Objective

To determine whether the costs reported by The Arc Franklin-Hamilton d/b/a The Adirondack Arc (Adirondack) 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 Adirondack’s CFRs for the fiscal year ended June 30, 2021, and certain expenses claimed on its CFRs for the 2 fiscal years ended June 30, 2020.

About the Program

Adirondack is a not-for-profit special education provider located in Tupper Lake that serves students from Franklin and Hamilton counties. Adirondack is authorized by SED to provide Preschool Special Class (over 2.5 hours per day) education services to children with disabilities between the ages of 3 and 5 years. For the purposes of this report, this program is referred to as the SED preschool cost-based program. Adirondack also operated other SED-approved preschool special education programs, including Special Education Itinerant Services, Evaluations, 1:1 Aides, and Preschool Related Services. However, payments for services under these programs are based on fixed fees, as opposed to the cost-based rates established using CFR-reported information. During the 2020-21 school year, Adirondack served approximately 43 preschool children in the SED preschool cost-based program.

Franklin and Hamilton counties pay tuition to Adirondack 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 Adirondack reports to SED on its annual CFRs. For the 3 fiscal years ended June 30, 2021, Adirondack reported approximately $3.9 million in reimbursable costs for the SED preschool cost-based programs.

Key Findings

For the 3 fiscal years ended June 30, 2021, we identified $76,812 in reported costs that did not comply with the requirements in the RCM and the CFR Manual, as follows:

• $59,299 in vehicle costs that were not sufficiently documented
• $9,074 in unsupported related-party costs
• $4,937 in insufficiently documented and ineligible costs, including unknown charges, household supplies, credit card transactions, food, and gifts
• $2,539 in executive compensation that exceeded 1.0 full-time equivalent
• $963 in compensation costs for one employee that should have been reported on Adirondack’s CFR under the 1:1 Aides program cost center

Key Recommendations

To SED:

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

To Adirondack:

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