Objective

To determine whether the costs reported by Empowering Minds Therapy Inc. (Empowering Minds) 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). The audit covered the expenses reported for the fiscal year ended June 2015.

About the Program

Empowering Minds is an SED-approved, for-profit special education provider located in Holbrook. Empowering Minds provides preschool special education services to children with disabilities who are between 3 and 4 years of age. SED sets the special education rates based on financial information, including costs, that Empowering Minds reports to SED on its annual CFR. Costs reported on the CFR must comply fully with the guidelines in SED’s RCM regarding eligibility and documentation requirements. For the fiscal year ended June 30, 2015, Empowering Minds reported $235,364 in reimbursable costs for Special Education Itinerant Teacher services.

Key Findings

For the fiscal year ended June 30, 2015, we identified $7,811 in costs that Empowering Minds reported on its CFR that did not comply with SED’s requirements for reimbursement. The ineligible costs included:

• $6,899 in personal service costs that were not fully supported by employee time records.
• $912 in other than personal service costs, consisting of $1,009 in non-allowable goodwill expense charged to the Program, which we offset by $97 for an adjustment made by SED for non-allowable franchise tax that we found to be allowable.

We also found that Empowering Minds did not disclose related-party transactions on its CFR-5 as required by the CFR Manual.

Key Recommendations

To SED:

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

To Empowering Minds:

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