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State Education Department
Elmcrest Children’s Center, Inc.
Compliance With the Reimbursable Cost Manual

Issued: May 24, 2017
Link to full audit report 2016-S-62
Link to 90-day response

To determine whether the costs reported by Elmcrest Children’s Center, Inc. (Elmcrest) 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). The audit covered expenses reported on Elmcrest’s CFR for the fiscal year ended June 30, 2014.

Elmcrest is a not-for-profit organization located in Syracuse, New York that operates a special education integrated preschool classroom within its early education center. Elmcrest is authorized by SED to provide preschool education services to children with disabilities between the ages of three and five years. Elmcrest is reimbursed for these services through rates set by SED. These reimbursement rates are based on financial information, including costs, that Elmcrest reports to SED on its annual CFR. To be eligible for reimbursement, reported costs must comply with the RCM requirements. For the fiscal year ended June 30, 2014, Elmcrest reported approximately $2.2 million in reimbursable costs on its CFR for one rate-based preschool special education program that it operated.

Key Findings

For the fiscal year ended June 30, 2014, Elmcrest claimed $54,250 in ineligible costs for the ratebased preschool special education program that it operated. The ineligible costs included:

  • $18,264 in personal service costs, which consisted of bonuses and employee fringe benefits;
  • $16,578 in overstated expenses that resulted from Elmcrest understating revenue that should have been offset against program expenses;
  • $12,911 in improperly allocated personal service and other than personal service costs; and • $6,497 in other than personal service costs, which consisted of undocumented vehicle costs, ineligible consulting services costs, non-reimbursable auditing fees, and other non-reimbursable expenses.

We also determined Elmcrest did not disclose related-party transactions with two vendors on its CFR, as required.

Key Recommendations


  • Review the disallowances identified by our audit and, if warranted, make the necessary adjustments to the costs reported on Elmcrest’s CFR and to Elmcrest’s tuition reimbursement rates.
  • Remind Elmcrest officials of the pertinent SED requirements that relate to the deficiencies we identified.

To Elmcrest:

  • Ensure that costs reported on annual CFRs fully comply with SED’s requirements, and communicate with SED to obtain clarification as needed.
  • Ensure that related-party transactions are properly disclosed, including on the CFR.

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