E&D Children Center, Inc. – Compliance With the Reimbursable Cost Manual

Issued Date
November 16, 2021
State Education Department (Preschool Special Education Audit Initiative)


To determine whether the costs reported by E&D Children Center, Inc. (E&D) 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 E&D’s CFR for the fiscal year ended June 30, 2015 and certain expenses claimed on its CFRs for the 2 fiscal years ended June 30, 2014.

About the Program

E&D is a New York City-based proprietary organization approved by SED to provide preschool Special Education Itinerant Teacher (SEIT) services to children with disabilities who are between the ages of 3 and 5 years. During the 2014-15 school year, E&D served approximately 275 students with disabilities.

The New York City Department of Education (DOE) refers students to E&D and pays for its services using rates established by SED. The rates are based on the financial information E&D reports to SED on its annual CFRs. For the 3 fiscal years ended June 30, 2015, E&D reported approximately $11.8 million in reimbursable costs for the SEIT preschool cost-based program.

Key Findings

For the 3 fiscal years ended June 30, 2015, we identified $711,676 in reported costs that did not comply with the requirements in the RCM and the CFR Manual, as follows:

  • $300,142 in independent contractor and consultant costs that did not comply with RCM requirements, including $133,612 in legal and accounting fees, $108,000 in contracted software maintenance, $41,530 in contracted computer repairs, and $17,000 in CFR/RCM consulting fees. These costs were not supported by detailed invoices, as required by the RCM.
  • $260,173 in non-mandated fringe benefits expenses (e.g., pension, health insurance) that were not proportionately similar between classes or groups of E&D employees.
  • $82,648 in unallowable personal service expenses, including $82,273 in unsupported year-end adjusting entries and $375 in personal parking expenses.
  • $34,859 in other than personal service (OTPS) expenses that were unsupported and/or insufficiently documented.
  • $20,442 in depreciation costs that were funded by another government grant.
  • $13,412 in unallowable OTPS costs, including $5,805 in staff commuting, $3,186 in food for staff, $2,400 in costs reported in the incorrect CFR reporting period, $1,621 in miscellaneous gifts to staff, and $400 paid to a charitable organization.

Key Recommendations


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

To E&D:

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

Kenrick Sifontes

State Government Accountability Contact Information:
Audit Director:Kenrick Sifontes
Phone: (212) 417-5200; Email: [email protected]
Address: Office of the State Comptroller; Division of State Government Accountability; 110 State Street, 11th Floor; Albany, NY 12236