Specific reasons underlying the finding of necessity:
The proposed amendment clarifies that the Department maintains discretion in establishing tuition rates based on a financial audit, specifically in deciding whether or not to adopt all of the recommended audit fiscal disallowances and/or whether to take further disallowances as deemed warranted upon internal review and desk audits. Pursuant to the proposed amendment, the Department would establish tuition rates based on an audit to the extent that the Commissioner determines the audit findings and recommendations are warranted and consistent with applicable federal and state Education Law, Commissioner’s regulations, and tuition reimbursement guidelines and requirements. Upon a determination that a particular finding or recommendation is not warranted, or is not consistent with applicable state and federal Education Law, Commissioner’s regulations, or tuition reimbursement guidelines and requirements, discretion will be exercised in establishing a rate based on audit, subject to the approval of the Director of the Budget.
Since the Board of Regents meets at fixed intervals, the earliest the proposed rule can be presented for regular (non-emergency) adoption, after expiration of the required 45-day public comment period provided for in the State Administrative Procedure Act (SAPA) sections 201(1) and (5), would be the September 12-13, 2016 Regents meeting. Furthermore, pursuant to SAPA section 203(1), the earliest effective date of the proposed rule, if adopted at the December meeting, would be December 28, 2016, the date a Notice of Adoption would be published in the State Register. Therefore, emergency action is necessary at the September 2016 Regents meeting for the preservation of the general welfare to allow the Commissioner to exercise discretion in setting tuition rates based on a financial audit to the extent that the Commissioner determines the audit findings and recommendations are warranted and consistent with applicable federal and state Education Law, Commissioner’s regulations, and tuition reimbursement guidelines and requirements.
It is anticipated that the proposed rule will be presented for adoption as a permanent rule at the December 28, 2016 Regents meeting, which is the first scheduled meeting after expiration of the 45-day public comment period prescribed in the State Administrative Procedure Act for State agency rule makings.
Subject:
Establishment of tuition rates.
Purpose:
To clarify that the Education Department maintains discretion in establishing tuition rates based on a financial audit.
Text of emergency/proposed rule:
Subdivision (c) of section 200.18 of the Regulations of the Commissioner of Education shall be amended, effective October 1, 2016, to read as follows:
(c) The establishment of tuition rates and repayment of funds resulting from audits performed in accordance with subdivision (a) or (b) of this section.
(1) A final audit report shall be issued for each such audit. [The final audit report shall be used to establish tuition rates based on audit. The rates based on audit shall be developed by the Commissioner and certified by the Director of the Budget.]
(i) The Commissioner shall review the final audit report, which shall be used to establish tuition rates based on audit to the extent the Commissioner determines that the audit findings and recommended disallowances contained therein are warranted and consistent with the Individuals with Disabilities Education Act (20 U.S.C. sections 1400 et seq.), Articles 81 and 89 of the Education Law, Parts 100 and 200 of the Commissioner’s regulations and the Department’s tuition reimbursement guidelines and requirements.
(ii) After consideration of the final audit by the Commissioner pursuant to subparagraph (i) of this paragraph, tuition rates based on audit shall then be established by the Commissioner and become final after certification by the Director of Budget.
This notice is intended:
to serve as both a notice of emergency adoption and a notice of proposed rule making. The emergency rule will expire December 28, 2016.
Text of rule and any required statements and analyses may be obtained from:
Kirti Goswami, New York State Education Department, 89 Washington Avenue, Room 148, Albany, NY 12234, (518) 474-8966, email: legal@nysed.gov
Data, views or arguments may be submitted to:
Doreen Ryan, New York State Education Department, 2M West, 89 Washington Avenue, Albany, NY 12234, (518) 474-5510, email: nysedp12@nysed.gov
Public comment will be received until:
45 days after publication of this notice.
This rule was not under consideration at the time this agency submitted its Regulatory Agenda for publication in the Register.
Regulatory Impact Statement
1. STATUTORY AUTHORITY:
Education Law section 207 empowers the Board of Regents and the Commissioner to adopt rules and regulations to carry out laws of the State regarding education and the functions and duties conferred on the State Education Department by law.
Education Law section 4401(5) defines tuition and the sources from which it can be calculated, and sections 4401(10)–(11) outline the structure of tuition rates.
Education Law section 4402(1) through (8) outlines the responsibilities of school districts with respect to educational programs and services for students with disabilities.
Education Law section 4403 outlines the responsibilities of the Department with respect to the provision of education programs and services to students with disabilities and authorizes the Commissioner of Education to promulgate such rules and regulations pertaining to the physical and educational needs of such students as the Commissioner deems to be in their best interest.
Education Law section 4405(1) through (6) establishes the process for computing financial responsibility for special education services for certain children with handicapping conditions, including the tuition rates, once certified by the director of the budget.
Education Law section 4410(1)(g) defines "municipality" for purposes of the section. Education Law section 4410(11)(i) and (ii) provides that a municipality or, in addition, the board of education in a city having a population of one million or more, may perform a fiscal audit of special education programs and services for which it bears fiscal responsibility. Section 4410(10) defines "approved costs" and details the commissioner's authority to set tuition rates for approved services or programs, and outlines the process by which such rates shall be determined. Section 4410(11) outlines a municipality's financial responsibility for those approved costs, and what portions shall be reimbursed by the state. Section 4410(13) authorizes the Commissioner to promulgate regulations to implement the provisions of Education Law section 4410.
Education Law section 4410-c directs the New York State Comptroller to audit the expenses reported to the Department by every preschool special education provider, to the extent such funds as are made available for such purpose, and requires that all such providers be audited by March 31, 2018.
2. LEGISLATIVE OBJECTIVES:
Consistent with the above statutory authority, the proposed amendment is necessary to clarify that the Education Department maintains discretion in establishing tuition rates based on a financial audit, specifically in deciding whether or not to adopt all of the recommended audit fiscal disallowances and/or whether to take further disallowances as deemed warranted upon internal review and desk audits. All such tuition rates based on financial audit are subject to Division of the Budget review and approval prior to becoming certified.
3. NEEDS AND BENEFITS:
Section 200.18(a) of Commissioner’s Regulations provides that all approved programs shall be subject to audit by the State.1 Audits of approved special education programs may be conducted by the Department, the Office of the State Comptroller, and other State agencies or agencies of other states. Additionally, pursuant to section 4410 of the Education Law and 200.18(b) of Commissioner’s Regulations, approved preschool special education providers may be also be audited by each municipality, or in the case of a city having a population of one million or more, the board of education, bearing fiscal responsibility for tuition reimbursement. Additionally, chapter 545 of the Laws of 2013 directed the New York State Comptroller to audit the expenses reported to the Department by every preschool special education provider, to the extent such funds as are made available for such purpose.
In accordance with Education Law sections 4003, 4401, 4402, 4403, 4405, 4408 and 4410 and sections 200.9 and 200.19 of the Regulations of the Commissioner, the Commissioner establishes tuition reimbursement rates for approved special education programs. Following an official financial audit, the Department revises a program’s originally established tuition rate to reflect a “rate based on audit” which is defined in section 200.9(a)(19) of Commissioner’s Regulations as “a tuition rate that has been calculated based on a final audit of actual program expenses, revenues, enrollment data and other relevant program information performed by the Commissioner, the State Comptroller, other State agencies or agencies or subdivisions of other states, or a municipality in accordance with section 200.18 of this Part.” The existing language of section 200.18(c)(1) of the Regulations of the Commissioner states that a final audit report shall be issued for each audit and used to establish tuition rates developed by the Commissioner and certified by the Director of the Budget. This tuition rate is used by the appropriate school district, local agency or municipality to recoup any overpayment deemed due.
In October of 2012, the Supreme Court, Appellate Division, Third Department, interpreted the language of section 200.18(c)(1) of the Regulations of the Commissioner and held that “the Commissioner's otherwise broad discretion in setting the reconciliation rate is curtailed where the service provider has been audited by the Comptroller” and that as a result the Department was “bound to accept the data provided by the [provider] petitioner in establishing its tuition rates.”2 This decision resulted in the Department being prohibited from making an adjustment to a provider’s reimbursement rate, even with documented evidence to support the adjustment, as the adjustment was not specifically mentioned in the final audit report. This decision could also be interpreted to limit the Department’s ability to use its discretion regarding the implementation of audit report findings and recommendations thus requiring the Department to adopt all disallowances regardless of whether it agrees with the audit determination or not. This interpretation would effectively restrict the Department's ability to exercise discretion in the enforcement of its own reimbursement standards under applicable laws, rules and regulations, and placed constraints constrains the Commissioner's general duties with respect to establishing tuition reimbursement rates subject to the approval of the Director of the Budget.
The proposed amendment clarifies that the Department maintains discretion in establishing tuition rates based on a financial audit, specifically in deciding whether or not to adopt all of the recommended audit fiscal disallowances and/or whether to take further disallowances as deemed warranted upon internal review and desk audits. Pursuant to the proposed amendment, the Department would establish tuition rates based on an audit to the extent that the Commissioner determines the audit findings and recommendations are warranted and consistent with the Individuals with Disabilities Education Act (20 U.S.C. sections 1400 et seq.), Articles 81 and 89 of the Education Law, Parts 100 and 200 of the Commissioner’s regulations and the Department’s tuition reimbursement guidelines and requirements. Upon a determination that a particular finding or recommendation is not warranted, or is not consistent with the Individuals with Disabilities Education Act (20 U.S.C. sections 1400 et seq.), Articles 81 and 89 of the Education Law, Parts 100 and 200 of the Commissioner’s regulations and/or the Department’s tuition reimbursement guidelines and requirements, discretion will be exercised in establishing a rate based on audit, subject to the approval of the Director of the Budget.
4. COSTS:
(a) Costs to the State: none.
(b) Costs to local governments: none required. The proposed amendment does not impose any costs on local governments beyond those imposed by statute. The proposed amendment simply serves to clarify what the Commissioner and the Department’s discretion is in accepting the final report in an audit in setting tuition rates, a process which the Department is also already engaged in.
(c) Costs to private regulated parties: none.
(d) Cost to regulating agency for implementation and continued administration of this rule: none.
5. LOCAL GOVERNMENT MANDATES:
The proposed amendment clarifies that the Education Department maintains discretion in establishing tuition rates based on a financial audit, specifically in deciding whether or not to adopt all of the recommended audit fiscal disallowances and/or whether to take further disallowances as deemed warranted upon internal review and desk audits. Pursuant to the proposed amendment, the Department would establish tuition rates based on an audit to the extent that the Commissioner determines the audit findings and recommendations are warranted and consistent with applicable federal and state Education Law, Commissioner’s regulations, and tuition reimbursement guidelines and requirements. Upon a determination that a particular finding or recommendation is not warranted, or is not consistent with applicable state and federal Education Law, Commissioner’s regulations, or tuition reimbursement guidelines and requirements, discretion will be exercised in establishing a rate based on audit, subject to the approval of the Director of the Budget. Because the proposed amendment simply clarifies the Education Department’s discretion in a currently existing process, it imposes no new local government mandates.
6. PAPERWORK:
The proposed amendment clarifies where discretion lies in a preexisting process performed by the Education Department, and therefore no additional paperwork will be generated as a result of the proposed amendment.
7. DUPLICATION:
The proposed amendment does not duplicate any existing State or Federal requirements.
8. ALTERNATIVES:
The proposed amendment is necessary to clarify that the Education Department maintains discretion in establishing tuition rates based on a financial audit, specifically in deciding whether or not to adopt all of the recommended audit fiscal disallowances and/or whether to take further disallowances as deemed warranted upon internal review and desk audits. Differences of opinion as to the degree to which the Department’s discretion is curtailed when an approved special education provider has been subject to audit has resulted in litigation. The proposed amendment will resolve this issue and provide clarification to other agencies and providers involved in the rate-setting process following the issuance of an official financial audit. There are no significant alternatives and none were considered.
9. FEDERAL STANDARDS:
There are no applicable Federal standards.
10. COMPLIANCE SCHEDULE:
It is anticipated that regulated parties will be able to achieve compliance with the proposed amendment by its effective date.
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1 For purposes of this regulation, approved programs include programs that provide special education to students with disabilities requiring the establishment of a tuition rate, in accordance with sections 4003, 4401, 4403, 4405, 4408 and 4410 of the Education Law. These include preschool and school-age special education private providers, Special Act School Districts, BOCES, and school-districts.
2 99 A.D.3d at 1084-85.
Regulatory Flexibility Analysis
Small Businesses:
The proposed amendment is needed to clarify that the Education Department maintains discretion in establishing tuition rates based on a financial audit, specifically in deciding whether or not to adopt all of the recommended audit fiscal disallowances and/or whether to take further disallowances as deemed warranted upon internal review and desk audits. The proposed amendment does not impose any adverse economic impact, reporting, record keeping or any other compliance requirements on small businesses. Because it is evident from the nature of the proposed amendment that it does not affect small businesses, no further measures were needed to ascertain that fact and none were taken. Accordingly, a regulatory flexibility analysis for small businesses is not required and one has not been prepared.
Local Government:
EFFECT OF RULE:
The proposed amendment applies to municipalities, defined in Education Law section 4410(1)(g) as a county outside of the city of New York or the city of New York in the case of a county contained within the city of New York, and the board of education of the city of New York, that choose to perform a fiscal audit of Education Law section 4410 preschool special education programs and services for which the municipality bears fiscal responsibility. Pursuant to Education Law section 4410(1)(g), the proposed amendment is applicable to all counties in the State that are located outside of the city of New York and the city of New York in the case of a county contained within the city of New York. The proposed amendment also applies to fiscal audits performed by the New York State Education Department, the Office of the State Comptroller, other State agencies or agencies of other states of school-age providers operated by private providers, special act school districts, boards of cooperative educational services and public school districts receiving public funds for the education of students with disabilities who have been enrolled pursuant to articles 81 and 89 of the Education Law.
COMPLIANCE REQUIREMENTS:
Section 200.18(a) of Commissioner’s Regulations provides that all approved programs shall be subject to audit by the State.1 Audits of approved special education programs may be conducted by the Department, the Office of the State Comptroller, and other State agencies or agencies of other states. Additionally, pursuant to section 4410 of the Education Law and 200.18(b) of Commissioner’s Regulations, approved preschool special education providers may be also be audited by each municipality, or in the case of a city having a population of one million or more, the board of education, bearing fiscal responsibility for tuition reimbursement. Additionally, chapter 545 of the Laws of 2013 directed the New York State Comptroller to audit the expenses reported to the Department by every preschool special education provider, to the extent such funds as are made available for such purpose.
In accordance with Education Law sections 4003, 4401, 4402, 4403, 4405, 4408 and 4410 and sections 200.9 and 200.19 of the Regulations of the Commissioner, the Commissioner establishes tuition reimbursement rates for approved special education programs. Following an official financial audit, the Department revises a program’s originally established tuition rate to reflect a “rate based on audit” which is defined in section 200.9(a)(19) of Commissioner’s Regulations as “a tuition rate that has been calculated based on a final audit of actual program expenses, revenues, enrollment data and other relevant program information performed by the Commissioner, the State Comptroller, other State agencies or agencies or subdivisions of other states, or a municipality in accordance with section 200.18 of this Part.” The existing language of section 200.18(c)(1) of the Regulations of the Commissioner states that a final audit report shall be issued for each audit and used to establish tuition rates developed by the Commissioner and certified by the Director of the Budget. This tuition rate is used by the appropriate school district, local agency or municipality to recoup any overpayment deemed due.
In October of 2012, the Supreme Court, Appellate Division, Third Department, interpreted the language of section 200.18(c)(1) of the Regulations of the Commissioner and held that “the Commissioner's otherwise broad discretion in setting the reconciliation rate is curtailed where the service provider has been audited by the Comptroller” and that as a result the Department was “bound to accept the data provided by the [provider] petitioner in establishing its tuition rates.”2 This decision resulted in the Department being prohibited from making an adjustment to a provider’s reimbursement rate, even with documented evidence to support the adjustment, as the adjustment was not specifically mentioned in the final audit report. This decision could also be interpreted to limit the Department’s ability to use its discretion regarding the implementation of audit report findings and recommendations thus requiring the Department to adopt all disallowances regardless of whether it agrees with the audit determination or not. This interpretation would effectively restrict the Department's ability to exercise discretion in the enforcement of its own reimbursement standards under applicable laws, rules and regulations, and placed constraints constrains the Commissioner's general duties with respect to establishing tuition reimbursement rates subject to the approval of the Director of the Budget.
The proposed amendment clarifies that the Department maintains discretion in establishing tuition rates based on a financial audit, specifically in deciding whether or not to adopt all of the recommended audit fiscal disallowances and/or whether to take further disallowances as deemed warranted upon internal review and desk audits. Pursuant to the proposed amendment, the Department would establish tuition rates based on an audit to the extent that the Commissioner determines the audit findings and recommendations are warranted and consistent with the Individuals with Disabilities Education Act (20 U.S.C. sections 1400 et seq.), Articles 81 and 89 of the Education Law, Parts 100 and 200 of the Commissioner’s regulations and the Department’s tuition reimbursement guidelines and requirements. Upon a determination that a particular finding or recommendation is not warranted, or is not consistent with the Individuals with Disabilities Education Act (20 U.S.C. sections 1400 et seq.), Articles 81 and 89 of the Education Law, Parts 100 and 200 of the Commissioner’s regulations and/or the Department’s tuition reimbursement guidelines and requirements, discretion will be exercised in establishing a rate based on audit, subject to the approval of the Director of the Budget.
PROFESSIONAL SERVICES:
The proposed amendment does not impose any additional professional services requirements. Existing statute (Education Law 4410) and regulation (Part 200.18) required municipalities and the board of education in the city of New York that choose to perform audits pursuant to Education Law section 4410 to do so in accordance with audit standards established by the commissioner.
COMPLIANCE COSTS:
None required. The proposed amendment simply serves to clarify what the Commissioner and the Department’s discretion is in accepting the final report in an audit in setting tuition rates, a process which the Department is also already engaged in.
ECONOMIC AND TECHNOLOGICAL FEASIBILITY:
The proposed amendment does not impose any additional costs or new technological requirements on local governments. The proposed amendment does not impose any adverse economic impact, reporting, record keeping or any other compliance requirements on local governments; municipalities and the board of education of the city of New York are not required to perform new functions pursuant to the proposed amendment.
MINIMIZING ADVERSE IMPACT:
The proposed amendment is necessary to clarify that the Education Department maintains discretion in establishing tuition rates based on a financial audit, specifically in deciding whether or not to adopt all of the recommended audit fiscal disallowances and/or whether to take further disallowances as deemed warranted upon internal review and desk audits. Because the statute upon which the proposed amendment is based applies to all affected municipalities and all approved special education programs in the State, it is not possible to establish differing compliance or reporting requirements or timetables or to exempt them from the provisions of the proposed amendment.
LOCAL GOVERNMENT PARTICIPATION:
Comments on the proposed rule were solicited from school districts through the offices of the district superintendents of each supervisory district in the State, from the chief school officers of the five big city school districts and from charter schools.
INITIAL REVIEW OF RULE (SAPA § 207):
Pursuant to State Administrative Procedure Act section 207(1)(b), the State Education Department proposes that the initial review of this rule shall occur in the fifth calendar year after the year in which the rule is adopted, instead of in the third calendar year. The justification for a five year review period is that, following the decision of the New York State Supreme Court, Appellate Division, Third Department's decision in Mid Island Therapy Associates, LLC v. New York State Dep't of Educ., 99 A.D.3d 1082, 1084 (3d Dept. 2012), the proposed amendment is necessary to clarify that the Education Department maintains discretion in establishing tuition rates based on a financial audit, specifically in deciding whether or not to adopt all of the recommended audit fiscal disallowances and/or whether to take further disallowances as deemed warranted upon internal review and desk audit, and therefore changes to the substantive provisions of the proposed amendment are dependent on subsequent judicial interpretation. Accordingly, there is no need for a shorter review period. The Department invites public comment on the proposed five year review period for this rule. Comments should be sent to the agency contact listed in item 10. of the Notice of Proposed Rule Making published herewith, and must be received within 45 days of the State Register publication date of the Notice.
_______________
1 For purposes of this regulation, approved programs include programs that provide special education to students with disabilities requiring the establishment of a tuition rate, in accordance with sections 4003, 4401, 4403, 4405, 4408 and 4410 of the Education Law. These include preschool and school-age special education private providers, Special Act School Districts, BOCES, and school-districts.
2 99 A.D.3d at 1084-85.
Rural Area Flexibility Analysis
TYPES AND ESTIMATED NUMBER OF RURAL AREAS:
The proposed amendment applies to municipalities, defined in Education Law section 4410(1)(g) as a county outside of the city of New York or the city of New York in the case of a county contained within the city of New York, and the board of education of the city school district of the city of New York, that choose to perform a fiscal audit of Education Law section 4410 preschool special education programs and services for which the municipality bears fiscal responsibility, and all other preschools subject to audit by the New York State Comptroller pursuant to Education Law section 4410-c. The proposed amendment also applies to fiscal audits performed by the New York State Education Department, the Office of the State Comptroller, other State agencies or agencies of other states of school-age providers operated by private providers, special act school districts, boards of cooperative educational services and public school districts receiving public funds for the education of students with disabilities who have been enrolled pursuant to articles 81 and 89 of the Education Law. This proposed amendment impacts all counties including the 44 rural counties with less than 200,000 inhabitants.
REPORTING, RECORDKEEPING AND OTHER COMPLIANCE REQUIREMENTS; AND PROFESSIONAL SERVICES:
The proposed amendment clarifies that the Education Department maintains discretion in establishing tuition rates based on a financial audit, specifically in deciding whether or not to adopt all of the recommended audit fiscal disallowances and/or whether to take further disallowances as deemed warranted upon internal review and desk audits. Pursuant to the proposed amendment, the Department would establish tuition rates based on an audit to the extent that the Commissioner determines the audit findings and recommendations are warranted and consistent with applicable federal and state Education Law, Commissioner’s regulations, and tuition reimbursement guidelines and requirements. Upon a determination that a particular finding or recommendation is not warranted, or is not consistent with applicable state and federal Education Law, Commissioner’s regulations, or tuition reimbursement guidelines and requirements, discretion will be exercised in establishing a rate based on audit, subject to the approval of the Director of the Budget.
The proposed amendment does not impose any additional professional services requirements.
COSTS:
None required. The proposed amendment simply serves to clarify what the Commissioner and the Department’s discretion is in accepting the final report in an audit in setting tuition rates, a process which the Department is also already engaged in.
MINIMIZING ADVERSE IMPACT:
The proposed amendment is necessary to clarify that the Education Department maintains discretion in establishing tuition rates based on a financial audit, specifically in deciding whether or not to adopt all of the recommended audit fiscal disallowances and/or whether to take further disallowances as deemed warranted upon internal review and desk audits. Because Education Law section 4410-c requires the New York State Comptroller to audit all preschool special education providers by March 31, 2018, and because the proposed amendment applies to all preschool and school-age approved special education programs, it was not possible to establish different requirements for entities in rural areas, or to exempt them from the amendment's provisions.
RURAL AREA PARTICIPATION:
The proposed rule was submitted for review and comment to the Department’s Rural Education Advisory Committee, which includes representatives of school districts in rural areas.
Job Impact Statement
The proposed amendment is necessary to clarify that the Education Department maintains discretion in establishing tuition rates based on a financial audit, specifically in deciding whether or not to adopt all of the recommended audit fiscal disallowances and/or whether to take further disallowances as deemed warranted upon internal review and desk audits. Because it is evident from the nature of the proposed amendment that it will have a positive impact, or no impact, on jobs or employment opportunities, no further steps were needed to ascertain those facts and none were taken. Accordingly, a job impact statement is not required and one has not been prepared.
