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NYS Comptroller


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State Education Department
Block Institute School
Compliance With the Reimbursable Cost Manual

Issued: December 31, 2019
Link to full audit report 2018-S-69

To determine whether the costs reported by Block Institute School (Block) on its Consolidated Fiscal Reports (CFRs) were reasonable, necessary, directly related to the special education programs, and sufficiently documented pursuant to the State Education Department’s (SED) Reimbursable Cost Manual (RCM) and the Consolidated Fiscal Reporting and Claiming Manual (CFR Manual). The audit focused primarily on expenses claimed on Block’s CFR for the fiscal year ended June 30, 2017 and certain expenses claimed on its CFRs for the two fiscal years ended June 30, 2016.

About the Program
Block is a New York City-based not-for-profit organization authorized by SED to provide preschool Special Class and preschool Special Class in an Integrated Setting programs to children with disabilities who are between the ages of three and five years. For purposes of this report, these programs are collectively referred to as the SED preschool cost-based programs. Block also operated two other SED-approved preschool special education programs: Evaluations and 1:1 Aides. However, payments for services under these programs are based on fixed fees. Block operated several other programs, including SED’s School Age Special Class; Adult Day, Clinical, and Residential Services funded by the Office for People With Developmental Disabilities; and a federal grant program, Pals with Paws. Block and its affiliates¹ operate from three locations in Brooklyn and share the same executive management and board of directors. During the 2016-17 school year, Block served approximately 287 students in its SED preschool cost-based programs.

The New York City Department of Education (DOE) refers students to Block and pays for its services using rates established by SED. The rates are based on the financial information Block reports to SED on its annual CFRs. SED reimburses DOE 59.5 percent of the statutory rate it pays Block. For the three fiscal years ended June 30, 2017, Block reported approximately $22.4 million in reimbursable costs for its SED preschool cost-based programs. To be eligible for reimbursement, reported costs must comply with the requirements in the RCM and the CFR Manual.

Key Findings
For the three fiscal years ended June 30, 2017, we identified $1,761,867 in reported costs that did not comply with the requirements in the RCM and the CFR Manual, as follows:

  • $922,765 in inadequately documented compensation costs for teaching staff. Block officials did not provide documentation to show that these employees worked the hours Block reported for them in the SED preschool cost-based programs. ƒƒ
  • $588,874 in inadequately documented other than personal service costs, including $32,682 for legal expenses that were not supported by invoices.
  • $198,689 in other ineligible costs, including $98,347 in excess executive compensation and $38,283 in expenses that were not related to the SED preschool cost-based programs.
  • $51,539 in overallocated nurse compensation costs.

Key Recommendations

  • Review the recommended disallowances identified by our audit and make the appropriate adjustments to Block’s CFRs and tuition reimbursement rates, as warranted.
  • Remind Block officials of the pertinent SED requirements that relate to the deficiencies we identified.

To Block:

  • Ensure that all costs reported on annual CFRs fully comply with SED’s reimbursement requirements.

¹ Block Institute, Inc.; Brooklyn Community Mental Retardation Services Company, Inc.; and the Brooklyn Hebrew School for Retarded Children.

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