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NYS Comptroller


Taxpayers' Guide to State and Local Audits

State Education Department
The Child School
Compliance With the Reimbursable Cost Manual

Issued: September 11, 2015
Link to full audit report 2012-S-67

To determine whether the expenses reported on the Consolidated Fiscal Reports (CFRs) of The Child School (School) were calculated properly, documented adequately, and allowable pursuant to the State Education Department’s (SED) Reimbursable Cost Manual (Manual). Our audit covered the three fiscal years ended June 30, 2011.

The School provides special education services to New York City children between 6 and 21 years of age. The School is certified to provide special education services for up to 239 children. Pursuant to the State Education Law, special education providers, such as the School, are reimbursed for their services using tuition rates established by SED based on the financial information they reported on their annual CFRs. For the three fiscal years ended June 30, 2011, the School claimed about $26 million in reimbursable expenses for the special education programs we audited.

Key Findings

  • In total, we identified $978,085 in reported personal service and other than personal service (OTPS) costs that were ineligible for reimbursement.
  • The ineligible personal service costs ($435,471) included overstated compensation, ineligible bonuses, non-program-related costs, and other unsupported costs. Among these ineligible costs were: $114,338 in excessive salary expenses for 70 employees; $168,579 in excessive pension costs; and $41,523 in bonuses that were not supported by the required formal performance evaluations.
  • The ineligible OTPS costs ($542,614) were either unsupported, unnecessary, unreasonable, or not program related. Among the ineligible OTPS costs were: $163,663 for a less-than-arm’slength contract for building maintenance and cleaning services; $139,647 for non-programrelated and/or inadequately documented “Other” expenses; and $72,856 for costs (including depreciation) for the vehicles purchased and leased for the School’s Executive Directors.

Key Recommendations

  • Review the disallowances identified in our report and adjust the School’s CFRs and tuition reimbursement rates for the audit scope period as appropriate.
  • Work with School officials to ensure they understand and comply with the Reimbursable Cost Manual and the Consolidated Fiscal Reporting and Claiming Manual.

To the Child School:

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

Other Related Audits/Reports of Interest

Bilingual SEIT & Preschool, Inc.: Compliance With the Reimbursable Cost Manual (2011-S-13)
Churchill School and Center: Compliance With the Reimbursable Cost Manual (2012-S-20)

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