Objective

To determine whether the costs reported by Shield of David (Shield), d.b.a. The Shield Institute, on its Consolidated Fiscal Report (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). This audit covered the expenses claimed on Shield’s CFR for the fiscal year ended June 30, 2016.

About the Program

Shield is a New York City-based organization authorized by SED to provide full-day Special Class and full-day Special Class in an Integrated Setting services to children with disabilities who are between the ages of 3 and 5 years. For purposes of this report, these programs are collectively referred to as the SED preschool cost-based programs. Shield also operated two other SED-approved programs: Evaluations 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 financial information reported on CFRs. Shield also provided school-age special education services to children with disabilities who are between the ages of 5 and 21 years. During the fiscal year ended June 30, 2016, Shield served approximately 276 students in the SED preschool cost-based programs.

New York City Public Schools refers students to Shield and pays for its services using rates established by SED. The rates are based on the financial information that Shield reports to SED on its annual CFRs. For the fiscal year ended June 30, 2016, Shield reported approximately $10.3 million in reimbursable costs for the SED preschool cost-based programs.

Key Findings

For the fiscal year ended June 30, 2016, we identified $221,752 in reported costs that did not comply with the requirements in the RCM and the CFR Manual, as follows:

• $78,287 in unsupported compensation expenses, including fringe benefits, charged to the SED preschool cost-based programs.
• $131,762 in unsupported, insufficiently documented, and overallocated depreciation expenses related to equipment and property.
• $6,448 for non-reimbursable employee parking expenses.
• $3,010 for various non-reimbursable expenses, including $2,084 in gifts, flower arrangements, and party supplies; $600 in fines; and $326 in food purchases.
• $2,245 for overallocated costs related to painting a classroom.

Key Recommendations

To SED:

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

To Shield:

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