Objective

To determine whether the costs reported by Handicapped Children’s Association of Southern New York, Inc. (HCA) 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 covered expenses reported on HCA’s 2017 and 2018 CFRs for the fiscal year ended June 30, 2018.

About the Program

HCA (also known as Helping Celebrate Abilities) is a not-for-profit special education provider located in Johnson City and serves students from four counties in the Southern Tier. HCA is authorized by SED to provide Preschool Integrated Special Class education services to children with disabilities, ages 3 and 4, at four different locations. For the purpose of this report, this program is referred to as the SED preschool cost-based program. HCA also operated other SED-approved preschool special education programs including Special Education Itinerant Services, Evaluations, Related Services, 1:1 Aides, and a Department of Health Infant/Toddler program. However, payments for services under these programs are based on fixed fees, as opposed to the cost-based rates established through CFR-reported financial information. During the 2017–18 school year, HCA served 84 preschool children with disabilities.

The counties that use HCA preschool special education services pay tuition to HCA using reimbursement rates set by SED. The State, in turn, reimburses the counties for a portion of the tuition paid. SED sets the special education rates based on financial information, including costs, that HCA reports to SED on its annual CFRs. For the fiscal year ended June 30, 2018, HCA reported more than $1.9 million in reimbursable costs for the SED preschool cost-based program.

Key Findings

For the fiscal year ended June 30, 2018, we identified $66,009 in reported costs that did not comply with the requirements in the RCM and CFR Manual, as follows:

• $35,816 in costs reported by HCA on the CFRs that were not offset by an increase in revenue received for students without disabilities and staffing costs that exceeded the revenue reported by HCA on its CFR for services for students without disabilities.
• $29,786 in ineligible personal service compensation costs for bonus payments made without having a written policy detailing the criteria and methods used to determine the performance evaluation rating for bonus issuance, and for unsupported hours worked.
• $407 in ineligible other than personal service costs for unsupported supplies, travel, and health care purchases, and for food for staff.

Key Recommendations

To SED:

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

To HCA:

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