Objective

To determine whether the costs reported by Parsons Child and Family Center (Parsons) 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 and the Consolidated Fiscal Reporting and Claiming Manual. The audit covered expenses reported on Parsons’ CFR for the fiscal year ended June 30, 2015.

About the Program

Parsons is an SED-approved special education provider located in Albany County. Among other programs, Parsons provides preschool special education services to children with disabilities who are between three and five years of age. Parsons is reimbursed for these services through rates set by SED. The reimbursement rates are based on financial information, including costs, that Parsons reports to SED on its annual CFR. To be eligible for reimbursement, reported costs must be reasonable, necessary, directly related to the special education program, and sufficiently documented. For the fiscal year ended June 30, 2015, Parsons reported approximately $1.2 million in reimbursable costs on its CFR for the Preschool Special Class – over 2.5 hours per day, Preschool Integrated Special Class – over 2.5 hours per day, and Preschool Integrated Special Class – 2.5 hours per day (collectively referred to as the Programs) that it operated.

Key Findings

For the fiscal year ended June 30, 2015, we identified $247,699 in ineligible costs that Parsons reported on its CFR for the Programs. The ineligible costs included:

• $188,149 in overstated expenses that resulted from Parsons misreporting revenue that should have been offset against program expenses on the correct CFR line.  
• $46,843 in other than personal service costs, consisting of $26,002 in unsupported expenses, $15,425 in incorrectly allocated expenses, and $5,416 in other nonreimbursable costs such as working capital interest, food for staff, and parent agency costs
• $12,707 in personal service costs, consisting of $11,674 in excessive salary and fringe benefit costs for certain employees, and $1,033 in executive compensation that was greater than the allowed regional median salary.

Key Recommendations

To SED:

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

To Parsons:

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