Objective

To determine whether the costs reported by Kids Unlimited, PT, OT & SLP, PLLC (Kids Unlimited) 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) and the Consolidated Fiscal Reporting and Claiming Manual (CFR Manual). The audit focused primarily on expenses claimed on Kids Unlimited’s CFR for the fiscal year ended June 30, 2015 and certain expenses claimed on its CFRs for the two fiscal years ended June 30, 2014.

About the Program

Kids Unlimited is a New York City-based for-profit organization authorized by SED to provide Special Education Itinerant Teacher (SEIT) services to children with disabilities who are between the ages of three and five years. Kids Unlimited serves children in New York City’s five boroughs. For the fiscal year ended June 30, 2015, Kids Unlimited served 143 children.

The New York City Department of Education refers students to Kids Unlimited and pays for its services using rates established by SED. The rates are based on the financial information Kids Unlimited reports to SED on its annual CFRs. For the three fiscal years ended June 30, 2015, Kids Unlimited reported approximately $8.8 million in reimbursable costs for the SEIT preschool cost-based program.

Key Findings

For the three fiscal years ended June 30, 2015, we identified $446,835 in reported costs that did not comply with the requirements in the RCM and recommend that such costs be disallowed. These ineligible costs included $437,839 in personal service costs and $8,996 in other than personal service costs, as follows:

• $264,189 in compensation that exceeded the regional average;
• $173,650 in over-reported health insurance benefits;
• $6,281 in unsupported depreciation expenses; and
• $2,715 in ineligible and unsupported cable television, internet, and telephone service costs.

Key Recommendations

To SED:

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

To Kids Unlimited: 

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