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State Education Department
Therapy and Learning Center, Inc.
Compliance With the Reimbursable Cost Manual

Issued: July 18, 2017
Link to full audit report 2016-S-44
Link to 90-day response

To determine whether the costs reported by Therapy and Learning Center, Inc. (TLC) 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 and Consolidated Fiscal Reporting and Claiming Manual. The audit included expenses claimed on TLC’s CFR for the fiscal year ended June 30, 2014, and certain expenses claimed on TLC’s CFRs for the two fiscal years ended June 30, 2013.

TLC is a Brooklyn-based not-for-profit organization authorized by SED to provide full-day Special Class and full-day Special Class in an Integrated Setting preschool special education services to children with disabilities who are between the ages of three and five years. For purposes of this report, these programs are collectively referred to as the SED cost-based programs. During the 2013-14 school year, TLC served about 138 students. In addition to the cost-based programs, TLC operated two other SED programs: Evaluations and 1:1 Aides. However, payments for services for these other programs are based on fixed fees, as opposed to the cost-based rates established through CFR-reported financial information. TLC also operated an Early Intervention program which was discontinued at the end of the 2013-14 fiscal year.

The New York City Department of Education (DoE) refers students to TLC based on clinical evaluations and pays for TLC’s services using rates established by SED. The rates are based on the financial information TLC reports to SED on its annual CFRs. SED reimburses the DoE for a portion of its payments to TLC 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, TLC reported approximately $12.9 million in reimbursable costs for the SED cost-based programs.

Key Findings

For the three fiscal years ended June 30, 2014, we identified $276,453 in reported costs that did not comply with SED requirements and recommend such costs be disallowed. These ineligible costs included $143,974 in personal service costs and $132,479 in other than personal service costs, as follows:

  • $51,707 in costs applicable to the fixed-fee 1:1 Aides program. TLC incorrectly allocated these costs to its cost-based programs rather than to the fixed-fee 1:1 Aides program;
  • $51,733 in over-allocated fringe benefit expenses. TLC applied an incorrect allocation rate for fringe benefits;
  • $20,342 in excess executive compensation;
  • $20,192 in ineligible and/or unsupported sick leave accruals and bonuses;
  • $87,178 in insufficiently documented consultant costs; and
  • $45,301 in ineligible and/or unsupported expenses. Examples include purchases for software, equipment, and technology support services.

Key Recommendations


  • Review the recommended disallowances resulting from our audit and make the appropriate adjustments to TLC’s CFRs and reimbursement rates.
  • Work with TLC officials to ensure their compliance with SED’s reimbursement requirements.


  • Ensure that costs reported on future CFRs comply with SED’s reimbursement requirements.

Other Related Audits/Reports of Interest

Susan E. Wagner Preschool: Compliance With the Reimbursable Cost Manual (2015-S-100)
Books and Rattles, Inc.: Compliance With the Reimbursable Cost Manual (2016-S-25)

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