Objective

To determine whether the costs reported by The Guild for Exceptional Children, Inc. (GEC) 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 GEC’s CFR 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

GEC is a New York City-based not-for-profit organization authorized by SED to provide Special Class (over 2.5 hours per day) and 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, these programs are referred to as the SED preschool cost-based programs. GEC operated other SED-approved preschool special education programs, including 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. GEC also operated other programs, such as New York State Office for People With Developmental Disabilities (OPWDD) residential services and day habilitation programs. During the fiscal year ended June 30, 2021, GEC served approximately 227 students in the SED preschool cost-based programs.

New York City Public Schools refers students to GEC based on clinical evaluations and pays for its services using rates established by SED. The rates are based on the financial information GEC reports to SED on its annual CFRs. For the 3 fiscal years ended June 30, 2021, GEC reported approximately $17.2 million in reimbursable costs for the SED preschool cost-based programs.

Key Findings

For the 3 fiscal years ended June 30, 2021, we identified $258,712 in reported costs that did not comply with the requirements in the RCM and the CFR Manual, as follows:

• $120,404 in unsupported or insufficiently documented other than personal service costs.
• $43,255 in overallocated/non-program-related compensation costs.
• $35,077 in staffing expenses in excess of SED’s approved staffing ratios.
• $32,577 in ineligible/non-program-related other than personal service costs.
• $27,399 in unsupported compensation costs.

Key Recommendations

To SED:

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

To GEC:

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