Purpose

To determine whether the costs reported on the Consolidated Fiscal Reports (CFRs) of Metro Therapy, Inc. (Metro Therapy) were calculated properly, documented adequately, and allowable pursuant to the State Education Department’s (SED) Reimbursable Cost Manual (Manual). Our audit covered the three fiscal years ended June 30, 2011.

Background

Metro Therapy is based in Hauppauge, New York and provides Special Education Itinerant Teacher (SEIT) services to children between the ages of three and five years residing in New York City and Nassau and Suffolk counties. During the 2010-11 school year, Metro Therapy taught 284 students through services rendered in the students’ homes, schools, or neighborhood community centers. Pursuant to State Education Law, special education providers (including Metro Therapy) are reimbursed through tuition rates established by SED based on financial information reported on the providers’ CFRs. For the three fiscal years ended June 30, 2011, Metro Therapy reported about $7.1 million in reimbursable costs on its CFRs.

Key Findings

We identified $833,949 in non-reimbursable costs. Among the costs we recommend for disallowance are:

• $357,063 in excessive allocations of salaries and fringe benefits to the SEIT program;
• $185,512 in compensation paid to five individuals who did not provide services to the SEIT program;
• $116,069 in excessive compensation paid to the Executive Director and the Assistant Executive Director;
• $66,636 in parent company allocation expenses that were not in compliance with the Manual; and
• $62,138 in unrelated or undocumented non-personal service costs.

Key Recommendations

To SED:

• Review the recommended disallowances, adjust Metro Therapy’s CFRs, and revise Metro Therapy’s tuition reimbursement rates, as appropriate.
• Work with Metro Therapy officials to help ensure their proper reporting of reimbursable costs.

To Metro Therapy:

• Ensure that reimbursable costs reported on the CFRs comply with Manual requirements.

Other Related Audits/Reports of Interest

State Education Department: Bilingual SEIT & Preschool, Inc. - Compliance With the Reimbursable Cost Manual (2011-S-13)
State Education Department: IncludED Educational Services, Inc. - Compliance with the Reimbursable Cost Manual (2010-S-59)