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State Education Department
Susan E. Wagner Preschool
Compliance With the Reimbursable Cost Manual

Issued: November 17, 2016
Link to full audit report 2015-S-100
Link to 90-day response

To determine whether the costs reported by Susan E. Wagner Preschool (Wagner), aka the Northeast Bronx Day Care Center Inc., 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 expenses claimed on Wagner’s CFR for fiscal year ended June 30, 2014, and certain expenses claimed on Wagner’s CFRs for the two fiscal years ended June 30, 2013.

Wagner is a Bronx, New York not-for-profit organization that was approved by SED to provide Special Education Itinerant Teacher (SEIT), full-day and half-day Special Class (SC), and full-day Special Class in an Integrated Setting (SCIS) preschool special education programs to children with disabilities who are between the ages of three and five years. Wagner discontinued its SEIT program at the end of fiscal year 2011-12. During the 2013-14 year, Wagner served about 308 students. The New York City Department of Education (DoE) refers students to Wagner based on clinical evaluations, and pays for their services using rates established by SED. The rates are based on the financial information that Wagner reports to SED on its annual CFRs. SED reimburses DoE for a portion of its payments to Wagner based on statutory rates. Reimbursable costs must be reasonable, necessary, directly related to the special education program, and sufficiently documented. For the three fiscal years ended June 30, 2014, Wagner reported approximately $17.1 million in reimbursable costs for the audited cost-based programs.

In addition to the SEIT, SC, and SCIS preschool special education programs, Wagner operated three other SED programs: Evaluations, Related Services, and 1:1 Aides. However, payments for services under these other programs were based on fixed fees, as opposed to the cost-based rates established through CFR-reported financial information. Wagner also operated a Universal Pre-Kindergarten program, a Head Start program, and a private day care program.

Key Findings

For the three fiscal years ended June 30, 2014, we identified $140,902 in reported costs that did not comply with the Manual’s requirements and recommend such costs be disallowed. These ineligible costs included $39,709 in personal service costs and $101,193 in other than personal service (OTPS) costs, as follows:

  • $81,370 in real estate taxes. According to a lease agreement, Wagner was only responsible for the payment of real estate taxes above the base year amount;
  • $39,709 in unsupported and/or ineligible compensation costs for six employees;
  • $18,650 in inadequately documented consultant costs; and
  • $1,173 in ineligible staff food costs.

Key Recommendations


  • Review the recommended disallowances resulting from our audit and make appropriate adjustments to the costs reported on Wagner’s CFRs and to Wagner’s reimbursement rates.
  • Work with Wagner officials to help ensure their compliance with the provisions in the Manual.

To Wagner:

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

Other Related Audits/Reports of Interest

Whitestone School for Child Development: Compliance With the Reimbursable Cost Manual (2014-S-38)
Institutes of Applied Human Dynamics: Compliance With the Reimbursable Cost Manual (2014-S-39)

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