

as a payment source.

Required Actions

Corrective Action Plan—within 90 days of the date of this letter the State must submit: 

1. A corrective action plan that includes timelines for implementation of activities related to ensuring that 

MDE’s system of payments is implemented consistently in all regions of the State incorporating IDEA 

Part C payor of last resort requirements. 

2. MDE’s CAP must include timelines and a list of supporting documentation that will be submitted to 

OSEP, including documentation related to:

a. Monitoring and other oversight of IDEA requirements such as Statewide implementation of its 

system of payments and payor of last resort policies;

b. Submit with its FFY 2023 grant application to OSEP under Section II.A.3.a. its method with its 

Medicaid agency;

c. Analysis of the impact of inconsistent access of Medicaid as a payor source on the provision of EI 

services and outcomes for infants and toddlers with disabilities; and 

d. Training activities provided to service areas regarding IDEA Part C fiscal requirements for a 

statewide system implementing MDE’s system of payments and ensuring compliance with IDEA 

payor of last resort requirements.

Evidence of Implementation—as soon as possible, but no later than one year from the date of this letter:

1. Training and implementation for each of the remaining 13 service areas on accessing Medicaid for 

eligible infants and toddlers consistent with the MDE’s system of payments and;

2. Implementation of MDE’s State-wide SOP policy in service areas impacted by their lack of access to 

Medicaid funding for EI services.
OSEP DMS REPORT MICHIGAN | 2022 PAGE 12 

DISPUTE RESOLUTION

DISPUTE RESOLUTION

Background:

During OSEP’s monitoring activities, OSEP and MDE discussed the DMS Dispute Resolution protocols which 

examine how Michigan implements its general supervisory responsibility in the area of dispute resolution to 

ensure and address potential noncompliance. OSEP reviewed the State’s dispute resolution policies and 

procedures, procedural safeguard and dispute resolution manuals, training materials, and other relevant dispute 

resolution reports and data provided by MDE. OSEP notes that, in accordance with 34 C.F.R. § 303.430(d)(2), 

the State has adopted the IDEA Part B due process hearing procedures under 34 C.F.R. §§ 303.440 through 

303.449. 

OSEP conducted virtual Dispute Resolution protocol interviews on February 16 and February 17, 2022, with 

the staff from the MDE’s OGS/ECD&FE, including consultants from Early On and the MDE's OSE Program 

Accountability Unit Supervisor and Dispute Resolution Contact. OSEP notes, as stated above, MDE has 

adopted the IDEA Part B due process hearing procedures. The OSE Program Accountability Unit Supervisor 

and Dispute Resolution Contact, in limited collaboration with staff from the OGS/ECD&FE, provided an 

overview of the dispute resolution process, citing guidance from the following manuals and other relevant 

resources: Michigan Administrative Rules for Special Education with Related IDEA Federal Regulations 

(updated June 2021), Procedural Safeguards Notice (updated October 2018), Early On Procedural Safeguards: 

Protecting Families Rights (updated February 2019), Special Education State Complaints: Procedures and 

Model Forms (updated June 2021), Special Education Dispute Resolution Options (updated June 2021), Special 

Education Due Process Complaint Procedures (updated January 2022). 

MDE has an active Memorandum of Understanding (MOU) with the Michigan Department of Administrative 

Hearings and Rules to execute responsibilities related to Due Process hearings. MDE has additional agreements 

with Special Education Mediation Services (SEMS) and Public Sector Consulting, the entity responsible for 

Catamaran. Catamaran, as outlined in the Monitoring and Data sections, is the data management system used by 

MDE to track activities and data related to IDEA and the Michigan Administrative Rules for Special Education 

(MARSE). According to MDE, Catamaran is designed to support districts and service areas in meeting their 

obligations under IDEA, MARSE, and State identified priorities. Catamaran and SEMS are managed by OSE 

and used by both OSE and the OGS/ECD&FE. 

Legal Requirements:

The State must have reasonably designed dispute resolution procedures and practices if it is to effectively 

implement: the State complaint procedures requirements in 34 C.F.R. §§ 300.151 through 300.153; the 

mediation requirements in 34 C.F.R. § 300.506; and the due process complaint and impartial due process 

hearing and expedited due process hearing requirements in 34 C.F.R. §§ 300.500, 300.507 through 300.518 and 

300.532. 

Under 34 C.F.R. § 300.506(a), each SEA must ensure that procedures are established and implemented to allow 

parties to disputes involving any matter under this part, including matters arising prior to the filing of a due 

process complaint, to resolve disputes through a mediation process. Under 34 C.F.R. § 300.506(b)(1), the 

State’s procedures must ensure that the mediation process: is voluntary on the part of the parties; is not used to 

deny or delay a parent’s right to a hearing on the parent’s due process complaint, or to deny any other rights 
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afforded under Part B of the IDEA; and is conducted by a qualified and impartial mediator who is trained in 

effective mediation techniques.

Under 34 C.F.R. § 300.506(c)(1)(i)–(ii), an individual who serves as a mediator may not be an employee of the 

SEA or the LEA that is involved in the education or care of the child and must not have a personal or 

professional interest that conflicts with the person’s objectivity.

See Appendix I for a listing of additional legal requirements.

OSEP Analysis:

OSEP reviewed all information shared during the protocol interviews, documents submitted during the DMS 

document request period, and those submitted during and after the on-site and virtual visits with MDE. MDE 

has reported four mediations and no due process complaints for FFYs 2019, 2020 and 2021. MDE received a 

State Complaint in the Spring of 2022 but had otherwise not recorded a State Complaint for the previous three 

years. 

IDEA mediation requirements are facilitated by SEMS with oversight from MDE. On June 15, 2022, OSEP 

received a clarification response from MDE regarding the number of mediators they currently have and the way 

in which they are assigned. MDE advised that they have 54 mediators who are generally assigned through their 

local partners (Community Dispute Resolution Centers) based on their availability once a mediation date has 

been set. Further, they described that an “all call” mediation request with the date, is generally sent out to the 

mediators covering that part of the State. MDE notes in their June 15 clarification response, as well as on the 

SEMS website, that occasionally specific mediators are requested by the mediation participants.

Additional documents received by email, the Agreement to Participate in a Special Education mediation and the 

Virtual Mediation Terms, detail an understanding and agreement set forth by SEMS, representing MDE, with 

the purpose of mediation participants acknowledging agreement by signature. On the Agreement to Participate 

in a Special Education Mediation document, there are nine statements that are meant to be agreed to and 

understood by mediation participants, including that confidentiality may be waived when all participants agree 

to do so in writing. Term number five, on the Virtual Mediation Terms document, further addresses 

confidentiality and directs that each party recognize that, given the use of information and communication 

technology, it is not possible to ensure that all communications will be confidential. Term number five, on the 

Virtual Mediation Terms document continues, that each party commits to minimizing the chance of 

inappropriate disclosures, that parties agree that no electronic, digital, or audio recording will be made of the 

mediation session, and that each party understands that it is not possible to completely control where or how 

some personal information may be collected, stored, or accessed. Finally, term number six on the Virtual 

Mediation Terms document, states that by signing the agreement, each party specifically agrees to mediation 

using an information and communication technologies platform, and releases MDE and associated mediation 

participants from any liability in the event of any inadvertent disclosure.

Throughout the DMS monitoring activities, the OSE Program Accountability Supervisor and Dispute 

Resolution Contact and representatives from SEMS and Public Sector Consulting provided insight into the 

system of general supervision as it relates to dispute resolution – Mediation, State Complaints, and Due Process. 

While the dispute resolution process is managed through Part B, intentional collaboration for internal 

organization that provides for the education, engagement, and alignment between MDE Part B and Part C in 

relation to these processes is recognized by the State as an area in need of improvement. MDE has 

acknowledged the need for improvement and communicated with OSEP during the protocol interviews and onsite visit that an internal work group specifically designed to establish a more collaborative and informed effort 

between the two programs has been formed.
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Conclusion and Action Required:

OSEP’s analysis is based on the documents and information provided by MDE and interviews with the State. 

Based on this analysis, OSEP finds that MDE does not have procedures and practices that are reasonably 

designed to implement the dispute resolution requirements of IDEA, specifically in the area of mediation. 

Because MDE did not receive any Part C State complaints or due process requests in FFYs 2019, 2020, and 

2021, OSEP could not determine the effectiveness of the State’s due process hearing procedures and practices.

Findings: Mediation

1. OSEP finds that the MDE’s mediation policies and procedures are not consistent with the requirement 

under 34 C.F.R § 303.431(b)(2)(ii) that the LA must select mediators on a random, rotational, or other 

impartial basis. MDE reports that an “all call” request with the date of mediation meeting is generally 

sent out to the mediators covering the area of the State where the request originated. Further, the SEMS 

website states that if parties want to choose a specific mediator from the roster, both the school and 

parent must agree on the individual. The State’s use of an “all call” request and the school and parent 

selection of a mediator do not ensure that mediators are selected on a random, rotational, or impartial 

basis, and therefore are out of compliance with the IDEA requirement. 

2. OSEP finds that MDE’s mediation policies and procedures are not consistent with the confidentiality 

requirements under 34 C.F.R § 303.431(b)(7), that ensure discussions that occur during the mediation 

process are confidential. On the SEMS website, participants are encouraged to consider participating in 

virtual mediation. In the Virtual Mediation Terms document provided by SEMS, participants are advised 

that it is not possible to ensure all communication will remain confidential. In order to participate in the 

virtual option, parties are required to sign the agreement, acknowledging release of liability in the event 

of any disclosures. Further, what is posted on the SEMS website under “Virtual Meetings,” is different 

than what is captured in the Virtual Mediation Terms document. Based on what is posted on their 

website, their virtual mediation platform is secure. 

Required Actions

Policies and Procedures—within 90 days of the date of this letter the State must submit: 

1. Documentation demonstrating that it has procedures and practices in place that are reasonably designed 

to implement the IDEA dispute resolution requirements of IDEA in accordance with 34 C.F.R. § 

303.431. Specifically, MDE must:

a. Provide evidence that mediators are selected on a random, rotational, or other impartial basis.

b. Provide evidence that discussions occurring during the mediation process, whether in-person or 

virtual, are confidential.

Recommendations

1. Under 34 C.F.R § 303.431(a), each LA must ensure that procedures are established and implemented to 

allow parties to disputes involving any matter under this part, including matters arising prior to the filing 

of a due process complaint, to resolve disputes through a mediation process at any time. Based on the 

information provided by MDE, it is unclear how a decision is made in determining whether facilitation 

or mediation will be utilized for the resolution of concerns. The definition of mediation, as provided by 

MDE, is in alignment with the Federal regulations. MDE defines facilitation as an early dispute 

resolution option which may be helpful during meetings involving complex or potentially challenging 

special education issues. Based on information retrieved from the SEMS website, mediation is 
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considered an option only if there is a specified area of disagreement. The SEMS website also reflects 

that mediation is an option for any dispute.

• OSEP recommends that MDE better define their practice of using facilitation as an early dispute 

resolution option and mediation as an option designated by IDEA. Further, OSEP recommends that 

MDE have more concise and consistent intake practices for determining use of these dispute 

resolution options. Under 34 C.F.R § 303.431(d), a lead agency may establish procedures to offer to 

parents and EIS providers that choose not to use the mediation process, an opportunity to meet, at a 

time and location convenient to the parents, with a disinterested party (1) who is under contract with 

an appropriate alternative dispute resolution entity, or a parent training and information center or 

community parent resource center in the State established under section 671 or 672 of the Act; and 

(2) who would explain the benefits of, and encourage the use of, the mediation process to parents.

2. Under 34 C.F.R § 303.431(b)(5), if the parties resolve a dispute through the mediation process, the 

parties must execute a legally binding agreement that sets forth that resolution. On the SEMS website, a 

feature of mediation is described as the ability to allow parties to draft an agreement. 

• OSEP recommends changing the verbiage on the SEMS website under Compare Resolution Options, 

and where otherwise stated, to reflect that if parties resolve a dispute through the mediation process, 

the parties must execute a “legally binding agreement.”

3. OSEP recommends that MDE better define their service agreement with SEMS and other service 

providers who may receive funding through IDEA. As part of a State’s system of general supervision, 

there must be mechanisms in place to monitor for services and other deliverables provided by their 

grantees. The 2014 Request for Proposal (RFP): Fiscal Agent for Michigan’s Statewide Dispute 

Resolution Program is used by OSE as the operational grant agreement, according to MDE. SEMS 

leadership refers to the 2014 RFP as the foundation for the SEMS grant objectives, and MDE considers 

SEMS a grantee. OSEP is unclear and needs more information on how MDE is using the service 

agreement with SEMS and what general oversight mechanisms are in place for this agreement. 
APPENDIX

APPENDIX

Monitoring and Improvement Legal Requirements:

In order to effectively monitor the implementation of Part C of the IDEA, the State must have policies and 

procedures that are reasonably designed to ensure that the State can meet:

1. Its general supervisory responsibility as required in 34 C.F.R. § 303.120. 

2. Its monitoring responsibilities in 34 C.F.R. §§ 303.700 through 303.702, and 

3. Its responsibility to annually report on performance of the State and of each Early Intervention Service (EIS) 

program, as provided in 34 C.F.R. §§ 303.700(a)(2) and 303.702(b)(2). 

 A State’s monitoring responsibilities include monitoring compliance by its EIS programs and providers 

(regardless of whether Federal IDEA Part C funds) with the requirements of IDEA Part C, to ensure that the LA 

can effectively carry out its general supervision responsibility under IDEA Part C, consistent with 

34 C.F.R. § 303.120(a)(2). 

Under 34 C.F.R. § 303.700(b), the State’s monitoring activities must primarily focus on: 

4. Improving early intervention results and functional outcomes for all infants and toddlers with disabilities; 

and

5. Ensuring that EIS programs and providers meet the program requirements under Part C of the Act, with a 

particular emphasis on those requirements that are most closely related to improving early intervention 

results for infants and toddlers with disabilities. Improving educational results and functional outcomes for 

all children with disabilities.

In exercising its monitoring responsibilities under 34 C.F.R. § 303.700(d), the State also must ensure that when 

it identifies noncompliance with IDEA Part C requirements by EIS programs and providers, the noncompliance 

is corrected as soon as possible, and in no case later than one year after the State’s identification of the 

noncompliance, as required under 34 C.F.R. § 303.700(e). 

Further, under 34 C.F.R. § 303.120 the State must have a system that includes a single line of responsibility in a 

lead agency designated or established by the Governor that is responsible for the following: (1) The general 

administration and supervision of programs and activities administered by agencies, institutions, organizations, 

and EIS providers receiving assistance under Part C of the Act; and the monitoring of programs and activities 

used by the State to carry out Part C of the IDEA (whether or not the programs or activities are administered by 

agencies, institutions, organizations, and EIS providers that are receiving assistance under Part C of the IDEA), 

to ensure that the State complies with Part C of the Act. The State must also have in effect a system that 

includes monitoring and enforcement requirements in 34 C.F.R. §§ 303.700 through 303.701 and 303.704. 

In addition, under 34 C.F.R. § 303.700(a)(1), the State must monitor the implementation of IDEA Part C and 

under 34 C.F.R. § 303.700(a)(4) must report annually on the performance of the State and each EIS program on 

the targets in the State’s Performance Plan. As a part of its monitoring responsibilities under these provisions, 

the LA must use quantifiable and qualitative indicators in the priority areas identified in 34 C.F.R. § 303.700(d) 

and the SPP/APR indicators established by the Secretary, consistent with 34 C.F.R. § 303.700(c). Each State 

also must use the targets established in the State's performance plan under 34 C.F.R. § 303.701 and the priority 

areas described in 34 C.F.R. § 303.700(d) to analyze the performance of each EIS program located in the State. 

34 C.F.R. § 303.702. 
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Data Legal Requirements:

To meet the data reporting requirements of IDEA sections 616 and 618 (as modified by IDEA section 642) and 

34 C.F.R. §§ 303.124, 303.224 and 303.701(c) and 303.720 through 303.724, the State must have a data system 

that is reasonably designed to collect and report valid and reliable data and information to the Department and 

the public in a timely manner and ensure that the data collected and reported reflects actual practice and 

performance. 

Fiscal Management Legal Requirements: 

Under 34 C.F.R. § 303.120(a)(1), each State’s system must include a single line of responsibility in a LA, 

designated or established by the Governor, that is responsible for the general administration and supervision of 

all EIS providers (regardless of whether they receive Federal IDEA funds), to ensure Statewide compliance with 

IDEA Part C requirements. As part of this responsibility, LAs must monitor and enforce the fiscal requirements 

under Part C of the IDEA, including the payor of last resort requirements in 34 C.F.R. §§ 303.500 and 303.510 

and the system of payment policies, such as use of public benefits or insurance or private insurance to pay for 

Part C services in 34 C.F.R. §§ 303.520 and 303.521. If the State LA identifies noncompliance, it must ensure 

that the noncompliance is corrected as soon as possible and in no case later than one year after the LA’s 

identification of the noncompliance consistent with 34 C.F.R. § 303.120(a)(2)(iv) and 303.700(e). Further, 

under 2 C.F.R. § 200.303, the LA must establish effective internal controls that provide reasonable assurance of 

compliance with “Federal statutes, regulations, and the terms and conditions of the Federal award,” and the LA 

must monitor its compliance with the requirements of the Federal award.

Dispute Resolution Legal Requirements:

Under 34 C.F.R. § 303.421(a), the State must ensure that prior written notice is provided to parents a reasonable 

time before the EIS provider proposes or refuses to initiate or change the identification, evaluation or placement 

of the infant or toddler or the provision of early intervention services. Under 34 C.F.R. § 303.421(b), this notice 

must be in sufficient detail to inform parents about the dispute resolution procedures. 

The State must have reasonably designed dispute resolution procedures and practices if it is to effectively 

implement:

1. The State complaint procedures requirements in 34 C.F.R. §§ 303.432 through 303.434; 

2. The mediation requirements in 34 C.F.R. § 303.431; and 

3. The due process complaint and impartial due process hearing requirements 34 C.F.R. §§ 303.440 through 

303.449. 

State Complaint Procedures 

Under 34 C.F.R. § 303.432, each LA must adopt written procedures for resolving any complaint, including a 

complaint filed by an organization or individual from another State, that meets the requirements of 

34 C.F.R. § 303.434. Under 34 C.F.R. § 303.434, the complaint, among other requirements, must be signed and 

written and contain a statement alleging that a public agency has violated a requirement of Part C of the Act or 

the Part C regulations including the facts on which the statement is based. Under 34 C.F.R. § 303.434(c), the 

complaint must allege a violation that occurred not more than one year prior to the date that the complaint is 

received. Under 34 C.F.R. § 303.433(a), the minimum State complaint procedures must include a time limit of 

60 days after the complaint is filed to:

1. Carry out an onsite investigation, if the LA determines that an investigation is necessary. 
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2. Give the complainant the opportunity to submit additional information, either orally or in writing, about the 

allegations in the complaint;

3. Provide the public agency with the opportunity to respond to the complaint, including, at a minimum—

a. At the discretion of the public agency, a proposal to resolve the complaint; and

b. An opportunity for a parent who has filed a complaint and the public agency to voluntarily engage in 

mediation consistent with 34 C.F.R. § 303.431;

4. Review all relevant information and make an independent determination as to whether the public agency is 

violating a requirement of Part C of the Act or of this part; and

5. Issue a written decision to the complainant that addresses each allegation in the complaint and contains—

a. Findings of fact and conclusions; and

b. The reasons for the LA’s final decision.

Under 34 C.F.R. § 303.433(b)(1), the State’s procedures must permit an extension of the 60-day time limit only 

if:

1. Exceptional circumstances exist with respect to a particular complaint, or

2. The parent (or individual or organization, if mediation or other alternative means of dispute resolution is 

available to the individual or organization under State procedures) and the public agency involved agree to 

extend the time to engage in mediation under 34 C.F.R. § 303.433(a)(3)(ii), or to engage in other alternative 

means of dispute resolution, if available in the State.

Mediation

Under 34 C.F.R. § 303.431(a), each LA must ensure that procedures are established and implemented to allow 

parties to dispute involving any matter under this part, including matters arising prior to the filing of a due 

process complaint, to resolve disputes through a mediation process. Under 34 C.F.R. § 303.431(b)(1), the 

State’s procedures must ensure that the mediation process—

1. Is voluntary on the part of the parties;

2. Is not used to deny or delay a parent’s right to a hearing on the parent’s due process complaint, or to deny 

any other rights afforded under Part C of the IDEA; and

3. Is conducted by a qualified and impartial mediator who is trained in effective mediation techniques.

Under 34 C.F.R. § 303.431(c)(1)(i)–(ii), an individual who serves as a mediator may not be an employee of the 

LA or an EIS provider that is involved in the provision of early intervention services or other services to the 

child and may not have a personal or professional interest that conflicts with the person’s objectivity.

Under 34 C.F.R. § 303.442(b)(1), the LA must convene a resolution meeting within 15 days of receiving notice 

of the parent’s due process complaint, and prior to the initiation of a due process hearing under 

34 C.F.R. § 303.433. Under 34 C.F.R. § 303.510(a)(3), the resolution meeting need not be held if the parent and 

the LA agree in writing to waive the meeting; or the parties agree to use the mediation process described in 

34 C.F.R. § 303.442(a)(3).

Under 34 C.F.R. § 303.442(b, if the LA has not resolved the due process complaint to the satisfaction of the 

parent within 30 days of the receipt of the due process complaint, the due process hearing may occur. Under 

34 C.F.R. § 303.442(c) the 30-day resolution period may be adjusted to be shorter or longer if one of the 
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circumstances identified in that paragraph are present. Under 34 C.F.R. § 303.447(a), the LA agency must 

ensure that not later than either 30 days or 45 days (consistent with the LA’s written policies and procedures 

adopted under 34 C.F.R. § 303.440(c)) after the expiration of the 30-day period in 34 C.F.R. § 303.442(b), or 

the adjusted 30-day time periods described in 34 C.F.R. § 303.442(c)) that a final decision is reached in the 

hearing; and a copy of the decision is mailed to each of the parties, unless under 34 C.F.R. § 303.447(c), a 

hearing officer grants a specific extension of the 45-day timeline at the request of either party. Any party 

aggrieved by the findings and decision made under 34 C.F.R. §§ 303.440 through 303.445 who does not have 

the right to an appeal under 34 C.F.R. § 303.446(b), and any party aggrieved by the findings and decision under 

34 C.F.R. § 303.446(b), has the right to bring a civil action with respect to the due process complaint under 

34 C.F.R. § 303.440.