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State Education Department
Easter Seals New York
Compliance With the Reimbursable Cost Manual

Issued: October 12, 2016
Link to full audit report 2015-S-27
Link to 90-day response

To determine whether the costs reported by Easter Seals New York (Easter Seals NY) on its Consolidated Fiscal Report (CFR) were properly calculated, adequately documented, and allowable under the State Education Department’s (SED) guidelines, including the Reimbursable Cost Manual (RCM). Our audit covered the three calendar years ended December 31, 2013.

Easter Seals NY, a not-for-profit organization, offers a wide variety of services to children and adults with disabilities and special needs including, but not limited to, medical services, residential services, and many educational services throughout New York State. Easter Seals NY is authorized by SED to provide preschool special education services to children with disabilities between the ages of three and five years. Easter Seals NY operates preschool special education programs at their Bronx, Monticello, Port Jervis, and Valhalla locations. Easter Seals NY is reimbursed for preschool special education services through rates set by SED. The reimbursement rates are based on financial information, including costs, that Easter Seals NY reports to SED on its annual CFR. To be eligible for reimbursement, reported costs must comply with RCM requirements. For the three calendar years ended December 31, 2013, Easter Seals NY reported approximately $27.6 million in reimbursable costs on its CFRs for three rate-based preschool special education programs.

During our audit scope, Easter Seals New Hampshire (Easter Seals NH) was the parent agency of Easter Seals NY and provided administrative services such as accounts payable, accounts receivable, payroll, and human resource services to Easter Seals NY and other affiliates.

Key Findings

For the three calendar years ended December 31, 2013, Easter Seals NY claimed $688,543 in ineligible costs for its rate-based preschool special education programs. The ineligible costs included:

  • $546,263 in personal service costs for personnel that exceeded SED-approved staffing ratios for the programs. For example, for the 2012-13 year, Easter Seals NY charged 3.519 full-time equivalent teacher assistants (costing $111,550) to a preschool integrated special education class above the SED-approved staffing ratio. Easter Seals NY was unable to provide documentation to justify the additional staffing and related cost.
  • $110,206 in parent agency administration services provided by Easter Seals NH that included executive compensation above the allowed regional median salary, bonus payments to nondirect care staff, discriminatory pension expenses, non-reimbursable food and gifts, unsupported charges, and duplicative membership payments.
  • $32,074 in other than personal service costs that were either not allowable or unsupported by proper documentation. This included $19,714 for gifts to employees and other individuals. According to the RCM, gifts for staff are not reimbursable.

Key Recommendations


  • Review the disallowances identified by our audit and make the necessary adjustments to the costs reported on Easter Seals NY’s CFRs and to Easter Seals NY’s tuition reimbursement rates, as appropriate.
  • Remind Easter Seals NY officials of the pertinent SED guidelines that relate to the deficiencies we cited.

To Easter Seals NY :

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

Other Related Audits/Reports of Interest

Dynamic Center Inc.: Compliance With the Reimbursable Cost Manual (2014-S-3)

State Government Accountability Contact Information:
Audit Director: Andrea Inman
Phone: (518) 474-3271; Email:
Address: Office of the State Comptroller; Division of State Government Accountability; 110 State Street, 11th Floor; Albany, NY 12236