Purpose

To determine whether the costs reported by The New Interdisciplinary School (NIS) on its Consolidated Fiscal Reports (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 NIS’ CFR for the fiscal year ended June 30, 2015, and certain expenses reported on NIS’ CFR for the fiscal year ended June 30, 2014.

Background

NIS is an SED-approved, not-for-profit special education provider located in Suffolk County, New York. NIS provides preschool special education services to children with disabilities who are between three and five years of age. NIS is reimbursed for preschool special education services through rates set by SED. The reimbursement rates are based on financial information, including costs, that NIS reports to SED on its annual CFR. To be eligible for reimbursement, reported costs must comply with the RCM requirements. For the two fiscal years ended June 30, 2015, NIS reported approximately $11.6 million in reimbursable costs on its CFRs for the five rate-based preschool special education programs (Programs) it operated.

Key Findings

For the two fiscal years ended June 30, 2014 and 2015, we identified $119,752 in ineligible costs that NIS reported on its CFRs for the Programs. The ineligible costs included:

• $83,192 in personal service costs, which consisted of $76,277 in improperly allocated salaries and fringe benefit costs, $5,658 in non-reimbursable bonuses and associated mandated fringe benefits, and $1,257 in compensation and associated mandated fringe benefits related to a health insurance incentive program; and
• $36,560 in other than personal service costs, which consisted of $30,978 in unsupported consulting costs, $3,826 in ineligible auditing fees, and $1,756 in other non-reimbursable expenses.

Key Recommendations

To SED:

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

To NIS:

• 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

North Country Kids, Inc.: Compliance With the Reimbursable Cost Manual (2016-S-53)
Lois Bronz Children’s Center, Inc.: Compliance With the Reimbursable Cost Manual (2016-S-86)