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NYS Comptroller

THOMAS P. DiNAPOLI

Taxpayers' Guide to State and Local Audits

State Education Department
Lifeline Center for Child Development, Inc.
Compliance With the Reimbursable Cost Manual


Issued: October 13, 2017
Link to full audit report 2016-S-95

Purpose
To determine whether the costs reported by Lifeline Center for Child Development, Inc. (Lifeline) on its Consolidated Fiscal Reports (CFRs) were reasonable, necessary, directly related to the special education program, and sufficiently documented pursuant to the State Education Department’s (SED) Reimbursable Cost Manual (Manual) and the Consolidated Fiscal Reporting and Claiming Manual (CFR Manual). The audit focused primarily on expenses claimed on Lifeline’s CFR for the fiscal year ended June 30, 2015, and included certain expenses claimed on Lifeline’s CFRs for the two fiscal years ended June 30, 2014.

Background
Lifeline is a Queens, New York-based not-for-profit organization authorized by SED to provide preschool special education services to children with disabilities who are between the ages of three and five years. During the 2014-15 school year, Lifeline served about 52 students. The New York City Department of Education (DoE) refers students to Lifeline and pays for their services using rates established by SED. The DoE is reimbursed by SED for a portion of its payments to Lifeline. For the three fiscal years ended June 30, 2015, Lifeline reported approximately $9.8 million in reimbursable costs for the SED preschool cost-based program. Lifeline also shares space and staff with a DoE District 75 program that serves school-age special education students.

Key Findings
For the three fiscal years ended June 30, 2015, we identified $304,192 in reported costs that did not comply with the guidelines in the Manual, as follows:

  • $80,506 in bonuses, including $61,205 to employees who were not eligible to receive such payments, $12,857 that exceeded the 3.5 percent limit set by SED, and $6,444 that was not supported by performance evaluations;
  • $75,569 in property-related expenses that were incorrectly allocated to the SED preschool costbased program;
  • $53,742 in excess staffing costs. The excess costs resulted from Lifeline exceeding the approved staff-to-student ratios specified in the program approval letters issued by SED’s Special Education Quality Assurance Office;
  • $31,313 in ineligible expenses, including $21,083 in taxi fares to transport parents and their children to Lifeline for evaluations, $5,091 in food for staff, $1,445 in gift cards, $1,408 for lobbying, $966 for investment management, $664 for staff uniforms, $250 in food for Board meetings, $228 for student clothing, a $122 plaque for a retiring employee, and $56 for flowers;
  • Lifeline used an allocation methodology that was neither fair nor reasonable to allocate $24,337 of their plant manager’s compensation to the SED cost-based program;
  • $23,587 in undocumented and/or insufficiently documented expenses, including $2,105 in compensation to four employees, $7,015 for repairs and maintenance, $6,513 for staff travel and development, $5,175 for tuition reimbursement, $1,600 in consulting costs, $1,040 in depreciation expense, and $139 for advertising; and
  • $15,138 in compensation incorrectly allocated to the SED cost-based program, including $7,053 in agency administration costs and $8,085 in executive compensation.

Key Recommendations

To SED:

  • Review the recommended disallowances resulting from our audit and make the appropriate adjustments to Lifeline’s CFRs and tuition reimbursement rates, as warranted.
  • Work with Lifeline officials to ensure their compliance with SED’s reimbursement requirements.

To Brookville:

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

Other Related Audits/Reports of Interest

Hebrew Institute for the Deaf and Exceptional Children: Compliance With the Reimbursable Cost Manual (2015-S-67)
Books and Rattles, Inc.: Compliance With the Reimbursable Cost Manual (2016-S-25)


State Government Accountability Contact Information:
Audit Director:Kenrick Sifontes
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