A Roadmap to Mandate Relief:

Improving Pre-school Special Education in NYS

Submitted by the New York State Association of Counties November 2012

NYSAC November 2012

The New York State Association of Counties is a bipartisan

A Roadmap to Mandate Relief

municipal association serving the counties of New York State, including the City of New York. Organized in 1925, NYSACs mission is to represent, educate and advocate for member counties and the thousands of elected and appointed county officials who serve the public.

COUNTY LEADERSHIP TEAM Hon. Edward A. Diana (Orange) President New York State Association of Counties Hon. Greg Edwards (Chautauqua) President New York State County Executives Association Hon. A. Douglas Berwanger (Wyoming) President New York State Association of County Board Chairs Charles Nesbit (Orleans) President New York State Association of County Administrators and Managers Stephen J. Acquario Executive Director New York State Association of Counties

November 2012
2012 New York State Association of Counties

A ROADMAP TO MANDATE RELIEF: IMPROVING PRE-SCHOOL SPECIAL EDUCATION IN NYS

OVERVIEW
New York States Preschool Special Education program provides essential services like speech and occupational therapy to special needs children between the ages of 3 and 5. It serves as a bridge between the Early Intervention program (from birth to 3 years old) and a formal Individual Educational Plan (IEP) in a school setting. Federal and State laws govern the Preschool Special Education Program and grant the legal authority to administer the program to the State and school districts. New York is the only state in the nation that mandates counties to fund the Preschool Special Education Program. This arrangement separates program decision making authority from fiscal responsibility. Remarkably, counties have no real role in the Preschool Special Education Program, other than to bankroll it. New Yorks Preschool Special Education Program was enacted in 1989. At its inception, the program cost approximately $96 million annually. Just 10 years ago, the program cost $792 million annually and served approximately 60,000 children. Today, the Preschool Special Education Program is estimated to cost $2 billion annually and serve about 75,000 children. On average, approximately $22,000 is spent per child per year, however some children receive in excess of $200,000 in services each year. Despite having to fund the sky rocketing costs associated with this program, counties have no way to evaluate whether these costly services are providing good outcomes for these children. A number of smart government reform efforts have been proposed in recent years. However, State lawmakers have consistently refused to address the issues of program cost and accountability. This summer (2012), the New York State Comptroller released a series of audits that uncovered millions of dollars of systemic fraud and abuse by a number of large program providers. (See Appendix A.) Concurrently, the New York Times published an investigative series of articles detailing the unaccountable costs of the program and called for reforms to the way these important services are funded and provided. (See Appendix B.)

Despite the efforts of the task force and the recommendations of four consecutive governors, the Preschool Special Education program awaits much needed reform.

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PROGRAM SERVICES
The Preschool Special Education Program represents sound public policy. It provides special needs children ages 3-5 with essential services including speech therapy, occupational therapy, physical therapy, assistive technology, parent education, and counseling. These educational services are provided in the least restrictive environment that will enable a child to maximize their learning potential. Preschool Special Education services are available to any eligible child at no expense to their family. There are no income restrictions on eligibility; if a child needs these services, they will get them. It is an entitlement for the worthiest population.

THE PROCESS
Once a child is determined by the school district to need a certain number of services from a list of preferred providers, the school district fills out a form, by hand, which they give to the county. The county then takes the information on the form, enters it into a database, which gets uploaded to the State Education Department. Counties pay providers for services in the first instance; the State Education Department then verifies if the child actually received the services and repays the counties. State reimbursement is laggedit often takes 12 to 18 months for counties to receive reimbursement for the States share.

State Education Department Approved Programs

Special Education Itinerant Teacher (SEIT) a special education teacher works with a child in a setting recommended by the CPSE. Special Class in an Integrated Setting (SC/IS) a class with preschool student with and without disabilities. Special Class (SC) a class with only children with disabilities.

COUNTY ROLE FROM PAST TO PRESENT

Counties have been mandated to fund Preschool Special Education since 1989, when section 4410 of the New York State Education Law was adopted. Section 4410 shifted the cost of care for these children from the Family Courts (where all matters child-related were determined) and on to the counties budgets. Initially, counties and the City of New York were reimbursed for 50 percent of program costs. By the 1993-1994 school year, the State was to incrementally assume a greater portion of the costs and Counties and New York City were to be reimbursed for 75 percent of program costs. This never took effect. In 1990 the reimbursement schedule was amended, and the reimbursement for counties and New York City remained at 50 percent of expenditures. The law was amended once more in 1992 to establish the
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A Roadmap to Mandate Relief:

f0rmula that remains in place today. Currently, state law provides that counties are to be reimbursed for 69.5 percent of the cost of the Preschool Special Education. Unfortunately for counties and New York City, in a bold stroke to cement this unfunded mandate each year the budget not withstands this provision of law and reimburses counties for only 59.5 percent of the bill even though the law dictates they should be reimbursed for 69.5 percent of the bill. While no counties (outside of the City of New York) have a department of education, counties maintain a non-voting roll at mandatory meetings for children in the Preschool Special Education Program, called the Committee on Preschool Special Education (CPSE). The CPSE is comprised of a chair person from a local school district, an early childhood teacher, a special education teacher, a parent, an evaluator, a private provider of services and a county representative. They meet to discuss the services that each child will receive. It is important to note that the county representative is the only member of the CPSE with no actual authority. While they are given the opportunity to provide input, their suggestions can be completely disregarded by the rest of the committee. Although counties have significant financial stake in this program, they have no oversight or decision making authority. Counties have no ability to determine eligibility, delivery, or evaluation of services. Conversely, school districts play a significant role in program decision-making, yet they are not responsible for any portion of the bill. This flawed arrangement begs the broader question today, how can costs for this escalating program be contained and services improved when those making the decisions about services (i.e., cost) do not fund the bill?

New York is the only state in the nation that mandates counties to fund the Preschool Special Education Program.

PROVIDER RATES AND COUNTY REIMBURSEMENT

Rates for Preschool Special Education services are set by the State Education Department (SED) and the Division of the Budget (DOB). Prospective rates for the school year are issued by SED, in consultation with the Division of the Budget (DOB). At the end of the school year, providers submit cost reports to SED, which then issues reconciliation rates. These reconciliation rates can be issued up to 3 years after the cost reports are submitted, but counties on average keep their files open for approximately 6 years in order to avoid any budget shortfalls. The county or provider is responsible for paying or recouping the difference between the prospective rate and the reconciliation rate. In one recent example a local upstate provider serving multiple counties had their reconciliation rate increase $22,000 per year, per child. Multiple counties were therefore responsible for making millions of dollars in retroactive and unanticipated payments. With the 2 percent property tax cap in place, unanticipated rate increases such as this make it very difficult if not impossible for counties to properly plan their budgets.

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Over the years, counties have managed to piece together ideas and efforts in order to best improve the antiquated process of mandated paperwork and bureaucracy for the program. Despite not providing the services, counties are clear about one thing: the program is about the children. It is for this reason that counties continue to process every childs paperwork, by hand, in order to ensure that each child gets the services she needs.

TRANSPORTING CHILDREN FOR SERVICES

Counties are responsible for providing and financing transportation for all Preschool Special Education students. The cost of transporting these students is over $500 million each year. New York State provides counties with a stipend up to a capped amount for transportation based on regional trip rates established by DOB. Once a county exceeds the cap, counties are responsible for 100 percent of the additional transportation costs. Every county in New York State exceeds their transportation cap each year. Last year, county taxpayers spent more than $300 million for transportation in this program. The county in which a preschool child resides is responsible for providing suitable transportation, as determined by the board of education. If the board determines that a child must receive special education services and programs at a location greater than 50 miles from the child care location, it must first request approval of the States Commissioner of Education. The county must transport the child from their child care setting/home to the special service or program and back once daily on days when services have been scheduled. Cost savings could be achieved if counties were able to contract with school districts that already provide transportation for their students. While this arrangement is permissible in law, school districts have not been willing to enter into these agreements as there is no motivation for them to do so because they are not responsible for transportation costs.

AUDITS AND INVESTIGATIONS

How can costs for this escalating program be contained and services improved when those making the decisions about services (i.e., cost) do not fund the bill?

The deficiencies apparent in the Preschool Special Education Program triggered an audit of 18 providers by New York State Comptroller Thomas Dinapoli. These audits have revealed severe program inefficiencies that have resulted in waste, fraud and abuse amounting to tens of millions of dollars annually. For example, an audit of a single agency preschool special education provider revealed $250,000 of improper costs in just one year. State and local tax dollars were diverted from providing children with vital services, and instead used to purchase tree, bushes, gravel, carpeting and tiles for the vacation residence of the agencys executive director. Other agency audits revealed taxpayer dollars being used to pay the salaries of absentee executive directors, improper employment of family members, luxury vehicles, and various personal effects. One must question, who is truly benefitting from this taxpayer
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funded program? Are our most vulnerable children receiving the services they need? Or, are they being preyed on by providers looking to line their pockets with tax dollars under the guise of providing services to children with special needs? A system that creates opportunities for such flagrant abuse of tax dollars is a system that is unquestionably broken and in need of reform.

RECOMMENDATIONS FOR REFORM

NYSAC strongly supports the reforms proposed by Task Force and Governor Cuomo. Building on these smart proposals, NYSAC additionally recommends the following reforms. 1) Streamline transportation: Transportation for Pre-School Special Education is addressed in subdivision 8 of section 4410 of the Education Law. Currently, counties are able to make suggestions in regards to transportation, however these suggestions are seldom acted upon. In order to streamline the delivery of transportation services in the Pre-School Special Education program, the Education Law must be amended to allow greater involvement in determining placements and the appropriate type of transportation for each child. Additionally, parents should be encouraged to transport their children whenever possible. These parents would receive reimbursement for doing so. 2) Establish a regional transportation research grant: Many inefficiencies are apparent in the transport of Pre-School Special Education children. However counties currently do not have the financial ability to investigate the benefits of entering into regional transportation services contracts. Establishing a research grant program would allow counties the opportunity to provide transportation services more efficiently. 3) Establish an Arms Length relationship between the evaluator and provider of services: In order to increase accountability for the delivery of services in the Pre-School Special Education program, an arms length distance between the evaluator and service provider must be established. This will eliminate potential conflicts of interest that may exist because the child will be evaluated by independent and unbiased individuals. 4) Allow counties greater input on the placement of the child: Although counties are responsible for 40.5% of the costs in Pre-School Special Education, they do not have a voice when determining the placement of a child. Decisions on placement are made entirely by school districts and parents without regard to whether the chosen provider is the most cost efficient suitable provider. 5) Establish a fiscal incentive program: School districts have a dominant role in the Pre-School Special Education Program, however they have no financial stake. NYSAC suggests that the State establish a savings target or cap on an annual basis. If spending comes in below the target, school districts and counties would be entitled to a portion of the savings. This type of program would encourage counties and school district to develop new ideas for the provision of Pre-School Special Education services. 6) Permit SEIT services to be paid on a fee for service basis: For a variety of reasons (ie. Child absence, teacher absence, school vacation) the level of SEIT service a child is entitled to based on their IEP is not always provided. Under the current payment methodology, counties and the State
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must still pay for SEIT services even if they are not delivered. For the 2010-2011 school year it is estimated that an average of 21.7% of SEIT services approved and paid for, were never provided. By billing SEIT services on a fee for service basis, millions of dollars can be saved annually. 7) Establish an audit unit in the New York State Education Department (NYSED): Executive Deputy Commissioner of NYSED, Valerie Grey has expressed a need for more staff to be added to perform baseline oversight duties. She has further recommended the establishment of an audit unit in NYSED for more timely audits of preschool providers.

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APPENDIX A

Additional Reform Proposals

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TEMPORARY TASK FORCE ON PRESCHOOL SPECIAL EDUCATION

In 2007, the State recognized that New York States expenditure for preschool special education was growing at an unsustainable rate and convened the Temporary Task Force on Preschool Special Education. The task force was made up of 17 members representing every facet of the program including counties, providers, parents, and the State. The task force was charged with identifying strategies for improving the quality of the Preschool Special Education Program in a fiscally responsible manner. The task force issued a series of recommendations to address many of the deficiencies in the program. Despite the efforts of the task force and the recommendations of four consecutive governors, the Preschool Special Education program awaits much needed reform. In 2007 the States Temporary Task Force on Preschool Special Educations final report contained four primary and five secondary recommendations. Unfortunately for the children and for local property taxpayers, none of the Task Forces recommendations have been implemented. NYSAC continues to press the Governor and state legislature to adopt the following recommendations of the Task Force. 1) Enhance the knowledge and skills of Committee on Preschool Special Education (CPSE) members, program providers, and parents to facilitate transition from Early Intervention (EI) to preschool, and to increase meaningful participation and ensure consistency in decision making regarding preschool eligibility and service options. 2) Encourage development of Universal Prekindergarten (UPK) for three- and four-year-olds across New York State to increase the availability of integrated settings and promote earlier connections between preschoolers with disabilities and their school districts. 3) Focus the preschool decision making and service delivery processes with school districts since they have the federal and state responsibility for ensuring the provision of special educations services. This will facilitate accountability and oversight of the preschool system by school districts and the transition between preschool and school age. 4) Establish a new rate-setting methodology, using principles already being practiced by other service systems in New York State, to promote greater predictability and improved timeliness. 5) Ensure that the continuum of preschool services includes the flexibility needed to meet individual students needs in a cost-effective manner and is applied consistently across districts and programs, including access to educationally necessary July and August services for students transitioning from EI or newly entering the preschool delivery system. 6) Increase opportunities for children with disabilities to be served in any early childhood setting by promoting consistent learning standards, improving pre-service and in-service of early childhood service providers, and encouraging collaborative relationships between 4410 and other early childhood service providers.

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7) Enable continuity of provider services from EI to Preschool Special Education system where appropriate to childrens needs. 8) Reduce the high costs for transportation within the preschool system and avoid costs exceeding maximum allowable reimbursement rates. 9) Improve mechanisms for tracking progress and child outcomes across EI and preschool systems in order to increase comparability between EI and preschool measures, predict future system needs, evaluate impact of early intervention and preschool services on future performance, and provide system oversight, especially with regard to timeliness of referral, eligibility determinations, and service delivery.

2012-13 EXECUTIVE STATE BUDGET PROPOSAL

Governor Andrew Cuomo also offered a series of thoughtful reforms in his 2012-2013 Executive Budget. Unfortunately, these reforms were disregarded by the New York State Legislature. 1) Align fiscal responsibility with program decision makers: Governor Cuomo proposed that counties be reimbursed for up to 66.6% of program costs above a cap set at 2011-2012 school year expenses. This proposal would encourage more efficient and cost effective placements by those determining the services and providers. 2) Expand Counties Role: Counties would assume a greater role in the decision-making process when providers request an exception to payment rates. 3) Justification of Out-of-Area providers: Require justification be provided when a more costly out-ofarea special education provider is chosen over closer and suitable providers. 4) Increase Accountability: Establish an Arms-length distance between the evaluator and provider of services by prohibiting a child from being evaluated by the same agency providing the educational services.

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APPENDIX B

New York State Comptrollers Audits of Preschool Special Education Service Providers

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CONTACT:

Press Office (518) 474-4015

Immediately FOR RELEASE: July 19 2012

DiNapoli: Queens Special Education Contractor Overcharged State $1.5 Million

Bilingual SEIT & Preschool Inc., a Queens-based provider of special education services, inappropriately charged New York Citys Department of Education (DoE) by nearly $1.5 million for salaries, vehicle leases and items such as cosmetics and childrens furniture, according to an audit released today by State Comptroller Thomas P. DiNapoli. The findings were referred to the Queens County District Attorneys Office. Special education services are critical for thousands of children and every tax dollar meant for them should be spent on them, DiNapoli said. Sadly, my auditors have found that has not been the case at Bilingual SEIT & Preschool. As we have seen in several audits of special education providers, taxpayers are footing the bill for expenses they shouldnt have to cover, no-show jobs and other perks. This cannot continue. The audit released today is part of an in-depth review by DiNapolis office of New Yorks special education program by a team of auditors and investigators. Three audits released in June led to the arrests of four contractors and restitution of $610,000. Bilingual provides special education to about 700 disabled children between the ages of three and five years. DoE pays tuition to Bilingual using rates set by the State Education Department (SED) in the state reimbursable costs manual. SED oversees special education programs statewide. Costs reported by providers must comply fully with the guidelines in the manual. DiNapolis auditors, however, found numerous reporting by Bilingual that did not comply with the guidelines. For instance, Bilingual officials could not provide records to show that 26 employees had actually worked the time they were paid for. Auditors disallowed the $233,368 paid to those employees. Auditors also disallowed $107,380 paid to Bilinguals assistant executive director, the former wife of its executive director. She was paid $369,081 for fiscal years 2007-08 and 2008-09, but she actually performed the services of a payroll specialist. Bilingual inappropriately charged the state for $795,368 in other costs not allowed by the manual, including: $186,819 in rental expenses for three buildings that were unrelated to the SEIT program, one of which was under construction; $60,280 in lease payments, gas, insurance, parking, tolls, and maintenance costs for three vehicles (a Toyota Matrix, a Honda Odyssey with a rear entertainment system, and a Mercedes Benz); $22,347 in interest expenses for bank loans taken out by the former wife of the executive director; and $5,567 in childrens bedroom furniture, as well as other charges for cosmetics and cell phone

i: Queens Special Education Contractor Ov ercharged State $1.5 Million, 7/19/12 11/1/12

expenses. Auditors concluded Bilingual officials may also have deprived federal, state, and local taxing authorities of a significant amount of tax revenues by treating top officials of the school, as well as certain other staff, as independent contractors rather than as employees. The executive director, received $730,546 in total compensation for calendar years 2007 through 2009. Of this amount, just $108,270 was reported on his W-2 forms. The remaining $622,276 was paid to him as an independent contractor and was reported on the 1099 forms that were issued to him. Moreover, $577,276 of the $622,276 was issued to a separate corporation he formed. He admitted to investigators he did this intentionally because he had cash flow problems. Similarly, just $114,504 of the $541,077 in compensation the assistant executive director received for calendar years 2007 through 2009 was reported on her W-2 forms. The remaining $426,573 paid to her as an independent contractor was reported on forms 1099. Again, $234,573 (55 percent) of the $426,573 was issued to a separate corporation she had formed. DiNapoli recommended SED: Recover all reimbursements made to Bilingual for inappropriate or unsupported expenses included in Bilinguals consolidated financial reports. Consider recouping payments made for personal items directly from responsible Bilingual officials. Schedule regular training to Bilingual officials and other providers on what costs are eligible for reimbursement; remind and instruct Bilingual officials that personal expenses are not eligible for State reimbursement; and revise, as appropriate, SED written guidance to ensure that this issue is clear therein. Require Bilinguals senior management attend ethics training on their fiduciary responsibilities. The audit also recommended Bilingual: Ensure that its CFRs include only appropriate and allowable reimbursable expenses; and Ensure that any and all persons who work directly under the supervision of Bilingual officials are treated as employees and not independent contractors. SED officials generally agreed with the audits findings and intend to implement the recommendations as appropriate. Bilingual officials, through their attorneys, also agreed with most of the reports conclusions and recommendations. The complete comments of both SED and Bilingual are included in the audit. DiNapoli is continuing to work with SED and the New York City Department of Education to address these issues and protect funds from misappropriation. For a copy of the report visit: http://www.osc.state.ny.us/audits/allaudits/093012/11s13.pdf Last month, DiNapoli released three other audits of special education providers as part of his special education initiative. Those audits can be found at: http://www.osc.state.ny.us/press/releases/june12/062512.htm

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Albany Phone: (518) 474-4015 Fax: (518) 473-8940 NY C Phone: (212) 681-4840 Fax: (212) 681-7677 Internet: www.osc.state.ny .us www.osc.state.ny .us/press/releases/july 12/071912.htm 2

apoli:11/1/12 Education Contractor Bilked Taxpay ers Out of $2.6 Million, 8/01/12 Special

CONTACT:

Press Office (518) 474-4015

Immediately FOR RELEASE: August 1, 2012

DiNapoli: Special Education Contractor Bilked Taxpayers Out of $2.6 Million

Overcharges Include Pay For Executives Relatives
IncludED Educational Services, a Cedarhurst-based provider of special education services, inappropriately charged New York Citys Department of Education (DoE) and others more than $2.6 million over a twoyear period, including more than $850,000 in salaries paid to the sons and other relatives of its executive director, according to an audit released today by State Comptroller Thomas P. DiNapoli. The findings have been referred to the Manhattan District Attorneys Office. Waste, fraud and abuse cannot be tolerated in our special education programs, but my auditors keep finding it, DiNapoli said. Allowing these abuses to continue deprives children with disabilities of the resources intended for them and threatens the entire private special education program. The state and localities need to improve their management and oversight of special education providers to make sure taxpayers get what theyre paying for and students arent cheated. The audit released today is part of an in-depth review by DiNapolis office of New Yorks special education program by a team of auditors and investigators. Three audits released in June led to the arrests of four contractors and restitution of $610,000. The findings of another audit, Bilingual, released in July were referred to the Queens District Attorneys Office for further investigation. IncludED provides special education services to 375 children between the ages of three and five years. The State Education Department (SED) oversees special education programs statewide. The DoE and other districts pay tuition to IncludED using rates set by SED. These rates are based on costs from financial reports that special education providers, such as IncludED, submit to SED. The costs included on the reports must fully comply with the guidelines in SEDs Reimbursable Cost Manual. IncludED could not provide auditors with the documentation to support salary and wage costs for 50 employees totaling $1,540,082. Of this amount, $856,827 was paid to 11 relatives of the executive director, who routinely deposited the paychecks of his two sons into his own personal bank account. Auditors disallowed another $324,761 for fringe benefits. DiNapolis auditors found IncludEDs executive director and his wife billed DoE for personal costs totaling $32,359 including: $19,888 in non-allowable meal expenses; $9,720 in student loan payments and tuition costs; $1,482 in repair and maintenance expenses for landscaping services performed at their home; and $1,269 in airline ticket charges. Auditors also found IncludED charged the city and state $15,382 for rent and expenses for the California home of the son of the executive director. The son admitted he made up an invoice to obtain reimbursement of $6,000 for the security deposit and rent of which $4,682 was allocated to the audited
www.osc.state.ny .us/press/releases/aug12/080112a.htm 1

programs. He claimed another $10,700 in costs for light fixtures, installation fees, car rental, a computer, an iPhone, and other items. Auditors also disallowed IncludEDs claims for: $156,158 in office supply and advertising expenses; $59,553 in depreciation expenses that were unsupported; $53,311 in lease costs attributable to a separate day-care center, an early intervention program, and an unapproved program site in Flushing; and $36,547 for items such as cribs and changing pads that were used in other programs operated by IncludEDs owner that were separate from the special education programs. DiNapoli recommended SED review the findings of auditors and investigators and take the appropriate actions to recover the inappropriate expenses. SED officials generally agreed with the audits findings and intend to seek restitution as appropriate. For a copy of the report visit: http://www.osc.state.ny.us/audits/allaudits/093012/10s59.pdf . ###

Albany Phone: (518) 474-4015 Fax: (518) 473-8940 NY C Phone: (212) 681-4840 Fax: (212) 681-7677 Internet: www.osc.state.ny .us E-Mail: press@osc.state.ny .us Follow us on Twitter: @NY SComptroller

DiNapoli: Audit Finds Another Special Education Provider Bilked Taxpa...

http://www.osc.state.ny.us/press/releases/nov12/112012b.htm

CONTACT:

Press Office (518) 474-4015

Immediately FOR RELEASE: November 20, 2012

DiNapoli: Audit Finds Another Special Education Provider Bilked Taxpayers

Separate Audit Focusing on SEDs Management of Special Education Program
The directors of Achievements PLLC, a Latham-based special education service provider, billed taxpayers for more than $180,000 in ineligible expenses, some of which personally enriched the directors, their family members and staff, according to an audit released today by State Comptroller Thomas P. DiNapoli. The audits findings have been referred to the Albany County District Attorneys Office. Money that should be spent solely on students is instead being wasted, misspent or even pocketed by certain special education contractors to enrich themselves, DiNapoli said. Its clear the system for monitoring these dollars is broken and taxpayers are paying the price. The parents and children who rely on special education programs deserve better, and taxpayers have the right to know their money is being well-spent. It is clear from a series of audits done by my office that the states special education program needs a thorough review. DiNapoli also announced that his office is completing an expedited top-to-bottom audit of the State Education Departments oversight and management of New Yorks special education program. Through SED, New York State spends $2 billion each year to provide special services and classroom instruction to 37,000 children with physical, developmental and emotional disabilities. Earlier this year, after seeing several red-flags in audits and data collected by his staff, DiNapoli launched a widespread probe to look into the special education sector. Auditors have found numerous cases of provider contractors who have cheated the system and bilked taxpayers out of millions of dollars. In the latest report, auditors disallowed a total of $182,590 in Achievements claimed costs for the five-year period ended June 30, 2010 based on guidelines set in SEDs Reimbursable Cost Manual. The improper claims included $68,072 for goods and services for Achievements executive director and her husband, the business fiscal director, and their family. Investigators and auditors found the directors attempted to charge taxpayers $12,616 for a home entertainment center that was delivered and installed in their personal residence. Other personal expenses charged to the program included airfares and hotels at various vacation sites such as Disney World, a cruise, tickets to rock concerts, installation of fencing, a dishwasher at their personal residence and annual membership fees to a family recreation center. These types of egregious examples of public dollars diverted for blatant personal benefit should be detected and stopped much sooner through effective state oversight and monitoring by the State Education Department, DiNapoli said. DiNapolis auditors also found: $66,225 in excessive charges to lease office space in a building owned by Achievements directors; $48,293 in other costs that did not comply with the requirements of the manual; and

11/28/2012 9:18 AM

DiNapoli: Audit Finds Another Special Education Provider Bilked Taxpa...

http://www.osc.state.ny.us/press/releases/nov12/112012b.htm

Failure to comply with SEDs requirements for time and attendance records, cost allocation methodologies, and other financial management functions. Auditors further determined Achievements directors attempted to conceal their personal charges by distributing them to various accounts used to set the business reimbursement rates. Auditors recommended: SED review the disallowances identified in the audit and determine if adjustments to Achievements tuition reimbursement rates are needed; and Achievements ensure that the expenses claimed comply with the requirements prescribed by SED. SED generally agreed with the audits recommendations. For a copy of the complete Achievements report, including the providers response, visit: http://osc.state.ny.us/audits/allaudits/093013/11s18.pdf There have been several criminal referrals, felony arrests and hundreds of thousands of dollars in restitution made as a result of the earlier audits completed by DiNapolis office. In one case, auditors found nearly $250,000 in improper costs claimed by a Bronx company, including $3,162 used to purchase trees, bushes, gravel, carpeting and tiles for the vacation residence of its executive director and her husband. The audit can be found here: http://osc.state.ny.us/audits/allaudits /093012/10s32.htm One Long Island-based contractor couldnt document the need for $1.5 million in staff salaries, including $850,000 paid to 11 relatives of its executive director. The company even charged taxpayers $15,382 for rent and expenses for the California home of the executive directors son. That audit can be seen here: http://osc.state.ny.us/audits/allaudits/093012/10s59.htm And another provider paid its assistant executive director, the wife of its executive director, $324,881, as a full-time employee even as she was employed at the same time as a full-time dean, professor and department chair for the City University of New York. The full audit can be seen here: http://osc.state.ny.us/audits/allaudits/093012/10s31.htm To view the most recent audits of special education providers, visit: http://www.osc.state.ny.us/audits /auditAgencyList.htm#State Education Department
Albany Phone: (518) 474-4015 Fax: (518) 473-8940 NYC Phone: (212) 681-4840 Fax: (212) 681-7677 Internet: www.osc.state.ny.us E-Mail: press@osc.state.ny.us Follow us on Twitter: @NYSComptroller

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APPENDIX C

New York Times Stories and Editorials

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 2012 New York State Association of Counties

November 2012

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