Objective

To determine whether the costs reported by Franziska Racker Centers, Inc. dba Racker (Racker) on its Consolidated Fiscal Report (CFR) were properly calculated, adequately documented, and allowable under the State Education Department’s (SED) guidelines, including the Reimbursable Cost Manual (RCM). The audit covered expenses reported on Racker’s 2017 and 2018 CFRs for the fiscal year ended June 2018.

About the Program

Racker is an SED-approved, non-profit special education provider located in Tompkins County, serving students from nine counties in Central New York. Among other programs, Racker provides preschool special education services to children with disabilities who are 3 to 5 years of age. Racker is reimbursed for these services through rates set by SED. The reimbursement rates are based on financial information, including costs, that Racker reports to SED on its annual CFR. To be eligible for reimbursement, reported costs must comply with RCM requirements. For the fiscal year ended June 30, 2018, Racker reported approximately $4.36 million in reimbursable costs on its CFR for the Preschool Integrated Special Class – over 2.5 hours per day (Program) that it operated.

Key Findings

For the fiscal year ended June 30, 2018, we identified $199,372 in ineligible costs reported by Racker on its CFRs for the Program. The ineligible costs included:

• $94,258 in personal service costs, consisting of $69,538 in payments with inadequate time records, $20,977 in costs that were not appropriately allocated to the Program, and $3,743 in unallowable extra compensation payments.
• $105,114 in other than personal service costs, consisting of $87,304 in less-than-arm’s-length lease transactions, $7,035 in ineligible costs, $7,055 in vehicle costs, $2,813 in unsupported purchases, and $907 in staff travel.

Key Recommendations

To SED:

• Review the disallowances identified by our audit and, if warranted, make the necessary adjustments to the costs reported on Racker’s CFR and to Racker’s tuition reimbursement rates.
• Make necessary changes to ensure proper calculation of tuition rates and recover overpayments.
• Remind Racker officials of the pertinent SED requirements that relate to the deficiencies we identified.

To Racker:

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