Objective

To determine whether the costs submitted by Children’s Development Group, PLLC (CDG) on its Consolidated Fiscal Report (CFR) were allowable, properly calculated, and adequately documented in accordance with applicable State Education Department (SED) requirements. The audit covered costs reported on CDG’s CFR for the reporting year ended June 30, 2016.

About the Program

CDG is an SED-approved, for-profit provider of preschool special education services to children with disabilities who are between three and five years of age. CDG is reimbursed for these services through rates set by SED, which are based on financial information, including costs, that CDG reports to SED on its annual CFR. To be eligible for reimbursement, reported costs must comply with SED’s Reimbursable Cost Manual (RCM) requirements. For the reporting year ended June 30, 2016, CDG reported $427,599 in reimbursable costs for its Preschool Integrated Special Class – over 2.5 hours per day (Program), and provided these services to 18 children from nine school districts located in Washington and Essex counties

Key Findings

For the reporting year ended June 30, 2016, we identified $166,676 in reported costs that did not comply with SED’s requirements and are therefore not eligible for reimbursement. The $166,676 included $110,989 in personal service costs for which CDG could not provide appropriate supporting documentation demonstrating that they were for work related to the Program. The remaining $55,687 comprised $48,144 in other than personal service costs – such as insurance premiums and property lease payments – that did not meet one or more SED requirements related to documentation and $7,543 in costs that did not relate to the Program under which they were reported.

Key Recommendations

To SED:

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

To CDG:

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