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State Education Department
Hebrew Institute for the Deaf and Exceptional Children
Compliance With the Reimbursable Cost Manual

Issued: November 22, 2016
Link to full audit report 2015-S-67
Link to 90-day response

To determine whether the costs reported by the Hebrew Institute for the Deaf and Exceptional Children (Hebrew Institute) on its Consolidated Fiscal Reports (CFRs) were properly documented, program related, and allowable pursuant to the State Education Department’s (SED) Reimbursable Cost Manual (Manual). The audit included expenses claimed on Hebrew Institute’s CFRs for the three fiscal years ended June 30, 2014.

Hebrew Institute is a Brooklyn, New York, not-for-profit organization approved by SED to provide full-day and half-day Special Class (SC) and 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. During the 2013-14 school year, Hebrew Institute served about 171 students. The New York City Department of Education (DoE) refers students to Hebrew Institute based on clinical evaluations, and pays for their services using rates established by SED. The rates are based on the financial information that Hebrew Institute reports to SED on its annual CFRs. SED reimburses DoE for a portion of its payments to Hebrew Institute based on statutory rates. For the three fiscal years ended June 30, 2014, Hebrew Institute reported approximately $11 million in reimbursable costs for the audited cost-based programs.

In addition to the SC and SCIS programs, Hebrew Institute operated two other SED programs: Evaluations and 1:1 Aides. However, payments for services under these other programs were based on fixed fees, as opposed to cost-based rates established through CFR-reported financial information. Hebrew Institute also operated a private day care program.

Key Findings

For the three fiscal years ended June 30, 2014, we identified $774,122 in reported costs that did not comply with the Manual’s requirements and recommend such costs be disallowed. These ineligible costs included $624,868 in personal service costs and $149,254 in other than personal service costs, as follows:

  • $194,438 in lump sum bonuses that did not comply with the Manual’s requirements;
  • $132,846 in over-allocated compensation costs for 24 shared employees;
  • $132,377 in excessive executive compensation;
  • 121,660 in undocumented and/or insufficiently documented expenses, including $56,568 in compensation paid to eight employees, $22,024 in checks written out to the Executive Director, $10,000 to a consultant, and $5,728 in petty cash disbursements;
  • $108,639 in non-mandated fringe benefit contributions that did not comply with the Manual’s requirements;
  • $53,533 in ineligible expenses, including $13,641 for staff food, $8,617 in referral fees to employees, and $11,244 in legal fees not related to the SED cost-based programs; and
  • $30,629 for vehicle expenses not supported by usage logs.

Key Recommendations


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

To Hebrew Institute:

  • 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)
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