Objective

To determine whether the costs submitted by NYSARC, Inc. Columbia County Chapter d.b.a. The Starting Place (TSP) 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 TSP’s CFRs 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

TSP is a not-for-profit special education provider located in Hudson that serves students from Columbia, Dutchess, Greene, and Ulster counties. TSP is authorized by SED to provide full-day Preschool Special Class and full-day Preschool Integrated Special Class to children with disabilities who are between the ages of 3 and 4 years. For the purposes of this report, these programs are referred to as the SED preschool cost-based programs. TSP also operated one other SED-approved preschool special education program: 1:1 Aides. However, payments for services under this program are based on fixed fees, as opposed to the cost-based rates established through financial information reported on CFRs. During the 2021–22 school year, TSP served approximately 53 children in the SED preschool cost-based programs.

The counties pay tuition to TSP 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 TSP reports to SED on its annual CFRs. For the 3 fiscal years ended June 30, 2022, TSP reported approximately $3.8 million in reimbursable costs for the SED preschool cost-based programs.

Key Findings

For the 3 fiscal years ended June 30, 2022, we identified $271,842 in reported costs that did not comply with the requirements in the RCM and CFR Manual, as follows:

• $231,077 in staffing expenses in excess of SED’s approved staffing ratios.
• $35,198 in bonus payment compensation costs that were not in compliance with the RCM’s guidelines.
• $3,136 in unsupported, insufficiently documented, and non-allowable personal service costs.
• $1,831 in non-allowable costs, including rent expenses, food for holiday parties, employee gifts, and related-party expenses.
• $463 in excess executive compensation.
• $137 in unsupported general ledger entries that were reported on the CFRs, including $72 in other than personal service costs and $65 in personal service costs.

Key Recommendations

To SED:

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

To TSP:

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