Audit Report on the Contract between the Administration for Children’s Services and the Northeast Bronx Day Care Center, Inc. for Day Care Services at the Susan E. Wagner Day Care Center

AUDIT REPORT IN BRIEF

We performed an audit of the contract between the Administration for Children’s Services (ACS) and the Northeast Bronx Day Care Center, Inc. (NEBDCC) for day care services at the Susan E. Wagner Day Care Center (Center). Specifically, the audit determined whether the NEBDCC appropriately managed City revenues received and expended for the Center and whether appropriate background investigations were conducted of its employees.

The Center is a not-for-profit organization sponsored by NEBDCC and is located at 1140 East 229th Street in the Bronx. During Fiscal Year 2009, NEBDCC was under contract with ACS to provide child care services at the Center for approximately 115 pre-school children (two-and-a-half to six years of age). On December 1, 2008, NEBDCC took over the ACS-funded group child care program operated by the Victory Day Care Center Inc. (Victory), located at 3440 White Plains Road in the Bronx. Victory was also under contract with ACS to provide child care services for 55 pre-school children (two-and-a-half to six years of age). To reflect the additional funds for NEBDCC to operate Victory, ACS modified the original budget of the child care contract.  In Fiscal Year 2009, NEBDCC received City funds totaling $867,888 for both day care center locations.

Audit Findings and Conclusions

The audit found that NEBDCC did not appropriately manage the City revenues it received and expended for the Center. However, NEBDCC did conduct appropriate background investigations of the Center’s employees.

There was a lack of control over the $867,888 in revenues that NEBDCC received from the City for the period reviewed, a large portion of which was received for the Center. NEBDCC is operating without an approved salary allocation plan and maintained no supporting documentation justifying the salary allocations for those employees who work for the Center and who also work for other NEBDCC-sponsored programs. NEBDCC also incorrectly and inconsistently charged expenditures to ACS and failed to allocate certain expenditures among all the NEBDCC-sponsored programs that received the benefit. Due to insufficient records, however, the full extent of the misspent funds and overcharges to ACS that may have occurred could not be determined. Further, we found that ACS inadequately monitored and reviewed the Center’s expenditures, thereby allowing these conditions to occur. As a result of these inadequate controls, NEBDCC improperly charged and was reimbursed by ACS for services not provided and for goods that ACS did not receive any benefit from.

On a positive note, with regard to background investigations of employees, the personnel files generally included all the required documentation, such as reviews of criminal background investigations and training in recognizing abuse and maltreatment of children.

Audit Recommendations

Based on our findings, we make 16 recommendations, including that:

NEBDCC officials should:

• Develop a cost allocation plan, with the assistance of ACS, that accurately reflects the number of hours spent working on the various programs sponsored at the Center.

• Ensure that the appropriate allocation percentage is used when charging expenditures to its various programs. When a manual allocation method is used, the methodology and justification should be indicated on the payment records.

ACS officials should:

• Review the salaries of the employees covered by the ACS contract and recoup monies paid for any portions of their salaries that are not attributable to the ACS-contracted services.

• Review the expenditures submitted by NEBDCC for reimbursement and the documentation supporting the expenditures to ensure that the funds provided are used to benefit the Center as described in the contract with NEBDCC.

Agency Response

ACS and Center officials generally agreed with the audit’s findings and recommendations.