WNY News Now

(WNY News Now) – New York City – An audit conducted by the State Education Department revealed that Small Wonder Preschool, Inc., a New York City-based nonprofit, claimed over $264,000 in non-compliant costs over three fiscal years.

In a comprehensive audit conducted by the State Education Department (SED), it was found that Small Wonder Preschool, Inc., a provider of special education services for children with disabilities, reported $264,701 in costs that did not meet the guidelines established by the SED’s Reimbursable Cost Manual (RCM) and the Consolidated Fiscal Reporting and Claiming Manual (CFR Manual).

The audit, which focused on the fiscal years ending June 30, 2020, and June 30, 2021, raised concerns about Small Wonder’s compliance with state-mandated reporting procedures for reimbursable costs. The audit identified numerous inconsistencies in financial reporting, particularly for costs that were undocumented, misallocated, or in violation of the RCM’s guidelines.

Small Wonder Preschool serves approximately 85 students in its cost-based special education program. These students are referred to the preschool by the New York City Department of Education, with funding rates determined based on the organization’s reported costs. Over the three fiscal years under audit, Small Wonder claimed approximately $5.9 million in reimbursable costs.

Key Findings

The audit identified several critical areas of non-compliance, including the following:

1. Undocumented and Insufficiently Documented Costs: A total of $153,004 was reported in undocumented or inadequately documented costs. These include $85,578 for audit fees, $52,456 in IT service costs, and additional expenses related to storage, marketing, and journal entries.
2. Improper Bonus Compensation: The preschool reported $70,308 in bonus payments that did not adhere to the RCM’s compensation guidelines.
3. Misallocated Aide Compensation: Compensation for seven 1:1 aides, amounting to $30,173, was incorrectly charged to the special education cost-based program, instead of being allocated to the appropriate 1:1 aide cost center.
4. Other Non-reimbursable Costs: The audit uncovered $8,527 in costs that failed to meet the RCM’s requirements. These included $4,740 for contracted direct care services, vehicle insurance premiums, and food expenses for staff. Additionally, $809 in interest was claimed on a non-approved loan from the Executive Director, further contributing to the non-compliant expenses.
5. Staffing Ratio Violations: An excess of $2,689 in staffing costs was reported, surpassing the approved ratios for staff-to-student numbers, indicating an over-allocation of staffing expenses.