Purpose

To determine whether the costs reported by the Interdisciplinary Center for Child Development (ICCD) on its Consolidated Fiscal Reports (CFRs) were reasonable, necessary, directly related to the special education program, and sufficiently documented pursuant to the State Education Department’s (SED) Reimbursable Cost Manual (RCM). The audit focused primarily on expenses claimed on ICCD’s CFR for the fiscal year ended June 30, 2015, and included certain expenses claimed on ICCD’s CFRs for the two fiscal years ended June 30, 2014.

Background

ICCD is a New York City-based for-profit organization authorized by SED to provide preschool special education services to children with disabilities who are between the ages of three and five years. During the 2014-15 school year, ICCD served about 282 students at locations in Queens and Nassau County. The New York City Department of Education (DoE) and local school districts refer students to ICCD and pay for its services using rates established by SED. The DoE and the local school districts are reimbursed by SED for a portion of their payments to ICCD. For the three fiscal years ended June 30, 2015, ICCD reported approximately $30.2 million in reimbursable costs for the SED preschool special education cost-based programs. In addition, ICCD operates two other SED-approved preschool special education programs: Evaluations and 1:1 Aides. However, payments for services under these other programs are based on fixed fees.

Key Findings

For the three fiscal years ended June 30, 2015, we identified $453,670 in reported costs that did not comply with the requirements in the RCM, as follows:

• $274,830 in a less-than-arm’s-length lease transaction where the reimbursed costs exceeded the owner’s actual cost;
• $176,793 in compensation related to excess staffing of teacher aides/assistants;
• $1,765 in over-allocated and/or excess employee compensation; and
• $282 in non-program-related expenses.

Key Recommendations

To SED:

• Review the recommended disallowances resulting from our audit and make the appropriate adjustments to ICCD’s CFRs and reimbursement rates, as warranted.
• Work with ICCD officials to ensure their compliance with the provisions in the RCM.

To ICCD:

• Ensure that costs reported on future CFRs comply with the RCM’s requirements.

Other Related Audits/Reports of Interest

Lifeline Center for Child Development, Inc.: Compliance With the Reimbursable Cost Manual (2016-S-95)
Kennedy Child Study Center: Compliance With the Reimbursable Cost Manual (2017-S-7)