Audit: Extensive Problems with Child Development Center

ALBANY, N.Y. -- The Pyramids Child Development Center, with facilities in Clinton and Essex counties, improperly claimed reimbursement for nearly $240,000 in taxpayer money for unexplained, undocumented or improper expenses, such as the preparation of the executive director’s personal income taxes, according to an audit released Thursday in a press release by state Comptroller Thomas P. DiNapoli.

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The audit, which examined the financial records of Pyramids’ four largest pre-school special education programs from July 2005 to June 2006, identified a number of improper claims for staff salaries and bonuses, depreciation of equipment and professional services from those related to staff. Auditors recommended that the State Education Department (SED), which oversees special education programs, recover the entire $171,000 salary paid to the executive director who lives out-of-state because there was little evidence of the work she provided to justify her salary. SED worked cooperatively with auditors during the course of this audit.

Pyramids is approved by the state to provide pre-school special education to children from birth through age three and received $2.7 million in state and county funds in fiscal year ended June 30, 2006. It also provides in-home services and operates seven pre-school special education facilities in Morrisonville, Elizabethtown, Keeseville and Ticonderoga, as well as day care centers. In December, Pyramids filed for Chapter 11 bankruptcy but continues to operate its facilities.

Among the audit’s major findings:

• The executive director, who resides in North Carolina, was rarely on-site at any of Pyramids’ facilities and did not keep any time and attendance records. When auditors attempted to review a computer network log, which Pyramids’ officials said would provide evidence of the executive director’s work activity, there was not sufficient evidence found. Auditors recommended that SED recover her $171,000 salary, which includes the $93,113 that she billed to the four programs reviewed by auditors.
• Auditors also found that the not-for-profit’s board consisted of employees. Therefore, it did not provide independent oversight or monitoring of Pyramids’ financial affairs.
• Pyramids claimed $15,308 for legal, accounting and other administrative costs that were not appropriate, including charges for the preparation of the executive director’s personal income taxes and fees for lobbying services.
• Pyramids improperly awarded $101,335 in bonuses and fringe benefits to staff, including a $10,000 bonus for the executive director that did not meet state reimbursement requirements. Bonus compensation may be reimbursed if based on merit and supported by employee performance evaluations, which did not happen in this case.
• Another $30,133 was improperly claimed by Pyramids for building and equipment depreciation and amortization, food and other unexplained and unsupported expenses. Documentation could not be provided for several furniture and equipment purchases.

Auditors made eight recommendations to SED and Pyramids to improve operations and recover improperly paid money. SED agreed with all of the audit findings, while Pyramids did not agree with the audit findings. A full response from both entities is included in the audit.

-- NYSSCPA.org News Staff

Posted on 5/15/08