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Audit: Millions of Dollars in Misspent Special Education Aid in N.Y. State

Special education money intended for  preschool students has been misspent on services that were never documented,  including food, travel, flowers, even air conditioners installed in personal residences, according on an audit released Monday from New York State Comptroller Thomas P. DiNapoli.

DiNapoli's office has been probing the state's preschool special education program, which, in an unusual arrangement, is provided through special education itinerant teachers as opposed to through individual school districts. The itinerant teachers are employed by about 320 approved for-profit and not-for-profit private providers, and about 81,000 preschool children receive special education services in the state, at a cost of about $1.4 billion a year.

Back in June 2012, the comptroller's office launched a special education audit initiative, finding several instances of fraud and abuse, according to a news release from the office. After that, lawmakers gave DiNapoli the go-ahead to audit every contract from all of the state's private providers at least once by 2018, giving him money to hire more auditors to do so. (Thirty-seven of 40 audits have been released; three other audits have not been released because of ongoing legal investigations.)

The report released Monday represented some of the most recent audits. Among the findings, according to the comptroller's office: 

  • One provider based in New York City charged taxpayers $794,219 in reported costs that did not comply with state education department requirements for reimbursement, including: $373,200 in compensation to 11 employees for which there was no evidence that they worked for the provider; $198,888 in executive compensation that was improperly allocated to the provider; and $109,187 costs that were "unsupported by appropriate documentation," including food, travel, international recruitment costs, and air conditioners that were installed in the personal residence of the provider's executive director.
  • Auditors disallowed $2.4 million spent by a Buffalo school, which provides special education and other services to children and young adults from 3 to 21 years old. The school spent nearly $2 million on noncompetitive contracts with companies that had ties to members of the school's board, and more than $100,000 on food, flowers, personal expenses, and gifts for staff.
  • In Orange County, auditors discovered a Florida, N.Y.-based provider reported $420,953 in non-reimbursable costs in 2012. Those costs included gifts and food for staff, holiday parties, and personal expenses such as personal laundry and phone service costs.

More than $40 million has been misspent in the last decade, the comptroller's office contends. "Special education providers play a crucial role in our education system, but some unscrupulous contractors have taken advantage of lax oversight to game the system, rip off children and taxpayers, and line their own pockets," DiNapoli said in a statement.

The state education department has agreed to implement all the recommendations in the special education expense audits, including reviewing recommended disallowances, and recovering disallowed expenses, according to the audit report. The department has also agreed to strengthen its oversight.

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