Objective

To determine whether the costs reported by the Wayne County Chapter of NYSARC, Inc. (ARC Wayne) 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 RCM) and the Consolidated Fiscal Reporting and Claiming Manual (CFR Manual). The audit covered expenses reported on ARC Wayne’s 2016 and 2017 CFRs for the fiscal year ended June 30, 2017.

About the Program

ARC Wayne is a not-for-profit organization located in Wayne County. Among other programs, ARC Wayne provides preschool special education services to children with disabilities who are three and four years of age. ARC Wayne is reimbursed for these services through rates set by SED. The reimbursement rates are based on financial information, including costs, that ARC Wayne reports to SED on its annual CFR. To be eligible for reimbursement, reported costs must comply with the RCM requirements. For the fiscal year ended June 30, 2017, ARC Wayne reported approximately $3 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 Programs) that it operated.

Key Findings

For the fiscal year ended June 30, 2017, we identified $20,988 in ineligible costs that ARC Wayne reported on its CFRs for the Programs. The ineligible costs included:

• $11,284 in costs not offset by an increase to revenue received for students without disabilities and $1,015 in staffing costs for services for students without disabilities in excess of this revenue.
• $8,385 in personal service costs consisting of $7,759 in bonus compensation and $626 in nonreimbursable staffing costs.
• $304 in other than personal service costs for non-allowable food.

Key Recommendations

To SED:

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

To ARC Wayne:

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