ATTACHMENT
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MEMORANDUM
To: Jim Horne, Commissioner, Florida Department of Education
From: Leigh M. Manasevit, Brustein & Manasevit
Date: June 16, 2003
Subject: Use of Federal Funds for Class Size Reduction Amendment Costs
Beginning with the 2003-2004 fiscal year the Class Size Reduction Amendment (CSR)
requires the Legislature to provide sufficient funding to districts to reduce the average
number of students in each classroom by at least two students per year to meet specified
class sizes by the beginning of the 2010 school year. The CSR Amendment has raised
concern regarding the use of Federal funds to meet this responsibility and the potential
implications of adverse consequences to districts. As you know, nearly all Federal
education grant funds, including Title I Part A, are subject to a fiscal requirement known
as the “supplement not supplant requirement.” To avoid potential adverse consequences,
each school district must consider if the use of Federal funds in its individual district will
violate the “supplement not supplant requirement” mandated by Federal law. We have
carefully researched this issue and are providing the following guidance.
The OMB Circular A-133 Compliance Supplement provides guidance to auditors
regarding tests to be used to determine if supplanting has occurred. Auditors will
presume supplanting has occurred if any of the following practices has occurred:
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A grantee uses Federal funds to provide services that the grantee is required to
make available under other Federal, State or local laws; or
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A grantee uses Federal funds to provide services that the grantee provided
with non-Federal funds in the prior year; or
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A grantee uses funds to provide services for participating children that the
grantee provides with non-Federal funds for nonparticipating children.
These presumptions may be rebutted only if the grantee can demonstrate to the
satisfaction of the auditors that the grantee would not have provided the services in
question with non-Federal funds, had the Federal funds not been available. In other
words, what would the grantee have done in the absence of Federal funds?
Supplanting Analysis #1
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Auditors will presume that a recipient of Federal funds has violated the supplanting
prohibition if the recipient uses Federal funds to support a state-mandated activity, the
situation posed by the CSR Amendment. A Local Education Agency (LEA) can
overcome this presumption, if the LEA can demonstrate that it could not meet the
requirements of the mandate using only non-Federal funds. There is no single way to
overcome this presumption, and each LEA’s individual financial situation and
educational programming choices will determine whether or not that district will be able
to overcome the supplanting presumption. Thus, individual districts will be responsible
to provide the necessary documentation to overcome the supplanting prohibition.
A memorandum from Lavan Dukes, Bureau Chief, Accountability, Research, and
Measurement, dated February 3, 2003, requested districts to generate their baseline data
from 2002-03 to determine the average class size in their jurisdiction.
These data must
include all classrooms regardless of the fund source(s) used to support the
classrooms (i.e., local, state and Federal fund sources).
To determine if a district risks
a supplement not supplant violation in the 2003-04 fiscal year, each district must
calculate the following information:
A.
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Excluding Federal funds
, what level of local and state fiscal effort has the
district devoted to reducing class size in the previous fiscal year (i.e., 2002-
2003)?
B. How much state funding for operating expenses will the district receive to
implement the CSR initiative (i.e. 2003-2004)?
C. Based on the district’s 2002-2003 baseline data reported to the Department,
how many teachers does the district need to hire in order to meet the CSR
requirement?
D. What will be the actual cost (operating expenses only) of C to the district to
implement the CSR initiative?
Districts which do not have sufficient non-Federal resources [A + B] to meet the actual
costs (operating expenses) of implementation of the CSR initiative [D] may be able to use
Federal funds for this purpose. Below are three illustrations:
Scenario #1:
District #1 can achieve the reduction in class size by the required two students
using existing state and local resources only. District #1 may not use Federal
funds to support the CSR initiative, because in the absence of Federal funds,
District #1’s non-federal resources are sufficient to achieve the objective.
Therefore, use of Federal funds would be supplanting.
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Scenario #2
With the new money received from the state and the non-federal funds it has used
in the past, District #2 will have sufficient funds to meet the CSR requirement and
reduce the district’s average class size ratio by two students. Thus, District #2
may not use Federal funds to support the CSR initiative, because in the absence of
Federal funds, District #2’s non-Federal resources (i.e., prior year local and state
fiscal effort and new state resources), are sufficient to achieve the objective.
Therefore, use of Federal funds would be supplanting.
Scenario #3
District #3 uses all its existing state and local resources just to meet basic
education needs and there are no other funds available. District #3 will receive
additional new money from the State to implement the CSR amendment, however
that money will only pay for
a portion of the costs of reducing the average
class size by two students
. In this scenario only, District #3 may be able to use
Federal funds to pay the additional costs of meeting the CSR requirement. In the
absence of Federal funds, District #3 would not have sufficient funds to meet the
objective using all non-Federal funds available to it. Therefore, use of Federal
funds would be supplemental and would not supplant the use of non-Federal
resources.
If a district cannot meet the CSR requirement with non-Federal funds available to it, then
it may be able to use Federal funds for this purpose. However, the district must provide
fiscal and programmatic documentation
to demonstrate this fact. In recent non-
regulatory guidance, the U.S. Department of Education has indicated that LEAs could use
budget information, planning documents, legislative history to make the case that the
LEA does not have the resources to meet State mandates. Thus, the LEA must generate
and keep this documentation for auditors to review.
Supplanting Analysis #2
The second presumption of supplanting arises when a grantee uses Federal funds to
provide services that the grantee provided with non-Federal funds in the prior year. This
requirement prohibits shifting non-Federal funds from one educational program to
another, in anticipation of receipt of Federal funds. If a district plans to use Federal funds
to support a teaching position previously paid by non-Federal funds, an auditor will
presume that supplanting has occurred. Thus, to overcome this presumption, we advise
the district to identify activities that, in the absence of Federal funds, it would support
through non-Federal funds, and the reason for eliminating the non-Federal support for
this position or service.
Conclusion
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The supplement not supplant requirement is a complex fiscal determination and violating
these requirements can subject a district to serious financial consequences. We advise
districts to be very circumspect regarding use of Federal funds to meet the requirements
of the CSR Amendment. Before committing the district’s federal resources in this
manner, we suggest you perform the analysis described above to determine if the
district’s proposed use of funds will violate the supplement not supplant requirement.
Also, please keep in mind, that the use of Federal funds in any manner must be allowable
under the authorizing program statutes (e.g., comparability requirements under Title I,
Part A).
