Objective

To determine whether the costs reported by United Cerebral Palsy Association (UCP) of Niagara County dba Empower (Empower) on its Consolidated Fiscal Reports (CFR) 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 Empower’s CFRs for the 3 fiscal years ended June 30, 2020.

About the Program

Empower is a not-for-profit special education provider located in Niagara Falls that serves students in Niagara County. Empower is an affiliate of the Cerebral Palsy Associations of New York State. Empower is authorized by SED to provide education services—Preschool Special Class – over 2.5 hours per day, Preschool Integrated Special Class – 2.5 hours per day, and Preschool Integrated Special Class – over 2.5 hours per day—to children with disabilities up to the age of 5 years. Empower is an affiliate of the Cerebral Palsy Associations of New York State. For the purpose of this report, these programs are referred to as the SED preschool cost-based programs.

Empower also operated other SED-approved preschool special education programs including Evaluations, Related Services, and 1:1 Aides. 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 2019–20 school year, Empower served 94 preschool children in the SED preschool cost-based programs.

Niagara County pays tuition to Empower using reimbursement rates set by SED. The State, in turn, reimburses the county for a portion of the tuition paid. SED sets the special education rates based on financial information, including costs, that Empower reports to SED on its annual CFRs. For the 3 fiscal years ended June 30, 2020, Empower reported approximately $6.6 million in reimbursable costs for the SED preschool cost-based programs.

Key Findings

For the 3 fiscal years ended June 30, 2020, we identified $1,141,685 in reported costs that did not comply with the requirements in the RCM and CFR Manual, as follows:

• $482,418 in personal service costs reported on the CFR but not supported by the general ledger
• $389,873 in staffing expenses that were in excess of the approved staffing ratios
• $198,461 in unsupported salary costs
• $42,220 in other than personal service (OTPS) costs that were reported on the CFR but not supported by the general ledger
• $19,416 in expenses that were ineligible for reimbursement, including investment costs, banking service charges, gifts, staff food, personal travel costs, lobbying, advertising, membership fees, and other miscellaneous ineligible costs
• $3,976 in non-allowable compensation costs
• $3,164 in unsupported OTPS costs, including leased property and rental equipment
• $2,157 in bonus payment compensation that did not comply with the RCM.

Key Recommendations

To SED:

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

To Empower:

• Ensure that costs reported on annual CFRs fully comply with SED’s requirements and communicate with SED to obtain clarification as needed.
• Ensure that expenses reported on the CFR match the expenses reported on the financial statements.