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State Education Department
Leake and Watts Services, Inc.
Compliance With the Reimbursable Cost Manual

Issued: December 27, 2018
Link to full audit report 2017-S-73
Link to 90-day response

To determine whether the costs reported by Leake and Watts Services, Inc. (Leake and Watts) 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 the expenses reported on Leake and Watts’ CFR for the fiscal year ended June 30, 2015.

Leake and Watts (which, in 2018, changed its name to Rising Ground) is an SED-approved, not-for-profit special education provider located in Westchester County, New York. Leake and Watts provides preschool special education services to children with learning disabilities who are between three and five years of age. Leake and Watts is reimbursed for preschool special education services through rates set by SED. The reimbursement rates are based on financial information, including costs, that Leake and Watts reports to SED on its annual CFR. To be eligible for reimbursement, reported costs must comply with RCM requirements. For the fiscal year ended June 30, 2015, Leake and Watts reported approximately $6 million in reimbursable costs on its CFR for the seven rate-based preschool special education Programs (Programs) that it operated.

Key Findings
For the fiscal year ended June 30, 2015, we identified $228,071 in ineligible costs that Leake and Watts reported on its CFR for the Programs. The ineligible costs included:

  • $162,753 in personal service costs, which consisted of $158,044 in salaries and fringe benefits for staff working outside the Programs, $2,747 in executive compensation that exceeded the regional median compensation level, and $1,962 in costs for seven administrative staff whose compensation exceeded one full-time equivalent; and
  • $65,318 in other than personal service costs, which consisted of $53,960 in insufficiently documented expenses and $11,358 in ineligible expenses.

Key Recommendations

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

To Leake and Watts:

  • Ensure that costs reported on annual CFRs fully comply with SED’s requirements, and communicate with SED to obtain clarification as needed.

Other Related Audit/Report of Interest
The Network for Children’s Speech, Occupational & Physical Therapy, LLC: Compliance With the Reimbursable Cost Manual (2017-S-79)

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