The New York State Education Department audited the Martin C. Barell School located in Levittown, New York. The audit is below, except the numbers listed in Appendix A & B.

The unauthorized expenditures, undocumented absences and erroneous inventory data may be seen as common mistakes made by schools left without expert fiscal knowledge. But then, maybe not. We can all learn from looking at allocations that were not correct, and hope that the State someday either hires someone to audit all schools, or at least establishes a uniform policy for expenditure accountability that is enforced.

AUDIT REPORT




Introduction

Background

The State Education Department (Department) approves private schools to provide educational services to preschool and school-age students with disabilities. Each school is required to report revenue, expenses, and full time equivalent (FTE) attendance. This information is used by the Department to calculate tuition rates. The school district or municipality in which the student resides pays the students tuition at the approved rate and the Department reimburses the school district or municipality for a portion of the tuition.

The Nassau Suffolk Services for the Autistic, Inc. (NSSA) operates The Martin C. Barell School (School). The School, located in Levittown, New York, Nassau County, provides educational services to autistic preschool and school-age children. The School reported total expenses of $1.1 million and served about 24 children in its school programs.

Scope, Objectives and Methodology

Pursuant to Sections 305 and 4410 of the Education Law and Part 200.18 of the Regulations of the Commissioner or Education (Regulations), we audited selected management practices, records, and documentation supporting the Schools Consolidated Fiscal Report (CFR) for the period July 1, 1996 through June 30, 1997. This was a financial related audit and our objectives were to:

· determine the accuracy and reliability of information reported to the Department by the School;

· determine that expenses were properly reported in accordance with applicable laws, regulations and
policies;

· determine the accuracy of the reported FTE attendance used in the calculation of the tuition rate;

· determine that all applicable revenue was offset against reimbursable expenses as required by the
Education Law Section 4401;

· verify that tuition is billed and related revenue is accurately reported for all FTE students; and

· obtain an understanding of the internal control structure as it relates to the CFR.

To accomplish our objectives, we reviewed applicable laws, regulations, policies and procedures; interviewed Department and School management and staff; examined records and supporting documentation; sampled transactions on a non-statistical basis; and reviewed the Schools audited financial statements.

We conducted our audit in accordance with Government Auditing Standards issued by the Comptroller General of the United States. These standards require that we plan and perform the audit to obtain reasonable assurance that the reported expenses, revenue and FTE attendance for the School are accurate. Further, these standards require that we review and report on the internal control structure and compliance with applicable laws, regulations and policies for operations included within the scope of our audit.

An audit includes examining, on a test basis, evidence supporting transactions recorded in the accounting and operational records and applying other audit procedures considered necessary in the circumstances. An audit also includes assessing the estimates, judgments and decisions made by management. We believe that the audit provides a reasonable basis for our findings, conclusions and recommendations.

Comments of School Officials

School officials comments about the findings will be considered in preparing the final report. Their comments are included as Appendix B to the final report.

School officials generally agreed with the recommendations and stated they have already addressed many of the recommendations. However, they disagreed with some of the specific audit adjustments.

Auditors Note

In regard to the audit adjustments, School officials did not provide adequate documentation to show the expenses were reasonable, necessary and directly related to the education program.

Report on Net Reimbursable Expenses

The School reported $1,144,201 in net education related expenses for the fiscal year ending June 30, 1997. The Consolidated Fiscal Reporting and Claiming Manual (CFR Manual) and the Departments Reimbursable Cost Manual (Cost Manual) prescribe the cost reimbursement standards for reporting revenue and reimbursable expenses. Expenses must be necessary, reasonable and directly related to an approved education program for students with disabilities. In addition, the Cost Manual requires that expenses be adequately documented.

The audit found the School claimed certain non-reimbursable expenses, made accounting and reporting errors, did not adequately document all expenses, and used questionable allocation practices. The audit reduced reimbursable expenses by $134,387 for the school-age program and $35,844 for the preschool program. The following sections explain each item of adjustment in detail.

Non-Reimbursable Expenses

The School claimed for reimbursement $105,257 in expenses that are not reimbursable in the tuition rate. The Cost Manual specifies expenses that are reimbursable for schools receiving public funds for educating students with disabilities. The audit determined the School claimed non-reimbursable expenses related to staffing, travel and conferences, fundraising activities, employee bonuses and other items. As a result, program expenses were reduced by $73,586 and agency administration expenses were reduced by $31,671. In addition to these expenses, the audit determined the School claimed reimbursement for severance pay in the subsequent school year (1998-99) in excess of the allowable amount.

Approved Staffing Ratio

The School's staffing exceeded the approved student-staff ratios. The Department sets student-staff ratios for all programs. The cost of any direct care staff in excess of the approved ratios is not reimbursable unless supported by the students individualized education program (IEP) requirements. A school may hire staff in excess of the approved ratios, but the costs are not reimbursable.

The approved staffing ratio for the School is 6:1:3, i.e., 1 teacher and 3 paraprofessionals for every 6 students. During the 1996-1997 school year, there were 22 school-age and 2 preschool students for a total of 24 students. The approved total staffing, therefore, was 4 teachers and 12 paraprofessionals. However, the School had 4 teachers and 14 teacher assistants, or 2 more than approved. As a result, the audit reduced reimbursable expenses by $69,754 for salary and fringe benefits claimed for the two aides. In addition to reporting the expenses for reimbursement in the tuition rate, the School received grant revenue to pay the expenses for the two aides (see the section of the report on Grant Expenses).

Conference and Travel

The School claimed for reimbursement $24,606 in questionable expenses related to conference and travel. In addition, the School did not adequately document some of these expenses. The Cost Manual requires that conference and travel expenses claimed for reimbursement must be directly related to the education program or to administration of the program. The expenses must also be adequately documented.

The School claimed for reimbursement $23,560 in conference expenses and $1,046 in travel expenses that were either questionable or undocumented. Included in the amount are expenses related to a conference sponsored by the School. The audit questions the appropriateness of claiming the conference expenses since the expenses are not directly related to the provision of the education program. In addition, the audit noted the School received $25,275 in conference revenue and reported this amount under fundraising, rather than offsetting the reported conference expenses.

Also included in the conference expenses are numerous charges for the executive director and, in some cases, a board member to travel to various locations throughout the country (Illinois, Ohio, Massachusetts, Michigan, Minnesota and Oregon). However, adequate documentation such as conference brochures and meeting agendas was not available to show the purpose of the travel or how the conferences or travel directly related to the education program. The audit disallowed the $23,560 in conference expenses.

The School also claimed for reimbursement $756 in travel costs for airfare to Boston for the executive director to meet with the past president of the Association of Behavior Analysis to discuss school issues. However, the School did not provide brochures, agenda or other literature that document the purpose of the meeting.

The School also paid $290 for 1/2 the cost of airfare for a former employee to present her dissertation in Norway. The School stated that it paid 1/2 the cost of her airfare because it benefited from the presentation and was identified with her research. However, the School did not provide documentation to show the expense was necessary and directly related to the School.

The audit disallowed the $1,046 in travel expenses for the Boston and the Norway trip.

Fundraising Expenses

The School claimed for reimbursement $5,540 in questionable expenses related to fundraising including $3,000 for a Music of Life video, $1,750 for a retainer fee for a consultant, and $790 in printing expense for a Holiday Appeal. However, costs of organized fundraising (i.e., financial campaigns, endowment drives, or solicitation of gifts and bequests) to raise capital, or to obtain contributions are not reimbursable.

The "Music of Life" is a video depicting the accomplishments of the School and its students. The total cost of the video was $15,000 with $12,000 of the cost allocated to fundraising. The School stated that the remaining $3,000 was allocated to recruitment and advertising because excerpts from the film are used within the School for training purposes. In the absence of verifiable documentation, the audit cannot be assured that the $3,000 was a necessary education expense or that the allocation was reasonable.

The retainer fee was paid to a consultant to develop a short-term plan that identified key steps related to promotion and marketing of the School, fundraising, board development and program planning. Our review of monthly reports showed the majority of the activities related to fundraising.

The Holiday Appeal is a mailing that is sent out to raise funds for the School. It consists of a description of the School, an envelope with the Schools address and a voucher to be completed by the donor.

These expenditures appear to be fundraising in nature and are not reimbursable.

Employee Bonuses

The School claimed for reimbursement $2,000 in holiday bonuses even though the bonuses did not meet the established criteria for reimbursement. The Cost Manual states that bonuses are reimbursable only if they meet certain criteria including the payments are made within the first three-quarters of the school year and are based on merit as measured and supported by employee performance evaluations.

The School gave $100 holiday bonuses on December 20, 1996 to 20 staff members. However, the bonuses were not based on merit as measured and supported by employee performance evaluations. Therefore, the audit reduced reimbursable expenses by $2,000. In addition, the audit noted the expense was classified as "Staff Training" rather than salary expense and applicable payroll taxes were not applied.

Other Questionable Expenses

The School claimed other expenses totaling $3,357 that are also not reimbursable.

·$1,542 for food and beverages including $1,442 for a holiday party at a comedy club and $100 for food and beverages at a clam bar.

·$1,147 for a liability insurance policy that lists the executive director as a sole proprietor.

·$432 for costs for food and beverages served to parents at an orientation night.

·$236 for personal expenses including $172 for flowers and $64 for food sent as a gift.

Severance Pay

The cost of severance pay is reimbursable provided that it does not exceed two weeks salary for a full-time employee. A School employee was dismissed and received a severance package totaling $19,615 for 12 weeks of paid salary during the 1998-99 school year. In effect, the School incurred $16,346 (10 of the 12 weeks) in non-reimbursable expenses. Although there is no effect on the audit year, the Rate Setting Unit (RSU) will use the information to adjust allowable costs for the 1998-99 school year.

Accounting and Reporting Errors

The School did not properly classify and report certain expenses and revenue that resulted in net reimbursable expenses being over stated by $23,519 and grant expenses being understated by $10,192. The Cost Manual and the CFR Manual require that schools maintain accounts in accordance with generally accepted accounting principles and use the accrual basis of accounting.

The School did not properly classify and report certain expenses and revenue including unpaid accrued sick and personal days, prior period expenses, and grants.

Accrued Sick and Personal Days

The School inappropriately claimed for reimbursement $23,519 in unpaid accrued sick and personal days. The Cost Manual states that vacation and sick leave are reimbursable in the year actually paid and reported as salary. As such, accrued vacation and sick leave expenses are not reimbursable until actually paid.

The School included $23,519 in accrued sick and personal days as part of the reported salary expense. However, the accrued sick and personal days will only be paid upon termination or resignation or when the leave is actually used. Therefore, the expenses are not reimbursable and should not be reported as part of the School's salary expense. The audit reduced reimbursable expenses by $23,519.

Prior Period Expenses

The School did not report $9,030 in expenses in the year in which the expenses were incurred. Accounting principles require that expenses be reported in the period in which the expenses were incurred.

The School incurred $8,130 in pension expense and $900 in rent expense in 1995-1996 and reported the expenses for reimbursement in 1996-1997. As a result, expenses were understated for 1995-1996 and overstated for 1996-1997. Since the expenses were not reported twice, there will be no adjustment to reported expenses. Nevertheless, the School should report expenses in the proper period.

Grant Expenses

The School did not account for grant revenue and expenses in a separate cost center. The Cost Manual requires a separate cost center for each approved program and for each government grant. In addition, expenses will not be reimbursed more than once with public funds.

The School received $11,008 from two IDEA grants to partially fund the salary of an aide ($10,192) and some administrative expenses ($816). However, the revenue and expenses for the grant were not reported in a separate cost center, as required. In addition, the salary expense for the aide was claimed for reimbursement twice; once on the CFR (tuition rate) and once on the grant cost report.

The School also received a $35,000 grant from a private foundation to fund the salary of one of its aides. The revenue and expenses for this grant were also not accounted for in a separate cost center. Rather, the revenue was reported under other programs (fundraising) and the expense was charged to school programs and claimed for reimbursement.

The audit made the adjustment related to grants in the section of the report on approved staffing ratio (page 3).

Undocumented Expenses

The School did not maintain adequate documentation to support $14,565 in expenses. The Cost Manual specifies the documentation schools must maintain to support expenses. For example, it requires schools to maintain invoices and cancelled checks for all purchases. The audit reviewed several categories of expenses and found undocumented or inadequately documented expenses for consultant services and startup costs.

Consultant Services

The School did not maintain adequate documentation to support services costing $7,500 that were provided by consultants from an educational institute (Institute). The Cost Manual requires schools to maintain adequate documentation to support consultant services including the consultants résumé, a detailed list of the nature of the services provided, the number of days worked, dates services were provided, the charge per day and the product or outcome of the consultation.

The School had a written contract for $7,500 specifying the Institute would provide the School with a curriculum, staff training, and evaluation and consultation services. However, the School did not maintain adequate documentation to show the dates of service, School participants, or beneficiaries of the services. The Institute stated They have not had a need to maintain formal records regarding our interactions with the School& [It] has recently begun to track on-site visits but do not have this information readily available for previous years.

In response to our preliminary audit findings, the School provided the audit with a detailed report prepared by the Institutes executive director regarding a November 22, 1996 visit to the School. The report lists student names, teachers worked with, goals worked on and the time and area of the school where the activity took place. The report also provided the names of teachers/aides selected to attend training sessions at the Institute and the development of a program to train senior teachers to train the other staff members.

A detailed report on one visit to the School does not constitute adequate documentation to support the $7,500 expense. The documentation should include the dates of service, School participants or beneficiaries of the services and a description of services provided. Without the required documentation, the audit cannot be assured the services were provided and the fee was commensurate for the services provided. The $7,500 cost of the Institute contract is disallowed.

Amortized Startup Expenses

The School did not maintain adequate documentation to support $7,065 in amortized startup expenses. The Cost Manual requires schools to maintain documentation to support payments that are amortized as startup expenses. Without adequate documentation the expenses are not reimbursable.

The School, which opened on January 4, 1993, is the education component of NSSA. NSSA was in operation prior to 1993 and continues to operate an OMRDD funded respite program for the autistic and their families. The School classified $52,051 in costs incurred prior to the opening of the school as startup costs and claimed for reimbursement in the tuition rate the amortized cost over five years. The amounts that were not adequately documented include payments to the executive director and the program supervisor/principal.

The School did not have time logs or adequate documentation to support charging 1/3 of the executive directors salary as startup costs. In addition, the School did not have documentation to show that OMRDD funded only 2/3 of executive directors salary. Without adequate documentation the audit disallowed $3,915 which is the amount of the executive directors salary that was amortized during the audit period.

In addition, the School did not have time logs or adequate documentation to support amounts for a consultants work in planning and developing the School. The individual worked as a consultant for nine months and then was hired as an employee in the title program supervisor/principal. Sufficient documentation describing the consultants activities, hours worked and amount earned was provided for the first four months. Documentation for the remainder of the consultants work contains just the month and the amount paid. No description of the work done was provided. The audit disallowed $625, the undocumented portion of the consultants payment that was amortized during the audit period.

Adequate documentation was not provided to describe the program supervisor/principals activities during the period while she was on the payroll and earned an additional $10,338. The audit disallowed $2,068, the portion of the program supervisor/principal's salary that was amortized during the audit period.

The audit also adjusted reimbursable expenses by an additional $457 for the FICA tax for the disallowed salary for the executive director and the program supervisor/principal.

Questionable Allocations

The School did not allocate or properly document certain expenses which resulted in program expenses being overstated by $53,113 and agency administration expenses being understated by $57,484. The audit considered all adjustments and reallocated agency administration using the ratio value method which resulted in a $4,672 increase in the amount of agency administration costs reimbursed in the tuition rate. The Cost Manual requires all schools that operate more than one program to allocate expenses to each program. Any expense that cannot be charged directly to a specific program must be allocated across all programs that benefit from the expense. Schools must use allocation methods that are fair and reasonable and which can be documented for review. The School needs to improve the allocation of cost for its programs, direct and non-direct care positions, rent and agency administration.

Program Costs

The School did not allocate school-age and preschool program expenses on a fair and appropriate basis. The School allocated expenses between the school-age and preschool programs based on the ratio value of revenue, i.e., expenses are allocated to each program in the same proportion as the revenue received for each program. This method may not be reasonable since revenue is based in part on prior year expenses and the revenue may not be proportional to the expenses.

In the absence of documentation to support actual hours worked or cost for each program, the audit allocated program expenses based on student FTEs. The audit determined that the school-age program costs were understated by $17,293 (2 percent) and preschool program costs were overstated by $17,293.

Direct Care Salaries

The School did not maintain adequate documentation to support the allocation of two managers' salaries between direct and non-direct care positions. The Cost Manual limits the non-direct care (administration) costs reimbursed through the tuition rate to 30 percent of the total reimbursable costs after adjustments. As such, costs must be accurately classified and documented as direct and non-direct expenses.

The School allocated the salaries of two managers between direct and non-direct care positions as follows:

Position Non-Direct Direct Total

Executive Director/ $92,818 $39,779 $132,597
Disability Specialist

Principal/Supervisor $28,391 $42,587 $70,978

However, the School did not maintain payroll records or time studies to document time worked in each position. Rather the School used an estimate of time devoted to each position to allocate the costs. Without adequate documentation the audit reclassified $58,730 in direct care salary expense to non-direct care titles. The adjustment takes into account that the principal filled in as a supervising teacher for four months.

Rent Expense Allocation Not Accurate

The School did not allocate rent expense on a fair and appropriate basis. The School allocated its rent expense based on estimated usage and did not retain any documentation to show how the amounts were arrived at. Using square footage utilized by each program, the audit determined that the Schools allocation percentages were not accurate. This resulted in the school programs being undercharged $5,617, other programs being overcharged $4,371 and agency administration being overcharged $1,246.

Agency Administration Costs

The School did not allocate agency administration costs to its fundraising cost center and also did not report $30,000 in fundraising expenses. The Cost Manual states that agency administration costs should be allocated to all programs operated by the provider based on the ratio value method of allocation. The CFR Manual states that fundraising costs must not be netted against fundraising revenues on the cost report.

The Schools CFR accounted for a total of $38,985 in fundraising expenses in Other Programs. The audit determined that the School incurred an additional $30,000 in fundraising expenses while hosting a sports auction. Contrary to the CFR Manual, the School netted the fundraising costs against fundraising revenues on the CFR. Therefore, the audit increased the reported fundraising expenses to $30,000.

Also, the School did not allocate agency administration costs to the fundraising cost center. Using the revised total fundraising expenses, the audit reallocated agency administration costs to all cost centers. The reallocation, which takes into account all adjustments, resulted in a $4,672 increase in the amount of agency administration costs reimbursed in the tuition rate.

Recommendations

1. Establish procedures to ensure that only allowable expenses are claimed for reimbursement.

2. Establish procedures to ensure that only the cost of approved staffing ratios is claimed for
reimbursement.

3. Claim for reimbursement conference and travel expenses that are directly related to the education
program and are adequately documented.

4. Establish procedures to offset revenue against related expenses.

5. Do not claim for reimbursement fundraising expenses.

6. Ensure that bonus compensation is paid in accordance with the Cost Manual.

7. Improve procedures to ensure that expenses are reported in the period in which the expenses were
incurred.

8. Establish procedures to ensure that unpaid vacation and sick leave are not claimed for
reimbursement.

9. Ensure that the revenue and expenses for grants are accounted for in a separate cost center.

10. Ensure that adequate documentation is retained for all expenses claimed.

11. Improve procedures to ensure that allocation methods are fair and reasonable and supported by
documentation.

12. Maintain adequate records to enable the proper allocation of salary expenses.

13. Improve procedures to ensure that expenses are properly classified.

14. Allocate rent on a fair and appropriate basis.

15. Ensure fundraising expenses are reported in a separate cost center and are not netted against
revenue.

Comments of School Officials

School officials agreed with these recommendations.

Report on FTE Attendance

The audit reviewed the reported FTE attendance and determined the School accurately calculated FTE attendance. However, the School did not maintain adequate documentation to support student absences.

Undocumented Student Absences

The Cost Manual provides that attendance records must be maintained for all students indicating whether each student is present or absent and must be summarized monthly. In addition, schools must document legal and illegal absences and maintain the documentation for at least seven years.

The School did not require nor retain adequate documentation to support student absences. Two students were absent the entire first week of the six week summer session. The School recorded the absence, but did not note whether it was a legal or illegal absence or obtain a note from the parent to show the reason for the absence. Lacking adequate documentation, the audit could not determine if the missing week was due to legal absences. As a result, the audit reduced FTE attendance by 0.334.

In responding to the finding, the School indicated that it would now maintain a student sick call log, which should address the documentation requirement.

Recommendation

16. Maintain adequate documentation to support student absences.

Comments of School Officials

School officials agreed with this recommendation.

Report on Internal Controls and Compliance with Laws, Regulations and Policies

The Schools Board and management are responsible for ensuring compliance with applicable laws, regulations and policies. In addition, management is responsible for establishing and maintaining systems of internal controls. The objectives of these systems are to provide reasonable assurance that assets are safeguarded against loss from unauthorized use or disposition and that transactions are properly authorized and recorded to permit the preparation of financial reports in accordance with generally accepted accounting principles, applicable laws, regulations and policies.

The audit determined the School implemented many of the necessary internal controls and complied, in all material respects, with applicable laws, regulations and policies. However, as reported in a previous section, improvements are needed in accounting and reporting revenue and expenses. In addition, the School could also improve certain other areas including employee time sheets, inventory records, financial statement disclosures, and staff FTE.

Inadequate Employee Time Sheets

The School did not maintain time sheets for its administrators and office staff and did not require supervisory approval of the time sheets maintained for teachers and aides. The Cost Manual states that payroll must be supported by employee time records that are signed by the employee and the supervisor.

Teachers and aides record their daily attendance on biweekly time sheets that are submitted to the business office at the end of the pay period. In addition, the School's secretary tracks teacher and aide attendance on a monthly attendance grid. The time sheets were signed by the employees, but the line designated for an Approved Supervisors Signature was left blank on all the time sheets sampled by the audit.

Administrators and office staff were not required to maintain or submit time sheets and their attendance was not recorded on the attendance grid. The School did not adhere to the Cost Manual requirements that payroll be supported by employee time records that are signed by the employee and a supervisor and must be completed at least monthly. As a result, there is less assurance that all staff actually worked and accurately accounted for their time.

Subsequent to the completion of fieldwork, the School instituted a new policy that requires employees to sign their time sheets and obtain written supervisory approval of the time sheets. Administrators and office staff complete time sheets that are reviewed by the executive director. In addition, the attendance grid has been revised to include administrators and office staff.

Incomplete Inventory Records

The School's inventory records were not complete. The Cost Manual requires schools to maintain inventory records that include a description of the item, the make, model, serial number, cost, date of purchase, location, etc. In addition, schools should tag each item with an ownership decal.

The School's inventory records included a description of the asset, the date acquired, and the purchase price, but they did not include other information required by the Cost Manual including the model and serial number. Without this information, it is not possible to verify the model and serial numbers for the assets on the inventory schedule to the assets on hand. In addition, the assets were not labeled to indicate they were the property of the School. As a result, there is increased risk of misused, lost or stolen assets.

Inadequate Financial Statements Disclosure

The School did not adequately disclose the consulting services provided by its independent CPA. The Regulations require that a licensed or certified public accountant certify the financial statements and disclose any other non-audit services such as management consulting, automation consulting or bookkeeping services.

The CPA who certifies the programs financial statements also performs a management consulting function. However, the School did not adhere to the Regulations mandating that this practice be disclosed in the explanatory notes of the financial statements.

Misreported Staff FTE

The School did not accurately calculate or report the number of FTE staff. The CFR Manual specifies that hours paid is the basis for calculating the number of FTE staff. A teacher who works 37.5 hours per week for 46 weeks (the ten-month and the summer programs) should be reported as a 0.88 FTE (46/52).

The School reported full-time teachers and aides at 1.00 FTE each and not at 0.88 FTE as required by the CFR Manual. As a result, reported FTE teachers and aides were overstated by 0.48 and 2.49 FTEs respectively. The overstatement in FTEs makes any comparison among schools difficult.

Recommendations

17. Improve procedures to ensure that employee time sheets adhere to the Cost Manuals requirements.

18. Ensure inventory records are complete and include a description of the item, the make, model, serial
number, cost, date of purchase, location, etc.

19. Tag each inventory item with an ownership decal.

20. Disclose any services provided by the independent CPA in the explanatory notes to the audited
financial statements.

21. Develop and implement procedures to ensure that staff FTE is calculated and reported in accordance
with the CFR Manual.

Comments of School Officials

School officials agreed with these recommendations.

The Martin C. Barell School Special Education Program
Contributors to the Report:

· Michael Abbott, CPA--Audit Manager

· Neil A. Smith, CPA  Auditor- in-Charge


NEW YORK STATE EDUCATION DEPARTMENT
OFFICE OF AUDIT SERVICES

AUDIT REVIEW PROCEEDINGS

Requests for Audit Review

It is the policy of the State Education Department to consider for review matters of significant disagreement which result from a final audit report issued by the Office of Audit Services.

An organization requesting an audit review must make a written application to the Associate Commissioner for Planning and Policy Development, New York State Education Department, Room 128 EB, Albany, New York 12234 within 30 days of receiving the final audit report. An organization may request a review of an audit whenever the final audit report directs the recovery of funds from the organization and one or more of the following conditions is met:

·Recovery of funds would cause immediate and severe financial hardship to the organization, thereby affecting the well-being of program participants;

·The organizations violation was caused by erroneous written guidance from the State Education Department;

·The State Education Department failed to provide timely guidance on the matter or condition when the organization had previously requested such guidance in writing; and/or

·The report contains errors of fact or misinterpretation of laws, statutes, policies or guidelines.

Organizations requesting an audit review must submit a written application describing how one or more of the above conditions have been met. This application must include all evidence and information the organization believes are pertinent to support its position.

An audit report which recommends improvements in internal controls of administrative or financial systems, but has no material financial impact on the organization, will not be considered for an audit review proceeding.

Audit Report

Nassau Suffolk Services for the Autistic, Inc.
The Martin C. Barell School

For the Period: July 1, 1996 through June 30, 1997
SE-1298-1
June 30, 2002

The University of the State of New York
THE STATE EDUCATION DEPARTMENT
Office of Audit Services
Albany, New York 12234

THE STATE EDUCATION DEPARTMENT / THE UNIVERSITY OF THE STATE OF NEW YORK / ALBANY, NY 12234

Daniel Tworek
Director
Office of Audit Services
Tel. (518) 473-4516
Fax (518) 473-0259
E-mail: dtworek@mail.nysed.gov

August 1, 2002

Ms. Kathleen Mannion
Board President
Nassau Suffolk Services for the Autistic, Inc.
The Martin C. Barell School
11 Laurel Lane
Levittown, New York 11756

Dear Ms. Mannion:

The following is the final audit report (SE-1298-1) of the Nassau Suffolk Services for the Autistic, Inc./The Martin C. Barell School for the period July 1, 1996 through June 30, 1997. The audit was conducted pursuant to Section 305 of the Education Law in pursuit of Goal #5 of the Board of Regents/State Education Department Strategic Plan: Resources under our care will be used or maintained in the public interest.

It is the policy of the State Education Department to consider for review matters of significant disagreement which result from the issuance of a final audit report. Appendix C describes the process to be followed in the event of such disagreement.

Ninety days from the issuance of this report, District officials will be asked to submit a report on actions taken as a result of this audit. This required report will be in the format of a recommendation implementation plan and it must specifically address what actions have been taken on each audit recommendation.

I appreciate the cooperation and courtesies extended to the staff during the audit.

Sincerely,

Daniel Tworek
Enclosure

cc: R. Calhoun, R. Cate, L. Gloeckler, T. Hamel, R. Levay, T. Sheldon, B. Mason (OSC), C. Foster (DOB), H. Sovronsky (Nassau County), S. Ejaz (Nassau County), P. Gerhardt, Executive Director

Executive Summary

Background and Scope of the Audit

The Nassau Suffolk Services for the Autistic, Inc. operates the Martin C. Barell School (School). The School, located in Levittown, New York, Nassau County, is a private, non-profit school for children with autism. The School served 24 special education students with its staff of 27 and spent over $1.1 million during the 1996-97 school year. The audit examined selected management practices, records, and documentation for the period July 1, 1996 through June 30, 1997. This was a financial related audit and our primary objective was to assess the accuracy and reliability of information reported to the Department including expenses, revenue and FTE students.

Audit Results

The audit decreased net reimbursable expenses for the special education programs by $159,263 as shown on Exhibit A. A portion of these expenses was reallocated to other programs. A summary of the audit results follows. A more detailed discussion is presented in the main text of the report on the pages referenced.

·The School claimed certain non-reimbursable expenses including two aides, conference and travel expenses, fundraising expenses, employee bonuses, and other expenses (pages 4-7).

·The School did not properly classify and report certain expenses and revenue including unpaid accrued sick and personal days, prior period expenses, and grant revenue and expenses (pages 8-9).

·Certain expenses were not adequately documented including consultant services and amortized startup costs (pages 9-11).

·The School did not allocate or properly document certain expenses including program cost, direct care salaries, rent and agency administration costs (pages 11-14).

·The School accurately calculated FTE attendance, but did not adequately document student absences (page 16).

·The School implemented many of the necessary internal controls and complied, in all material respects, with applicable laws, regulations and policies. However, improvements are needed in accounting and reporting revenue and expenses. In addition, the School could also improve certain other areas including employee time sheets, inventory records, financial statement disclosures, and staff FTE (pages 17-19).

Comments of School Officials

School officials comments about the findings were considered in preparing this report. Their comments are included as Appendix B to the final report. School officials generally agreed with the recommendations and stated they have already addressed many of the recommendations. However, they disagreed with some of the specific audit adjustments.

Auditors Note

In regard to the audit adjustments, School officials did not provide adequate documentation to show the expenses were reasonable, necessary and directly related to the education program.