Purpose

To determine whether the costs reported by the League for the Handicapped (LFH) 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 fiscal year ended June 30, 2014.

Background

LFH, a not-for-profit organization located in Springville, New York, is an SED-approved provider of special education services. LFH offers a range of services and programs to children with disabilities from birth through eight years of age. In 2014, LFH provided preschool special education services to 156 children with learning disabilities from approximately 35 school districts located in three counties in western New York. The counties that use LFH’s special education services pay tuition to LFH using reimbursement rates set by SED. SED sets the reimbursement rates based on financial information, including costs, that LFH reports to SED on its annual CFR. To be eligible for reimbursement, reported costs must comply with the guidelines specified in the RCM. For the fiscal year ended June 30, 2014, LFH reported approximately $2.9 million in reimbursable costs for its SED-funded rate-based preschool special education programs.

Key Finding

For the fiscal year ended June 30, 2014, we identified $4,354 in other than personal service costs that were charged to the preschool special education programs that did not comply with SED’s requirements for reimbursement. The non-reimbursable costs included insufficiently documented expenses, costs for services that were not directly related to the programs, unallowable working capital interest, and credit card late fees.

Key Recommendations

To SED:

• Review the disallowances identified by our audit and, if warranted, make the necessary adjustments to the costs reported on LFH’s CFR and to LFH’s tuition reimbursement rates.

• Remind LFH officials of the pertinent SED guidelines that relate to the deficiencies identified.

To LFH:

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

Other Related Audits/Reports of Interest

State Education Department: Summit Educational Resources - Compliance With the Reimbursable Cost Manual (2014-S-49)
State Education Department: Newmeadow, Inc. - Compliance With the Reimbursable Cost Manual (2015-S-48)