A new audit from the state Comptroller's Office found Baker Victory Services submitted for reimbursement more than $150,000 in personnel and other costs that didn't qualify for reimbursement under state Education Department standards.
As part of its preschool special education program, Baker Victory Services sought reimbursement for ineligible bonuses, employee pay not related to the preschool special education program, public relations and advertising costs, "undocumented costs," and ineligible spending on donations, food, entertainment and gifts, according to a letter released Monday from the comptroller's office summarizing the audit's findings.
More than half the funding in question related to personnel costs, and included nearly $47,000 in bonuses and fringe benefits to employees "that were not based on merit." Instead, the bonuses were paid "based on the availability of funds, employee attendance or employee referrals," the audit found.
In addition to the nearly $86,000 in reimbursed personnel costs the comptroller was critical of, there were also nearly $70,000 in other costs, including more than $53,000 for public relations and advertising "that were either not supported, not allowed or not directly related to the programs."
A Lackawanna-based non-profit, Baker Victory Services provides a variety of social service programs. The audit covered about $6.9 million in spending for the preschool special education programs during the organization's fiscal year from July 2013 through June 2014 that was submitted for reimbursement.
The expenses submitted are used by the state Education Department to determine tuition reimbursement rates. Counties that use the preschool special education services pay reimbursement rates set by the state and the state reimburses the counties' 59.5 percent of the tuition, according to the comptroller's office.
The audit also criticized the organization for not maintaining adequate documentation to support some of its spending. The audit found nearly $15,000 in non-personnel costs "that were unsupported or were for inappropriate expenses."
The comptroller's office recommended Baker Victory Services improve its internal controls.
In a September letter responding to the comptroller's draft audit, Baker Victory Services CEO Terese M. Scofidio disputed some of the comptroller's findings and said the organization has made a number of changes to address the findings, including firing its chief financial officer, hiring a new CFO and hiring a new independent auditing firm.
"Such actions demonstrate the CEO's and the Board's exceptional attitude and leadership in the promotion of strong and sound internal controls over the agency's financial and regulatory reporting," Scofidio wrote.
Scofidio, through a spokesman, also issued a statement Monday, which listed what she described as "extraordinary steps to strengthen and improve our processes."
"We are appreciative of the audit's findings as they have given us the opportunity to further strengthen some of our reporting procedures," she said in the statement. "We will learn from the experience and we will be able to move forward, better suited to help the hundreds of Western New York children and families in our care."
State auditors also recommended the state Education Department review the audit's findings and make necessary adjustments to Baker Victory Services' consolidated fiscal reports, as well as to tuition reimbursement rates for the non-profit agency.