NY State Comptroller DiNapoli's Audit Of Roosevelt Island Child School Finds Almost $1 Million Of Ineligible Reimbursable Claims

Image From NY State Comptroller December 2014 Child School Audit Cover Page

The Roosevelt Island Child School/Legacy High School (Child School):

...is an independent K-12 school that educates students with learning disabilities. Students are given appropriate accommodations so that they receive full access to a general education curriculum and the school currently boasts a 94 percent graduation rate.

The Child School has had some prior financial and managerial difficulties.

 Image of Child School From Their Web Site

Reported February 7,2013:

Reported last Friday of job layoffs at Roosevelt Island's Child School/Legacy High School ("Child School") Just learned today that Sal Ferrera resigned yesterday as Executive Director of the Child School. Below is letter from the Child School/Legacy High School Board of Directors announcing Mr. Ferrera's resignation:...

and:

... According to RIOC Press Spokesperson:

Please be advised that Dr. Salvatore Ferrera has resigned from the Roosevelt Island Operating Corporation Board of Directors effective immediately. We thank Dr. Ferrera for his service, including his work as a Board member and as Executive Director of The Child School/Legacy High School. Dr. Ferrera has been, and will continue to be, a valued member of the Roosevelt Island community. We wish him well....

and:

... Child School gave back its lease for new 504 Main Street Arts Center/Auditorium to Master Leaseholder Hudson Related....

On December 31, 2014, NY State Comptroller Thomas DiNapoli issued this audit (Audit) of the Child School covering fiscal years 2009 - 20111. According to the Audit (Executive Summary Page 1):

Executive Summary

Purpose

To determine whether the expenses reported on the Consolidated Fiscal Reports (CFRs) of the Child School (School) were calculated properly, documented adequately, and allowable pursuant to the State Education Department’s (SED) Reimbursable Cost Manual (Manual). Our audit covered the three fiscal years ended June 30, 2011.

Background

The Child School provides special education services to New York City children between 6 and 21 years of age. The School is certified to provide special education services for up to 239 children. Pursuant to the State Education Law, special education providers, such as the School, are reimbursed for their services using tuition rates established by SED based on the financial information the School reported on its annual CFRs. For the three fiscal years ended June 30, 2011, the School claimed about $26 million in reimbursable expenses for the special education programs we audited.

Key Findings

In total, we identified $992,765 in reported personal service and other than personal service (OTPS) costs that were ineligible for reimbursement.

The ineligible personal service costs ($435,471) included overstated compensation, ineligible bonuses, non-program-related costs, and other unsupported costs. Among these ineligible costs were: $114,338 in excessive salary expenses for 70 employees; $168,579 in excessive pension costs; and $41,523 in bonuses that were not supported by the required formal performance evaluations.

The ineligible OTPS costs ($557,294) were either unsupported, unnecessary, unreasonable, or not program related. Among the ineligible OTPS costs were: $180,073 for a less-than-arm’s-length contract for building maintenance and cleaning services; $139,647 for non-program- related and/or inadequately documented “Other” expenses; and $72,856 for costs (including depreciation) for the vehicles purchased and leased for the School’s Executive Directors....

Audit Page 5:

... During the audit period, two Executive Directors (including the School’s founder) resigned their positions at the School. The first Executive Director (and founder) held this position until June 30,2010 and subsequently served the School as a consultant. The School’s second Executive Director was appointed in July 2010 and held that position until resigning in February 2013. For the 2010-11 fiscal year, the School generated a $1.5 million operating deficit...

Audit Page 7:

... For the three fiscal years we audited, the School claimed $527,526 under the “Other” expense category. We recommend disallowance of $139,647 of these expenses because they were ineligible or non-program related or lacked adequate support. The disallowed costs include $68,891 in food, entertainment, and other ineligible expenses. Among the ineligible items, the School claimed:

• $29,605 for food and entertainment, including a holiday party and a catered event for a parent meeting, $1,014 paid for invitations to a founders award benefit, $750 for a scholarship dinner, and $266 for Broadway tickets;
• $7,697 for parking violations;
• $3,464 for expenses normally paid by parents, including $1,864 for ice skating and $1,600
• for sporting events. The School claimed the $1,600 in question even though documentation
• showed that students’ parents already paid for these expenses;
• $4,600 for gifts; and
• $726 for a bronze statue....

Image From Audit Page 13

The Child School responded in a December 7, 2014 letter with these comments that are included in the Audit (Pages 18-23)

Child School Comment to Audit

Click here for the full Audit including responses from NY State Education Department and the Child School.

I asked the Child School for comment yesterday and will update post when a response is received.

UPDATE 2:10 PM - The Child School sent this letter to parents and stakeholders of the Child School in response to the Audit:

Child School Reply to Audit

Click here to view letter.