State Education Department
Important Steps, Inc.
Compliance with the
Reimbursable Cost Manual
Issued: June 22, 2012
Link to full audit report 2010-S-32
Link to the 90-day response
Purpose
To determine whether the costs reported by Important Steps, Inc. (Important Steps) on the
Consolidated Fiscal Report (CFR) were properly calculated, adequately documented, and allowable
under the Reimbursable Cost Manual (Manual). The audit covers the fiscal year ended June 30,
2008.
Background
Important Steps, Inc. (Important Steps), located in the Bronx, provides special education itinerant
teacher (SEIT) and related services to about 276 children ages three through five years. The
New York City Department of Education (DoE) pays Important Steps using reimbursement rates
established by the State Education Department (SED). The rates are based on claimed expenses
that Important Steps submits in its annual consolidated fiscal reports (CFR). During fiscal year
2007-08, the SEIT program at Important Steps had 69 employees and received $5.7 million in
State support.
Key Findings
We identified $244,874 in claimed costs (See Exhibit A) that we recommend be disallowed. These
costs were either unnecessary, unreasonable, unallowable, or undocumented, and some were
incurred for the personal benefit of officials at Important Steps, as follows:
- $65,541 in workers compensation payments on behalf of independent contractors and an additional $91,330 on behalf of certain employees who were paid for work they performed as independent contractors.
- $38,827 in corporate income tax expenses that were charged to the SEIT program.
- $19,050 in vehicle-related costs. Important Steps officials did not maintain usage logs to document the way these vehicles were used, as required.
- $12,002 in depreciation expense in connection with renovations and major repairs made to the Important Steps office. These renovations and repairs had not been pre-approved by SED, as required. An additional $3,855 in office renovations had not been competitively bid, as required.
- $11,107 in purchases for which there was no supporting documentation.
- $3,162 was used to purchase items that were installed at the personal residence of Important Steps' Executive Director.
Key Recommendations
- SED should review the exceptions identified by our audit and determine necessary adjustments to Important Steps' tuition reimbursement rates.
- Important Steps should ensure that the reporting of reimbursable expenses complies with SED requirements.
Other Related Audits/Reports of Interest
State Education Department: Integrated Treatment Services: Compliance with the Reimbursable Cost Manual Report 2009-S-37
State Education Department: Henry Viscardi School: Compliance with the Reimbursable Cost Manual Report 2009-S-70
State Government Accountability Contact Information:
Audit Director: Frank Patone
Phone:(212) 417-5200; Email: StateGovernmentAccountability@osc.state.ny.us
Address: Office of the State Comptroller; Division of State Government Accountability; 110 State Street, 11th Floor; Albany, NY 12236
