State regulations too costly for school Founder of Star Bartenders Institute says state costs are causing problems for business
TROY, N.Y.» Downtown business owner Elda Abate is looking to change regulations on licensed private career schools within New York state.
Abate opened her school Star Bartenders Institute in 2014 at 120 Fourth St. in downtown Troy. Here, she teaches an intensive, hands- on 40-hour bartending and mixology course to classes of about a dozen students several times per year.
A longtime bartender, Abate started this school out of a passion to share her skills and knowledge of the industry to create opportunities for her students.
As a private career school, Abate needed to obtain a license for Star Bartenders Institute from the Yew York State Department of Education, which regulates her school and all others like it within the state.
Almost three years into this entrepreneurial endeavor, Abate is still passionate about teaching bartending, and takes joy in helping students become successful in their field.
However, operating a licensed private career school has proven to be difficult from a financial standpoint, due to the regulations enforced by the state’s Department of Education.
The greatest challenge that Abate faces as owner of Star Bartenders Institute is having to pay for costly audits and review audits.
All career schools in a category of making less than $499,000 annually must have review audits and audits performed by a department-approved licensed certified public accountant, alternating each year.
For a small licensed private career school review audits currently cost approximately $3,000 per year and audits cost about $5,000, with prices only predicted to rise.
“How amI supposed to grow this business if I’m forced to pay those amounts?” Abate said. “That’s insane.”
A one woman show, Abate is Star Bartenders Institute’s director, teacher and agent - all titles for which she pays periodic fee to the department - as well as the business owner. With state regulations as they are now, Abate feels like she will never be able to grow the school or hire employees.
Schools in the other category, those making more than $500,000 per year, must have an audit performed every year.
The purpose of these audits and review audits, according to education department officials, is primarily to ensure a school’s financial ability to operate so that student tuition funds are protected, and to maintain the integrity of the tuition reimbursement account, which exists to protect those funds.
However, small school directors like Abate view the costs as a burden on their businesses. She believes that Star Bartenders Institute should only be forced to submit a compiled statement, her income tax information, each year. “They charge me tuition assessment quarterly and that should be a copy of all students, and they have access to all my student folders,” she continued. “That should suffice.”
In hopes of changing this regulation, Abate reached out to local Assemblymember John McDonald III, who is working to make an amendment in favor of the small businesses affected by this regulation.
McDonald is cosponsor of a bill that would amend the education law, in relation to licensed private career schools with gross tuition of less than $100,000. Its purpose it to allow licensed private career schools whose gross tuition is less than $100,000 in a school fiscal year and which receives less than $100,000 in state and federal student financial aid in a school fiscal year to file unaudited financial statements with the state education department, provided that once every three years they file an audited
financial statement.
The bill’s justification reads: “In recent years, the economy has affected numerous private career
schools. With declines in enrollment and increases in operational costs and expenses, numerous schools in this sector have been financially challenged; some even forced to permanently close. This legislation is in efforts to help lessen the financial burden of the cost-of-business schools grossing under $100,000 in tuition can furnish the commissioner with unaudited financial statements. Audited financial statements can be extremely costly, especially to schools struggling financially to operate.”
McDonald added, “The idea is to have these type of schools in play to help people gain meaningful employment, but not to spend a fortune trying to attend those schools, and not to put these schools out of business. That’s not the intention.”
As a small business owner himself, the assemblyman said, “These type of annual audits, when there’s not that much in sales, and you’re looking at the cost involved - it’s counterproductive. And It gets away from the mission.”
McDonald agrees that the regulation is unfair to small schools, and that the costs of audits are crazy.
Through discussing the matter with colleague Assemblywoman Alicia Hyndman, the bill’s lead sponsor who spent more than a decade serving as a senior professional conduct investigator with the state education department, McDonald found that Abate is not alone in her concerns. Hyndman has seen similar businesses struggle with the same challenges.
Their solution, through this bill, is to only require schools in a less than $100,000 category to sub- mit an audited financial statement once every three years. That way, the cost could be spread out, and planned for, McDonald said. “At the end of the day were trying to make it smoother.”
Looking ahead, the assemblymembers’ next step is to find a Senate sponsor, then hopefully act on the bill in the next legislative session, which starts in January.
Representatives from the New York State Department of Education would not comment on the pending legislation or whether or not the current license private career school audit policy is fair to small businesses.
The proposed change comes about five years after the New York State Legislature raised the financial floor for annual audited statements to $ 500,000 in 2012. Prior to then, all school reporting a revenue less than $250,000 could file a reviewed statement type every other year, and those making $250,000 or more were required to submit annual audited financial statements.
In addition to the expensive audits and review audit costs, Abate noted that Star Bartenders Institute also pays a $125 minimum quarterly assessment, and the department of education charges the school one percent of its revenue, not only gross tuition, but income from books and materials as well.
The two-week course at Star Bartenders Institute costs students $500: $300 in tuition, $170 for books and materials, and a $30 nonrefundable registration fee
urthermore, if students quit, Star Bartenders Institute is required to refund their tuition, even after they’ve started the course. This is another policy that Abate doesn’t like, because doesn’t hold people accountable for their actions, she said. Instead of 10-person classes with two students at each of the school’s five bartending sta- tions, Star Bartenders Institute increased its class size to 12 due to the probability of dropouts, of which there might be less without the mandated tuition refund.
“This education department is out of control,” said Abate, who was previously worked at other bartending schools in different states. “Having a business that’s licensed by the education department is almost impossible in New York state.”
As an entrepreneur, Abate takes pride in running a legitimate business with a pretty perfect track record, she said. “I’m not trying to have issues. I’m not trying to do a scam. I’m not trying to be illegitimate. Everything I do is solid.”
Abate just wants to keep operating her bartending school, but she’s finding it difficult to stay afloat.
In comparison to the large schools that the department regulates, “Obviously I’m a small fish,” Abate said. “I’m a little fish. But because I’m a little fish no one cares.”
Abate believes the costs required of her business due to state regulation are unfair and too much.
“I am not a huge university,” she said. “Enough is enough.”
Particularly regarding the review audit and audit expenses, “They should know that that’s a ridiculous, insane burden to put on small little schools,” she said.
As a solution to the problem, Abate thinks the state should pay for the audits it requires of small businesses, or there should be more categories with different regulations for the schools that don’t make much, like proposed in the bill cosponsored by Assemblyman McDonald. “They need to make multiple brackets,” she said.
Abate hopes for the sake of Star Bartenders Institute and other licensed private career schools like it, that regulation changes will be made in the near future.