Objective

To determine whether the costs reported by Williamsburg Infant & Early Childhood Development Center, Inc. (Williamsburg) 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 Williamsburg’s CFR for the fiscal year ended June 30, 2019 and certain expenses claimed on its CFRs for the 2 fiscal years ended June 30, 2018.

About the Program

Williamsburg is a New York City-based not-for-profit organization authorized by SED to provide full-day Special Class education services to children with disabilities who are between the ages of 3 and 5 years. For the purpose of this report, this program is referred to as the SED preschool cost-based program. Williamsburg also operated other SED-approved preschool special education programs: Evaluations, Related Services, 1:1 Aides, and a Department of Health Early Intervention program. However, payments for services under these programs are based on fixed fees. Williamsburg also operated private-pay programs for preschool and school-age children. During the 2018-19 school year, Williamsburg served 114 students.

The New York City Department of Education (DOE) refers students to Williamsburg and pays for its services using rates established by SED. The rates are based on the financial information Williamsburg reports to SED on its annual CFRs. For the 3 fiscal years ended June 30, 2019, Williamsburg reported approximately $11 million in reimbursable costs for the SED preschool cost-based program.

Key Findings

For the 3 fiscal years ended June 30, 2019, we identified $822,224 in reported costs that did not comply with the requirements in the RCM and the CFR Manual, as follows:

• $424,478 in ineligible property and rental expenses related to additional spaces/locations that were not approved by SED.
• $267,868 in compensation expenses that did not comply with the RCM’s requirements. Williamsburg officials did not provide us with sufficient documentation to show that the employees provided services to the SED preschool cost-based program.
• $69,345 in unallowable expenses, including $55,371 paid to transport teachers to work (commuting), $4,833 in costs not related to the SED preschool cost-based program, $3,831 in legal costs related to violations and political activities, $2,955 in accrued interest expenses related to interest-free loans, $1,588 in non-audit services that were provided within 365 days of required audit work, and $767 in other ineligible expenses.
• $42,813 in expenses that were not sufficiently documented, including $16,900 in repairs and maintenance costs, $9,959 in lice/nit inspection costs, $8,360 in computer technical support costs, $5,373 in accounting services costs, and $2,221 in various other costs that were not sufficiently documented or were unsupported.
• $17,720 in contractor expenses where services were not sufficiently documented. We could not determine whether the contractors provided services to the SED preschool cost-based program.

Key Recommendations

To SED:

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

To Williamsburg:

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