Audit Report on the Highbridge Advisory Council’s Compliance with Certain Financial Provisions of Its Contract With the Administration for Children’s Services

AUDIT REPORT IN BRIEF

This audit determined whether the New York City Administration for Children’s Services (ACS) ensured that the revenues and expenditures of the Highbridge Advisory Council Family Services, Inc. (Highbridge) were properly reported and whether Highbridge’s private tuition fees were calculated, reported, and used in compliance with ACS guidelines. Highbridge is a non-profit community service organization that provides educational and child-care services to infants and children in eight child-care centers and 73 family child-care homes (small facilities located in private residences) in the Bronx. In addition to the funds it receives for child-care services from ACS, Highbridge also receives funding from other sources for its Special Education, Universal Pre-Kindergarten, and Head Start programs.

During Fiscal Year 2003 (July 1, 2002, to June 30, 2003), Highbridge was under contract with ACS to provide child-care services for 1,091 children in its child-care centers and for 222 children in family child-care homes. To provide those services, ACS budgeted $8,227,608 for Highbridge. In addition, Highbridge received $1,021,569 from the New York State Department of Health (NYSDOH) Child and Adult Care Food Program (CACFP) to operate the nutrition programs at the child-care centers and family child-care homes.

Audit Findings and Conclusions

ACS did not adequately ensure that Highbridge’s revenues and expenditures were properly reported or that Highbridge’s private tuition fees were reported and used in compliance with ACS guidelines. ACS has neither made decisions on Highbridge’s cost-allocation plan and administrative salary pool nor ensured that Highbridge’s independent auditors have complied with ACS audit guidelines concerning the schedules and information that must be included in the annual audit reports. Further, although Highbridge properly calculated the private tuition fees it charged parents, Highbridge generally did not use private tuition fees to enhance its child-care programs as required and transferred most of its private tuition funds to other accounts. These weaknesses prevent ACS from determining the appropriate level of financial support for Highbridge and increase the risk that funds may be misappropriated.

Due to a variety of management control concerns relating to a deficit of about $2.6 million as of June 30, 2002, the previous executive director of Highbridge was terminated by the Highbridge board in November 2002. In addition, several members of the Highbridge board were replaced. While there is evidence of a renewed commitment to management controls at Highbridge and of an increased ACS involvement in monitoring the financial operations of this sponsor, ACS has not resolved key cost allocation and reporting issues that would help ensure the presence of sound financial practices at Highbridge.

Audit Recommendations

To address these issues, the audit makes seven recommendations, among them that ACS:

• Expedite its review of Highbridge’s cost-allocation methodology.
• Establish a cost-allocation methodology for sponsors of multiple centers with multiple programs and funding streams.
• Expedite its review of Highbridge’s administrative salary pool.
• Issue guidance on the use of administrative salary pools.
• Ensure that the annual audit reports for Highbridge contain all the required schedules, including information relating to CACFP salary contributions and the receipt and use of private tuition fees.

ACS Response

On November 8, 2004, we submitted a draft report to ACS officials with a request for comments. We received a written response from ACS officials on November 23, 2004. In their response, ACS officials generally agreed with the audit’s findings and recommendations.