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NYS Comptroller


Taxpayers' Guide to State and Local Audits

State Education Department
Association to Benefit Children
Compliance With the Reimbursable Cost Manual

Issued: February 8, 2019
Link to full audit report 2017-S-28

To determine whether the costs reported by the Association to Benefit Children (ABC) 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) Reimbursable Cost Manual (Manual) and the Consolidated Fiscal Reporting and Claiming Manual (Claiming Manual). The audit included expenses claimed on ABC’s CFR for the fiscal year ended June 30, 2014.

ABC is a not-for-profit State-approved private school established in 1986. ABC is approved by SED to operate preschool Special Class in an Integrated Setting half-day classes (program 9165) and full-day classes (program 9160) to children who are between three and five years of age. For purposes of this report, these programs are collectively referred to as the cost-based programs. ABC serves about 86 children between three and five years of age with learning disabilities in the cost-based programs. Although ABC has seven locations, SED services are performed at three locations in Manhattan: 86th Street (47 students), 88th Street (25 students), and 126th Street (14 students).

ABC is reimbursed for preschool special education services through rates established by SED. The reimbursement rates are based on financial information that ABC reports to SED on its annual CFR. To be eligible for reimbursement, reported costs must comply with the Manual’s requirements and be reasonable, necessary, directly related to the special education program, and sufficiently documented. For the fiscal year ended June 30, 2014, ABC reported approximately $4.8 million in reimbursable costs for the audited cost-based programs.

In addition to the cost-based preschool special education programs, ABC operates an SED-approved Evaluation program. Payments for services under this program are based on fixed fees, as opposed to costs on the CFR.

Key Findings
For the fiscal year ended June 30, 2014, we identified $263,196 in ineligible costs that ABC reported on its CFR and recommend such costs be disallowed. These ineligible costs included $164,004 in personal service costs, $13,696 in other than personal service (OTPS) costs, and $85,496 in depreciation expenses. Regarding the ineligible personal service costs:

  • For 39 out of the 106 employees, the total hours charged on the CFR were higher than the total hours worked on the ADP payroll. We obtained the payroll system’s employee total hours report for the fiscal year ended June 30, 2014, which showed actual hours worked for each employee during this period. We obtained the hourly rates from ABC for these employees and, based on the difference in the number of hours claimed versus payroll, calculated the recommended disallowance of $164,004 in personal service costs that did not comply with the applicable provisions of the Manual for reimbursement.

Our review of OTPS costs determined that charges/payments totaling $13,696 were not reimbursable. This disallowed amount included food, non-allowed merchandise, and items without documentation, as follows:

  • For program 9165, the costs included several food purchases for staff functions (such as luncheons) and food items that were not age appropriate (such as club soda and coffee creamer). In addition, some of the costs were not documented. The recommended disallowance is $9,452.
  • For program 9160, the disallowed amount of $2,213 included food for staff and adult-size T-shirts.
  • Some agency administrative expenses (food for staff functions, decorative supplies) were not sufficiently documented because there were no receipts. Based on the ratio value for the 9160 and 9165 programs, we recommend a disallowance of $2,031.

The provider claimed on the CFR that it purchased buildings and made improvements, claiming depreciation of $197,689 for the year ended June 30, 2014. Using adjusted values, the recommended disallowance for depreciation is $85,496.

Key Recommendations

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


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

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