Vol. 80 Tuesday, 

No. 81 April 28, 2015 

Part II 

Department of Education 

34 CFR Part 300 

Assistance to States for the Education of Children With Disabilities; Final 

Rule 


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DEPARTMENT OF EDUCATION 

34 CFR Part 300 

RIN 1820–AB65 

[Docket ID ED–2012–OSERS–0020] 

Assistance to States for the Education 

of Children With Disabilities 

AGENCY: Office of Special Education and 

Rehabilitative Services, Department of 

Education. 

ACTION: Final rule. 

SUMMARY: The Secretary of Education 

(Secretary) amends regulations for Part 

B of the Individuals with Disabilities 

Education Act (Part B or IDEA). These 

regulations govern the Assistance to 

States for the Education of Children 

with Disabilities program and the 

Preschool Grants for Children with 

Disabilities program. These 

amendments revise the regulations 

governing the requirement that local 

educational agencies maintain fiscal 

effort. 

DATES: These regulations are effective 

on July 1, 2015. 

Applicability dates: The Subsequent 

Years rule for Fiscal Years 2014 and 

2015, stated in final § 300.203(c)(1), 

reiterates the relevant provision of the 

2014 Appropriations Act and the 2015 

Appropriations Act, respectively. As 

explained in the Effective Date section 

of the Analysis of Comments and 

Changes, the 2014 and 2015 

Appropriations Acts made the 

Subsequent Years rule applicable for 

IDEA Part B grants awarded on July 1, 

2014, and July 1, 2015, respectively. 

FOR FURTHER INFORMATION CONTACT: 

Mary Louise Dirrigl, U.S. Department of 

Education, 550 12th Street SW., 

Potomac Center Plaza, Room 5156, 

Washington, DC 20202–2641. 

Telephone: (202) 245–7324. If you use a 

telecommunications device for the deaf 

(TDD) or a text telephone (TTY), you 

may call the Federal Relay System (FRS) 

at 1–800–877–8339. 

SUPPLEMENTARY INFORMATION: We amend 

the regulations governing the Assistance 

to States for Education of Children with 

Disabilities program and the Preschool 

Grants for Children with Disabilities 

program. 

On September 18, 2013, the Secretary 

published a notice of proposed 

rulemaking (NPRM) in the Federal 

Register (78 FR 57324) to amend the 

regulations in 34 CFR part 300 

governing these programs. In the 

preamble to the NPRM, the Secretary 

discussed the changes being proposed to 

the regulations governing the 

requirement that LEAs maintain effort, 

specifically: (1) The compliance 

standard; (2) the eligibility standard; (3) 

the level of effort required of an LEA in 

the year after it fails to maintain effort; 

and (4) the consequence for a failure to 

maintain local effort. These final 

regulations adopt the proposed 

amendments with modifications to 

improve organization, clarity, and 

flexibility for LEAs. 

Major Changes in the Regulations 

The following is a summary of the 

major changes in these final regulations 

from the regulations proposed in the 

NPRM. The rationale for each of these 

changes is discussed in the Analysis of 

Comments and Changes section of this 

preamble. 

• We moved the regulations 

governing eligibility for an IDEA Part B 

subgrant (sections 611 and 619 of the 

IDEA) from proposed § 300.203(b) to 

§ 300.203(a). 

• We added language to the eligibility 

standard in § 300.203(a)(1) to clarify the 

four methods that LEAs may use to meet 

this standard: (1) Local funds only, (2) 

the combination of State and local 

funds, (3) local funds only on a per 

capita basis, or (4) the combination of 

State and local funds on a per capita 

basis. 

• We changed the language in the 

eligibility standard in § 300.203(a)(1) to 

provide that the comparison year is the 

most recent fiscal year for which 

information is available, regardless of 

which method an LEA uses to establish 

eligibility. 

• We added language in the eligibility 

standard in § 300.203(a)(2) to provide 

that, when determining the amount of 

funds that the LEA must budget to meet 

the requirement in paragraph 

§ 300.203(a)(1), the LEA may take into 

consideration, to the extent the 

information is available, the exceptions 

and adjustment provided in §§ 300.204 

(exceptions for local changes) and 

300.205 (adjustment for Federal 

increase) that the LEA: (i) Took in the 

intervening year or years between the 

most recent fiscal year for which 

information is available and the fiscal 

year for which the LEA is budgeting; 

and (ii) reasonably expects to take in the 

fiscal year for which the LEA is 

budgeting. 

• We added language in 

§ 300.203(a)(3) to clarify that 

expenditures made from funds provided 

by the Federal government for which 

the State educational agency (SEA) is 

required to account to the Federal 

government, or for which the LEA is 

required to account to the Federal 

government directly or through the SEA, 

may not be considered in determining 

whether an LEA meets the eligibility 

standard in § 300.203(a)(1). 

• We moved the regulations 

governing compliance from proposed 

§ 300.203(a) to § 300.203(b). 

• We changed the language in the 

compliance standard in § 300.203(b)(1) 

to state that the comparison year is the 

preceding fiscal year, regardless of 

which method an LEA uses to establish 

compliance. 

• We added language to the 

compliance standard in § 300.203(b)(2) 

to clarify the four methods that LEAs 

may use to meet this standard: (1) Local 

funds only, (2) the combination of State 

and local funds, (3) local funds only on 

a per capita basis, or (4) the combination 

of State and local funds on a per capita 

basis. 

• We replaced proposed § 300.203(c) 

with three paragraphs—§ 300.203(c)(1), 

(2), and (3)—to improve clarity and 

readability. 

• The new § 300.203(c)(1) 

implements the requirement in the 

Consolidated Appropriations Act, 2014 

(2014 Appropriations Act) and the 

Consolidated and Further Continuing 

Appropriations Act, 2015 (2015 

Appropriations Act) that, for the fiscal 

years beginning on July 1, 2014, and on 

July 1, 2015, respectively, the level of 

effort an LEA must meet in the fiscal 

year after it fails to maintain effort is the 

level of effort that would have been 

required in the absence of that failure, 

not the LEA’s reduced level of 

expenditures. 

• The new § 300.203(c)(2) is 

applicable to any fiscal year beginning 

on or after July 1, 2015, and addresses 

the level of effort an LEA must maintain 

in a fiscal year after it fails to maintain 

effort, and the LEA is relying on local 

funds only, or local funds only on a per 

capita basis. The level of expenditures 

required of the LEA is the amount that 

would have been required under 

paragraph (b)(2)(i) or (iii) in the absence 

of that failure, not the LEA’s reduced 

level of expenditures. 

• The new § 300.203(c)(3) is 

applicable to any fiscal year beginning 

on or after July 1, 2015, and addresses 

the level of effort an LEA must maintain 

in a fiscal year after it fails to maintain 

effort, and the LEA is relying on a 

combination of State and local funds, or 

the combination of State and local funds 

on a per capita basis. The level of 

expenditures required of the LEA is the 

amount that would have been required 

under paragraph (b)(2)(ii) or (iv) in the 

absence of that failure, not the LEA’s 

reduced level of expenditures. 

• We added language in § 300.203(d) 

to clarify that, if an LEA fails to 


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maintain its level of expenditures for 

the education of children with 

disabilities, the SEA is liable in a 

recovery action for either the amount by 

which the LEA failed to maintain its 

level of expenditures in that fiscal year 

or the amount of the LEA’s Part B 

subgrant in that fiscal year, whichever is 

lower. 

• We made conforming changes to 

§§ 300.204, 300.205, and 300.208. 

• We added a new ‘‘Appendix E to 

Part 300–Local Educational Agency 

Maintenance of Effort Calculation 

Examples’’. 

Public Comment 

In response to our invitation in the 

NPRM, more than 300 parties submitted 

comments on the proposed regulations. 

The perspectives of parents, individuals 

with disabilities, teachers, related 

services providers, State and local 

officials, and others were very important 

in helping us identify where changes to 

the proposed regulations were necessary 

and in formulating those changes. 

Analysis of Comments and Changes 

An analysis of the comments and of 

any changes in the regulations since 

publication of the NPRM follows. We 

group comments and our responses to 

them by these subjects and sections: 

THE SUBSEQUENT YEARS RULE, 

§ 300.203(c) 

EFFECTIVE DATE 

LEA COMPLIANCE, § 300.203(b) 

Compliance Standard and Methodology 

Comparison Year 

Exceptions and Adjustment 

Data Retention and Administration 

LEA ELIGIBILITY, § 300.203(a) 

Eligibility Standard and Methodology 

Comparison Year 

Exceptions and Adjustment 

SEA Review 

Ineligibility 

FAILURE TO MAINTAIN EFFORT AND 

CONSEQUENCE, § 300.203(d) 

Legal Authority 

Burden on SEAs 

Calculating Penalties 

MISCELLANEOUS COMMENTS 

Generally, we do not address: 

(a) Minor changes, including 

technical changes made to the language 

published in the NPRM; 

(b) Suggested changes the Secretary is 

not legally authorized to make under 

applicable statutory authority; 

(c) Suggested changes that are beyond 

the scope of the changes proposed in the 

NPRM, including comments and 

suggestions relating to the scope and 

meaning of the exceptions and 

adjustment in §§ 300.204 and 300.205, 

except as those issues are directly 

related to the NPRM; and 

(d) Comments that express concerns 

of a general nature about the U.S. 

Department of Education (Department) 

or other matters that are not germane, 

such as requests for information about 

innovative instructional methods or 

matters that are within the purview of 

State and local decision-makers. 

However, the Department intends to 

issue guidance on LEA maintenance of 

effort (MOE) and to continue to provide 

technical assistance to States to address 

State-specific concerns. 

The Subsequent Years Rule, 

§ 300.203(c) 

Throughout the Analysis of 

Comments and Changes, we reference 

the Subsequent Years rule. The rule, as 

provided in final § 300.203(c), applies to 

LEAs that fail to maintain effort and 

provides that, in the fiscal year after an 

LEA fails to maintain effort, the level of 

effort the LEA must meet under 

§ 300.203 is the level of effort that 

would have been required in the 

absence of that failure, not the LEA’s 

actual reduced level of expenditures. 

Comment: Some commenters 

supported the Subsequent Years rule, 

which provides that, in the fiscal year 

after an LEA fails to maintain effort, the 

level of effort it must meet under 

§ 300.203 is the level of effort that 

would have been required in the 

absence of that failure, not the LEA’s 

actual reduced level of expenditures. 

Other commenters disagreed and 

asserted that the intent of the IDEA was 

to ensure that LEAs not reduce their 

level of expenditures for the education 

of children with disabilities from the 

preceding fiscal year, regardless of 

whether the LEA maintained effort in 

the preceding fiscal year. 

Some commenters expressed concern 

that the Subsequent Years rule does not 

address the flexibility LEAs need as 

State and Federal funding levels shrink 

and as the demographics and 

educational needs of their students vary 

from year to year. These commenters 

recommended revising the proposed 

regulation to permit an LEA to use the 

preceding fiscal year as the comparison 

year to meet the compliance standard, 

regardless of whether the LEA met the 

compliance standard in that year. 

In addition, a few of these 

commenters stated that the Subsequent 

Years rule is inconsistent with the IDEA 

and referenced the Subsequent Years 

provision in another section of the IDEA 

related to State financial support. 

Section 612(a)(18)(D) of the IDEA (20 

U.S.C. 1412(a)(18)(D)). These 

commenters stated that, while Congress 

provided an explicit requirement for 

maintenance of State financial support 

in any fiscal year following a fiscal year 

in which a State failed to maintain State 

financial support, Congress did not 

address what happens in a fiscal year 

after an LEA fails to maintain effort. The 

commenters, therefore, concluded that 

Congress did not intend to provide for 

a Subsequent Years rule applicable to 

LEA MOE. 

Discussion: The Department 

continues to believe that when an LEA 

fails to maintain its required level of 

expenditures, the level of expenditures 

required in future fiscal years is the 

amount that would have been required 

in the absence of that failure, and not 

the LEA’s actual expenditures in the 

fiscal year in which it failed to meet the 

compliance standard. We formally 

adopted this interpretation in April 

2012, and it is based on a careful 

consideration of the statutory language, 

structure, and purpose. See April 4, 

2012, letter to Ms. Kathleen Boundy, 

available at http://www2.ed.gov/policy/

speced/guid/idea/letters/2012-2/

index.html. 

Section 613(a)(2)(B) and (C) of the 

IDEA (20 U.S.C. 1413(a)(2)(B) and (C)) 

provides four exceptions and an 

adjustment that permit an LEA to 

lawfully reduce its expenditures for the 

education of children with disabilities 

when compared to the preceding fiscal 

year. The absence of an exception in the 

statute for the failure of an LEA to meet 

the compliance standard in the 

preceding fiscal year strongly supports 

that such a failure does not reduce the 

level of expenditures required in future 

years. In light of the detail with which 

other exceptions are laid out in the 

statute, we believe that the IDEA’s 

silence on the level of expenditures 

required in the fiscal year after an LEA 

has failed to meet the compliance 

standard does not reflect an intent by 

Congress to permit LEAs to benefit from 

a violation of the IDEA. Indeed, 

Congress included the Subsequent Years 

rule in the 2014 Appropriations Act, 

Public Law 113–76, 128 Stat. 5, 394 

(2014), and in the 2015 Appropriations 

Act, Public Law 113–235, 128 Stat. 

2130, 2499 (2014) and used language 

substantially similar both to the 

language the Department used in the 

NPRM and to the language in the 

Subsequent Years subparagraph of the 

maintenance of State financial support 

provision in section 612(a)(18)(D) of the 

IDEA. These factors strongly support the 

Department’s conclusion that the 

Subsequent Years rule reflects 

congressional intent. 

Furthermore, allowing an LEA to 

permanently reduce spending for the 

education of children with disabilities 

by failing to comply with the IDEA in 

a preceding fiscal year is inconsistent 

with the purpose of the MOE 


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1All references to a ‘‘fiscal year’’ in these 

regulations refer to the fiscal year covering that 

school year, unless otherwise noted. 

requirement, which is to ensure a 

continuation of at least a certain level of 

non-Federal expenditures for the 

education of children with disabilities, 

and would provide a long-term financial 

incentive for noncompliance. 

We also believe that permitting an 

LEA to reduce expenditures for the 

education of children with disabilities 

for reasons not specifically stated in the 

exceptions and adjustment in section 

613(a)(2)(B) and (C) of the IDEA (20 

U.S.C. 1413(a)(2)(B) and (C)) would 

likely have a negative effect on the 

amount and type of special education 

and related services available for 

children with disabilities. This result 

would be contrary to the overall 

purpose of the IDEA, which is ‘‘to 

ensure that all children with disabilities 

have available to them a free 

appropriate public education.’’ Section 

601(d) of the IDEA (20 U.S.C. 1401(d)). 

To provide additional clarity on the 

Subsequent Years rule and other issues 

raised in comments the Department 

received, we have included a number of 

tables in the Analysis of Comments and 

Changes. In addition, we are including 

all of the tables in a new Appendix E 

in order to ensure that they will be 

included when these final regulations 

are published in the Code of Federal 

Register. Tables 1 through 4 provide 

examples of how an LEA may comply 

with the Subsequent Years rule. Figures 

are in $10,000s. In Table 1, for example, 

an LEA spent $1 million in Fiscal Year 

(FY) 2012–2013 on the education of 

children with disabilities.1 The 

following year, the LEA was required to 

spend at least $1 million but spent only 

$900,000. In FY 2014–2015, therefore, 

the LEA is required to spend $1 million, 

the amount it was required to spend in 

2013–2014, not the $900,000 it actually 

spent. 

TABLE 1—EXAMPLE OF LEVEL OF EFFORT REQUIRED TO MEET MOE COMPLIANCE STANDARD IN YEAR FOLLOWING A

YEAR IN WHICH LEA FAILED TO MEET MOE COMPLIANCE STANDARD

Fiscal year Actual level of 

effort 

Required level 

of effort Notes 

2012–2013 ....................................... $100 $100 LEA met MOE. 

2013–2014 ....................................... 90 100 LEA did not meet MOE. 

2014–2015 ....................................... ........................ 100 Required level of effort is $100 despite LEA’s failure in 2013–2014. 

Table 2 shows how to calculate the 

required level of effort when there are 

consecutive fiscal years in which an 

LEA does not meet MOE. 

TABLE 2—EXAMPLE OF LEVEL OF EFFORT REQUIRED TO MEET MOE COMPLIANCE STANDARD IN YEAR FOLLOWING

CONSECUTIVE YEARS IN WHICH LEA FAILED TO MEET MOE COMPLIANCE STANDARD

Fiscal year Actual level of 

effort 

Required level 

of effort Notes 

2012–2013 ....................................... $100 $100 LEA met MOE. 

2013–2014 ....................................... 90 100 LEA did not meet MOE. 

2014–2015 ....................................... 90 100 LEA did not meet MOE. Required level of effort is $100 despite LEA’s 

failure in 2013–2014. 

2015–2016 ....................................... ........................ 100 Required level of effort is $100 despite LEA’s failure in 2013–2014 and 

2014–2015. 

Table 3 shows how to calculate MOE 

in a fiscal year after which an LEA spent 

more than the required amount on the 

education of children with disabilities. 

This LEA spent $1.1 million in FY 

2015–2016 though only $1 million was 

required. The required level of effort in 

FY 2016–2017, therefore, is $1.1 

million. 

TABLE 3—EXAMPLE OF LEVEL OF EFFORT REQUIRED TO MEET MOE COMPLIANCE STANDARD IN YEAR FOLLOWING YEAR

IN WHICH LEA MET MOE COMPLIANCE STANDARD

Fiscal year Actual level of 

effort 

Required level 

of effort Notes 

2012–2013 ....................................... $100 $100 LEA met MOE. 

2013–2014 ....................................... 90 100 LEA did not meet MOE. 

2014–2015 ....................................... 90 100 LEA did not meet MOE. Required level of effort is $100 despite LEA’s 

failure in 2013–2014. 

2015–2016 ....................................... 110 100 LEA met MOE. 

2016–2017 ....................................... ........................ 110 Required level of effort is $110 because LEA expended $110, and met 

MOE, in 2015–2016. 

Table 4 shows the same calculation 

when, in an intervening fiscal year, 

2016–2017, the LEA did not maintain 

effort. 


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TABLE 4—EXAMPLE OF LEVEL OF EFFORT REQUIRED TO MEET MOE COMPLIANCE STANDARD IN YEAR FOLLOWING YEAR

IN WHICH LEA DID NOT MEET MOE COMPLIANCE STANDARD

Fiscal year Actual level of 

effort 

Required level 

of effort Notes 

2012–2013 ....................................... $100 $100 LEA met MOE. 

2013–2014 ....................................... 90 100 LEA did not meet MOE. 

2014–2015 ....................................... 90 100 LEA did not meet MOE. Required level of effort is $100 despite LEA’s 

failure in 2013–2014. 

2015–2016 ....................................... 110 100 LEA met MOE. 

2016–2017 ....................................... 100 110 LEA did not meet MOE. Required level of effort is $110 because LEA 

expended $110, and met MOE, in 2015–2016. 

2017–2018 ....................................... ........................ 110 Required level of effort is $110, despite LEA’s failure in 2016–2017. 

To increase understanding of, and 

therefore compliance with, the 

Subsequent Years rule, and to address 

Congress’s adoption of it for FYs 2014 

and 2015 (the fiscal years beginning on 

July 1, 2014 and July 1, 2015, 

respectively) in the 2014 Appropriations 

Act and 2015 Appropriations Act, we 

divided proposed § 300.203(c) into three 

paragraphs. 

The first, § 300.203(c)(1), states the 

Subsequent Years rule for FYs 2014 and 

2015, respectively, as provided by the 

2014 and 2015 Appropriations Acts. 

Section 300.203(c)(1) states that if, in 

the fiscal year beginning on July 1, 2013 

or July 1, 2014, an LEA fails to meet the 

requirements of § 300.203 in effect at 

that time, the level of expenditures 

required of the LEA for the fiscal year 

subsequent to the year of the failure is 

the amount that would have been 

required in the absence of that failure, 

not the LEA’s reduced level of 

expenditures. In short, the 2014 

Appropriations Act requires the LEA to 

maintain effort, in 2014–2015, at the 

level that the LEA maintained in 2013– 

2014, unless the LEA did not meet the 

effort required in that year. If it did not, 

the LEA must maintain effort at the 

level that the LEA should have 

maintained in 2013–2014, which is the 

level from the preceding fiscal year, 

2012–2013. Similarly, the 2015 

Appropriations Act requires the LEA to 

maintain effort, in 2015–2016, at the 

level that the LEA maintained in 2014– 

2015, unless the LEA did not meet the 

effort required in that year. If it did not, 

the LEA must maintain effort at the 

level that the LEA should have 

maintained in 2014–2015, which is the 

level from the preceding fiscal year, 

2013–2014. 

The second paragraph, 

§ 300.203(c)(2), is applicable beginning 

on July 1, 2015, and sets out the 

Subsequent Years rule for when an LEA 

failed to meet the compliance standard 

using local funds only, or local funds 

only on a per capita basis, in a 

preceding fiscal year, and the LEA is 

relying on the same method to meet the 

eligibility or compliance standard in a 

subsequent year. 

The third paragraph, § 300.203(c)(3), 

is also applicable beginning on July 1, 

2015, and sets out the Subsequent Years 

rule for when an LEA failed to meet the 

compliance standard using a 

combination of State and local funds, or 

a combination of State and local funds 

on a per capita basis, in a preceding 

fiscal year, and the LEA is relying on the 

same method to meet the eligibility or 

compliance standard in a subsequent 

year. 

Changes: We replaced proposed 

§ 300.203(c) with a clearer articulation 

of the Subsequent Years rule in three 

paragraphs, § 300.203(c)(1), (2), and (3). 

Final § 300.203(c) accounts for the 

adoption of the Subsequent Years rule 

for FY 2014 in the 2014 Appropriations 

Act, and, for FY 2015 in the 2015 

Appropriations Act, but does not change 

the substance of the Subsequent Years 

rule from what was proposed in the 

NPRM. 

Effective Date 

Comment: Some commenters 

requested that the effective date of these 

regulations be extended to a date later 

than July 1, 2014, because SEAs and 

LEAs will need additional time to revise 

their policies and procedures. Several 

commenters recommended that the 

effective date be removed altogether, 

because the proposed regulations did 

not change LEAs’ existing obligation to 

maintain effort, which, some 

commenters stated, dates to 1997. Those 

commenters stated that the proposed 

July 1, 2014, effective date would permit 

some LEAs that did not maintain effort 

in a fiscal year prior to the fiscal year 

that begins on July 1, 2014, to take 

advantage of that failure. 

Discussion: There appears to have 

been confusion among some 

commenters about the effective date 

proposed in the NPRM. We proposed 

July 1, 2014, because that date was to be 

the beginning of the first grant award 

period after the date on which these 

regulations were published. The 

beginning of the first grant award period 

after publication of these regulations is 

now July 1, 2015. We have, therefore, 

made July 1, 2015, the effective date of 

these regulations. We believe this gives 

SEAs and LEAs sufficient time to revise 

their policies and procedures. This does 

not mean, however, that the obligation 

of an LEA to maintain effort, or to 

comply with the Subsequent Years rule, 

begins on that date. 

To the contrary, as we previously 

explained, the 2014 Appropriations Act 

and the 2015 Appropriations Act made 

the Subsequent Years rule applicable for 

the grant year beginning on July 1, 2014, 

and July 1, 2015, respectively. On 

March 13, 2014, the Office of Special 

Education Programs (OSEP) issued a 

letter to Chief State School Officers 

explaining the relevant provision of the 

2014 Appropriations Act related to the 

Subsequent Years rule, and stating that 

the provision was effective for Part B 

grants awarded on July 1, 2014. See 

March 13, 2014 letter to Chief State 

School Officers, available at http://

www2.ed.gov/policy/speced/guid/idea/

memosdcltrs/lea-moe-3-13-14.pdf. 

Prior to that, in 2012, OSEP issued the 

April 4, 2012, letter to Ms. Kathleen 

Boundy addressing this issue. In that 

letter, the Department set out the 

Subsequent Years rule, which stated 

that the level of effort that an LEA must 

meet in the year after it fails to maintain 

effort is the level of effort that it should 

have met in the preceding fiscal year 

and not the LEA’s actual expenditures 

for that year. While these regulations 

codify this position, this has been the 

Department’s interpretation of the 

statute since the letter to Ms. Boundy 

was issued. Therefore, the Department’s 

expectation is that SEAs and LEAs have 

been complying with this interpretation 

since FY 2012–2013. 

For FY 2012–2013, an LEA must have 

maintained at least the same level of 

expenditures as it did in the preceding 

fiscal year, FY 2011–2012, unless it did 


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not meet the compliance standard in 

that year. If it did not, the LEA must 

determine what it should have spent in 

FY 2011–2012, which is the amount that 

it actually spent in the preceding fiscal 

year, FY 2010–2011. 

The Department is unable, as some 

commenters suggest, to make these 

regulations effective back to 1997. The 

Department’s guidance about MOE prior 

to April 2012 was not always consistent 

with the current interpretation. For 

example, our 2011 letter to Dr. Bill East 

offered different guidance on the 

Subsequent Years rule. See June 16, 

2011, letter to Dr. Bill East, available at 

http://www2.ed.gov/policy/speced/guid/

idea/letters/2011-2/

east061611partbmoe2q2011.pdf We 

cannot now fault an SEA or an LEA for 

following the Department’s earlier 

guidance, and therefore cannot extend 

the effective date of the rules back to 

1997. 

Changes: The effective date of these 

regulations is July 1, 2015. 

Comment: One commenter requested 

that we add a paragraph (d) to § 300.203 

that would, in effect, provide that States 

could not determine that LEAs were out 

of compliance with the MOE 

requirement for any fiscal year for 

which the State had previously 

determined the LEA to be in 

compliance. 

Discussion: Because the Department 

may not impose retroactive 

requirements on grantees, it is not 

necessary to include in the final 

regulations a separate provision 

indicating that States and LEAs that 

were determined to be in compliance 

with the regulations in effect at the time 

of the receipt of a grant or subgrant may 

rely on those determinations of 

compliance. The Department does not 

expect States to revisit their compliance 

determinations. 

Changes: None. 

LEA Compliance, § 300.203(b) 

Compliance Standard and Methodology 

Comment: Some commenters 

suggested that the regulation be revised 

to reflect the order of the process so that 

the eligibility standard is set out before 

the compliance standard. 

Discussion: We agree that the 

eligibility standard should precede the 

compliance standard and that doing so 

will provide additional clarity. 

Therefore, we have set out the eligibility 

standard in § 300.203(a) and the 

compliance standard in § 300.203(b). 

Changes: We have revised final 

§ 300.203(a) to specify the eligibility 

standard and final § 300.203(b) to 

specify the compliance standard. We 

also have made conforming changes in 

§§ 300.203(c), 300.204, 300.205, and 

300.208. 

Comment: Commenters raised many 

questions and concerns about the four 

methods by which an LEA may meet the 

compliance standard. One commenter 

requested that the proposed regulations 

specifically list the four methods 

available to LEAs. Some commenters 

requested that the Department clarify 

that SEAs are required to allow LEAs to 

meet the compliance standard using any 

of the four methods. Other commenters 

stated that the proposed regulations 

emphasize meeting the MOE 

requirement using local funds only. 

Discussion: We agree that additional 

clarification is needed regarding the 

four methods by which an LEA may 

meet the compliance standard. We also 

agree that listing the four methods 

individually in the compliance standard 

will make it easier to understand that an 

LEA may meet the compliance standard 

using any one of these four methods and 

that SEAs must permit LEAs to do so. 

Listing the four methods individually 

should also clarify that the regulations 

do not emphasize meeting the 

compliance standard using local funds 

only or local funds only on a per capita 

basis. 

Changes: We have revised final 

§ 300.203(b)(2) to clarify that an LEA 

meets the compliance standard if it does 

not reduce the level of expenditures for 

the education of children with 

disabilities made by the LEA from at 

least one of the following sources below 

the level of those expenditures from the 

same source for the preceding fiscal 

year: (i) Local funds only; (ii) the 

combination of State and local funds; 

(iii) local funds only on a per capita 

basis; or (iv) the combination of State 

and local funds on a per capita basis. 

Comment: A few commenters 

requested clarification regarding 

whether and how LEAs may change 

methods to establish compliance from 

one year to the next. A commenter 

asked whether an LEA must use the 

same method to meet the compliance 

standard in a fiscal year that it used to 

meet the eligibility standard for that 

same year. 

Discussion: LEAs may change 

methods to establish compliance from 

one year to the next. Many LEAs will 

meet the compliance standard for a 

fiscal year using more than one method. 

An LEA is not required to use the same 

method to meet the compliance 

standard in a fiscal year that it used to 

meet the eligibility standard for that 

same year. For example, if an LEA meets 

the eligibility standard for FY 2016– 

2017 using local funds only, it is not 

required to meet the compliance 

standard for FY 2016–2017 using local 

funds only. Likewise, an LEA is not 

required to use the same method to meet 

the eligibility standard in a subsequent 

year that it used to meet the compliance 

standard in a preceding fiscal year. For 

example, if an LEA met the compliance 

standard for FY 2016–2017 using a 

combination of State and local funds, 

the LEA is not required to meet the 

eligibility standard for FY 2017–2018 

using a combination of State and local 

funds. 

An LEA may demonstrate that it 

meets the eligibility standard using any 

of the four methods. Similarly, during 

the course of an audit or other 

compliance review, the LEA may 

demonstrate that it met the compliance 

standard using any of the four methods. 

Selecting a particular method does not 

mean that the LEA did not meet the 

compliance standard using any of the 

other methods, or that the LEA cannot 

rely on those other methods to identify 

the amount of expenditures it must 

budget in order to meet the eligibility 

standard in a future fiscal year. It simply 

means that the LEA only has to meet the 

eligibility or compliance standard using 

one method. 

LEAs may meet the compliance 

standard using alternate methods from 

year to year. For example, an LEA met 

the compliance standard in FY 2016– 

2017 using all four methods. During a 

compliance review, the LEA provided 

data to the SEA demonstrating that it 

met the compliance standard for that 

year using a combination of State and 

local funds on a per capita basis. This 

data would be sufficient for the SEA to 

find that the LEA met the compliance 

standard. Subsequently, the State 

conducts an audit to determine if the 

LEA met the compliance standard in the 

next year, FY 2017–2018. The LEA 

provides information to the auditor that 

demonstrates that it met the compliance 

standard in FY 2017–2018 using local 

funds only. In order to demonstrate that 

it met the compliance standard using 

that method, the LEA provides to the 

auditor the amount of local funds only 

that the LEA spent for the education of 

children with disabilities in FY 2016– 

2017 and in FY 2017–2018 so that the 

auditor is comparing each year’s 

expenditures using the same method. A 

further example can be found in Table 

5 below. 

Changes: None. 

Comment: Another commenter asked 

whether the LEA must use separate 

thresholds for compliance using local 

funds only as well as local funds only 

on a per capita basis. 


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Discussion: The LEA would compare 

the amount of local funds only spent in 

the comparison year and the year for 

which it seeks to establish compliance. 

The LEA is not required to maintain 

effort on both an aggregate and a per 

capita basis. For example, if the LEA 

spent $100 in local funds only in FY 

2016–2017 and had 10 children with 

disabilities, the LEA spent $10 in local 

funds only on a per capita basis. 

Assuming the LEA met MOE in FY 

2016–2017 using those two methods, 

that is the amount ($10 per child with 

a disability) that the LEA would have to 

spend in FY 2017–2018 in order to meet 

the compliance standard using local 

funds only on a per capita basis, and 

$100 is the aggregate amount that the 

LEA would have to spend in FY 2017– 

2018 in order to meet the compliance 

standard using local funds only, 

assuming that, in FY 2017–2018, the 

LEA did not take any exceptions or 

adjustment in §§ 300.204 and 300.205. 

As noted above, the LEA is required to 

meet the compliance standard using 

only one of the four methods. 

Changes: None. 

Comment: A commenter noted that 

the tables in the NPRM did not address 

the difficulties encountered by LEAs 

that wish to use the exceptions and 

adjustment in §§ 300.204 and 300.205, 

or use per capita methods. 

Discussion: Tables 5 through 9 

address this comment. Table 5 provides 

an example of how an LEA may meet 

the compliance standard using alternate 

methods from year to year without using 

the exceptions or adjustment in 

§§ 300.204 and 300.205, and provides 

information on the following scenario. 

In FY 2015–2016, the LEA meets the 

compliance standard using all four 

methods. As a result, in order to 

demonstrate that it met the compliance 

standard using any one of the four 

methods in FY 2016–2017, the LEA 

must expend at least as much as it did 

in FY 2015–2016 using that same 

method. Because the LEA spent the 

same amount in FY 2016–2017 as it did 

in FY 2015–2016, calculated using a 

combination of State and local funds 

and a combination of State and local 

funds on a per capita basis, the LEA met 

the compliance standard using both of 

those methods in FY 2016–2017. 

However, the LEA did not meet the 

compliance standard in FY 2016–2017 

using the other two methods–local 

funds only or local funds only on a per 

capita basis–because it did not spend at 

least the same amount in FY 2016–2017 

as it did in FY 2015–2016 using the 

same methods. 

In FY 2017–2018, the LEA may meet 

the compliance standard using any one 

of the four methods. To meet the 

compliance standard using a 

combination of State and local funds, or 

a combination of State and local funds 

on a per capita basis, the LEA must 

expend at least the same amount it did 

in FY 2016–2017 using either of those 

methods, since it met the compliance 

standard using those methods in FY 

2016–2017. Or, if the LEA seeks to meet 

the compliance standard using the other 

two methods available, local funds only 

or local funds only on a per capita basis, 

in FY 2017–2018, it must expend at 

least as much as it did in FY 2015–2016 

using either of those methods. This is 

because the LEA did not meet the 

compliance standard using local funds 

only or local funds only on a per capita 

basis in FY 2016–2017. In FY 2016– 

2017, to demonstrate that it met the 

compliance standard using local funds 

only, or local funds only on a per capita 

basis, the LEA is required to spend at 

least the amount it expended in FY 

2015–2016 from those sources. Per the 

Subsequent Years rule, the amount of 

expenditures from local funds only and 

local funds only on a per capita basis in 

FY 2015–2016 becomes the required 

level of effort in FY 2017–2018. 

Numbers are in $10,000s spent for the 

education of children with disabilities. 

TABLE 5—EXAMPLE OF HOW AN LEA MAY MEET THE COMPLIANCE STANDARD USING ALTERNATE METHODS FROM YEAR

TO YEAR

Fiscal year Local funds 

only 

Combination of 

State and local 

funds 

Local funds 

only on a 

per capita 

basis 

Combination 

of State and 

local funds 

on a per 

capita basis 

Child count 

2015–2016 ............................................................................. * $500 * $950 * $50 * $95 10 

2016–2017 ............................................................................. 400 * 950 40 * 95 10 

2017–2018 ............................................................................. * 500 900 * 50 90 10 

* LEA met compliance standard using this method. 

Changes: We have not changed the 

regulation but we have included Tables 

5 through 9 to illustrate examples of 

how an LEA may meet the compliance 

or eligibility standard using alternate 

methods from year to year, either with 

or without using the exceptions or 

adjustment in §§ 300.204 and 300.205. 

Comment: One commenter requested 

clarification of the two per capita 

methods, one based on local funds only 

and one based on a combination of State 

and local funds. 

Discussion: The regulations do not 

change the standards for meeting MOE 

using local funds only on a per capita 

basis or a combination of State and local 

funds on a per capita basis. The 

regulations continue to use the term 

‘‘per capita,’’ which, in context, refers to 

the amount per child with a disability 

served by the LEA, either in local funds 

per child with a disability or a 

combination of State and local funds per 

child with a disability. 

When calculating the required level of 

effort on a per capita basis for the 

purpose of meeting the compliance 

standard, the LEA must determine the 

amount of local funds only (or a 

combination of State and local funds, as 

applicable) on a per capita basis that it 

expended for the education of children 

with disabilities, and reduce that 

amount by the exceptions or adjustment 

in §§ 300.204 and 300.205 calculated on 

a per capita basis. Specifically, the LEA 

must first divide the aggregate amount 

of exceptions and the adjustment it 

properly takes under §§ 300.204 and 

300.205 by the child count in the 

comparison year. The LEA must then 

subtract that result from the amount of 

local funds only (or a combination of 

State and local funds, as appropriate) on 

a per capita basis expended in the 

comparison year. Using other methods 

to determine the required level of effort 

(e.g., dividing the required level of 

aggregate effort using local funds only 

by the current year child count or 

dividing the exceptions and adjustment 

under §§ 300.204 and 300.205 properly 

taken by an LEA by the current year 

child count) may result in an inaccurate 

calculation of the required level of 

effort. 


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Table 6 provides an example of how 

an LEA may meet the compliance 

standard using alternate methods from 

year to year in years that the LEA used 

the exceptions or adjustment in 

§§ 300.204 and 300.205, including using 

the per capita methods. Numbers are in 

$10,000s spent for the education of 

children with disabilities. 

TABLE 6—EXAMPLE OF HOW AN LEA MAY MEET THE COMPLIANCE STANDARD USING ALTERNATE METHODS FROM YEAR

TO YEAR AND USING EXCEPTIONS OR ADJUSTMENT UNDER §§ 300.204 AND 300.205 

Fiscal year Local funds only Combination of State 

and local funds Local funds only on a per capita basis 

Combination of State 

and local funds on a 

per capita basis 

Child 

count 

2015– 2016 ...... $500 * .............................................. $950 * ........................... $50 * ................................................................... $95 * ............................. 10 

2016– 2017 ...... $400 ................................................ $950 * ........................... $40 ..................................................................... $95 * ............................. 10 

2017–2018 ....... $450 * .............................................. $1,000 * ........................ $45 * ................................................................... $100 * ........................... 10 

In 2017–2018, the LEA was required to spend at least the 

same amount in local funds only 

that it spent in the preceding fiscal year, subject to the Subsequent Years rule. Therefore, 

prior to taking any exceptions or 

adjustment in §§ 300.204 and 

300.205, the LEA was required 

to spend at least $500 in local 

funds only.

In 2017–2018, the LEA properly reduced its expenditures, per an 

exception in § 300.204, by $50, 

and therefore, was required to 

spend at least $450 in local 

funds only ($500 from 2015– 

2016 per Subsequent Years 

rule¥$50 allowable reduction 

per an exception under 

§ 300.204).

In 2017–2018, the LEA was required to spend 

at least the same amount in local funds only 

on a per capita basis that it spent in the preceding fiscal year, subject to the Subsequent 

Years rule. Therefore, prior to taking any exceptions or adjustment in §§ 300.204 and 

300.205, the LEA was required to spend at 

least $50 in local funds only on a per capita 

basis.

In 2017–2018, the LEA properly reduced its 

aggregate expenditures, per an exception in 

§ 300.204, by $50.

$50/10 children with disabilities in the comparison year (2015–2016) = $5 per capita allowable reduction per an exception under 

§ 300.204.

$50 local funds only on a per capita basis 

(from 2015–2016 per Subsequent Years 

rule)¥$5 allowable reduction per an exception under § 300.204 = $45 local funds only 

on a per capita basis to meet MOE.

2018–2019 ....... $405 ................................................ $1,000 * ........................ $45 * ................................................................... $111.11 * ...................... 9 

In 2018–2019, the LEA was required to spend at least the 

same amount in local funds only 

that it spent in the preceding fiscal year, subject to the Subsequent Years rule. Therefore, 

prior to taking any exceptions or 

adjustment in §§ 300.204 and 

300.205, the LEA was required 

to spend at least $450 in local 

funds only.

In 2018–2019, the LEA properly reduced its expenditures, per an 

exception in § 300.204 by $10 

and the adjustment in § 300.205 

by $10.

Therefore, the LEA was required to 

spend at least $430 in local 

funds only. ($450 from 2017– 

2018¥$20 allowable reduction 

per an exception and the adjustment under §§ 300.204 and 

300.205).

Because the LEA did 

not reduce its expenditures from the 

comparison year 

(2017–2018) using a 

combination of State 

and local funds, the 

LEA met MOE.

In 2018–2019, the LEA was required to spend 

at least the same amount in local funds only 

on a per capita basis that it spent in the preceding fiscal year, subject to the Subsequent 

Years rule. Therefore, prior to taking any exceptions or adjustment in §§ 300.204 and 

300.205, the LEA was required to spend at 

least $45 in local funds only on a per capita 

basis.

In 2018–2019, the LEA properly reduced its 

aggregate expenditures, per an exception in 

§ 300.204 by $10 and the adjustment in 

§ 300.205 by $10.

$20/10 children with disabilities in the comparison year (2017–2018) = $2 per capita allowable reduction per an exception and the adjustment under §§ 300.204 and 300.205.

$45 local funds only on a per capita basis 

(from 2017–2018)¥$2 allowable reduction 

per an exception and the adjustment under 

§§ 300.204 and 300.205 = $43 local funds 

only on a per capita basis required to meet 

MOE. Actual level of effort is $405/9 (the 

current year child count).

Because the LEA did 

not reduce its expenditures from the 

comparison year 

(2017–2018) using a 

combination of State 

and local funds on a 

per capita basis 

($1,000/9 = $111.11 

and $111.11 > 

$100), the LEA met 

MOE.

* LEA met MOE using this method. 

Note: When calculating any exception(s) and/or adjustment on a per capita basis for the purpose of determining the required level of effort, the LEA must use the 

child count from the comparison year, and not the child count of the year in which the LEA took the exception(s) and/or adjustment. When determining the actual 

level of effort on a per capita basis, the LEA must use the child count for the current year. For example, in determining the actual level of effort in 2018–2019, the 

LEA uses a child count of 9, not the child count of 10 in the comparison year. 

Changes: We have not changed the 

regulation but we have revised Table 6 

to include the use of alternate methods 

from year to year to meet the MOE 

requirements in years where the LEA 

used the exceptions or adjustment. 

Comment: One commenter asked 

whether the LEA or the SEA selects the 

method by which an LEA met the 

compliance standard if the LEA in fact 

met the standard using more than one 

method. The commenter expressed 

concern that choosing one method over 

another will affect the comparison year 

to be used in the future. 

Discussion: The SEA is responsible 

for determining whether an LEA meets 

the MOE eligibility standard in 

§ 300.203(a) and for determining 

whether an LEA meets the MOE 

compliance standard in § 300.203(b). In 

order to make this determination, the 

SEA must permit the LEA to meet either 

standard using any of the four methods. 

If the LEA meets the standards using 

more than one method, the SEA may 

select the method it uses to determine 

that the LEA met the eligibility or 

compliance standard. Ultimately, 

however, regardless of the method used 

to make these determinations, an LEA is 

not precluded from selecting a different 

method to meet either the eligibility or 

compliance standard in a subsequent 

year. 

Changes: None. 

Comment: A commenter suggested 

that the per capita calculation be 

expanded to allow for either 


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‘‘headcount’’ or a full-time equivalent 

(FTE) because FTE is more closely 

related to the cost of services than 

headcount. 

Discussion: By referencing FTE, we 

assume that the commenter was 

referring to using a per capita method of 

calculating effort that measures the cost 

per hour of special education and 

related services an LEA provides to 

children with disabilities, rather than 

the amount spent per child with a 

disability, in a particular fiscal year. 

Using a measure that depends on the 

cost of FTEs could allow LEAs to meet 

MOE by reducing the number of hours 

of special education and related services 

an LEA provides to children with 

disabilities. We therefore decline to 

adopt this method of measuring effort. 

This decision is consistent with the 

position we have taken on the meaning 

of ‘‘per capita.’’ As explained in the 

Analysis of Comments and Changes in 

the preamble to the 2006 IDEA Part B 

regulations, ‘‘[w]e do not believe it is 

necessary to include a definition of ‘per 

capita’ . . . because we believe that, in 

the context of the regulations, it is clear 

that we are using this term to refer to the 

amount per child with a disability 

served by the LEA.’’ See 71 FR 46540, 

46624 (Aug. 14, 2006). 

Changes: None. 

Comment: Some commenters asked 

for clarification on how to determine the 

amount an LEA must spend in local 

funds only or local funds only on a per 

capita basis to meet the compliance and 

eligibility standards if the LEA has 

never spent local funds for the 

education of children with disabilities 

in the past. The commenters asked 

whether these LEAs may use ‘‘zero’’ 

local funds as the amount spent in the 

comparison year and noted that, if this 

is the case, these LEAs will always meet 

the compliance and eligibility standards 

using local funds only, even in years 

when the level of expenditures for the 

education of children with disabilities 

made from a combination of State and 

local funds, or a combination of State 

and local funds on a per capita basis, is 

lower than the level of those 

expenditures in the comparison year. 

Discussion: LEAs, including an LEA 

that has not spent any local funds for 

the education of children with 

disabilities since the MOE requirement 

was enacted in 1997, are permitted to 

use any of the four methods to meet the 

compliance and eligibility standards. 

An LEA that has spent $0 in local funds 

for the education of children with 

disabilities can meet the compliance 

and eligibility standards by continuing 

to budget and spend $0 in local funds 

for the education of children with 

disabilities. However, the Department 

believes that there are very few 

instances where LEAs have expended 

$0 in local funds for the education of 

children with disabilities. We remind 

LEAs that, when demonstrating that 

they meet the compliance and eligibility 

standards using any of the four 

methods, they must be able to provide 

auditable data regarding their 

expenditures from the relevant sources 

in all relevant years. Simply because an 

LEA does not account for local funds 

separately from State funds does not 

mean that the LEA expends $0 in local 

funds for the education of children with 

disabilities. We also remind LEAs that, 

regardless of which method they use to 

demonstrate that they meet the 

standards, they must continue to make 

a free appropriate public education 

(FAPE) available to all eligible children 

with disabilities. 

Changes: None. 

Comment: One commenter suggested 

that the MOE requirement be changed 

from a dollar requirement to a 

requirement that LEAs maintain only 

the same percentage of expenditures for 

the education of children with 

disabilities compared to the overall 

education budget. 

Discussion: Section 613(a)(2)(A)(iii) of 

the IDEA (20 U.S.C. 1413(a)(2)(A)(iii)) 

states that, except as provided in section 

613(a)(2)(B) and (C) of the Act, Part B 

funds provided to an LEA must not be 

used to reduce the level of expenditures 

for the education of children with 

disabilities made by the LEA below the 

level of those expenditures for the 

preceding fiscal year. Substituting a 

requirement that an LEA not reduce the 

percentage of its total budget spent for 

the education of children with 

disabilities would not ensure that the 

LEA would meet the requirement in the 

statute, which prohibits a reduction in 

the level of expenditures for the 

education of children with disabilities, 

and not a percentage of the overall 

education budget. In addition, this 

approach does not provide protection 

for children with disabilities when the 

overall amount of the education budget 

drops. Therefore, the Department 

declines to make this change. 

Changes: None. 

Comment: A commenter stated that 

the Subsequent Years rule does not 

permit an LEA to take into account that 

the LEA met the compliance standard 

using a different method in a preceding 

fiscal year and would, for example, 

prevent an LEA from meeting the 

compliance standard using local funds 

only on a per capita basis if the LEA had 

used a different method in the 

preceding fiscal year. 

Discussion: The Subsequent Years 

rule does not prevent an LEA from using 

any of the four methods to meet the 

compliance standard in § 300.203(b), as 

demonstrated in Table 5. However, an 

LEA that wishes to meet the compliance 

standard in a fiscal year using one 

particular method must be able to 

identify the amount of funds that the 

LEA expended in the most recent fiscal 

year in which the LEA met the 

compliance standard using that same 

method. 

In the hypothetical posed by the 

commenter (in which an LEA wished to 

meet the compliance standard using 

local funds only on a per capita basis), 

the LEA would look to the preceding 

fiscal year and determine the amount of 

expenditures for the education of 

children with disabilities made by the 

LEA with local funds only on a per 

capita basis. If the LEA could have met 

the compliance standard using that 

method in the preceding fiscal year, the 

amount expended by the LEA using 

local funds only on a per capita basis in 

the preceding fiscal year is the 

minimum amount that the LEA must 

spend in order to meet the compliance 

standard in the current year using that 

method. 

However, if the LEA could not have 

met the compliance standard using local 

funds only on a per capita basis in the 

preceding fiscal year, the Subsequent 

Years rule applies. In that case, the LEA 

must determine the amount of local 

funds only on a per capita basis that the 

LEA should have spent in the preceding 

fiscal year in order to have met the 

compliance standard in that year. That 

is the amount of local funds only on a 

per capita basis that the LEA will need 

to spend in the current year to meet the 

compliance standard. 

Changes: None. 

Comment: A commenter suggested we 

reverse the order of the compliance 

standard in proposed § 300.203(a)(2)(i) 

and (ii) so that the methods that 

reference local funds only precede the 

methods that reference State and local 

funds. Another commenter 

recommended that the compliance 

standard in proposed § 300.203(a)(2) be 

rephrased in affirmative language. 

Discussion: As previously stated, we 

have revised final § 300.203(b)(2) 

(proposed § 300.203(a)(2)(i) and (ii)). 

Therefore, the suggestion to reverse the 

order of proposed § 300.203(a)(2)(i) and 

(ii) is no longer applicable. These 

comments and analyses use affirmative 

language where appropriate. In 

addition, the Department intends to 

issue guidance on these regulations and 

plans to provide examples in that 

guidance using affirmative language. 


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Changes: None. 

Comment: One commenter 

recommended that the determination 

that an LEA receives pursuant to section 

616 of the IDEA (20 U.S.C. 1416) be 

considered when deciding whether an 

LEA met the MOE compliance standard 

because that determination is based on 

IDEA Part B compliance requirements 

and is an indication that the LEA 

implemented the requirements of the 

IDEA. 

Discussion: Section 616 of the IDEA 

includes provisions related to 

monitoring, technical assistance, and 

enforcement of the IDEA. Pursuant to 

section 616(a)(1)(C) of the IDEA and 34 

CFR 300.600(a), each State must 

determine annually whether an LEA 

meets the requirements and purposes of 

the IDEA. The commenter’s suggestion 

is not consistent with section 

613(a)(2)(A)(iii) of the IDEA (20 U.S.C. 

1413(a)(2)(A)(iii)), which requires LEAs 

to maintain effort. Compliance with the 

MOE provision is a distinct requirement 

that cannot be met through compliance 

with other IDEA requirements or 

through meeting results targets. 

Changes: None. 

Comment: One commenter 

recommended that we add a new 

subsection to proposed § 300.203 

entitled ‘‘Budget and Expenditure 

Categories’’ that would define or 

reference the terms ‘‘education’’ and 

‘‘related services.’’ The commenter 

recommended that the regulations allow 

LEAs to compare either ‘‘education’’ 

expenditures or ‘‘education and related 

services’’ expenditures to meet the 

compliance and eligibility standards. 

The commenter stated that, in States 

where certain federally-defined ‘‘related 

services’’ are considered ‘‘education’’ 

pursuant to State law, an annual MOE 

comparison of ‘‘education and related 

services’’ may be preferable. The 

commenter stated that, in that instance, 

the match provided in order to receive 

the Federal Medicaid reimbursement 

should be included in the calculation. 

Discussion: The Department disagrees 

that the regulations should include 

definitions of these terms. The terms 

‘‘special education’’ and ‘‘related 

services’’ are defined in §§ 300.39 and 

300.34, respectively. When calculating 

the amount an LEA spends for the 

education of children with disabilities, 

the LEA must include expenditures for 

related services, regardless of whether a 

State considers certain federally-defined 

related services as education pursuant 

to State law. LEAs must include the 

amount of local only, or State and local, 

funds spent for the education of 

children with disabilities when 

calculating the level of effort required to 

meet the eligibility and compliance 

standards, even if those local only, or 

State and local, funds are also used to 

meet a matching requirement in the 

Medicaid program. We believe the 

regulations adequately address the 

expenditures that may be included in 

the MOE calculations, and therefore 

decline to add a new subsection 

addressing specific budget and 

expenditure categories. 

Changes: None. 

Comparison Year 

Comment: We received many 

comments about proposed 

§ 300.203(a)(2)(ii), which provided that 

the comparison year for an LEA that 

seeks to establish compliance using 

local funds only, or local funds only on 

a per capita basis, is ‘‘the most recent 

fiscal year for which the LEA met the 

MOE compliance standard based on 

local funds only, even if the LEA also 

met the MOE compliance standard 

based on State and local funds. . . .’’ 

Some commenters stated that the 

comparison year must always be the 

‘‘preceding fiscal year’’ because that is 

the language in the statute. Other 

commenters suggested that proposed 

subsection (a)(1) include the language 

‘‘even if the LEA also met the MOE 

compliance standard based on State and 

local funds. . . .’’ A few commenters 

stated that, in almost all circumstances, 

the baseline for MOE when using 

expenditures of local funds only will be 

the year of the highest level of 

expenditures of local funds only, even 

if that level was not from the preceding 

fiscal year, and even if the LEA met 

MOE in the preceding fiscal year using 

a different method. 

Discussion: We agree with the 

commenters that, when an LEA seeks to 

meet the compliance standard using 

local funds only, or local funds only on 

a per capita basis, the comparison year 

should align with the language in 

section 613(a)(2)(A)(iii) of the IDEA (20 

U.S.C. 1413(a)(2)(A)(iii)), which is ‘‘the 

preceding fiscal year.’’ Using the same 

comparison year for local funds only 

and for State and local funds will 

simplify the requirement for LEAs, 

SEAs, and auditors, which should result 

in increased compliance and 

enforcement. Therefore, we changed the 

comparison year for meeting the 

compliance standard using local funds 

only in proposed § 300.203(a)(2)(ii) to 

‘‘the preceding fiscal year’’ from ‘‘the 

most recent fiscal year for which the 

LEA met the MOE compliance standard 

based on local funds only, even if the 

LEA also met the MOE compliance 

standard based on State and local 

funds.’’ 

However, because we are adopting the 

Subsequent Years rule in § 300.203(c), 

the Department is, in effect, defining 

‘‘the preceding fiscal year’’ to mean the 

last fiscal year in which the LEA met 

MOE, regardless of whether the LEA is 

seeking to establish compliance based 

on local funds only, or based on State 

and local funds. Because our change 

affects the comparison year for the MOE 

calculation using local funds only, the 

provision in proposed 

§ 300.203(a)(2)(iii), which addresses the 

comparison year if the LEA has not 

previously met the MOE compliance 

standard based on local funds only, is 

no longer necessary. 

With regard to the comment that the 

comparison year when using local funds 

only, or local funds only on a per capita 

basis, will usually be the year of the 

highest level of local funds only 

expenditures, the final regulations at 

§ 300.203(b)(2) provide that, regardless 

of the method used, the comparison 

year is always the preceding fiscal year. 

However, the comparison year is subject 

to the Subsequent Years rule in 

§ 300.203(c), which means that, if the 

LEA did not maintain effort in the 

preceding fiscal year using local funds 

only, the required amount to meet the 

MOE compliance standard using local 

funds only is the amount that would 

have been required in the absence of 

that failure, and not the LEA’s reduced 

level of local funds only expenditures. 

Changes: We have revised final 

§ 300.203(b)(2) to specify that the 

comparison year, regardless of the 

method used, is the preceding fiscal 

year. We also removed proposed 

§ 300.203(a)(2)(iii). 

Comment: One commenter questioned 

the language in proposed 

§ 300.203(a)(2)(i) and (ii) that permitted 

LEAs to meet the compliance standard 

using local funds only and the 

combination of State and local funds. 

The commenter stated that having two 

standards imposes an unnecessary 

burden on SEAs and LEAs, which could 

result in additional misapplication of 

the MOE compliance standard. 

Discussion: The Department agrees 

that proposed § 300.203(a)(2)(i) and (ii) 

could benefit from additional 

clarification and that confusion will not 

promote compliance. Therefore, we 

have revised final § 300.203(b)(2) 

(proposed § 300.203(a)(2)(i) and (ii)) to 

state the compliance standard more 

clearly. 

However, the option to meet the 

compliance standard based on local 

funds only or a combination of State 

and local funds is not new. The 1999 

IDEA Part B regulations provided 

additional flexibility to LEAs in the 


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event of increased funding from State 

sources by permitting LEAs to meet 

MOE based on State and local funds, 

and the 2006 IDEA Part B regulations 

maintained that language. As explained 

in the Analysis of Comments and 

Changes in the preamble to the 1999 

IDEA Part B regulations, if a State 

increases funding to LEAs to reduce the 

fiscal burden on local government, an 

LEA may not need to continue to put 

the same amount of local funds toward 

expenditures for the education of 

children with disabilities in order to 

meet the MOE requirement. See 64 FR 

12406, 12571 (Mar. 12, 1999). However, 

if a State increases funding to an LEA, 

the LEA should not be able to replace 

any or all of its local funds with State 

funds unless the combination of State 

and local funds is not at least equal to 

the amount expended from the same 

source in a preceding fiscal year (subject 

to the Subsequent Years rule), as this 

would result in reductions in 

expenditures not contemplated by the 

statute. 

Changes: We have revised final 

§ 300.203(b)(2) to state the compliance 

standard more clearly and to specify 

that the comparison year, regardless of 

the method used, is the preceding fiscal 

year. 

Exceptions and Adjustment 

Comment: One commenter asked for 

clarification of the relationship between 

the amount by which an LEA is 

permitted to reduce its expenditures 

pursuant to §§ 300.204 and 300.205 and 

the amount the LEA must spend to meet 

the compliance standard in a future 

fiscal year. The commenter asked how 

the threshold for future compliance 

using local funds only or a combination 

of State and local funds is affected if an 

LEA reduces its expenditures in an 

amount less than the maximum amount 

permitted by §§ 300.204 and 300.205. 

Discussion: The LEA’s actual level of 

expenditures for the education of 

children with disabilities in a preceding 

fiscal year, and not the reduced level of 

expenditures that the LEA could have 

spent had it taken all of the exceptions 

and the adjustment permitted by 

§§ 300.204 and 300.205, is the level of 

expenditures required of the LEA in a 

future fiscal year (which may be affected 

by the Subsequent Years rule in 

§ 300.203(c)). For example, in FY 2015– 

2016, an LEA could have reduced its 

expenditures by $100,000 (from 

$2,100,000 to $2,000,000) by taking all 

of the exceptions permitted by 

§ 300.204. However, this LEA actually 

spent $2,025,000 in FY 2015–2016. 

Therefore, this LEA only reduced its 

expenditures by $75,000. In FY 2016– 

2017, the LEA must spend at least 

$2,025,000 if it chooses to use the same 

method of measuring expenditures 

(before calculating any exceptions or 

adjustment in §§ 300.204 and 300.205 

that it takes in FY 2016–2017). 

Changes: None. 

Comment: A commenter asked 

whether exceptions taken pursuant to 

§ 300.204 have to be specifically 

identified as reductions to State or local 

expenditures and whether all 

exceptions are allowable against local 

expenditures. 

Discussion: An LEA need not identify 

the exceptions and adjustment in 

§§ 300.204 and 300.205 as applying 

specifically against State or local 

expenditures. An LEA may apply the 

exceptions and the adjustment in 

§§ 300.204 and 300.205 to meet the 

compliance standard using any of the 

four methods. For an example of this 

calculation, see Table 6. 

Changes: None. 

Comment: One commenter requested 

that the Department allow an LEA to 

reduce its required level of expenditures 

if the increase in expenditures with 

State and local funds, or local funds 

only, in the preceding fiscal year was 

caused by a reduction in IDEA Part B 

funds. Some commenters stated that, as 

Federal funding fluctuates, LEAs need 

additional flexibility to move dollars in 

and out of programs. 

Discussion: While it is unusual for 

IDEA Part B funds to be reduced, the 

Department recognizes that this has 

occurred in the past. Nevertheless, 

reductions in expenditures, other than 

those permitted by the exceptions and 

adjustment in §§ 300.204 and 300.205, 

are not permissible under the statute 

and regulations, even if the LEA 

experienced decreased revenues. LEAs, 

therefore, must meet the eligibility and 

compliance standards regardless of the 

amount of their IDEA Part B subgrant. 

Changes: None. 

Comment: A few commenters 

requested that the Department consider 

a provision in the regulations that 

would permit a waiver of the MOE 

requirement, and they noted that the 

IDEA does not specifically prohibit 

MOE waivers. 

Discussion: The statute does not 

include a waiver provision for LEA 

MOE. Therefore, we believe that adding 

such a waiver would be inconsistent 

with the language and purpose of the 

MOE requirement in section 

613(a)(2)(A)(iii) of the IDEA (20 U.S.C. 

1413(a)(2)(A)(iii)). In addition, the 

Department believes that the exceptions 

and adjustment in §§ 300.204 and 

300.205, and the ability to meet the 

MOE eligibility and compliance 

standards using any of the four 

methods, provide adequate flexibility to 

LEAs. Therefore, these regulations do 

not provide for waivers of LEA MOE. 

Changes: None. 

Data Retention and Administration 

Comment: Commenters raised many 

questions and concerns about whether 

the proposed regulations would require 

LEAs and SEAs to maintain data and 

information on expenditures. Some 

commenters raised concerns or 

questions about the number of years for 

which LEAs and SEAs would have to 

maintain information related to meeting 

the eligibility and compliance 

standards. One of these commenters 

questioned how the MOE requirement 

interacts with State and local data 

retention policies because, without 

established time limits on how long the 

data must be maintained, the 

requirement may conflict with those 

policies. Several commenters expressed 

concern about the requirement for LEAs 

and SEAs to have systems that maintain 

information on the reductions an LEA 

took pursuant to §§ 300.204 and 

300.205. Commenters were concerned 

about LEAs’ ability to track the 

allowable exceptions and adjustment 

every year, and the cost of doing so, 

even if LEAs meet the MOE 

requirement, and particularly if they are 

required to go back an indefinite 

number of years to examine 

information. Some commenters stated 

that the proposed regulations would 

increase administrative costs if LEAs are 

required to track expenses by local and 

State sources separately. A few 

commenters asked what circumstances 

an LEA may take into account if it is 

required to go back more than five years 

to compare its expenditures (e.g., 

population shifts; State changes in 

funding formulas for special education; 

changes in poverty levels; statutory 

structural changes that shift pension or 

health care contributions from the 

employer (LEA) to the employees). 

Discussion: As an initial matter, in 

accordance with 34 CFR 76.731, SEAs 

and LEAs must keep records to show 

their compliance with program 

requirements, including the MOE 

requirement in § 300.203 and the 

provisions for exceptions and 

adjustment permitted in §§ 300.204 and 

300.205. SEAs and LEAs are subject to 

the record retention requirements in 2 

CFR 200.333, under which records must 

generally be retained for three years 

from the day the grantee or subgrantee 

submits to the awarding agency its 

single or last expenditure report for that 

period. Under 34 CFR 76.709, if SEAs or 

LEAs do not obligate all of their IDEA 


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Part B grant or subgrant funds by the 

end of the fiscal year for which Congress 

appropriated the funds, they may 

obligate those funds during a carryover 

period of one additional year. Therefore, 

SEAs and LEAs must generally keep 

records to show compliance with the 

MOE requirement for a minimum of five 

years. SEAs and LEAs have the 

discretion to keep the records longer 

than the required retention period if 

necessary to meet State and local data 

retention requirements. 

The Department recognizes that there 

is confusion about the information and 

data that LEAs and SEAs must maintain 

in order to meet the eligibility and 

compliance standards. In addition to the 

minimum five-year record retention 

requirement discussed above, an LEA 

that wishes to retain the flexibility to 

use any of the four methods to meet the 

MOE requirement in a particular fiscal 

year must have data and information 

that allow the LEA to determine the 

amount of expenditures it made in the 

relevant comparison year using that 

same method. 

An LEA that wishes to reduce its 

expenditures pursuant to the exceptions 

and adjustment in §§ 300.204 and 

300.205 must have data and information 

that demonstrate the LEA properly took 

the exceptions and adjustment. 

Unless the LEA failed to meet the 

compliance standard in the preceding 

fiscal year, the LEA will need 

information only from the preceding 

fiscal year to demonstrate compliance 

with the MOE requirement. However, if 

the LEA did not meet the compliance 

standard in the preceding fiscal year, 

the LEA will have to determine the 

proper comparison year. To do so, the 

LEA must use the Subsequent Years rule 

in § 300.203(c) and have information for 

that fiscal year, even if that fiscal year 

falls outside of the five years required 

for record retention. 

For example, an LEA that wishes to 

meet the compliance standard in FY 

2016–2017 using a combination of State 

and local funds must have information 

on the amount of State and local funds 

it expended for the education of 

children with disabilities in the 

preceding fiscal year, which is FY 2015– 

2016. If the LEA did not meet the 

compliance standard using that method 

in FY 2015–2016, it must have 

information from the proper comparison 

year. Since the Subsequent Years rule 

requirement is effective, at the earliest, 

for FY 2012–2013, the earliest fiscal 

year for which the LEA must have 

information is FY 2010–2011. This is 

because, in FY 2012–2013, the LEA 

must have spent at least the same 

amount for the education of children 

with disabilities as it spent in FY 2011– 

2012. If the LEA did not meet the 

compliance standard in FY 2011–2012, 

the LEA must, using that same method, 

determine what it should have spent in 

FY 2011–2012, which is what it actually 

spent in FY 2010–2011. In addition, in 

this hypothetical, if the LEA reduces 

expenditures in FY 2016–2017 based on 

an exception or adjustment permitted in 

§§ 300.204 and 300.205, the LEA must 

have documentation that it properly 

took the exception or adjustment. 

Finally, neither the proposed nor the 

final regulations change the 

circumstances under which an LEA may 

use the exceptions and adjustment in 

§§ 300.204 and 300.205, nor do they 

impose additional data retention 

requirements on LEAs. The change in 

circumstances raised by commenters, 

such as shifts in funding formulas, or 

changes that shift pension or health care 

contributions from the State or LEA to 

the employee, are not exceptions to the 

MOE requirement, and LEAs, therefore, 

would not be required to retain this 

information to demonstrate compliance 

with the MOE requirement. 

Changes: None. 

Comment: One commenter stated that, 

if an LEA does not have information on 

the amount of ‘‘local funds only’’ 

expended for the education of children 

with disabilities for a specified time 

period, the LEA should not be able to 

use the ‘‘local funds only’’ option to 

meet the eligibility and compliance 

standards for that same time period. 

Discussion: We understand that, due 

to State or local fiscal systems, some 

LEAs cannot distinguish between 

expenditures made with State funds and 

those made with local funds. While the 

regulations permit LEAs to use any one 

of the four methods, the regulations do 

not require an LEA to separately 

account for expenditures made with 

local funds and those made with State 

funds. However, regardless of the 

method used, LEAs must be able to 

provide auditable data to document that 

they met the eligibility and/or 

compliance standards using that 

method. Therefore, LEAs that are unable 

to account for local funds only, or local 

funds only on a per capita basis, or that 

choose not to retain those records, will 

be unable to use those methods to meet 

the eligibility and compliance standards 

and instead must meet the eligibility 

and compliance standards using either 

the combination of State and local funds 

or the combination of State and local 

funds on a per capita basis. 

Changes: None. 

Comment: One commenter expressed 

concern that the proposed changes to 

the regulations will require significant 

revision of training materials and 

documentation that some States have 

used for at least 15 years. 

Discussion: We understand that the 

changes to the MOE regulations may 

require changes to States’ policies and 

procedures and may therefore also 

require revisions to their training 

materials and documentation practices. 

However, we believe that the changes 

we are making to the regulations are 

necessary to increase understanding of, 

and compliance with, the MOE 

requirement. The Department will 

provide guidance on these regulations 

that will assist States in training LEAs 

on the documentation needed to 

demonstrate compliance with the MOE 

requirement. 

Changes: None. 

LEA Eligibility, § 300.203(a) 

Eligibility Standard and Methodology 

Comment: Commenters raised many 

questions and concerns related to the 

four methods by which an LEA may 

meet the eligibility standard. One 

commenter requested that the 

regulations specifically list the four 

methods available to LEAs. Some 

commenters requested that the 

Department clarify that SEAs are 

required to allow LEAs to meet the 

eligibility standard using all four 

methods. Other commenters stated that 

the proposed regulations emphasize 

meeting the MOE requirement using 

local funds only, rather than clarifying 

that an LEA may meet the requirement 

through any of the four methods. 

Discussion: We agree that additional 

clarification is needed regarding the 

four methods by which an LEA may 

meet the eligibility standard. We also 

agree that listing the four methods 

individually in the eligibility standard 

will clarify that an LEA may meet the 

eligibility standard using any one of 

these four methods, and that SEAs must 

permit LEAs to do so. Listing the four 

methods individually should also 

clarify that the regulations do not give 

preference or greater weight to any of 

the four methods. 

Changes: We have revised final 

§ 300.203(a)(1) (proposed § 300.203(b)) 

to specify that, for purposes of 

establishing an LEA’s eligibility for an 

award for a fiscal year, the SEA must 

determine that the LEA budgets, for the 

education of children with disabilities, 

at least the same amount, from at least 

one of the following sources, as the LEA 

spent for that purpose from the same 

source for the most recent fiscal year for 

which information is available: (i) Local 

funds only; (ii) the combination of State 

and local funds; (iii) local funds only on 


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a per capita basis; or (iv) the 

combination of State and local funds on 

a per capita basis. 

Comment: One commenter 

recommended that the Department 

retain the language in current 

§ 300.203(b)(1) requiring ‘‘at least the 

same total or per capita amount . . . the 

LEA spent . . . for the most recent prior 

year for which information is available.’’ 

The commenter objected that replacing 

‘‘the most recent prior year’’ with ‘‘the 

most recent fiscal year’’ would narrow 

the regulation and not give LEAs the 

opportunity to submit allowable 

exceptions for reduced expenditures 

that may have taken place multiple 

fiscal years ago. Other commenters 

supported the change from ‘‘most recent 

prior year’’ to ‘‘most recent fiscal year’’ 

because the latter provides more clarity. 

Discussion: We do not believe that the 

change from ‘‘most recent prior year’’ to 

‘‘most recent fiscal year’’ has the effect 

on demonstrating eligibility that the 

commenter attributes to it. The change 

is not a substantive change, and merely 

aligns the language of the regulation to 

the language of the statute, which uses 

‘‘fiscal year’’ and does not use ‘‘prior 

year.’’ Section 613(a)(2)(A)(iii) of the 

IDEA (20 U.S.C. 1413(a)(2)(A)(iii)). 

Nothing in this language prevents an 

LEA from reducing the amount of funds 

expended for the education of children 

with disabilities pursuant to the 

exceptions in § 300.204 or adjustment in 

§ 300.205. However, an LEA may not 

look back to a previous fiscal year and 

claim exceptions for that fiscal year that 

it did not actually take during that fiscal 

year. For example, an LEA expended 

$10,000 for the education of children 

with disabilities in FY 2014–2015. 

During that fiscal year, the LEA could 

have properly reduced its expenditures 

pursuant to exceptions in § 300.204 by 

$500 but chose not to do so. In January 

2016, the LEA is budgeting for the 

expenditures for the education of 

children with disabilities in order to 

demonstrate eligibility for an IDEA Part 

B subgrant for FY 2016–2017. The most 

recent fiscal year for which the LEA has 

information is FY 2014–2015. The LEA 

must budget $10,000 for the education 

of children with disabilities, and not 

$9,500. This is not a change in current 

law. 

Changes: None. 

Comparison Year 

Comment: The Department received 

many comments about the comparison 

year an LEA must use when meeting the 

eligibility standard. Some commenters 

supported a comparison year that is the 

same regardless of which of the four 

methods the LEA uses to meet the 

eligibility standard. 

Discussion: The Department 

appreciates the comments and questions 

that we received about the comparison 

year for the eligibility standard. We 

agree that the comparison year should 

be the same regardless of the method an 

LEA uses to meet the eligibility 

standard. 

Using the same comparison year for 

local funds only and for the 

combination of State and local funds 

will simplify the requirement for LEAs, 

SEAs, and auditors, and therefore 

should result in increased compliance 

and enforcement. In addition, this is 

consistent with how we changed the 

comparison year for the compliance 

standard using local funds only. 

Therefore, we have changed the 

comparison year for meeting the 

eligibility standard using local funds 

only in proposed § 300.203(b)(2) from 

‘‘the most recent fiscal year for which 

information is available and the LEA 

met the MOE compliance standard 

based on local funds only, even if the 

LEA also met the MOE compliance 

standard based on State and local 

funds’’ to ‘‘the most recent fiscal year 

for which information is available’’ in 

final § 300.203(a)(1). However, because 

we are adopting the Subsequent Years 

rule in § 300.203(c), the Department is, 

in effect, defining ‘‘the most recent 

fiscal year for which information is 

available’’ to mean the most recent fiscal 

year in which the LEA met MOE and for 

which it has information available, 

regardless of whether the LEA is seeking 

to meet the eligibility standard based on 

local funds only, or based on the 

combination of State and local funds. 

Because we have changed the 

comparison year for local funds only, 

the provision in proposed 

§ 300.203(b)(3), which addresses the 

comparison year if the LEA has not 

previously met the MOE compliance 

standard based on local funds only, is 

no longer necessary. 

Changes: We have revised final 

§ 300.203(a)(1) (proposed 

§ 300.203(b)(2)) to specify that the 

comparison year, regardless of the 

method used, is the most recent fiscal 

year for which information is available. 

We also removed proposed 

§ 300.203(b)(3). 

Comment: Some commenters sought a 

comparison year for the eligibility 

standard that is the ‘‘preceding fiscal 

year’’ and objected to making the 

comparison year ‘‘the most recent fiscal 

year for which information is available.’’ 

These commenters stated that the 

proposed regulation leaves open the 

possibility that the comparison year will 

be so far in the past that it will not 

provide a meaningful comparison. 

Similarly, other commenters 

recommended including language that 

limits how far back SEAs and LEAs 

must look as a reference point for 

comparison. 

Discussion: We do not agree with 

commenters who stated that the 

comparison year should be ‘‘the 

preceding fiscal year’’ because, at the 

time most LEAs are budgeting for the 

next fiscal year (the ‘‘budget year’’), the 

fiscal year preceding the budget year has 

not yet ended. Therefore, the LEA must 

look to the amount actually spent in 

‘‘the most recent fiscal year for which 

information is available’’ to determine 

the amount it must budget to meet the 

eligibility standard. 

We anticipate that ‘‘the most recent 

fiscal year for which information is 

available’’ will be two years before the 

budget year and therefore will not be so 

far in the past as to preclude a 

meaningful comparison. We assume, for 

example, that when an LEA is budgeting 

for FY 2016–2017, the most recent fiscal 

year for which final expenditure data 

are available would be FY 2014–2015. 

However, because circumstances in 

individual LEAs may vary, the 

Department declines to include 

language in the regulations that limits 

how far back SEAs and LEAs must go 

to identify a comparison year. 

Changes: None. 

Comment: A commenter asked what 

comparison year an LEA would use to 

meet the eligibility standard in a fiscal 

year subsequent to a fiscal year (or 

years) when the LEA was not eligible 

for, or did not receive, an IDEA Part B 

subgrant. 

Discussion: An LEA that seeks to 

establish eligibility in a fiscal year 

subsequent to a fiscal year (or years) 

when the LEA was not eligible, or did 

not receive, an IDEA Part B subgrant, 

must use the comparison year in 

§ 300.203(a)(1), which is ‘‘the most 

recent fiscal year for which information 

is available.’’ This is the case even if the 

most recent fiscal year for which 

information is available is a fiscal year 

during which the LEA was not eligible 

for, or did not receive, an IDEA Part B 

subgrant. 

Changes: None. 

Comment: A commenter asked 

whether, in order to meet the eligibility 

standard, an LEA must use the same 

method it used to meet the compliance 

standard in the most recent fiscal year 

for which information is available. 

Discussion: When establishing 

eligibility, an LEA is not required to use 

the same method it used to meet the 

compliance standard in the most recent 


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23656 Federal Register / Vol. 80, No. 81 / Tuesday, April 28, 2015 / Rules and Regulations 

fiscal year for which information is 

available. When an LEA is budgeting for 

the education of children with 

disabilities, the LEA selects a method by 

which it intends to meet the eligibility 

standard. The LEA identifies the 

amount it spent for the education of 

children with disabilities using that 

same method in the most recent fiscal 

year for which information is available. 

If the LEA met the compliance standard 

using the same method in the most 

recent fiscal year for which information 

is available, the LEA must budget at 

least that amount (after taking into 

consideration the exceptions and 

adjustment in §§ 300.204 and 300.205, 

as permitted by § 300.203(a)(2)) in order 

to meet the eligibility standard. 

Pursuant to the Subsequent Years rule 

in § 300.203(c), if the LEA did not meet 

the compliance standard using that 

method in the most recent fiscal year for 

which information is available, the LEA 

determines the amount that the LEA 

should have spent for the education of 

children with disabilities using that 

same method in the most recent fiscal 

year for which information is available. 

In that case, the LEA must budget at 

least that amount (after taking into 

consideration the exceptions and 

adjustment in §§ 300.204 and 300.205, 

as permitted by § 300.203(a)(2)) in order 

to meet the eligibility standard. 

Tables 7 and 8 demonstrate how an 

LEA could meet the eligibility standard 

over a period of years using different 

methods from year to year. These tables 

assume that the LEA did not take any 

of the exceptions or adjustment in 

§§ 300.204 and 300.205. Numbers are in 

$10,000s budgeted and spent for the 

education of children with disabilities. 

TABLE 7—EXAMPLE OF HOW AN LEA MAY MEET THE ELIGIBILITY STANDARD IN 2016–2017 USING DIFFERENT METHODS

Fiscal year Local funds 

only 

Combination 

of State and 

local funds 

Local funds 

only on a 

per capita 

basis 

Combination 

of State and 

local funds 

on a per 

capita basis 

Child count Notes 

2014–2015 ............................ * $500 * $1,000 * $50 * $100 10 

2015–2016 ............................ .................... .................... .................... .................... .................... Final information not available at time 

of budgeting for 2016–2017. 

How much must the LEA 

budget for 2016–2017 to 

meet the eligibility standard 

in 2016–2017? 

500 1,000 50 100 .................... When the LEA submits a budget for 

2016–2017, the most recent fiscal 

year for which the LEA has information is 2014–2015. It is not necessary for the LEA to consider information on expenditures for a fiscal 

year prior to 2014–2015 because 

the LEA maintained effort in 2014– 

2015. Therefore, the Subsequent 

Years rule in § 300.203(c) is not applicable. 

* The LEA met the compliance standard using all 4 methods. 

TABLE 8—EXAMPLE OF HOW AN LEA MAY MEET THE ELIGIBILITY STANDARD IN 2017–2018 USING DIFFERENT METHODS

AND THE APPLICATION OF THE SUBSEQUENT YEARS RULE

Fiscal year Local funds 

only 

Combination 

of State and 

local funds 

Local funds 

only on a 

per capita 

basis 

Combination 

of State and 

local funds 

on a per 

capita basis 

Child count Notes 

2014–2015 ............................ * $500 * $1,000 * $50 * $100 10 

2015–2016 ............................ 450 * 1,000 45 * 100 10 

2016–2017 ............................ .................... .................... .................... .................... .................... Final information not available at time 

of budgeting for 2017–2018. 

How much must the LEA 

budget for 2017–2018 to 

meet the eligibility standard 

in 2017–2018? 

500 1,000 50 100 .................... If the LEA seeks to use a combination 

of State and local funds, or a combination of State and local funds on 

a per capita basis, to meet the eligibility standard, the LEA does not 

consider information on expenditures 

for a fiscal year prior to 2015–2016 

because the LEA maintained effort 

in 2015–2016 using those methods. 


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TABLE 8—EXAMPLE OF HOW AN LEA MAY MEET THE ELIGIBILITY STANDARD IN 2017–2018 USING DIFFERENT METHODS

AND THE APPLICATION OF THE SUBSEQUENT YEARS RULE—Continued 

Fiscal year Local funds 

only 

Combination 

of State and 

local funds 

Local funds 

only on a 

per capita 

basis 

Combination 

of State and 

local funds 

on a per 

capita basis 

Child count Notes 

However, if the LEA seeks to use local 

funds only, or local funds only on a 

per capita basis, to meet the eligibility standard, the LEA must use information on expenditures for a fiscal year prior to 2015–2016 because 

the LEA did not maintain effort in 

2015–2016 using either of those 

methods, per the Subsequent Years 

rule. That is, the LEA must determine what it should have spent in 

2015–2016 using either of those 

methods, and that is the amount that 

the LEA must budget in 2017–2018. 

* LEA met MOE using this method. 

Changes: None. 

Comment: A commenter stated that 

because the SEA is responsible for 

paying back funds if an LEA fails to 

maintain effort, it is better left to the 

SEA to determine how LEAs must 

demonstrate eligibility for an IDEA Part 

B subgrant. 

Discussion: Section 613(a) of the IDEA 

(20 U.S.C. 1413(a)) provides the 

standard for an LEA’s eligibility for an 

IDEA Part B subgrant. An LEA is eligible 

for assistance under IDEA Part B in a 

fiscal year only if it submits a plan that 

provides assurances to the SEA that the 

LEA meets each of the conditions in 

section 613(a) of the IDEA, including an 

assurance that amounts provided to the 

LEA will not be used, except as 

provided in the statutory exceptions and 

adjustment, to reduce the level of 

expenditures for the education of 

children with disabilities made by the 

LEA from local funds below the level of 

those expenditures for the preceding 

fiscal year. In addition, for the purpose 

of establishing an LEA’s eligibility for 

an IDEA Part B subgrant in § 300.203(a), 

the SEA must determine that the LEA 

budgets for the education of children 

with disabilities at least the same total 

or per capita amount as the LEA spent 

for that purpose from the same source 

for the most recent fiscal year for which 

information is available. Because the 

IDEA statute and regulations specify 

that LEAs must meet these eligibility 

requirements, it would be inconsistent 

with the IDEA to allow SEAs to use 

different eligibility requirements. The 

fact that an SEA would be liable in a 

recovery action pursuant to section 452 

of the General Education Provisions Act 

(GEPA) (20 U.S.C. 1234a) does not affect 

the Department’s responsibility to 

interpret the statute and issue 

regulations on the MOE requirement or 

the State’s responsibility to ensure that 

LEAs meet the eligibility requirements. 

Changes: None. 

Exceptions and Adjustment 

Comment: Many commenters objected 

to the eligibility standard in proposed 

§ 300.203(b)(1), which would require an 

LEA to budget, for the education of 

children with disabilities, at least the 

same total or per capita amount as the 

LEA spent for that purpose from the 

same source for the most recent fiscal 

year for which information is available 

without permitting LEAs to take into 

consideration the exceptions and 

adjustment permitted in §§ 300.204 and 

300.205. Some of these commenters 

recommended that proposed 

§ 300.203(b)(1) make explicit reference 

to the authorized exceptions and 

adjustment in §§ 300.204 and 300.205. 

In addition, some commenters asked the 

Department to clarify how an LEA may 

consider the exceptions and adjustment 

in §§ 300.204 and 300.205 when 

budgeting for the expenditures for the 

education of children with disabilities. 

Discussion: The commenters appear 

to have partially misread proposed 

§ 300.203(b)(1), which did permit an 

LEA to take into consideration the 

exceptions and adjustment that the LEA 

actually took in the comparison year, as 

permitted in §§ 300.204 and 300.205, 

when calculating the amount of 

expenditures for the education of 

children with disabilities in the most 

recent fiscal year for which information 

is available. The final regulations at 

§ 300.203(a)(1) continue to permit an 

LEA to take into consideration the 

exceptions and adjustment, as permitted 

in §§ 300.204 and 300.205. 

What the proposed rule did not do, 

however, was permit an LEA to take 

into consideration exceptions or an 

adjustment taken in the intervening 

fiscal year(s) between the budget year 

and the comparison year. The proposed 

rule also did not permit an LEA to 

consider the exceptions and adjustment 

that it reasonably anticipates taking in 

the budget year but that have not yet 

occurred. 

We understand that an LEA will have 

information about exceptions and an 

adjustment that it took in the 

intervening year(s), even if the LEA does 

not have final information on 

expenditures for that year(s). For 

example, when an LEA is budgeting for 

FY 2016–2017, the LEA knows that it 

took an exception under § 300.204 in FY 

2015–2016 that will permissibly lower 

the amount the LEA was otherwise 

required to spend for the education of 

children with disabilities in FY 2015– 

2016 when compared to FY 2014–2015 

(the most recent fiscal year for which 

the LEA has information). The LEA may 

also reasonably anticipate that it will 

take an exception under § 300.204 in FY 


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2016–2017, the budget year. We agree 

with the commenters that the eligibility 

standard should permit LEAs to take 

into consideration the exceptions and 

adjustment in the intervening fiscal 

year(s) and the budget year. Table 9 

provides an example of how an LEA 

may consider the exceptions and 

adjustment in §§ 300.204 and 300.205 

when budgeting for the expenditures for 

the education of children with 

disabilities. 

TABLE 9—EXAMPLE OF HOW AN LEA MAY MEET THE ELIGIBILITY STANDARD USING EXCEPTIONS AND ADJUSTMENT IN

§§ 300.204 AND 300.205, 2016–2017 

Fiscal year Local funds 

only 

Combination 

of State and 

local funds 

Local funds 

only on a 

per capita 

basis 

Combination 

of State and 

local funds 

on a per 

capita basis 

Child count Notes 

Actual 2014–2015 expenditures.* $500 * $1,000 * $50 * $100 10 ...................................... The LEA met the compliance standard using all 

4 methods.* 

Exceptions and adjustment 

taken in 2015–2016.

¥50 ¥50 ¥5 ¥5 ........................................... LEA uses the child count 

number from the comparison year (2014– 

2015). 

Exceptions and adjustment 

the LEA reasonably expects to take in 2016– 

2017.

¥25 ¥25 ¥2.50 ¥2.50 ........................................... LEA uses the child count 

number from the comparison year (2014– 

2015). 

How much must the LEA 

budget to meet the eligibility standard in 2016– 

2017? 

425 925 42.50 92.50 ........................................... When the LEA submits a 

budget for 2016–2017, 

the most recent fiscal 

year for which the LEA 

has information is 2014– 

2015. However, if the 

LEA has information on 

exceptions and adjustment taken in 2015– 

2016, the LEA may use 

that information when 

budgeting for 2016– 

2017. The LEA may 

also use information that 

it has on any exceptions 

and adjustment it reasonably expects to take 

in 2016–2017 when 

budgeting for that year. 

However, we caution that, when 

taking into consideration the exceptions 

and adjustment that the LEA took in the 

intervening fiscal year(s) for the purpose 

of meeting the eligibility standard in the 

budget year, the LEA does so without 

having final information on its 

expenditures for the education of 

children with disabilities in the 

intervening fiscal year(s). That 

intervening fiscal year will be the 

comparison year (subject to the 

Subsequent Years rule) for the purpose 

of meeting the compliance standard in 

the budget year. Accordingly, LEAs 

should also take into consideration 

information related to increased 

expenditures for the education of 

children with disabilities in the 

intervening fiscal year(s) that would 

affect the amount the LEA must spend 

in the budget year in order to meet the 

compliance standard in the budget year. 

Otherwise, the LEA may budget less for 

the education of children with 

disabilities than it will need to expend 

in order to meet the compliance 

standard in that year. 

Changes: We added new 

§ 300.203(a)(2), which permits an LEA 

to take into consideration, to the extent 

the information is available, the 

exceptions and adjustment provided in 

§§ 300.204 and 300.205 that the LEA: (i) 

Took in the intervening year or years 

between the most recent fiscal year for 

which information is available and the 

fiscal year for which the LEA is 

budgeting; and (ii) reasonably expects to 

take in the fiscal year for which the LEA 

is budgeting. 

SEA Review 

Comment: A few commenters 

objected to the language in the NPRM 

that ‘‘States will need to carefully 

review LEA applications, and compare 

amounts budgeted to amounts expended 

in prior years.’’ These commenters 

stated that section 613(a) of the IDEA 

(20 U.S.C. 1413(a)) requires only 

assurances in an LEA’s application to 

the State, rather than information that 

demonstrates its compliance with the 

MOE requirement, and that the 

requirement that an LEA have on file 

with the SEA information to 

demonstrate that the eligibility 

requirement has been met was 

intentionally removed from the IDEA 

Part B regulations after the 2004 

reauthorization of the IDEA. Moreover, 

these commenters stated that requiring 

LEAs to submit a budget as part of the 

eligibility process imposes undue 

burden on SEAs and LEAs, creating 

additional paperwork and requiring 

more staff to provide oversight. One 

commenter stated that the Department 


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must clarify whether a State must 

receive a detailed special education 

budget from each LEA outlining how 

the LEA has taken the exceptions and 

adjustment in §§ 300.204 and 300.205 or 

whether the State must receive an 

overall budgeted amount from the LEA 

for the education of children with 

disabilities for the upcoming fiscal year. 

Discussion: The requirement that, in 

order to find an LEA eligible for an 

IDEA Part B subgrant award for a fiscal 

year, an SEA must determine that the 

LEA has budgeted sufficient funds to 

meet the MOE eligibility standard is a 

regulatory requirement that has been in 

effect since 1999 and was not removed 

from the 2006 IDEA Part B regulations 

implementing the 2004 amendments to 

the IDEA. In 2006, the Department did 

remove the requirement that an LEA 

have information on file with the SEA 

to demonstrate that the LEA actually 

met the MOE compliance standard. That 

regulatory change was based on the 

statutory change to section 613(a) made 

by the 2004 IDEA Amendments to 

require LEAs to provide assurances, 

rather than information demonstrating, 

that the LEA meets each of the 

conditions in section 613(a) of the IDEA. 

However, in § 300.203(b)(1) of the 2006 

IDEA Part B regulations, the Department 

maintained the regulatory requirement 

that the SEA determine whether the 

LEA has met the MOE eligibility 

standard (i.e., has budgeted sufficient 

funds for the education of children with 

disabilities). The Department continues 

to believe that the MOE eligibility 

standard is necessary because an LEA 

that has met the eligibility standard for 

a fiscal year is more likely to meet the 

MOE compliance standard for that same 

fiscal year. 

We do not believe that this 

requirement imposes an undue burden 

on SEAs or LEAs. Some SEAs already 

use the IDEA Part B subgrant 

application process to collect 

compliance data on MOE, and the 

Department has learned through fiscal 

monitoring that most SEAs already 

require LEAs to submit budget 

information and are not relying on an 

assurance to determine whether an LEA 

has budgeted sufficient funds. In 

addition, the SEA has the discretion to 

determine the type and amount of 

information that it must review in order 

to be able to determine that the LEA has 

budgeted sufficient funds to meet the 

MOE eligibility standard. It is not 

necessary for the SEA to review a 

detailed budget, so long as the SEA has 

sufficient information to determine if 

the LEA meets the eligibility standard. 

For example, these regulations do not 

require LEAs to submit budgets broken 

down by object codes or line items. The 

Department intends to issue guidance 

following the publication of these 

regulations and will include 

information regarding the eligibility 

standard. 

Changes: None. 

Comment: A commenter urged the 

Department to clarify that, when 

reviewing an LEA’s application for an 

IDEA Part B subgrant, an SEA may rely 

on information on expenditures for the 

most recent fiscal year for which 

information is available at the time the 

LEA submits its application, rather than 

requiring the SEA to review information 

on expenditures for a more recent fiscal 

year than the one for which the LEA 

submits information to the SEA during 

the review of the LEA’s application. 

Discussion: The Department 

understands that, in some States, 

because of the timing of their fiscal 

years or for other State- or LEA-specific 

reasons, after an LEA submits its 

application for an IDEA Part B subgrant, 

the LEA submits information on 

expenditures for a more recent fiscal 

year than the one for which it provided 

information in its application. SEAs 

need not make multiple determinations 

of an LEA’s eligibility for an IDEA Part 

B subgrant for a given fiscal year. 

However, the SEA must use, as a 

comparison year for the purpose of 

determining an LEA’s eligibility, the 

most recent fiscal year for which the 

LEA has information. Accordingly, if, 

before the SEA determines the LEA’s 

eligibility for a given fiscal year, the 

LEA submits to the SEA information on 

expenditures for a more recent fiscal 

year, the SEA must use that information 

in determining the LEA’s eligibility. 

Changes: None. 

Comment: A commenter noted that 

budget data submitted with an LEA’s 

application for an IDEA Part B subgrant 

are often preliminary, and that, 

therefore, by the time the SEA 

determines eligibility for an IDEA Part 

B subgrant, the LEA’s budget may have 

changed. 

Discussion: We recognize that, at the 

time some LEAs submit their 

applications to the SEA for an IDEA Part 

B subgrant, their budgets may be 

preliminary. The SEA has the discretion 

to determine, based on the patterns and 

practices of its LEAs, whether an LEA 

submitted reasonable budget data with 

its application. If, before it determines 

an LEA’s eligibility for an IDEA Part B 

subgrant, an SEA finds that the budget 

data have changed substantially, we 

expect the SEA would require the LEA 

to update its application. 

Changes: None. 

Comment: One commenter asked if an 

LEA must submit budget amendments 

to the SEA if its expenditures change 

during the year. 

Discussion: No. Once an SEA has 

determined an LEA’s eligibility for an 

IDEA Part B subgrant, the LEA does not 

need to provide amendments that reflect 

changes in expenditures in order to 

remain eligible for that year. 

Changes: None. 

Comment: One commenter asked 

whether an LEA must describe in its 

IDEA Part B subgrant application the 

method it will use to meet the MOE 

eligibility standard. 

Discussion: Although these 

regulations do not require an LEA to 

describe in its application the method 

that it will use to meet the MOE 

eligibility standard, an SEA may require 

this information, and the LEA is not 

prohibited from providing that 

information in its application. The SEA 

must be able to determine that the LEA 

meets the eligibility standard using at 

least one of the four permissible 

methods. As stated above, regardless of 

which method it uses to meet the MOE 

eligibility standard, the LEA may use a 

different method to meet the eligibility 

standard in a subsequent fiscal year. 

Changes: None. 

Comment: A commenter stated that 

the proposed regulations created a new 

requirement for auditors to compare the 

amounts budgeted to meet the MOE 

eligibility standard in a given fiscal year 

to the amounts spent in the comparison 

year to meet the MOE compliance 

standard. This commenter expressed 

concern that anticipated budget 

amounts might not align with prior 

expenditures. 

Discussion: Neither the proposed nor 

the final regulations create a new audit 

standard. The eligibility standard has 

always required a comparison of 

amounts budgeted in a given fiscal year 

to amounts expended in the comparison 

year. 

Changes: None. 

Ineligibility 

Comment: A few commenters 

requested clarification on the 

consequence of not meeting the MOE 

eligibility standard. One commenter 

asked if an SEA would be required to 

find an LEA ineligible for its IDEA Part 

B subgrant if the proposed LEA budget 

does not meet the MOE eligibility 

standard. Another commenter asked for 

clarification on what happens to the 

IDEA Part B funds that are not awarded 

to an LEA. 


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Discussion: If an SEA determines that 

an LEA does not meet the MOE 

eligibility standard using any of the four 

methods in final § 300.203(a) (proposed 

§ 300.203(b)), the SEA must provide 

notice that the LEA is not eligible for an 

IDEA Part B subgrant, as required by 

§ 300.221(a). The SEA must also provide 

the LEA with reasonable notice and an 

opportunity for a hearing, pursuant to 

§ 300.221(b). If the SEA determines that 

the LEA is not eligible to receive a Part 

B subgrant for that fiscal year, the SEA 

retains the amount of Part B funds that 

the LEA would have received. 34 CFR 

300.227(a)(1). The SEA would then be 

required to provide special education 

and related services directly to children 

with disabilities residing in the area 

served by that LEA. 34 CFR 

300.227(a)(1). 

Changes: None. 

Comment: None. 

Discussion: Current § 300.203(b)(3) 

provides that SEAs and LEAs may not 

consider any expenditures made from 

funds provided by the Federal 

government for which the SEA and LEA 

are required to account to the Federal 

government in determining an LEA’s 

compliance with current § 300.203(a). 

While the proposed regulations 

included this requirement in the 

compliance standard in proposed 

§ 300.203(a)(3), the proposed regulations 

did not include this requirement in the 

eligibility standard. This was an 

oversight. To ensure that this 

requirement applies to both the 

eligibility and compliance standards, we 

added § 300.203(a)(3). 

Changes: We added new 

§ 300.203(a)(3) to require that 

expenditures made from funds provided 

by the Federal government for which 

the SEA is required to account to the 

Federal government or for which the 

LEA is required to account to the 

Federal government directly or through 

the SEA may not be considered in 

determining whether an LEA meets the 

eligibility standard in § 300.203(a)(1). 

Failure To Maintain Effort and 

Consequence, § 300.203(d) 

Legal Authority 

Comment: One commenter stated that 

proposed § 300.203(d) is based on a 

misreading of section 452 of GEPA (20 

U.S.C. 1234a). The commenter stated 

that it is the responsibility of the LEA, 

rather than the SEA, to return any 

funds. Another commenter asked if an 

SEA has the right to seek recovery of 

funds from the LEA and requested that 

this right be included in the final 

regulation. 

Discussion: The liability of the SEA in 

a recovery action if an LEA fails to meet 

the compliance standard is not new. 

The SEA is responsible for ensuring that 

LEAs receiving an IDEA Part B subgrant 

comply with all applicable requirements 

of that statute and its implementing 

regulations, including the MOE 

requirement. If an LEA fails to meet the 

MOE requirement in a particular fiscal 

year, the Department has authority to 

take steps to recover the appropriate 

amount of funds from the SEA. 

Section 452(a)(1) of GEPA (20 U.S.C. 

1234a(a)(1)) provides that the 

Department may recover funds if a 

grantee has made an unallowable 

expenditure of funds or has otherwise 

failed to discharge its obligation to 

account properly for funds under the 

grant. Under IDEA Part B, it is the State 

(operating through the SEA), and not the 

LEA, that is the Department’s grantee. 

As such, the authority granted to the 

Department pursuant to GEPA 

specifically authorizes recovery of funds 

from the SEA. Section 453(a)(1) of GEPA 

(20 U.S.C. 1234b(a)(1)) provides that the 

measure of recovery in such a 

circumstance is an amount that is 

proportionate to the extent of the harm 

that the violation caused to an 

identifiable Federal interest associated 

with the program under which the 

recipient received the award. An 

identifiable Federal interest includes, 

but is not limited to, compliance with 

expenditure requirements and 

conditions, such as maintenance of 

effort. Section 453(a)(2) of GEPA (20 

U.S.C. 1234b(a)(2)). Accordingly, when 

an SEA fails to ensure that an LEA has 

met the compliance standard in final 

§ 300.203(b), the SEA, not the LEA, is 

liable in a recovery action under these 

provisions for the amount by which the 

LEA failed to maintain its level of 

expenditures, or the amount of the 

LEA’s Part B IDEA subgrant, whichever 

is lower. 

The SEA, in turn, following 

applicable State procedures, could seek 

reimbursement from the LEA. See July 

26, 2006, letter to Ms. Carol Ann Baglin, 

available at http://www2.ed.gov/policy/

speced/guid/idea/letters/2006-3/

baglin072606moe3q2006.pdf. The 

Department has not included a 

provision permitting SEAs to seek 

reimbursement from LEAs because that 

is a matter of State law. 

Changes: None. 

Burden on SEAs 

Comment: Some commenters objected 

to proposed § 300.203(d) and stated that 

the consequence for a failure to meet the 

MOE compliance standard should fall 

on the LEA and not the SEA. These 

commenters stated that while an SEA is 

able, through its oversight 

responsibilities, to identify that an LEA 

has failed to meet its MOE obligation, 

SEAs have no control over local 

budgets, and not all States have the 

fiscal resources to provide State funds to 

help an LEA meet its MOE obligation. 

Some commenters stated that if an LEA 

fails to maintain effort and is not able 

to pay back funds to the SEA, the SEA 

will be required to absorb the financial 

loss and has no recourse because 

Federal funding cannot be reduced or 

withheld from the LEA. 

Discussion: The Department 

appreciates the concern of some 

commenters that SEAs should not be 

liable in a recovery action to return nonFederal funds because of an LEA’s 

failure to meet the MOE compliance 

standard. However, as noted in the Legal 

Authority section of the Analysis of 

Comments and Changes, the SEA 

(acting on behalf of the State), not the 

LEA, is the grantee in the IDEA Part B 

program. As a condition of eligibility for 

an IDEA Part B grant, States must 

provide an assurance to the Department 

that the SEA is responsible for ensuring 

that, among other things, all 

requirements of Part B are met. Section 

612(a)(11)(A)(i) of the IDEA (20 U.S.C. 

1412(a)(11)(A)(i)). SEAs can minimize 

LEA noncompliance by carefully 

reviewing an LEA’s application for an 

IDEA Part B subgrant to determine if the 

LEA meets the MOE eligibility standard, 

by monitoring for compliance on a 

regular basis, and by providing 

technical assistance to LEAs. SEAs that 

find an LEA is failing to comply with 

the MOE requirement may take further 

enforcement action as provided in 

§ 300.222. 

With respect to the concern raised by 

some commenters that some SEAs may 

be unable to absorb the loss because 

they do not have sufficient State funds, 

or because the SEA may not withhold 

Federal funds to an LEA that has failed 

to meet the MOE compliance standard, 

we remind States that they may seek 

reimbursement of these amounts from 

the LEA, to the extent permitted under 

State law. Whether a State seeks 

recovery from an LEA is at the 

discretion of the State. 

Changes: None. 

Comment: Some commenters stated 

that SEAs will be required to spend 

additional administrative time 

collecting funds, accounting for the 

collection in their financial systems, 

and returning funds to the Department. 

One of these commenters requested 

clarification about the timeframe within 


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which funds must be returned to the 

Department and the process for 

returning funds (such as what 

identifying information to include on 

the check, where to send it, and what 

supporting documentation to include). 

Discussion: There should be no 

additional burden on, or expense to, an 

SEA as a result of codifying the 

Department’s long-standing practice, 

which is consistent with GEPA, into 

final § 300.203(d). We added this 

provision to the final regulations not 

because this is a change in law, but 

because the Department believes that 

some SEAs and LEAs were not aware of 

the consequence of an LEA’s failure to 

meet the MOE compliance standard. We 

acknowledge that those SEAs that were 

not aware of this requirement may need 

additional time to set up a process for 

returning funds to the Department and 

taking any associated actions against an 

LEA that the SEA wishes to take. 

However, this is a long-standing 

requirement, and therefore, we expect 

that SEAs already have a process in 

place. The Department believes that 

enforcement of the MOE requirement is 

critical to ensuring compliance. 

The Department intends to provide 

guidance on the process for returning 

funds but does not believe it is 

appropriate or necessary to include 

administrative details in these 

regulations. 

Changes: None. 

Calculating Penalties 

Comment: A few commenters 

requested clarification of the definition 

of the ‘‘amount equal to the amount by 

which the LEA failed to maintain its 

level of expenditures’’ in proposed 

§ 300.203(d). One commenter asked how 

to determine the amount of the penalty 

if an LEA failed to meet the MOE 

compliance standard. The commenter 

asked whether the SEA should 

determine the amount of the failure to 

be the lesser amount generated by the 

four methods (after accounting for the 

allowed exceptions and adjustment). 

Discussion: The ‘‘amount equal to the 

amount by which an LEA failed to 

maintain its level of expenditures’’ is 

determined by calculating the amount 

by which the LEA failed to meet the 

MOE compliance standard. Before 

determining the amount of the failure, 

the SEA must permit the LEA to use any 

one of the four methods and to take the 

exceptions and the adjustment in 

§§ 300.204 and 300.205, where 

permissible. The amount of the failure, 

therefore, would be the smallest amount 

generated by the four methods (after 

accounting for the allowed exceptions 

and adjustment). 

Changes: None. 

Comment: A commenter asked if the 

amount by which an LEA failed to meet 

the compliance standard could exceed 

the amount of the LEA’s IDEA Part B 

subgrant received in the year of the 

failure. 

Discussion: While it is possible that 

the amount of a failure to meet the 

compliance standard may exceed the 

amount of the LEA’s IDEA Part B 

subgrant for the fiscal year in question, 

the SEA’s liability to the Department 

cannot. This is because, as discussed 

earlier, section 453(a)(1) of GEPA (20 

U.S.C. 1234b(a)(1)) provides that the 

measure of recovery in such a 

circumstance is proportionate to the 

extent of the harm that the violation 

caused to an identifiable Federal 

interest associated with the program 

under which the recipient received the 

award. Under this circumstance, the 

Federal interest associated with the 

IDEA Part B program is limited to the 

amount of the LEA’s IDEA Part B 

subgrant (the total amount of the LEA’s 

subgrants under sections 611 and 619 of 

the IDEA). 

Table 10 provides examples of how to 

calculate the amount by which an LEA 

failed to maintain its level of 

expenditures and of the amount of nonFederal funds that an SEA must return 

to the Department on account of that 

failure. 

TABLE 10—EXAMPLE OF HOW TO CALCULATE THE AMOUNT OF AN LEA’S FAILURE TO MEET THE COMPLIANCE STANDARD

IN 2016–2017 AND THE AMOUNT THAT AN SEA MUST RETURN TO THE DEPARTMENT

Fiscal year Local funds 

only 

Combination 

of State and 

local funds 

Local funds only on a per 

capita basis 

Combination of State and 

local funds on a per capita 

basis 

Child count 

Amount of 

IDEA Part B 

subgrant 

2015–2016 .......... * $500 * $950 $50 * ....................................... $95 * ....................................... .................... Not relevant. 

2016–2017 .......... 400 750 $40 ......................................... $75 ......................................... 10 $50. 

Amount by which 

an LEA failed 

to maintain its 

level of expenditures in 2016– 

2017.

100 200 $100 (the amount of the failure equals the amount of 

the per capita shortfall 

($10) times the number of 

children with disabilities in 

2016–2017 (10)).

$200 (the amount of the failure equals the amount of 

the per capita shortfall 

($20) times the number of 

children with disabilities in 

2016–2017 (10)).

The SEA determines that the amount of the LEA’s failure is $100 using the calculation method that results in the lowest amount of a failure. 

The SEA’s liability is the lesser of the four calculated shortfalls and the amount of the LEA’s Part B subgrant in the fiscal year in which the 

LEA failed to meet the compliance standard. In this case, the SEA must return $50 to the Department because the LEA’s IDEA Part B 

subgrant was $50, and that is the lower amount. 

* LEA met MOE using this method. 

Changes: We added language in 

§ 300.203(d) to clarify that, if an LEA 

fails to maintain its level of 

expenditures for the education of 

children with disabilities, the SEA is 

liable in a recovery action for the 

amount by which the LEA failed to 

maintain its level of expenditures in 

that fiscal year, or the amount of the 

LEA’s Part B subgrant in that fiscal year, 

whichever is lower. 

Comment: A commenter suggested 

that the phrase ‘‘up to the amount of 

IDEA funds spent in that year’’ be added 

to the end of proposed § 300.203(d) 

because section 613(a)(2)(A)(iii) of the 

IDEA (20 U.S.C. 1413(a)(2)(A)(iii)) states 

that an LEA shall not use these funds to 

reduce its level of expenditures for the 

education of children with disabilities 

below the level of those expenditures 

for the preceding fiscal year; therefore, 

the penalty should be no more than the 

IDEA Part B funds that the LEA spent 

in a particular fiscal year. 

Discussion: The Department disagrees 

with the commenter who recommended 

that § 300.203(d) be changed to limit the 

amount of the penalty to the amount of 


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IDEA Part B funds actually spent by the 

LEA in the fiscal year in which the LEA 

failed to meet the compliance standard. 

Once an LEA accepts an IDEA Part B 

subgrant, the LEA is required to meet 

the compliance standard in § 300.203(b), 

and the amount of IDEA Part B funds 

spent by the LEA in that fiscal year is 

not relevant to the calculation of the 

MOE penalty. 

Changes: None. 

Comment: Many commenters 

requested that proposed § 300.203(d) 

incorporate language from the July 26, 

2006, letter to Baglin, which stated, 

‘‘Faced with a history of noncompliance 

with the MOE requirement, however, 

the SEA would need to carefully 

determine whether the LEA will meet 

the MOE requirement in the coming 

year (in which case a grant should be 

made), or whether the SEA should begin 

an administrative withholding action 

[consistent with section 613(c) and (d) 

of the IDEA] because it is not convinced 

that the LEA will meet the MOE 

requirement for the new year.’’ The 

commenters stated that this language 

would underscore the importance of 

SEA monitoring and oversight to ensure 

implementation and compliance with 

the MOE requirement. Another 

commenter suggested that the 

Department add a specific consequence 

for LEAs that fail to comply with MOE 

for more than one fiscal year. 

Discussion: The Department agrees 

that SEAs have a responsibility to 

ensure that LEAs meet the MOE 

eligibility and compliance standards. 

However, §§ 300.221 and 300.222 

address what procedures the SEA must 

follow if the SEA determines that the 

LEA is not eligible or that an eligible 

LEA is failing to comply with the MOE 

requirement, and it is not necessary to 

duplicate those provisions in 

§ 300.203(d). We believe that 

§ 300.203(d) provides an appropriate 

consequence for MOE failures that occur 

in more than one fiscal year, because the 

penalty in § 300.203(d) applies in each 

fiscal year in which the LEA fails to 

maintain effort. Therefore, it is not 

necessary to add an additional 

consequence for such LEAs. 

Changes: None. 

Comment: Some commenters stated 

that LEAs should not be penalized for 

MOE violations in the absence of 

evidence that the LEA has failed to 

make FAPE available. Another 

commenter questioned the effectiveness 

of the consequence for MOE violations. 

Specifically, the commenter asked what 

evidence demonstrates that repayment 

of Federal funds by an LEA leads to 

increased compliance with the IDEA or 

a greater ability to maintain effort in 

future years. In addition, the commenter 

questioned whether losing access to 

Federal dollars will be an incentive for 

LEAs to use sound financial practices 

that are fair to all the students they 

serve and to be better positioned to 

provide FAPE in the least restrictive 

environment for children with 

disabilities. 

Discussion: The Department 

appreciates, but disagrees with, these 

comments. LEAs that receive an IDEA 

Part B subgrant must meet both the 

FAPE obligation and the MOE 

requirement separately; the two 

provisions are not contingent on each 

other. Regarding the comment 

questioning the effectiveness of the 

consequence for failure to maintain 

effort, the Department notes that the 

requirement to return funds based on an 

LEA’s failure to maintain effort is a 

statutory requirement. Consistent with 

sections 452(a)(1) and (a)(2) and 

453(a)(1) of GEPA (20 U.S.C. 1234a(a)(1) 

and (a)(2) and 1234b(a)(1)) and longstanding Department practice, an SEA is 

liable in a recovery action to pay the 

Department, from non-Federal funds or 

funds for which accountability to the 

Federal government is not required, the 

difference between the amount of local, 

or State and local, funds the LEA should 

have expended and the amount that it 

actually did expend. Section 453(a)(1) of 

GEPA (20 U.S.C. 1234b(a)(1)) provides 

that the measure of recovery in such a 

circumstance is an amount that is 

proportionate to the extent of the harm 

that the violation caused to an 

identifiable Federal interest associated 

with the program under which the 

recipient received the award. An 

identifiable Federal interest includes, 

but is not limited to, compliance with 

expenditure requirements and 

conditions, such as maintenance of 

effort. Section 453(a)(2) of GEPA (20 

U.S.C. 1234b(a)(2)). Because the SEA in 

such a recovery action is required to 

return non-Federal funds, and not 

Federal funds, the SEA and LEA are not 

losing access to Federal IDEA Part B 

funds. See 2 CFR 200.441. 

Changes: None. 

Miscellaneous Comments 

Comment: A few commenters stated 

that, because the Department 

acknowledged that MOE violations have 

not been extensive, a more restrained 

regulatory approach is justified. 

Discussion: We disagree. In 

determining whether there was a need 

to revise the MOE regulations, OSEP 

found that at least 40 percent of States 

have policies and procedures that are 

not consistent with the MOE 

requirement. For example, many States 

have not permitted LEAs to use all four 

methods to meet the eligibility or 

compliance standard. Another State did 

not allow LEAs to include local funds 

spent for the education of children with 

disabilities in its MOE calculations if 

the LEA was also required to spend 

those funds to meet a Medicaid 

matching requirement. These actions 

restrict the ability of LEAs to meet the 

MOE requirement and may result in a 

finding of noncompliance by LEAs 

where none exists. Moreover, the 

Department learned through fiscal 

monitoring that some States, prior to 

awarding IDEA Part B subgrants, were 

not requiring LEAs to demonstrate that 

they met the MOE eligibility standard. 

In addition, as we stated in the NPRM, 

some States identified noncompliance 

by LEAs with the MOE requirement and 

returned non-Federal funds to the 

United States Treasury in the amount of 

that failure but did not inform the 

Department of the failures, indicating 

that the number of failures to comply 

with the MOE requirement may be 

undercounted. Moreover, the 

Department learned, through its review 

of comments received in response to the 

NPRM, that some States were not aware 

that, if an LEA failed to meet the MOE 

compliance standard, the SEA was 

liable in a recovery action to return nonFederal funds to the Department in the 

amount of the failure. Accordingly, the 

Department does not believe that the 

lack of documentation of widespread 

MOE noncompliance necessarily leads 

to the conclusion that States and LEAs 

understand and comply with the MOE 

requirement. 

Changes: None. 

Comment: Many commenters 

supported the proposed changes to the 

MOE regulations because the changes 

would provide necessary clarification. 

Other commenters stated that the 

proposed regulations did not clarify the 

MOE requirement. A few commenters 

stated that the MOE requirement should 

be imposed only after the Department 

and Congress make an effort to 

compensate school districts for the 40 

percent of special education costs that 

the commenters say the States were 

promised when the IDEA was enacted. 

Discussion: We believe that the final 

regulations and the tables provided here 

clarify the MOE requirement. We 

disagree with the view expressed by 

commenters that the Department should 

not issue and enforce MOE regulations 

until the maximum amount of the grant 

a State receives is 40 percent of the 

average per-pupil expenditure in public 

elementary and secondary schools in 

the United States. The Department has 

no legal authority to condition 


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compliance with the MOE requirement 

on Congress’s providing a particular 

level of appropriations. The IDEA 

requires that amounts provided to LEAs 

shall not be used, except as allowed by 

the exceptions and adjustment in 

§§ 300.204 and 300.205, to reduce the 

level of expenditures for the education 

of children with disabilities made by the 

LEA from local funds below the level of 

those expenditures for the preceding 

fiscal year. 

The Department believes that the 

MOE regulations provide necessary 

clarification on, and therefore will 

increase understanding by States and 

LEAs of, the MOE requirement, 

including: The Subsequent Years rule, 

the eligibility and compliance 

standards, the four methods available to 

LEAs to meet the eligibility and 

compliance standards, and the existing 

exceptions and adjustment in 

§§ 300.204 and 300.205. The 

Department also believes that the MOE 

requirement is consistent with, and 

promotes, the requirement that LEAs 

make FAPE available to all eligible 

children with disabilities. 

Changes: None. 

Comment: Several commenters 

objected generally to the MOE 

requirement and raised a variety of 

concerns, including that the proposed 

regulations encourage fraud, waste, and 

abuse because they encourage LEAs to 

spend funds to meet the MOE 

requirement rather than to ensure that 

children with disabilities receive FAPE. 

Other commenters stated a concern that 

LEAs will submit budgets that have 

inflated or non-existent costs simply to 

demonstrate eligibility for an IDEA Part 

B subgrant. A few commenters also 

stated that the proposed regulations 

create a disincentive for LEAs that wish 

to increase their expenditures for the 

education of children with disabilities 

for one-time, high-cost initiatives, 

because the district would be forced to 

continue spending the same amount of 

funds in future years after the initiative 

is completed. 

Discussion: We do not believe that the 

regulations encourage fraud, waste, and 

abuse because they encourage LEAs to 

spend funds to meet the MOE 

requirement rather than to ensure that 

children with disabilities receive FAPE. 

State and local funds spent on the 

education of children with disabilities 

meet both the requirement to maintain 

effort and the requirement to make 

FAPE available to children with 

disabilities. 

With respect to the comment that the 

MOE regulations create a disincentive 

for LEAs that wish to implement 

temporary initiatives for the education 

of children with disabilities because 

doing so will increase the LEA’s 

required level of effort in future years, 

section 613(a)(2)(B) of the IDEA and its 

implementing regulations in § 300.204 

include five exceptions that permit an 

LEA to reduce its required level of 

expenditures. We believe these 

exceptions, such as the termination of 

costly expenditures for long-term 

purchases, and the adjustment in 

§ 300.205 provide LEAs sufficient 

flexibility to adjust their required level 

of effort based on changed 

circumstances. 

Changes: None. 

Comment: Some commenters stated 

that the MOE regulations do not take 

into account the variety of fiscal systems 

in States and LEAs. The commenters 

expressed concern over the many Statespecific issues that need to be 

independently addressed by OSEP or 

that fall outside the scope of the 

proposed regulation. 

Discussion: We believe that the 

regulations provide sufficient direction 

to States and LEAs regardless of their 

fiscal systems. State-specific issues will 

be addressed by OSEP as needed. In 

addition, the Department intends to 

issue guidance on the MOE requirement 

and will continue to provide technical 

assistance to States to address Statespecific concerns, including those 

related to the specifics of financial 

systems. One source of technical 

assistance will be the new Center for 

IDEA Fiscal Reporting that OSEP 

awarded under the FY 2014 competition 

CFDA 84.373F. OSEP awarded the grant 

to WestEd. The Center for IDEA Fiscal 

Reporting can be found at http://

cifr.wested.org/. This center will 

improve the capacity of State staff to 

collect and report accurate fiscal data to 

meet the data collection requirements 

related to LEA MOE Reduction and 

Coordinated Early Intervening Services 

(CEIS) and State Maintenance of 

Financial Support (State MFS); and 

increase States’ knowledge of the 

underlying fiscal requirements and the 

calculations necessary to submit valid 

and reliable data on LEA MOE/CEIS and 

State MFS. 

Changes: None. 

Comment: One commenter asked 

whether the requirement regarding CEIS 

will be affected by the proposed 

regulations. 

Discussion: The provisions regarding 

CEIS in §§ 300.205(d) and 300.226 are 

not affected by these regulations. 

Changes: None. 

Comment: A few commenters 

recommended that the Department issue 

additional guidance to accompany the 

final regulations. Suggestions included: 

A detailed checklist of what needs to be 

accounted for in LEAs’ budgets, a chart 

that lays out how to meet the MOE 

requirement, and examples that use 

specific numbers. 

Discussion: We appreciate the 

commenters’ suggestions for additional 

guidance. This Analysis of Comments 

and Changes includes several tables to 

assist States and LEAs. These tables also 

have been included in new Appendix E 

to the regulations. In addition, the 

Department intends to issue guidance 

on the MOE requirement. 

Changes: We have redesignated 

current Appendix E as new Appendix F. 

We have added new Appendix E to 

include Tables 1 through 10, which are 

included in the Analysis of Comments 

and Changes. This appendix will be 

published in the Code of Federal 

Regulations. 

Executive Orders 12866 and 13563 

Regulatory Impact Analysis 

Under Executive Order 12866, the 

Secretary must determine whether this 

regulatory action is ‘‘significant’’ and, 

therefore, subject to the requirements of 

the Executive order and subject to 

review by the Office of Management and 

Budget (OMB). Section 3(f) of Executive 

Order 12866 defines a ‘‘significant 

regulatory action’’ as an action likely to 

result in a rule that may— 

(1) Have an annual effect on the 

economy of $100 million or more or 

adversely affect a sector of the economy, 

productivity, competition, jobs, the 

environment, public health or safety, or 

State, local, or tribal governments or 

communities in a material way (also 

referred to as an ‘‘economically 

significant’’ rule); 

(2) Create serious inconsistency or 

otherwise interfere with an action taken 

or planned by another agency; 

(3) Materially alter the budgetary 

impacts of entitlement grants, user fees, 

or loan programs or the rights and 

obligations of recipients thereof; or 

(4) Raise novel legal or policy issues 

arising out of legal mandates, the 

President’s priorities, or the principles 

stated in the Executive order. 

This final regulatory action is a 

significant regulatory action subject to 

review by OMB under section 3(f) of 

Executive Order 12866. 

We have also reviewed these 

regulations under Executive Order 

13563, which supplements and 

explicitly reaffirms the principles, 

structures, and definitions governing 

regulatory review established in 

Executive Order 12866. To the extent 

permitted by law, Executive Order 

13563 requires that an agency— 


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(1) Propose or adopt regulations only 

on a reasoned determination that their 

benefits justify their costs (recognizing 

that some benefits and costs are difficult 

to quantify); 

(2) Tailor its regulations to impose the 

least burden on society, consistent with 

obtaining regulatory objectives and, 

taking into account—among other things 

and to the extent practicable—the costs 

of cumulative regulations; 

(3) In choosing among alternative 

regulatory approaches, select those 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety, 

and other advantages; distributive 

impacts; and equity); 

(4) To the extent feasible, specify 

performance objectives, rather than the 

behavior or manner of compliance a 

regulated entity must adopt; and 

(5) Identify and assess available 

alternatives to direct regulation, 

including economic incentives—such as 

user fees or marketable permits—to 

encourage the desired behavior, or 

provide information that enables the 

public to make choices. 

Executive Order 13563 also requires 

an agency ‘‘to use the best available 

techniques to quantify anticipated 

present and future benefits and costs as 

accurately as possible.’’ The Office of 

Information and Regulatory Affairs of 

OMB has emphasized that these 

techniques may include ‘‘identifying 

changing future compliance costs that 

might result from technological 

innovation or anticipated behavioral 

changes.’’ 

We are issuing these final regulations 

only on a reasoned determination that 

their benefits justify their costs. In 

choosing among alternative regulatory 

approaches, we selected those 

approaches that maximize net benefits. 

Based on the analysis that follows, the 

Department believes that these final 

regulations are consistent with the 

principles in Executive Order 13563. 

We also have determined that this 

regulatory action would not unduly 

interfere with State, local, or tribal 

governments in the exercise of their 

governmental functions. 

Potential Costs and Benefits 

In accordance with both Executive 

orders, the Department has assessed the 

potential costs and benefits, both 

quantitative and qualitative, of this 

regulatory action. In conducting this 

analysis, the Department examined the 

extent to which the changes made by 

these proposed regulations would add 

to or reduce the costs to States, LEAs, 

and others, as compared to the costs of 

implementing the current Part B 

program regulations. Based on the 

following analysis, the Secretary has 

concluded that the changes could result 

in reduced costs for States and LEAs to 

the extent that increased understanding 

of the MOE requirement and use of all 

four methods to demonstrate that LEAs 

met MOE would result in States making 

fewer repayments to the Department 

and seeking fewer recoveries from LEAs. 

However, there is also the potential for 

additional costs for States and LEAs to 

the extent that LEAs are required to 

increase expenditures in the year 

following a failure to meet the MOE 

provisions under Part B of the Act or if 

a State or LEA incorrectly calculated 

MOE in a preceding year. The Secretary 

believes that the benefits of ensuring 

that adequate resources are available to 

provide FAPE for children with 

disabilities are likely to outweigh any 

costs to LEAs that violated the MOE 

requirement in the preceding year and 

do not plan to restore funding in the 

subsequent year to the level they should 

have maintained in the preceding year. 

Section 300.203 

The effect of the final regulations on 

LEAs will depend on: (1) The degree of 

understanding by States and LEAs about 

the eligibility and compliance standards 

and the ability that the LEAs have to 

meet one of four methods; and (2) the 

likelihood that LEAs would violate the 

MOE requirement in any given year and 

seek to maintain funding at the reduced 

level in subsequent years. One possible 

source of information that could be used 

to estimate the effect of the final 

regulations on LEAs is data on previous 

findings of LEA violations. However, as 

described in the Analysis of Comments 

and Changes section, the Department 

has limited information on LEA 

violations. States are responsible for 

monitoring LEA compliance with the 

MOE requirement and resolving any 

audit findings in this area, but States are 

not required to report the number of 

LEAs that violated the MOE 

requirement, the basis of the violations, 

or the amount of funding involved. 

Other sources of information on the 

likely effects of the final regulations are 

audit reports and OSEP’s fiscal 

monitoring of States’ implementation of 

the current regulations. OSEP’s fiscal 

monitoring, in conjunction with the 

Department’s Office of Inspector 

General’s (OIG) audit findings and 

reports, have identified a number of 

problems with State administration of 

the MOE requirement under the current 

regulations, suggesting that there is 

confusion about the MOE requirement 

and a lack of clarity in the existing 

regulations. Specifically, OSEP has 

found that at least 40 percent of States 

have policies and procedures that are 

not consistent with how States should 

determine eligibility for, or compliance 

with, the MOE requirement. Most 

notably, it appears that some States have 

not allowed LEAs to use all four 

methods to demonstrate that they have 

met the MOE requirement for purposes 

of eligibility or compliance 

determinations, including the method 

that allows the LEA to demonstrate that 

it met the MOE requirement on the basis 

of local funds only. There is also some 

indication that States may have used an 

incorrect comparison year when LEAs 

made a local-to-local comparison. 

In years in which States did not allow 

the LEAs to use all four methods to 

demonstrate they met MOE, it is 

possible that LEAs budgeted for, and 

expended, more than they would have 

if both States and LEAs had understood 

that they had flexibility to use any of the 

four methods. In these instances, the 

clarification made in the final 

regulations will result in a reduction in 

future expenditures on the part of LEAs. 

Additionally, in instances in which 

States did not appropriately allow the 

LEAs to use any of the four methods in 

meeting MOE, the State may have 

sought to recover funds from LEAs or 

made unnecessary repayments to the 

Department. Clarifying that all four 

methods may be used for MOE 

determinations should result in States 

making fewer repayments to the 

Department and seeking fewer 

recoveries from LEAs. 

Alternatively, in those cases in which 

States may be allowing LEAs to use an 

incorrect comparison year when using 

the local funds only method, clarifying 

the comparison year may result in 

increased expenditures by LEAs. For 

example, in its May 20, 2013 Alert 

Memorandum, the OIG raised concerns 

about the comparison years used by the 

State of California in determining MOE 

compliance. According to that 

memorandum, the State used an 

incorrect comparison year when 

determining that two LEAs met the 

MOE requirement using local funds 

only method. Specifically, California 

allowed the LEAs that had never relied 

on local funds only to meet the MOE 

requirement to use a comparison year 

from three years earlier, instead of 

requiring a comparison of expenditures 

made with local funds only to the 

preceding fiscal year. In this case, the 

clarification made by the final 

regulations will require increased LEA 

expenditures. We do not know the 

extent to which the use by States and 

LEAs of incorrect comparison years has 

permitted lower expenditures than 


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would be required under the final 

regulations, or, alternatively, the extent 

to which using the incorrect comparison 

year has resulted in higher 

expenditures. However, in general, the 

findings made during fiscal monitoring 

demonstrating that States are providing 

less flexibility to LEAs than is allowable 

under the law suggest that the 

clarifications included in these 

regulations would reduce costs for both 

LEAs and States. 

The regulations also specifically 

address the level of expenditures 

required by an LEA in the fiscal years 

following a fiscal year in which an LEA 

violated the MOE requirement. 

Specifically, the final regulations clarify 

that, in a fiscal year following a fiscal 

year in which the LEA failed to meet 

MOE, the required level of expenditures 

is the level of expenditures in the last 

fiscal year in which the LEA met the 

MOE requirement, not the reduced level 

of expenditures in the preceding fiscal 

year (the Subsequent Years rule). 

We believe that this clarification in 

the regulations will improve State 

administration of the program, and that 

it is consistent with the IDEA and in the 

best interest of children with 

disabilities. We do not expect this 

change to have a significant impact on 

LEA expenditures in the near term 

based on available data concerning the 

extent of LEA violations and the 

likelihood of future violations. 

However, this change would eliminate 

the risk, under the current regulations, 

that State policy could permit LEAs that 

reduce spending in violation of the 

MOE requirement to maintain the 

reduced level of expenditures in 

subsequent years. 

The Department typically learns of an 

LEA violation in conjunction with its 

review of audit findings. In the 

relatively few instances in which the 

Department has issued program 

determination letters to States 

concerning audit findings about LEA 

failure to maintain the appropriate level 

of effort, most of the findings concerned 

the absence of an effective State system 

for monitoring MOE rather than specific 

MOE violations. 

Since 2004, the only program 

determination letter that identified 

specific questioned costs for LEA failure 

to meet MOE involved Oklahoma. In 

December 2006, the Department issued 

a program determination letter to the 

Oklahoma SEA seeking recovery of 

$583,943.29 expended under IDEA Part 

B due to audit findings that 76 LEAs 

had not met their required level of effort 

for funds in Federal fiscal Year (FFY) 

2003. In School Year (SY) 2009–2010, 

Oklahoma reported having 532 LEAs; 

accordingly, approximately 14 percent 

of the State’s LEAs were affected by 

these audit findings. After reviewing 

additional materials provided by the 

State that supported the application of 

the MOE exceptions in § 300.204, the 

Department reduced the amount of its 

determination to $289,501.76. The final 

claim against Oklahoma was settled for 

$217,126.32. 

We also searched the Federal Audit 

Clearinghouse for information about 

single audits of Federal awards 

conducted by States or private 

accounting firms of LEAs that expend 

$500,000 or more in a year in Federal 

award funds, as required by Office of 

Management and Budget (OMB) 

Circular A–133. The Federal Audit 

Clearinghouse is located at the 

following link: www.census.gov/econ/

overview/go1400.html. We searched for 

audit findings in response to area ‘‘G’’ 

of the compliance supplement to OMB 

Circular A–133, which relates to 

‘‘Matching, Level of Effort, and 

Earmarking,’’ for audits related to Code 

of Federal Domestic Assistance section 

84.027 (funds awarded under section 

611 of the IDEA). Single audits of 

Federal awards are not available for all 

LEAs through the Federal Audit 

Clearinghouse, but there is information 

on single audits for 9,024 LEAs for FY 

2009, which represents approximately 

60 percent of LEAs. 

Our search identified 25 audits that 

contained findings related to section G 

of the compliance supplement, four of 

which were accompanied by audit 

reports that included questioned costs 

related to failure to achieve the required 

MOE. Only two of the four audits 

specified amounts of questioned costs, 

for $10,428 and $153,621.53, 

respectively. Although these findings do 

not necessarily represent all violations 

of the MOE requirement, both the small 

number and size of questioned costs 

related to failure to meet this 

requirement suggest that MOE 

violations are not extensive. Audit 

findings for fiscal years 2007, 2008, 

2010, and 2011 (to the extent available) 

were generally consistent with the 

findings for 2009. 

Another source of information for 

estimating the likelihood of future MOE 

violations are data on the extent to 

which LEAs have reduced expenditures 

pursuant to the new flexibility provided 

in the 2004 amendments to the IDEA. 

Pursuant to section 613(a)(2)(C) of the 

IDEA, for any fiscal year in which an 

LEA receives an allocation under 

section 611(f) that exceeds its allocation 

for the previous fiscal year, an LEA that 

otherwise meets the requirements of the 

IDEA may reduce the level of 

expenditures that are otherwise required 

to meet the MOE requirement by not 

more than 50 percent of the amount of 

the increased allocation. Since May 

2011, States have been reporting the 

amount that each LEA received in an 

IDEA subgrant under section 611 or 

section 619, whether the State had 

determined that the LEA or educational 

service agency (ESA) had met the 

requirements of Part B of the IDEA, and 

whether each LEA or ESA had reduced 

its expenditures pursuant to § 300.205. 

Data are available at http://

tadnet.public.tadnet.org/pages/712 

(Table 8 LEA-level files, revised 2/29/

12, accessed 11/03/14). 

The data we have collected to date 

include reductions taken in the year in 

which LEAs were most likely to make 

reductions because of the availability of 

an additional $11.3 billion for formula 

grant awards under the Grants to States 

program provided under the American 

Recovery and Reinvestment Act of 2009 

(ARRA). Because these additional funds 

increased the annual allocation to most 

LEAs in FFY 2009 over FFY 2008, LEAs 

meeting conditions established by the 

State and the Department were 

permitted to reduce the level of support 

they would otherwise be required to 

provide during SY 2009–2010 by up to 

50 percent of the amount of the 

increase. 

Of the 14,936 LEAs that received 

allocations under section 611 in FFY 

2008 and FFY 2009, States reported that 

12,061 received increased allocations 

under section 611 and met other 

conditions so that they were eligible to 

reduce their level of effort. Notably, 

only 4,237 LEAs (or 36 percent) 

reported that they reduced their level of 

effort. If they met the conditions, LEAs 

were permitted to reduce effort by up to 

50 percent of the increase in their 

allocation, but they typically reduced 

spending only by 38 percent. 

Larger LEAs were more likely to 

reduce expenditures than LEAs in 

general. For the 100 largest LEAs, based 

on their FFY 2008 allocations under 

section 611, 31 of the 51 LEAs that were 

eligible to reduce expenditures actually 

did so, and these LEAs reduced 

expenditures by an average of 73 

percent of the allowable amount. 

Of the 4,237 LEAs that reported 

reducing expenditures, only 32 had 

been determined to have not met the 

requirements of IDEA Part B and may 

have violated the MOE requirement, 

unless one of the exceptions to the MOE 

requirement in § 300.204 were 

applicable. The combined amount of 

MOE reductions for these LEAs was 

$19,304,506, with a median reduction of 

$745. One of these LEAs reported a 


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23666 Federal Register / Vol. 80, No. 81 / Tuesday, April 28, 2015 / Rules and Regulations 

reduction of $18,358,631, which 

represents 41 percent of the increase in 

that LEA’s allocation from the previous 

year; but the reductions that were taken 

by the remaining LEAs were relatively 

small. 

The combined amount by which 

eligible LEAs in the 50 States, the 

District of Columbia, and Puerto Rico 

could have reduced their level of effort 

in SY 2009–2010 was $5.6 billion, but 

the actual combined reduction was only 

27 percent of that amount, or $1.5 

billion. Because most LEAs did not 

reduce expenditures when they had an 

opportunity to do so, which would have 

led to an allowable reduction of their 

level of effort required in future years, 

it is reasonable to assume that a smaller 

number of LEAs would undertake 

reductions that constitute violations of 

the MOE requirement. We believe that 

it is highly unlikely that the 4,205 LEAs 

that met the requirement of section 

613(a)(2)(C) of the IDEA and reduced 

their level of effort would seek further 

reductions that would violate the MOE 

requirement because they legitimately 

lowered their own required level of 

effort when they made those previous 

reductions. 

Based on available audit findings and 

data, the Department believes that LEAs 

generally are unlikely to reduce 

expenditures in violation of the MOE 

requirement. Moreover, we believe that 

the requirement that LEAs make FAPE 

available to all eligible children with 

disabilities provides another critical 

protection against unwarranted 

reductions of expenditures to support 

education for children with disabilities. 

However, to ensure that State policy and 

administration of the MOE requirement 

are consistent with the Department’s 

position on the required level of future 

expenditures in cases of LEA violations, 

we think that it is critical to change the 

regulations to clearly articulate the 

Department’s interpretation of the law. 

Paperwork Reduction Act of 1995 

Under the Paperwork Reduction Act 

of 1995 (44 U.S.C. 3501–3520), we have 

assessed the potential information 

collections in these proposed 

regulations that would be subject to 

review by OMB (Report on IDEA Part B 

Maintenance of Effort Reduction 

(§ 300.205(a)) and Coordinated Early 

Intervening Services (§ 300.226)) 

(Information Collection 1820–0689). In 

conducting this analysis, the 

Department examined the extent to 

which the amended regulations would 

add information collection requirements 

for public agencies. Based on this 

analysis, the Secretary has concluded 

that these amendments to the Part B 

regulations would not impose 

additional information collection 

requirements. 

Intergovernmental Review 

This program is subject to the 

requirements of Executive Order 12372 

and the regulations in 34 CFR part 79. 

One of the objectives of the Executive 

order is to foster an intergovernmental 

partnership and a strengthened 

federalism. The Executive order relies 

on processes developed by State and 

local governments for coordination and 

review of proposed Federal financial 

assistance. 

This document provides early 

notification of the Department’s specific 

plans and actions for this program. 

Assessment of Educational Impact 

In the NPRM we requested comments 

on whether the proposed regulations 

would require transmission of 

information that any other agency or 

authority of the United States gathers or 

makes available. 

Based on the response to the NPRM 

and on our review, we have determined 

that these final regulations do not 

require transmission of information that 

any other agency or authority of the 

United States gathers or makes 

available. 

Accessible Format: Individuals with 

disabilities can obtain this document in 

an accessible format (e.g., braille, large 

print, audiotape, or compact disc) on 

request to the program contact person 

listed under FOR FURTHER INFORMATION

CONTACT. 

Electronic Access to This Document: 

The official version of this document is 

the document published in the Federal 

Register. Free Internet access to the 

official edition of the Federal Register 

and the Code of Federal Regulations is 

available via the Federal Digital System 

at: www.gpo.gov/fdsys. At this site you 

can view this document, as well as all 

other documents of this Department 

published in the Federal Register, in 

text or Adobe Portable Document 

Format (PDF). To use PDF you must 

have Adobe Acrobat Reader, which is 

available free at the site. 

You may also access documents of the 

Department published in the Federal 

Register by using the article search 

feature at: www.federalregister.gov. 

Specifically, through the advanced 

search feature at this site, you can limit 

your search to documents published by 

the Department. You may also view this 

document in text or PDF at the 

following site: idea.ed.gov. 

(Catalog of Federal Domestic Assistance 

Number 84.181) 

List of Subjects in 34 CFR Part 300 

Administrative practice and 

procedure, Education of individuals 

with disabilities, Elementary and 

secondary education, Equal educational 

opportunity, Grant programs— 

education, Privacy, Private schools, 

Reporting and recordkeeping 

requirements. 

Dated: April 9, 2015. 

Arne Duncan, 

Secretary of Education. 

For the reasons discussed in the 

preamble, the Secretary amends part 

300 of title 34 of the Code of Federal 

Regulations as follows: 

PART 300—ASSISTANCE TO STATES 

FOR THE EDUCATION OF CHILDREN 

WITH DISABILITIES 

■ 1. The authority citation for part 300 

is revised to read as follows: 

Authority: 20 U.S.C. 1221e–3, 1406, 1411– 

1419, 3474, unless otherwise noted. 

■ 2. Section 300.203 is revised to read 

as follows: 

§ 300.203 Maintenance of effort. 

(a) Eligibility standard. (1) For 

purposes of establishing the LEA’s 

eligibility for an award for a fiscal year, 

the SEA must determine that the LEA 

budgets, for the education of children 

with disabilities, at least the same 

amount, from at least one of the 

following sources, as the LEA spent for 

that purpose from the same source for 

the most recent fiscal year for which 

information is available: 

(i) Local funds only; 

(ii) The combination of State and local 

funds; 

(iii) Local funds only on a per capita 

basis; or 

(iv) The combination of State and 

local funds on a per capita basis. 

(2) When determining the amount of 

funds that the LEA must budget to meet 

the requirement in paragraph (a)(1) of 

this section, the LEA may take into 

consideration, to the extent the 

information is available, the exceptions 

and adjustment provided in §§ 300.204 

and 300.205 that the LEA: 

(i) Took in the intervening year or 

years between the most recent fiscal 

year for which information is available 

and the fiscal year for which the LEA is 

budgeting; and 

(ii) Reasonably expects to take in the 

fiscal year for which the LEA is 

budgeting. 

(3) Expenditures made from funds 

provided by the Federal government for 

which the SEA is required to account to 

the Federal government or for which the 

LEA is required to account to the 


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Federal government directly or through 

the SEA may not be considered in 

determining whether an LEA meets the 

standard in paragraph (a)(1) of this 

section. 

(b) Compliance standard. (1) Except 

as provided in §§ 300.204 and 300.205, 

funds provided to an LEA under Part B 

of the Act 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 those expenditures 

for the preceding fiscal year. 

(2) An LEA meets this standard if it 

does not reduce the level of 

expenditures for the education of 

children with disabilities made by the 

LEA from at least one of the following 

sources below the level of those 

expenditures from the same source for 

the preceding fiscal year, except as 

provided in §§ 300.204 and 300.205: 

(i) Local funds only; 

(ii) The combination of State and local 

funds; 

(iii) Local funds only on a per capita 

basis; or 

(iv) The combination of State and 

local funds on a per capita basis. 

(3) Expenditures made from funds 

provided by the Federal government for 

which the SEA is required to account to 

the Federal government or for which the 

LEA is required to account to the 

Federal government directly or through 

the SEA may not be considered in 

determining whether an LEA meets the 

standard in paragraphs (b)(1) and (2) of 

this section. 

(c) Subsequent years. (1) If, in the 

fiscal year beginning on July 1, 2013 or 

July 1, 2014, an LEA fails to meet the 

requirements of § 300.203 in effect at 

that time, the level of expenditures 

required of the LEA for the fiscal year 

subsequent to the year of the failure is 

the amount that would have been 

required in the absence of that failure, 

not the LEA’s reduced level of 

expenditures. 

(2) If, in any fiscal year beginning on 

or after July 1, 2015, an LEA fails to 

meet the requirement of paragraph 

(b)(2)(i) or (iii) of this section and the 

LEA is relying on local funds only, or 

local funds only on a per capita basis, 

to meet the requirements of paragraph 

(a) or (b) of this section, the level of 

expenditures required of the LEA for the 

fiscal year subsequent to the year of the 

failure is the amount that would have 

been required under paragraph (b)(2)(i) 

or (iii) in the absence of that failure, not 

the LEA’s reduced level of expenditures. 

(3) If, in any fiscal year beginning on 

or after July 1, 2015, an LEA fails to 

meet the requirement of paragraph 

(b)(2)(ii) or (iv) of this section and the 

LEA is relying on the combination of 

State and local funds, or the 

combination of State and local funds on 

a per capita basis, to meet the 

requirements of paragraph (a) or (b) of 

this section, the level of expenditures 

required of the LEA for the fiscal year 

subsequent to the year of the failure is 

the amount that would have been 

required under paragraph (b)(2)(ii) or 

(iv) in the absence of that failure, not the 

LEA’s reduced level of expenditures. 

(d) Consequence of failure to 

maintain effort. If an LEA fails to 

maintain its level of expenditures for 

the education of children with 

disabilities in accordance with 

paragraph (b) of this section, the SEA is 

liable in a recovery action under section 

452 of the General Education Provisions 

Act (20 U.S.C. 1234a) to return to the 

Department, using non-Federal funds, 

an amount equal to the amount by 

which the LEA failed to maintain its 

level of expenditures in accordance 

with paragraph (b) of this section in that 

fiscal year, or the amount of the LEA’s 

Part B subgrant in that fiscal year, 

whichever is lower. (Approved by the 

Office of Management and Budget under 

control number 1820–0600) 

(Authority: 20 U.S.C. 1413(a)(2)(A), Pub. L. 

113–76, 128 Stat. 5, 394 (2014), Pub. L. 113– 

235, 128 Stat. 2130, 2499 (2014)) 

§ 300.204 [Amended] 

■ 3. Section 300.204 is amended by 

removing, from the introductory text, 

the citation ‘‘§ 300.203(a)’’ and adding, 

in its place, the citation ‘‘§ 300.203(b)’’. 

§ 300.205 [Amended] 

■ 4. Section 300.205 is amended by 

removing, from paragraph (a), both 

instances of the citation ‘‘§ 300.203(a)’’, 

and adding, in both places, the citation 

‘‘§ 300.203(b)’’. 

§ 300.208 [Amended] 

■ 5. Section 300.208 is amended by 

removing, from paragraph (a), the 

citation ‘‘300.203(a)’’ and adding, in its 

place, the citation ‘‘300.203(b)’’. 

Appendix E to Part 300 [Redesignated as 

Appendix F to Part 300] 

■ 6. Appendix E to part 300 is 

redesignated as Appendix F to part 300. 

■ 7. A new Appendix E is added to read 

as follows: 

Appendix E To Part 300—Local 

Educational Agency Maintenance of 

Effort Calculation Examples 

The following tables provide examples of 

calculating LEA MOE. Figures are in 

$10,000s. All references to a ‘‘fiscal year’’ in 

these tables refer to the fiscal year covering 

that school year, unless otherwise noted. 

Tables 1 through 4 provide examples of 

how an LEA complies with the Subsequent 

Years rule. In Table 1, for example, an LEA 

spent $1 million in Fiscal Year (FY) 2012– 

2013 on the education of children with 

disabilities. In the following year, the LEA 

was required to spend at least $1 million but 

spent only $900,000. In FY 2014–2015, 

therefore, the LEA was required to spend $1 

million, the amount it was required to spend 

in FY 2013–2014, not the $900,000 it actually 

spent. 

TABLE 1—EXAMPLE OF LEVEL OF EFFORT REQUIRED TO MEET MOE COMPLIANCE STANDARD IN YEAR FOLLOWING A

YEAR IN WHICH LEA FAILED TO MEET MOE COMPLIANCE STANDARD

Fiscal year Actual level 

of effort 

Required level 

of effort Notes 

2012–2013 ....................................... $100 $100 LEA met MOE. 

2013–2014 ....................................... 90 100 LEA did not meet MOE. 

2014–2015 ....................................... ........................ 100 Required level of effort is $100 despite LEA’s failure in 2013–2014. 

Table 2 shows how to calculate the 

required amount of effort when there are 

consecutive fiscal years in which an LEA 

does not meet MOE. 


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TABLE 2—EXAMPLE OF LEVEL OF EFFORT REQUIRED TO MEET MOE COMPLIANCE STANDARD IN YEAR FOLLOWING

CONSECUTIVE YEARS IN WHICH LEA FAILED TO MEET MOE COMPLIANCE STANDARD

Fiscal year Actual level 

of effort 

Required level 

of effort Notes 

2012–2013 ....................................... $100 $100 LEA met MOE. 

2013–2014 ....................................... 90 100 LEA did not meet MOE. 

2014–2015 ....................................... 90 100 LEA did not meet MOE. Required level of effort is $100 despite LEA’s 

failure in 2013–2014. 

2015–2016 ....................................... ........................ 100 Required level of effort is $100 despite LEA’s failure in 2013–2014 and 

2014–2015. 

Table 3 shows how to calculate the 

required level of effort in a fiscal year after 

the year in which an LEA spent more than 

the required amount on the education of 

children with disabilities. This LEA spent 

$1.1 million in FY 2015–2016 though only $1 

million was required. The required level of 

effort in FY 2016–2017, therefore, is $1.1 

million. 

TABLE 3—EXAMPLE OF LEVEL OF EFFORT REQUIRED TO MEET MOE COMPLIANCE STANDARD IN YEAR FOLLOWING YEAR

IN WHICH LEA MET MOE COMPLIANCE STANDARD

Fiscal year Actual level 

of effort 

Required level 

of effort Notes 

2012–2013 ....................................... $100 $100 LEA met MOE. 

2013–2014 ....................................... 90 100 LEA did not meet MOE. 

2014–2015 ....................................... 90 100 LEA did not meet MOE. Required level of effort is $100 despite LEA’s 

failure in 2013–2014. 

2015–2016 ....................................... 110 100 LEA met MOE. 

2016–2017 ....................................... ........................ 110 Required level of effort is $110 because LEA expended $110, and met 

MOE, in 2015–2016. 

Table 4 shows the same calculation when, 

in an intervening fiscal year, 2016–2017, the 

LEA did not maintain effort. 

TABLE 4—EXAMPLE OF LEVEL OF EFFORT REQUIRED TO MEET MOE COMPLIANCE STANDARD IN YEAR FOLLOWING YEAR

IN WHICH LEA DID NOT MEET MOE COMPLIANCE STANDARD

Fiscal year Actual level 

of effort 

Required level 

of effort Notes 

2012–2013 ....................................... $100 $100 LEA met MOE. 

2013–2014 ....................................... 90 100 LEA did not meet MOE. 

2014–2015 ....................................... 90 100 LEA did not meet MOE. Required level of effort is $100 despite LEA’s 

failure in 2013–2014. 

2015–2016 ....................................... 110 100 LEA met MOE. 

2016–2017 ....................................... 100 110 LEA did not meet MOE. Required level of effort is $110 because LEA 

expended $110, and met MOE, in 2015–2016. 

2017–2018 ....................................... ........................ 110 Required level of effort is $110, despite LEA’s failure in 2016–2017. 

Table 5 provides an example of how an 

LEA may meet the compliance standard 

using alternate methods from year to year 

without using the exceptions or adjustment 

in §§ 300.204 and 300.205, and provides 

information on the following scenario. In FY 

2015–2016, the LEA meets the compliance 

standard using all four methods. As a result, 

in order to demonstrate that it met the 

compliance standard using any one of the 

four methods in FY 2016–2017, the LEA 

must expend at least as much as it did in FY 

2015–2016 using that same method. Because 

the LEA spent the same amount in FY 2016– 

2017 as it did in FY 2015–2016, calculated 

using a combination of State and local funds 

and a combination of State and local funds 

on a per capita basis, the LEA met the 

compliance standard using both of those 

methods in FY 2016–2017. However, the LEA 

did not meet the compliance standard in FY 

2016–2017 using the other two methods— 

local funds only or local funds only on a per 

capita basis—because it did not spend at 

least the same amount in FY 2016–2017 as 

it did in FY 2015–2016 using the same 

methods. 

TABLE 5—EXAMPLE OF HOW AN LEA MAY MEET THE COMPLIANCE STANDARD USING ALTERNATE METHODS FROM YEAR

TO YEAR

Fiscal year Local funds 

only 

Combination of 

State and local 

funds 

Local funds 

only 

on a per 

capita basis 

Combination of 

State and local 

funds on a per 

capita basis 

Child count 

2015–2016 ............................................................................. * $500 * $950 * $50 * $95 10 

2016–2017 ............................................................................. 400 * 950 40 * 95 10 


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TABLE 5—EXAMPLE OF HOW AN LEA MAY MEET THE COMPLIANCE STANDARD USING ALTERNATE METHODS FROM YEAR

TO YEAR—Continued 

Fiscal year Local funds 

only 

Combination of 

State and local 

funds 

Local funds 

only 

on a per 

capita basis 

Combination of 

State and local 

funds on a per 

capita basis 

Child count 

2017–2018 ............................................................................. * 500 900 * 50 90 10 

* LEA met compliance standard using this method. 

Table 6 provides an example of how an 

LEA may meet the compliance standard 

using alternate methods from year to year in 

years in which the LEA used the exceptions 

or adjustment in §§ 300.204 and 300.205, 

including using the per capita methods. 

TABLE 6—EXAMPLE OF HOW AN LEA MAY MEET THE COMPLIANCE STANDARD USING ALTERNATE METHODS FROM YEAR

TO YEAR AND USING EXCEPTIONS OR ADJUSTMENT UNDER §§ 300.204 AND 300.205 

Fiscal year Local funds only Combination of State 

and local funds Local funds only on a per capita basis 

Combination of State 

and local funds on a 

per capita basis 

Child 

count 

2015– 2016 ...... $500 * .............................................. $950 * ........................... $50 * ................................................................... $95 * ............................. 10 

2016– 2017 ...... 400 .................................................. 950 * ............................. 40 ....................................................................... 95 * ............................... 10 

2017–2018 ....... 450 * ................................................ 1,000 * .......................... 45 * ..................................................................... 100 * ............................. 10 

In 2017–2018, the LEA was required to spend at least the 

same amount in local funds only 

that it spent in the preceding fiscal year, subject to the Subsequent Years rule. Therefore, 

prior to taking any exceptions or 

adjustment in §§ 300.204 and 

300.205, the LEA was required 

to spend at least $500 in local 

funds only.

In 2017–2018, the LEA properly reduced its expenditures, per an 

exception in § 300.204, by $50, 

and therefore, was required to 

spend at least $450 in local 

funds only ($500) from 2015– 

2016 per Subsequent Years rule 

¥ $50 allowable reduction per 

an exception under § 300.204).

...................................... In 2017–2018, the LEA was required to spend 

at least the same amount in local funds only 

on a per capita basis that it spent in the preceding fiscal year, subject to the Subsequent 

Years rule. Therefore, prior to taking any exceptions or adjustment in §§ 300.204 and 

300.205, the LEA was required to spend at 

least $50 in local funds only on a per capita 

basis.

In 2017–2018, the LEA properly reduced its 

aggregate expenditures, per an exception in 

§ 300.204, by $50.

$50/10 children with disabilities in the comparison year (2015–2016) = $5 per capita allowable reduction per an exception under 

§ 300.204.

$50 local funds only on a per capita basis 

(from 2015–2016 per Subsequent Years 

rule) ¥ $5 allowable reduction per an exception under § 300.204 = $45 local funds 

only on a per capita basis to meet MOE.

...................................... ............

2018–2019 ....... 405 .................................................. 1,000 * .......................... 45 * ..................................................................... 111.11 * ........................ 9 

In 2018–2019, the LEA was required to spend at least the 

same amount in local funds only 

that it spent in the preceding fiscal year, subject to the Subsequent Years rule. Therefore, 

prior to taking any exceptions or 

adjustment in §§ 300.204 and 

300.205, the LEA was required 

to spend at least $450 in local 

funds only.

In 2018–2019, the LEA properly reduced its expenditures, per an 

exception in § 300.204 by $10 

and the adjustment in § 300.205 

by $10.

Therefore, the LEA was required to 

spend at least $430 in local 

funds only. ($450 from 2017– 

2018 ¥ $20 allowable reduction 

per an exception and the adjustment under §§ 300.204 and 

300.205).

Because the LEA did 

not reduce its expenditures from the 

comparison year 

(2017–2018) using a 

combination of State 

and local funds, the 

LEA met MOE.

In 2018–2019, the LEA was required to spend 

at least the same amount in local funds only 

on a per capita basis that it spent in the preceding fiscal year, subject to the Subsequent 

Years rule. Therefore, prior to taking any exceptions or adjustment in §§ 300.204 and 

300.205, the LEA was required to spend at 

least $45 in local funds only on a per capita 

basis.

In 2018–2019, the LEA properly reduced its 

aggregate expenditures, per an exception in 

§ 300.204 by $10 and the adjustment in 

§ 300.205 by $10.

$20/10 children with disabilities in the comparison year (2017–2018) = $2 per capita allowable reduction per an exception and the adjustment under §§ 300.204 and 300.205.

$45 local funds only on a per capita basis 

(from 2017–2018) ¥ $2 allowable reduction 

per an exception and the adjustment under 

§§ 300.204 and 300.205 = $43 local funds 

only on a per capita basis required to meet 

MOE. Actual level of effort is $405/9 (the 

current year child count).

Because the LEA did 

not reduce its expenditures from the 

comparison year 

(2017–2018) using a 

combination of State 

and local funds on a 

per capita basis 

($1,000/9 = $111.11 

and $111.11 > 

$100), the LEA met 

MOE.

* LEA met MOE using this method. 

Note: When calculating any exception(s) and/or adjustment on a per capita basis for the purpose of determining the required level of effort, the LEA must use the 

child count from the comparison year, and not the child count of the year in which the LEA took the exception(s) and/or adjustment. When determining the actual 

level of effort on a per capita basis, the LEA must use the child count for the current year. For example, in 2018–2019, the LEA uses a child count of 9, not the child 

count of 10 in the comparison year, to determine the actual level of effort. 

Tables 7 and 8 demonstrate how an LEA 

could meet the eligibility standard over a 

period of years using different methods from 

year to year. These tables assume that the 

LEA did not take any of the exceptions or 

adjustment in §§ 300.204 and 300.205. 

Numbers are in $10,000s budgeted and spent 

for the education of children with 

disabilities. 


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TABLE 7—EXAMPLE OF HOW AN LEA MAY MEET THE ELIGIBILITY STANDARD IN 2016–2017 USING DIFFERENT METHODS

Fiscal year Local funds 

only 

Combination 

of State and 

local funds 

Local funds 

only on a 

per capita 

basis 

Combination 

of State and 

local funds 

on a per 

capita basis 

Child count Notes 

2014–2015 ........... * $500 * $1,000 * $50 * $100 10 The LEA met the compliance standard using all 4 methods.* 

2015–2016 ........... ........................ ........................ ........................ ........................ ........................ Final information not available at 

time of budgeting for 2016–2017. 

How much must 

the LEA budget 

for 2016–2017 

to meet the eligibility standard 

in 2016–2017? 

500 1,000 50 100 ........................ When the LEA submits a budget for 

2016–2017, the most recent fiscal 

year for which the LEA has information is 2014–2015. It is not necessary for the LEA to consider information on expenditures for a fiscal year prior to 2014–2015 because the LEA maintained effort in 

2014–2015. Therefore, the Subsequent Years rule in § 300.203(c) is 

not applicable. 

* The LEA met the compliance standard using all 4 methods. 

TABLE 8—EXAMPLE OF HOW AN LEA MAY MEET THE ELIGIBILITY STANDARD IN 2017–2018 USING DIFFERENT METHODS

AND THE APPLICATION OF THE SUBSEQUENT YEARS RULE

Fiscal year Local funds 

only 

Combination 

of State and 

local funds 

Local funds 

only on a 

per capita 

basis 

Combination 

of State and 

local funds 

on a per 

capita basis 

Child count Notes 

2014–2015 ........... * $500 * $1,000 * $50 * $100 10 

2015–2016 ........... 450 * 1,000 45 * 100 10 

2016–2017 ........... ........................ ........................ ........................ ........................ ........................ Final information not available at 

time of budgeting for 2017–2018. 

How much must 

the LEA budget 

for 2017–2018 

to meet the eligibility standard 

in 2017–2018? 

500 1,000 50 100 ........................ If the LEA seeks to use a combination of State and local funds, or a 

combination of State and local 

funds on a per capita basis, to 

meet the eligibility standard, the 

LEA does not consider information 

on expenditures for a fiscal year 

prior to 2015–2016 because the 

LEA maintained effort in 2015– 

2016 using those methods. 

However, if the LEA seeks to use 

local funds only, or local funds 

only on a per capita basis, to meet 

the eligibility standard, the LEA 

must use information on expenditures for a fiscal year prior to 

2015–2016 because the LEA did 

not maintain effort in 2015–2016 

using either of those methods, per 

the Subsequent Years rule. That 

is, the LEA must determine what it 

should have spent in 2015–2016 

using either of those methods, and 

that is the amount that the LEA 

must budget in 2017–2018. 

* LEA met MOE using this method. 

Table 9 provides an example of how an 

LEA may consider the exceptions and 

adjustment in §§ 300.204 and 300.205 when 

budgeting for the expenditures for the 

education of children with disabilities. 


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TABLE 9—EXAMPLE OF HOW AN LEA MAY MEET THE ELIGIBILITY STANDARD USING EXCEPTIONS AND ADJUSTMENT IN

§§ 300.204 AND 300.205, 2016–2017 

Fiscal year Local funds 

only 

Combination 

of State and 

local funds 

Local funds 

only on a 

per capita 

basis 

Combination 

of State and 

local funds 

on a per 

capita basis 

Child count Notes 

Actual 2014–2015 expenditures.* $500 * $1,000 * $50 * $100 10 The LEA met the compliance 

standard using all 4 methods.* 

Exceptions and adjustment taken in 2015– 

2016.

¥50 ¥50 ¥5 ¥5 ........................ LEA uses the child count number 

from the comparison year 

(2014–2015). 

Exceptions and adjustment the LEA reasonably expects to 

take in 2016–2017.

¥25 ¥25 ¥2.50 ¥2.50 ........................ LEA uses the child count number 

from the comparison year 

(2014–2015). 

How much must the 

LEA budget to meet 

the eligibility standard in 2016–2017?.

425 925 42.50 92.50 ........................ When the LEA submits a budget 

for 2016–2017, the most recent fiscal year for which the 

LEA has information is 2014– 

2015. However, if the LEA has 

information on exceptions and 

adjustment taken in 2015– 

2016, the LEA may use that information when budgeting for 

2016–2017. The LEA may also 

use information that it has on 

any exceptions and adjustment 

it reasonably expects to take in 

2016–2017 when budgeting for 

that year. 

Table 10 provides examples both of how to 

calculate the amount by which an LEA failed 

to maintain its level of expenditures and of 

the amount of non-Federal funds that an SEA 

must return to the Department on account of 

that failure. 

TABLE 10—EXAMPLE OF HOW TO CALCULATE THE AMOUNT OF AN LEA’S FAILURE TO MEET THE COMPLIANCE STANDARD

IN 2016–2017 AND THE AMOUNT THAT AN SEA MUST RETURN TO THE DEPARTMENT

Fiscal year Local funds 

only 

Combination 

of State and 

local funds 

Local funds 

only on a 

per capita 

basis 

Combination 

of State and 

local funds 

on a per 

capita basis 

Child count 

Amount of 

IDEA Part B 

subgrant 

2015–2016 .......... * $500 * $950 $50 * ................................. $95 * ................................. ........................ Not relevant. 

2016–2017 .......... 400 750 40 ..................................... 75 ..................................... 10 $50 

Amount by which 

an LEA failed to 

maintain its 

level of expenditures in 2016– 

2017.

100 200 100 (the amount of the 

failure equals the 

amount of the per capita shortfall ($10) times 

the number of children 

with disabilities in 

2016–2017 (10)).

200 (the amount of the 

failure equals the 

amount of the per capita shortfall ($20) times 

the number of children 

with disabilities in 

2016–2017 (10)).

........................ ........................

The SEA determines that the amount of the LEA’s failure is $100 using the calculation method that results in the lowest amount of a failure. 

The SEA’s liability is the lesser of the four calculated shortfalls and the amount of the LEA’s Part B subgrant in the fiscal year in which the LEA 

failed to meet the compliance standard. In this case, the SEA must return $50 to the Department because the LEA’s IDEA Part B subgrant was 

$50, and that is the lower amount. 

* LEA met MOE using this method. 

[FR Doc. 2015–09755 Filed 4–27–15; 8:45 am] 

BILLING CODE 4000–01–P 


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