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State Education Department
Just Kids Early Childhood Learning Center
Compliance With the Reimbursable Cost Manual

Issued: December 31, 2015
Link to full audit report 2015-S-13
Link to 90-day response

To determine whether the costs reported by Just Kids Early Childhood Learning Center (Just Kids), 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). The audit included the expenses claimed on Just Kids’ CFRs for the fiscal years 2011-12, 2012-13, and 2013-14.

Just Kids Early Childhood Learning Center (Just Kids) is a Suffolk County-based for-profit organization that is authorized by SED to provide, among other SED-approved programs, Preschool Special Education Itinerant Teacher (SEIT), Special Class (SC), and Special Class in an Integrated Setting (SCIS) programs to disabled children between the ages of three and five years. During the 2013-14 school year, Just Kids served about 803 students. Local school districts refer preschool students to Just Kids programs based on clinical evaluations. The counties pay for the preschool special education services using rates established by SED. The rates are based on the financial information that Just Kids reports to SED on its annual CFRs. The State in turn reimburses the counties 59.5 percent of the statutory rates they pay Just Kids. For the three fiscal years beginning July 1, 2011 and ending June 30, 2014, Just Kids reported approximately $53.7 million in reimbursable costs for its SED Programs. In addition to the Preschool special education programs, Just Kids also operates a day care center. Several Just Kids employees also performed services at an affiliated entity, Just Kids Diagnostic & Treatment Center. Just Kids and the Diagnostic & Treatment Center share a common ownership. This less-than-arm’s-length relationship, as defined in the Manual, is disclosed in the notes to Just Kids’ Annual Financial Statement.

Key Findings

For the three fiscal years ended June 30, 2014, we identified $417,994 in reported costs that did not comply with the Manual’s requirements and recommend such costs be disallowed. These ineligible costs included $229,117 in personal service costs and $188,877 in other than personal service (OTPS) costs. Among the disallowances we identified were:

  • $148,590 in OTPS expenses, including $117,986 for repairs, maintenance, office supplies, and utilities;
  • $108,662 in employee day care discounts given to employees who were not the parents of the students enrolled in their programs;
  • $70,951 for lack of time records/work product for an employee; and
  • $38,800 in overstated compensation for two employees.

We have also identified certain less-than-arm’s-length transactions by Just Kids that SED should reevaluate.

Key Recommendations


  • Review the recommended disallowances resulting from our audit and make the appropriate adjustments to Just Kids’ reimbursement rates.
  • Work with Just Kids officials to help ensure their compliance with Manual provisions.

Re-evaluate Just Kids’ less-than-arm’s-length (LTAL) lease and health service transactions for reasonableness and cost effectiveness.

To Just Kids:

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

Other Related Audits/Reports of Interest

Milestone School for Child Development: Compliance With the Reimbursable Cost Manual (2014- S-37)
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