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NYS Comptroller

THOMAS P. DiNAPOLI

Taxpayers' Guide to State and Local Audits

State Education Department
Kids-Centric, Inc.
Compliance With the Reimbursable Cost Manual


Issued: December 30, 2015
Link to full audit report 2014-S-73
Link to 90-day response

Purpose
To determine whether the costs reported by Kids-Centric, Inc. (Kids-Centric) on its Consolidated Fiscal Reports (CFRs) were properly documented, program-related, and allowable pursuant to the State Education Department’s (SED) Reimbursable Cost Manual (Manual). The audit covered expenses claimed on Kids-Centric’s CFR for fiscal year 2012-13, and certain expenses claimed on Kids-Centric’s CFRs for the two fiscal years ended June 30, 2012.

Background
Kids-Centric is a Brooklyn, New York-based for-profit organization that provides Special Education Itinerant Teacher (SEIT) services and integrated special class preschool special education programs (collectively referred to as the SED Programs) to disabled children between the ages of three and five years. During the 2012-13 school year, Kids-Centric served 153 students. The New York City Department of Education (DoE) refers students to Kids-Centric based on clinical evaluations and pays for its services using rates established by SED. The rates are based on the financial information that Kids-Centric reports to SED on its annual CFRs. SED reimburses DoE for a portion of its payments to Kids-Centric based on statutory rates.

For the three fiscal years ended June 30, 2013, Kids-Centric reported approximately $14.2 million in reimbursable costs for the audited program. Our audit period focused primarily on fiscal year 2012-13. However, we expanded our review to include certain items claimed on the CFRs for fiscal years 2010-11 and 2011-12.

Key Findings

For the three fiscal years ended June 30, 2013, we identified $301,601 in reported costs that did not comply with Manual requirements and recommend such costs be disallowed. These ineligible costs included $139,267 in personal services costs and $162,334 in other than personal service costs. Among the disallowances we identified were:

  • $67,783 in various unsupported travel expenses. This included $51,330 in unsupported vehicle expenses. Kids-Centric did not maintain vehicle logs for certain vehicles or the vehicle logs and other supporting documentation for other vehicles was not sufficient to support the vehicle’s program-related use;
  • $58,565 in salary expenses that were not supported or documented. For the 2012-13 year, we compared the personal service costs reported on the CFR to supporting documentation (e.g., payroll ledgers) and found that there was no supporting documentation for $58,565 in reported costs;
  • $39,410 in ineligible and/or unsupported food expenses. The expenses included parties for staff as well as alcohol; and
  • $36,812 in costs that were already reimbursed from federal IDEA grants.

Key Recommendations

To SED:

  • Review the recommended disallowances resulting from this audit and make the appropriate adjustments to Kids-Centric’s CFRs and to Kids-Centric’s reimbursement rates.
  • Work with Kids-Centric officials to help ensure their compliance with Manual provisions.

To Kids-Centric:

  • Ensure that costs reported on future CFRs comply with all the requirements in the Manual.

Other Related Audits/Reports of Interest

Whitestone School for Child Development: Compliance With the Reimbursable Cost Manual (2014-S-38)
Institutes of Applied Human Dynamics: Compliance With the Reimbursable Cost Manual (2014- S-39)


State Government Accountability Contact Information:
Audit Director: Frank Patone
Phone: (212) 417-5200; Email: StateGovernmentAccountability@osc.state.ny.us
Address: Office of the State Comptroller; Division of State Government Accountability; 110 State Street, 11th Floor; Albany, NY 12236