Purpose

To determine whether costs reported by the Norman Howard School (NHS) on the Consolidated Fiscal Report (CFR) were properly calculated, adequately documented and allowable under the Consolidated Fiscal Report Manual (CFR Manual) and the Reimbursable Cost Manual (RCM). This audit covered the period July 1, 2008 through June 30, 2011.

Background

NHS, located in Rochester, New York, provides special education services to children with learning disabilities in grades 5 through 12. NHS is reimbursed for these services based upon financial information contained in the CFR it files with the New York State Education Department (SED). To be eligible for reimbursement, the expenses must comply with the guidelines contained in the CFR Manual and RCM. For the three fiscal years ended June 30, 2011, NHS reported costs totaling $11.3 million for the special education program we audited.

Key Findings

• We disallowed $208,305 in personal service and other than personal service costs for the three fiscal years ended June 30, 2011 because they were unnecessary or unallowable, or were not correctly reported on the CFR.
  • The disallowances for personal services consisted of $170,325 in compensation for uncertified teachers and teachers' assistants.
  • The disallowances for other than personal services included $30,000 in overstated mortgage interest costs and $7,980 in contracted direct care expenses that were not reasonable or necessary for NHS' special education program.
• We also questioned personal services costs totaling $67,295 for two employees who did not have the required professional certifications during portions of our audit period. Further, we questioned $21,729 in other than personal service costs for a contracted program that might no longer be necessary.

Key Recommendations

• SED should review the disallowances resulting from our audit, make the appropriate adjustments to the costs reported by NHS, and reduce NHS reimbursement rates, as appropriate.
• NHS should ensure that the reporting of reimbursable expenses complies with SED requirements and that professional employees have the certifications required for the positions they hold.

Other Related Audits/Reports of Interest

State Education Department: Capital District Beginnings, Inc. - Compliance With the Reimbursable Cost Manual (2011-S-1)
State Education Department: Achievements, PLLC - Compliance With the Reimbursable Cost Manual (2011-S-18)