Last week, the OSC issued its 2017 annual report on its preschool special education audit initiative. During 2017, the OSC completed 23 audits; 7 on LI, 8 in NY City and its surrounding Boroughs; 2 in Westchester; and 6 across the rest of the State. According to the report, the 23 audits netted $12,526,844 of disallowances on $454,123,716 of costs, for a total disallowance of 2.76% of costs claimed, the lowest level since the OSC started its audits. While the report states that the total disallowances in dollars across many of the categories of disallowances were up, the disallowances as a percentage of costs reviewed was slightly down, with last year’s disallowance percentage at 2.91%. To date, the OSC has completed 112 audits.
The OSC’s annual report references audits performed by the NYCDOE, and Monroe, Onondaga, and Suffolk counties. To date, these jurisdictions have completed 33 audits. It is not clear if the OSC will be accepting these audits in lieu of doing audits of their own.
The most significant findings during 2017 are comparable to the 2016 findings:
- Unsupported/ineligible expenses – 83% of programs audited
- Payroll expenses – other programs – 65% of programs audited
- Unsupported/ineligible consultant expenses – 52% of programs audited
- OTPS – Other programs – 52% of programs audited
- Penalties, interest, fines, fees – 43% of programs audited
- Unsupported/ineligible payroll expenses – 39% of programs audited
- Unsupported bonuses – 39% of programs audited
Consistent with what we’ve seen, the biggest increase is in the area of consultant expenses, which only had a 27% findings rate during fiscal 2016.
Of the 23 audits performed during 2017, 10 were 1 year audits, 4 were 2 year audits, and 9 were 3 year audits. During 2017, the LI audits were performed by upstate audit teams. As a result, 15 audits were done by upstate teams (60% were 1 year audits, 13% were 2 year audits, and 27% were 3 year audits). As for the 8 audits conducted by the NY City based teams, 12.5% were 1 year, 25% were 2 year, and 62.5% were 3 years. This is consistent with prior years, where NY City based audit teams primarily perform 3 year audits.
Two of the agencies reported had findings in excess of 7% of expenses reviewed, with another two over 4%. All of the other 19 agencies were all under 4%.
Kenneth R. Cerini, CPA, CFP, FABFA
Ken is the Managing Partner of Cerini & Associates, LLP and is the executive responsible for the administration of our not-for-profit and educational provider practice groups. In addition to his extensive audit experience, Ken has been directly involved in providing consulting services for nonprofits and educational facilities of all sizes throughout New York State in such areas as cost reporting, financial analysis, Medicaid compliance, government audit representation, rate maximization, board training, budgeting and forecasting, and more.