Objective

To determine whether the costs reported by The Arc Erie County New York (Arc Erie) on its Consolidated Fiscal Reports (CFRs) 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 the expenses reported on ARC Erie’s 2018 and 2019 CFRs for the fiscal year ended June 30, 2019.

About the Program

Arc Erie is an SED-approved, not-for-profit special education provider located in Williamsville, New York. Arc Erie 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, reported by Arc Erie on the annual CFR that it submits to SED. 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, 2019, Arc Erie reported approximately $3.6 million in reimbursable costs for its two rate-based preschool special education programs: Preschool Special Class – over 2.5 hours per day and Preschool Integrated Special Class – over 2.5 hours per day.

Key Findings

For the fiscal year ended June 30, 2019, we identified $8,724 in other than personal service costs that Arc Erie reported on its CFR that did not comply with SED’s requirements for reimbursement. The ineligible costs included:

• $6,178 in non-reimbursable costs, including $1,715 in promotional items, $1,707 in food for staff, $955 in undocumented expenses, $813 in gifts for staff, $701 for parties, $160 in overreported CFR costs, and $127 in donations.
• $1,632 for non-audit services (tax services) performed by the accounting firm during the same 365-day period of the CFR and financial statement audit.
• $914 in non-reimbursable investment fees.

Key Recommendations

To SED:

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

To Arc Erie:

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