Objective

To determine whether the costs reported by Kids in Action of Long Island, Inc. (Kids in Action) 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 Kids in Action’s CFR for the fiscal year ended June 30, 2015.

About the Program

Kids in Action is a for-profit organization located in Suffolk County, Long Island. Among other programs, Kids in Action provides preschool Special Education Itinerant Teacher (SEIT) services to children with disabilities who are between 3 and 4 years of age. Kids in Action is reimbursed for these services through rates set by SED. Kids in Action also operated a Department of Health-approved program (Early Intervention); however, payments for services under this program are based on fixed fees. The reimbursement rates for the SEIT program are based on financial information, including costs, that Kids in Action 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, 2015, Kids in Action reported $393,508 in reimbursable costs on its CFR for the SEIT program that it operated.

Key Findings

For the fiscal year ended June 30, 2015, we identified $41,897 in ineligible costs reported by Kids in Action on its CFR for the SEIT program. The ineligible costs included:

• $31,968 in personal service costs, consisting of $25,704 in overallocated compensation for office workers charged directly to the SEIT program, $3,818 in compensation not sufficiently supported by employee time records, and $2,446 in non-program-related compensation.
• $9,929 in other than personal service costs, consisting of $6,867 in expenses that were not adequately supported by allocation methodologies or receipts, $2,290 in non-allowable telephone service fees, $452 in excess mileage expenses, and $320 in other ineligible costs.

Key Recommendations

To SED:

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

To Kids in Action:

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