Objective

To determine whether the costs reported by Amerimed Kids, LLC (Amerimed Kids) 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 Amerimed Kids’ CFR for the fiscal year ended June 30, 2015, and included certain expenses claimed on its CFRs for the two fiscal years ended June 30, 2014.

About the Program

Amerimed Kids is a New York City-based for-profit organization authorized by SED to provide Preschool Special Education Itinerant Teacher (SEIT) services to children with disabilities who are between the ages of three and five years. In addition to owning and operating the Amerimed Kids SEIT program, the Assistant Executive Director also owns and operates at least one private business and a Department of Health Early Intervention (EI) program. Amerimed Kids shares office space and certain employees with the private business and the EI program. We repeatedly requested support from Amerimed Kids for the expenses allocated to the SEIT program. These requests were not complied with.

During the 2014-15 school year, Amerimed Kids served approximately 81 students. The New York City Department of Education refers students to Amerimed Kids and pays for its services using rates established by SED. The rates are based on the financial information Amerimed Kids reports to SED on its annual CFRs. For the three fiscal years ended June 30, 2015, Amerimed Kids reported approximately $3.8 million in reimbursable costs for the SEIT cost-based program.

In a letter dated December 18, 2018, Amerimed Kids informed SED of its intent to close the SEIT program.

Key Findings

For the three fiscal years ended June 30, 2015, we identified $975,845 in reported costs that did not comply with the requirements in the RCM, as follows:

• $797,472 in insufficiently documented personal service costs, including $479,500 in compensation to the Executive and Assistant Executive Directors, $237,927 in compensation to ten employees who worked for SED and non-SED programs, $54,221 in bonuses that were not based on merit, and $25,824 in incorrectly reported compensation;
• $116,920 in insufficiently documented rent expenses, including $8,511 for a location that was not approved by SED;
• $61,453 in other than personal service expenses for space shared by the SED program and the Assistant Executive Director’s other businesses. Amerimed Kids did not provide the statistical basis for the percentages that were used to calculate the expenses allocated to the programs, as required.

Key Recommendation

SED should review the exceptions identified by our audit and take appropriate actions to recover the disallowed expenses.