If Admin checks "documents cannot be provided" there should be a prompt to ask "are you sure" and then a prompt that asks "do you want to move this app to Verified status". If family checks "documents cannot be provided" there should be a prompt that suggests to the family to upload a Special Circumstances Letter. Then an Administrator should have to Approve if the documents cannot be provided by either approving and moving the app to Verified status or by denying the family which then prompts Blackbaud to email the family that the request was not approved and the documents must still be provided or a Special Circumstances Letter must be uploaded.
I have tagged this as Implemented because the actions you are describing are now available, just not in the exact order defined here. The school or parent now has the ability to uncheck the "doc" cannot be provided box, and the school admin as the ability to move an app to Verified from the Manage Families page. Hopefully that gets you to where you need to be, just on a slightly different path or workflow.