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

Issued: December 31, 2018
Link to full audit report 2016-S-38
Link to 90-day response

To determine whether the costs reported by Manual Therapy Center, Inc. (Manual Therapy) 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 (RCM). The audit focused primarily on expenses claimed on Manual Therapy’s CFR for the fiscal year ended June 30, 2014, and included certain expenses claimed on its CFRs for the two fiscal years ended June 30, 2013.

Manual Therapy is a New York City-based for-profit organization authorized by SED to provide preschool Special Education Itinerant Teacher (SEIT) services to children with disabilities who are between the ages of three and five years. In addition to this cost-based program, Manual Therapy operated one other SED-approved preschool special education program: Related Services. However, payments for services under the Related Services program are based on fixed fees.

During the 2013-14 school year, Manual Therapy served about 313 students. The New York City Department of Education refers students to Manual Therapy and pays for its services using rates established by SED. The rates are based on the financial information that Manual Therapy reports to SED on its annual CFRs. For the three fiscal years ended June 30, 2014, Manual Therapy reported approximately $15.6 million in reimbursable costs for the SEIT cost-based program.

Key Findings
For the three fiscal years ended June 30, 2014, we identified $818,286 in reported costs that did not comply with the requirements in the RCM, as follows:

  • $179,312 in compensation costs that were not supported by time and attendance records;
  • $144,676 in a less-than-arm’s-length lease transaction wherein the reimbursed costs exceeded
    the owner’s actual cost;
  • $130,457 in excess compensation paid to two employees who were reported as working in
    positions that did not reflect their actual duties;
  • $111,425 in inadequately supported other than personal service (OTPS) expenses;
  • $96,224 in compensation costs that were incorrectly allocated to the SEIT cost-based program instead of the Related Services fixed-fee program;
  • $53,855 in OTPS expenses that were not related to the SEIT cost-based program;
  • $53,414 in depreciation expenses that were not adequately supported or incorrectly calculated;
  • $25,170 in insufficiently documented OTPS expenses; and
  • $23,753 in expenses that were not eligible for reimbursement, including $16,477 in non-audit services, $7,228 in incorrectly allocated compensation, and $48 for a payroll tax overpayment.

Key Recommendations

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

To Manual Therapy:

  • Ensure that all costs reported on future CFRs comply with the RCM’s requirements.

Other Related Audits/Reports of Interest
Volunteers of America – Greater New York, Inc.: Compliance With the Reimbursable Cost Manual (2017-S-32)
NYSARC, Inc. – NYC Chapter: Compliance With the Reimbursable Cost Manual (2017-S-47)

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