State Education Department


Skip to Content

Login   Subscribe   Site Index   Contact Us   Google Translate™

NYS Comptroller


Taxpayers' Guide to State and Local Audits

State Education Department
Fred S. Keller School
Compliance With the Reimbursable Cost Manual

Issued: December 27, 2016
Link to full audit report 2015-S-98
Link to 90-day response

To determine whether the costs reported by Fred S. Keller School (FSK) on its Consolidated Fiscal Reports (CFRs) were properly calculated, adequately documented, and allowable under the State Education Department’s (SED) guidelines, including the Reimbursable Cost Manual (Manual). The audit covered expenses claimed on FSK’s CFR for the fiscal year ended June 30, 2014, and certain expenses claimed on FSK’s CFRs for the two fiscal years ended June 30, 2013.

FSK is an SED-approved not-for-profit special education provider located in Palisades and Yonkers, New York. FSK provides preschool special education services to children with disabilities who are between the ages of three and five years. FSK is reimbursed for preschool special education services through rates set by SED. These reimbursement rates are based on financial information, including costs, that FSK reports to SED on its annual CFR. To be eligible for reimbursement, reported costs must comply with the Manual. For the three years ended June 30, 2014, FSK reported over $21.2 million in reimbursable costs on its CFRs for five rate-based preschool special education programs.

Key Findings

For the three years ended June 30, 2014, we identified $455,117 in costs that were not in compliance with the Manual. These costs included:

  • $433,588 in non-personal service costs, which consisted of $224,430 in unnecessary consultant costs; $101,625 in insufficiently documented consultant costs, vehicle costs, and credit card purchases; $78,474 in consultant costs that were not related to the preschool special education programs; and $29,059 in non-reimbursable purchases; and
  • $21,529 in personal service costs, which consisted of $14,709 for work that was not related to the preschool special education programs and $6,820 for ineligible employee bonuses.

In addition, we questioned the propriety of certain actions involving FSK’s Board of Directors that pertain to related-party business transactions. For example, three members of FSK’s fourmember Board of Directors had significant, material business transactions with FSK. We concluded that improvements in the Board of Directors’ conduct are needed to ensure the financial and programmatic integrity of FSK’s programs in the future.

Key Recommendations


  • Review the disallowances identified by our audit and, if warranted, make the necessary adjustments to the costs reported on FSK’s CFRs and to FSK’s tuition reimbursement rates.
  • Remind FSK officials of the pertinent SED requirements that relate to the deficiencies we identified.
  • Direct FSK to develop a conflict of interest policy consistent with SED’s requirements and guidelines.

To FSK :

  • Ensure that costs reported on annual CFRs fully comply with SED’s requirements, and communicate with SED to obtain clarification as needed.
  • Develop a conflict of interest policy consistent with SED’s requirements and guidelines. At a minimum, the policy should incorporate SED’s provisions, which discourage conflicts of interest, and specify protocols to follow when conflicts of interest arise.

Other Related Audits/Reports of Interest

The Arc of Orange County: Compliance With the Reimbursable Cost Manual (2015-S-45)
Center for Disability Services: Compliance With the Reimbursable Cost Manual (2015-S-40)

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