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State Education Department
Children’s Center for Early Learning
Compliance With the Reimbursable Cost Manual

Issued: December 29, 2014
Link to full audit report 2011-S-21
Link to 90-day response

To determine whether the expenses reported on the Consolidated Fiscal Reports (CFRs) of the Children’s Center for Early Learning (Center) were calculated properly, documented adequately, and allowable pursuant to the State Education Department’s (SED) Reimbursable Cost Manual (Manual). Our audit primarily covered the two fiscal years ended June 30, 2009. In addition, we examined selected costs from fiscal years 2005-06 and 2006-07.

The Center provides special education services to New York City-based children between three and five years of age. Pursuant to New York State Education Law, special education providers, such as the Center, are reimbursed for their services using tuition rates established by SED based on the financial information reported on their annual CFRs. For the three fiscal years ended June 30, 2009, the Center claimed approximately $10.7 million in reimbursable expenses for the programs we audited (Programs). According to SED, the Center’s special education operations ended on May 5, 2014.

Key Findings
We identified $797,438 in reported costs that should not have been reimbursed, as follows:

  • $741,942 in salary and related personal service expenses for costs chargeable to Center affiliates; for time not worked; and for other undocumented personal service costs.
  • $55,496 in non-personal service costs that were either undocumented; not properly allocated between programs; or not Program-appropriate. Such costs include fees for undocumented professional services, income tax penalties, food purchases, and office-related expenses.
  • The Center made interest-free loans to related parties using Program monies.

Key Recommendations
To the State Education Department:

  • Review the disallowances addressed in our report and adjust the Center’s CFRs and tuition reimbursement rates for the audit scope period as appropriate.
  • Work with Center officials to help ensure that only allowable costs are included on any of their CFRs prepared after our scope period.
  • Direct Center officials to disclose all “less-than-arm’s-length” transactions on any CFRs prepared after the scope period and prior to ceasing operations.

To the Children’s Center for Early Learning:

  • Ensure that costs reported on any CFRs prepared after the scope period comply with Manual requirements.

Other Related Audits/Reports of Interest

Bilingual SEIT & Preschool, Inc.: Compliance With the Reimbursable Cost Manual (2011-S-13)
Special Education Associates, Inc.: Compliance With the Reimbursable Cost Manual (2010-S-31)

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