Objective

To determine whether the costs reported by the William T. Dillon Child Study Center (Dillon Center) at St. Joseph’s University, New York 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 Dillon Center’s CFR for the fiscal year ended June 30, 2022, and certain expenses claimed on its CFRs for the 2 fiscal years ended June 30, 2021.

About the Program

Dillon Center is a New York City-based not-for-profit organization authorized by SED to provide Integrated Special Class (over 2.5 hours per day) education services to children with disabilities who are 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. Dillon Center also operated other programs, including four general education classrooms and an after-school program. During the fiscal year ended June 30, 2022, Dillon Center served six students with special needs in the SED preschool cost-based program.

New York City Public Schools refers students to Dillon Center based on clinical evaluations and pays for its services using rates established by SED. The rates are based on the financial information that Dillon Center reports to SED on its annual CFRs. For the 3 fiscal years ended June 30, 2022, Dillon Center reported approximately $1.3 million in reimbursable costs for the SED preschool cost-based program.

Key Findings

For the 3 fiscal years ended June 30, 2022, we identified $392,884 in reported costs that did not comply with the requirements in the RCM and the CFR Manual, as follows: 

• $336,879 in personal service costs that did not meet RCM requirements, including $195,898 in compensation costs that were not supported, $137,152 in staffing expenses that were in excess of the approved staffing ratios, and $3,829 in compensation for non‑program-related parking valets.
• $39,169 in unsupported or insufficiently supported other than personal service (OTPS) costs, including $37,035 in groundskeeping/maintenance costs, $1,665 in therapy session costs, $208 in overclaimed utility costs, $199 in gasoline charges, and $62 in petty cash transactions. 
• $16,836 in other OTPS costs that did not meet RCM requirements:
  • $7,268 for overallocated legal and accounting/audit expenses.
  • $4,923 for non-audit services, including financial modeling and debt issuance, provided within 365 days of required audit work.
  • $2,263 for incorrect therapy session billing.
  • $1,794 in non-program-related expenses, including insurance for artwork and liability insurance for St. Joseph’s University, New York students. 
  • $588 in other non-allowable costs, including gifts and 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 Dillon Center’s CFRs and to Dillon Center’s tuition reimbursement rates, as warranted.
• Remind Dillon Center officials of the pertinent SED requirements that relate to the deficiencies we identified.

To Dillon Center:

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