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NYS Comptroller


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State Education Department
East River Child Development Center
Compliance With the Reimbursable Cost Manual

Issued: July 21, 2017
Link to full audit report 2016-S-3
Link to 90-day response

To determine whether the costs reported by the East River Child Development Center (ERCDC) on its Consolidated Fiscal Report (CFR) were reasonable, necessary, directly related to the special education program, and sufficiently documented, pursuant to the State Education Department’s (SED) guidelines, including the Reimbursable Cost Manual (Manual). Our audit covered the fiscal year ended June 30, 2014.

ERCDC is a New York City-based not-for-profit organization authorized by SED to provide Special Education Itinerant Teacher (SEIT) and full-day Special Class (SC) preschool special education services to children with disabilities who are three to four years of age. For purposes of this report, these programs are collectively referred to as the SED cost-based programs. During the 2013-14 school year, ERCDC served about 96 students in its center-based SC program. ERCDC is reimbursed for preschool special education services through rates established by SED. The reimbursement rates are based on the financial information that ERCDC reports to SED on its annual CFRs. To be eligible for reimbursement, reported costs must comply with the Manual requirements and be reasonable, necessary, directly related to the special education program, and sufficiently documented. For the fiscal year ended June 30, 2014, ERCDC reported approximately $4.9 million in reimbursable costs for the audited cost-based programs.

In addition to the cost-based preschool special education programs, ERCDC operates two other SED programs: Evaluations and 1:1 Aides. However, payments for services under these other programs are based on fixed fees, as opposed to the cost-based rates established through CFRreported financial information. ERCDC also receives monetary grants from other governmental and private sources.

Key Findings

For the fiscal year ended June 30, 2014, we identified $350,246 in ineligible costs that ERCDC reported on its CFR and recommend such costs be disallowed. These ineligible costs included $340,064 in personal service costs and $10,182 in other than personal service costs. Among the ineligible costs identified were:

  • $116,508 in retirement plan payments for certain ERCDC employees that were not proportionally similar to benefits for general ERCDC staff;
  • $89,940 in compensation costs for ERCDC’s Comptroller, who did not perform many of the functions normally required of that position;
  • $52,266 in employee compensation that was not properly supported by time and attendance records; and
  • $43,025 in salaries and fringe benefits paid to 1:1 aides that were charged to the SC preschool special education program, but should have been charged to the 1:1 Aides program.

Key Recommendations


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


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

Other Related Audits/Reports of Interest

Aim High Children’s Services: Compliance With the Reimbursable Cost Manual (2015-S-62)
Hebrew Institute for the Deaf and Exceptional Children: Compliance With the Reimbursable Cost Manual (2015-S-67)

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