Objective

To determine whether the costs reported by These Our Treasures, Inc. (TOTS) on its Consolidated Fiscal Reports (CFRs) were reasonable, necessary, directly related to the special education programs, 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 TOTS’ CFR for the fiscal year ended June 30, 2017 and certain expenses claimed on its CFRs for the 2 fiscal years ended June 30, 2016.

About the Program

TOTS is a New York City-based non-for-profit organization authorized by SED to provide preschool special education services to children with disabilities who are between the ages of 3 and 5 years. During our audit period, TOTS operated preschool special education half-day and full-day Special Class programs. For the purposes of this report, these programs are collectively referred to as the SED preschool cost-based programs. TOTS also operated an SED preschool special education 1:1 Aide program; however, payments for services under this program were based on fixed fees, as opposed to the cost-based rates established through CFR-reported financial information. In addition,
TOTS operated an Infant/Toddler Early Intervention program and received monetary grants from public sources.

During the 2016-17 school year, TOTS served approximately 68 preschool students with disabilities at its one location in the Bronx. The New York City Department of Education (DOE) refers students to TOTS based on clinical evaluations and pays for TOTS’ services using rates established by SED. The rates are based on the financial information that TOTS reports to SED on its annual CFRs. SED reimburses the DOE 59.5% of the statutory rate it pays to TOTS. For the 3 fiscal years ended June 30, 2017, TOTS reported approximately $5 million in reimbursable costs for the SED preschool cost-based programs.

Key Findings

For the 3 fiscal years ended June 30, 2017, we identified $182,856 in reported costs that did not comply with the requirements in the RCM and/or CFR Manual, as follows:

• $93,163 in personal service costs, including $50,318 in overallocated salary costs, $27,539 in salaries claimed for time that was not recorded on employee time sheets, $861 in salary paid in excess of the employee’s salary scale, and $14,445 in fringe benefits associated with these ineligible salary costs.
• $89,693 in other than personal services costs, including $84,017 in undocumented building improvement depreciation costs and $5,676 in other non-reimbursable depreciation costs.

We recommend that SED disallow the $182,856 in reported costs that we identified.

Key Recommendations

To SED:

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

To TOTS:

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