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State Education Department
The Network for Children’s Speech, Occupational & Physical Therapy, LLC
Compliance With the Reimbursable Cost Manual

Issued: July 3, 2018
Link to full audit report 2017-S-79
Link to 90-day response


To determine whether the costs reported by The Network for Children’s Speech, Occupational & Physical Therapy, LLC (CTN) on its Consolidated Fiscal Reports (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 the expenses reported on CTN’s CFR for the fiscal year ended June 30, 2015 and certain expenses reported on its CFRs for the two fiscal years ended June 30, 2014.


CTN is an SED-approved, for-profit special education provider located in Onondaga County, New York. CTN provides preschool special education services to children with disabilities who are between three and five years of age. CTN is reimbursed for preschool special education services through rates set by SED. The reimbursement rates are based on financial information, including costs, that CTN reports to SED on its annual CFR. To be eligible for reimbursement, reported costs must comply with RCM requirements. For the three fiscal years ended June 30, 2015, CTN reported approximately $2.5 million in reimbursable costs on its CFRs for the one rate-based preschool special education program (Program) that it operated.

Key Findings

For the three fiscal years ended June 30, 2015, we identified $707,677 in ineligible costs that CTN reported on its CFRs for the Program. The ineligible costs included:
• $668,259 in personal service costs, consisting of $511,672 in overstated personal service costs for special education itinerant teachers (SEIT), $93,445 in unsupported personal service costs for office workers, $63,039 in excessive compensation to a SEIT teacher who had an ownership interest in CTN, and $103 in improper bonus payments; and
• $39,418 in other than personal service costs, which consisted of $13,574 in insufficiently documented expenses, $13,491 in related-party lease expenses that exceeded the owner’s actual cost, $10,067 in overallocated expenses due to inappropriate allocation methods, and $2,286 in other ineligible expenses.
Additionally, we determined CTN did not disclose related-party transactions with Vector Management Solutions, Inc. 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 CTN’s CFRs and to CTN’s tuition reimbursement rates.
• Remind CTN officials of the pertinent SED requirements that relate to the deficiencies we identified.


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

Other Related Audit/Report of Interest

Hawthorne Foundation, Inc.: Compliance With the Reimbursable Cost Manual (Report 2017-S-3)

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