Objective

To determine whether the costs reported by Family and Educational Consultants (FEC) on its Consolidated Fiscal Reports (CFR) were properly calculated, adequately documented, and allowable under the State Education Department’s (SED) guidelines, including the Reimbursable Cost Manual (RCM). The audit covered expenses reported on FEC’s CFR for the fiscal year ended June 30, 2015 and certain expenses reported on FEC’s CFRs for the two fiscal years ended June 30, 2014.

About the Program

FEC is an SED-approved, for-profit special education provider located in Ulster County. FEC provides preschool special education services to children with disabilities who are between three and five years of age. FEC is reimbursed for these services through rates set by SED. The reimbursement rates are based on financial information, including costs, that FEC reports to SED on its annual CFR. To be eligible for reimbursement, reported costs must comply with the RCM requirements. For the three fiscal years ended June 30, 2015, FEC reported approximately $1.1 million in reimbursable costs on its CFRs for the preschool Special Education Itinerant Teacher services (referred to as the Program) that it provided.

Key Findings

For the three fiscal years ended June 30, 2015, we identified $161,956 in ineligible costs that FEC reported on its CFRs for the Program. The ineligible costs included $96,006 in personal service costs and $65,950 in other than personal service costs, as follows:

• $73,902 in salary costs for five office workers and the Executive Director that were improperly charged directly to the Program, and $22,104 for one teacher who did not work in the Program;
• $47,273 in agency administration costs that were improperly charged directly to the Program;
• $12,200 for costs that were unrelated to the Program, food for meetings and for staff, gifts, bank charges and late fees, and certain unsupported costs; and
• $6,477 in working capital interest.

Key Recommendations

To SED:

• Review the disallowances identified by our audit and, if warranted, make the necessary adjustments to the costs reported on FEC’s CFRs and to FEC’s tuition reimbursement rates.
• Remind FEC officials of the pertinent SED requirements that relate to the deficiencies we identified.

To FEC:

• Ensure that costs reported on annual CFRs fully comply with SED’s requirements, and communicate with SED to obtain clarification as needed.