On appeal from a Final Decision of the State Board of Education, 34-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted January 22, 2008
Before Judges Sabatino and Alvarez.
This appeal arises out of a financial audit by the Department of Education ("the Department") of a private company that provided services to disabled schoolchildren in 2001-02.
The provider, Youth Consultation Service, Inc. ("YCS"), appeals a final administrative decision of the State Board of Education ("the State Board") issued on March 7, 2007. That final agency decision disallowed certain payroll costs and associated tuition charges claimed by YCS, based upon the results of the Department's audit. For the reasons we set forth in this opinion, we affirm the State Board's final agency decision.
YCS is a multi-purpose private firm that provides more than eighty-five educational and therapeutic programs at about seventy locations. Among those programs, YCS operates Sawtelle Learning Center-Collingswood ("Sawtelle South"), a private school for the disabled, which is licensed by the Department.
Pursuant to N.J.S.A. 18A:46-13, every school district in New Jersey is obligated to provide an education to students who are classified as disabled and in need of special services. A school district that is unable to deliver those required services, in full or in part, may satisfy its obligation by sending the special-needs student to a facility or program approved by the Department, such as Sawtelle South. N.J.S.A. 18A:46-14.
As the provider of such services at Sawtelle South, YCS is statutorily authorized to charge tuition to the school districts that send children to that facility. N.J.S.A. 18A:46-21. The tuition assessed must not exceed the "actual cost per pupil." Ibid. That "actual cost" limitation on tuition is to be calculated in accordance with "rules prescribed by the [C]commissioner [of Education] and approved by the State Board." Ibid. Those rules are codified in regulations presently appearing at N.J.A.C. 6A:23-4.1 to 4.16.
During the 2001-02 fiscal year in question, YCS operated many programs, apart from Sawtelle South, which were outside of the purview of the State Board and the Department. Those other programs included residential facilities for juveniles, foster homes, community programs, family preservation services, and outpatient care facilities. Several of those other programs were regulated or financially supported by other State agencies, including the Department of Human Services and the Juvenile Justice Commission. These various business units collectively have resulted in the company receiving annual revenues in excess of $60 million.
The President and Chief Executive Officer ("CEO") of YCS during the 2001-02 fiscal year was Richard Mingoia. As President and CEO of that entire enterprise, Mingoia received a salary that year of $226,424. Mingoia's executive responsibilities extended well beyond Sawtelle South, to the host of other YCS programs not regulated by the Department. Hence, Mingoia's personal oversight of Sawtelle South was only a part-time endeavor.
In calculating tuition to charge back to school districts for the pupils at Sawtelle South, YCS and its accountants prorated Mingoia's salary, assertedly pursuant to generally accepted accounting principles, based upon the total costs involved in the respective programs. This resulted in $7178,*fn1
representing 3.17% of Mingoia's overall salary for 2001-02, being allocated to Sawtelle South. YCS treated this portion of Mingoia's salary as a compensable indirect cost within the ...