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July 3, 2013

DiNapoli: Westchester Special Education Provider
Overcharged Taxpayers $800,000

School Engaged in Questionable Practices
Cites Need for Approval of Legislation to Hold Providers Accountable

The Westchester School for Special Children (WSSC) overcharged taxpayers by more than $800,000 over a four-year period, and engaged in questionable business transactions with companies connected to board members and executives, according to an audit released today by New York State Comptroller Thomas P. DiNapoli. The findings of the audit are under review by the Office of the Attorney General. Legislation that would improve oversight of preschool special education by mandating audits of every provider was recently passed by the legislature.

“As recent audits by my office have shown, special education providers like the Westchester School for Special Children are taking advantage of lax state oversight to pad their own expenses,”DiNapoli said. “The State Education Department needs to make sure special needs children are getting the services they need and taxpayer dollars are protected. The Legislature has passed a bill to make sure every one of these providers is audited by my office. There must be greater accountability in the spending of special education dollars.”

WSSC, based in Yonkers, provides special education services to school-age and pre-school children between 3 and 21 years of age. The New York City Department of Education (DoE) and other school districts pay tuition and fees to the school according to rates set by State Education Department (SED). For the four years ended June 30, 2011, WSSC claimed approximately $48.7 million in public support.

DiNapoli’s auditors found the school paid nine employees who were unqualified for their positions a total of $254,868, including pay for eight uncertified special education teachers. At the same time, the school’s former executive director and former assistant executive director took home $126,447 more than SED’s median allowable compensation levels.

Auditors disallowed $112,734 in expenses for five vehicles –a 2008 Chevrolet Tahoe, 2008 Ford Edge, 2008 Audi A-6, 2008 Lincoln Navigator, and a 2010 Lincoln MKS –because school officials could not produce records to support the business use of the vehicles.

DiNapoli’s auditors found the school charged the state $61,284 in tuition reimbursements that did not comply with SED guidelines and $48,000 for salary increases to an employee whose job tasks and responsibilities did not change.

From 2007-08 through 2010-11, a company owned by WSSC’s former board chairman installed security equipment costing $136,032 at the school under a contract that was not competitively bid as required. Auditors disallowed $19,318 in reported depreciation costs for the equipment.

At the same time, WSSC paid a relative of the current executive director $245,659 for capital construction work at the school even though he did not submit the lowest bid and his bid was submitted eight months after the deadline. Auditors disallowed $21,320 in depreciation costs related to this project.

In addition, WSSC paid $97,870 to a lobbying firm owned by the brother of WSSC’s current executive director. Although these costs were not claimed for reimbursement, auditors noted they represented a less-than-arms-length business arrangement. At the time WSSC chose the lobbyist, the current executive director was the assistant executive director and the owner of the firm was a former member of WSSC’s board.

The former executive director used a WSSC credit card and WSSC checks to make personal purchases, including $4,254 at a Harley Davidson dealer; $1,723 for lodging near Zion National Park; $1,620 at a cigar store and $369 at Victoria’s Secret. Although he eventually reimbursed WSSC for the personal expenses, he should not have used WSSC funds for such expenses.

DiNapoli’s auditors recommended SED:

  • Review the disallowances resulting from the audit, make the appropriate adjustments to the costs and adjust WSSC’s tuition reimbursement rates, as appropriate; and
  • Direct WSSC officials to fully comply with state provisions and ensure that all reported costs are allowable.

Auditors recommended WSSC:

  • Ensure that reported costs comply fully with state guidelines; and
  • Fix the organizational and procedural weaknesses found.
  • SED officials generally agreed with the audit’s findings. For a copy of the full report, including the school’s response, visit: http://osc.state.ny.us/audits/allaudits/093013/11s41.pdf

    DiNapoli has identified fraud and improper use of funds in a recent series of audits of special education providers. His office has completed 18 audits of preschool special education providers, finding nearly $20 million in unsupported or inappropriate charges. There are currently 13 additional audits of preschool special education providers in progress.
    The audits have resulted so far in the arrests of four employees of two providers, two convictions and restitution of $610,000. One special education provider was convicted as an entity and fined $25,000. Six additional cases referred to law enforcement are still pending.

    The Comptroller's recent audit of SED’s fiscal and program oversight of special education providers found that the agency has not conducted any on-site provider audits since 2007.

    SED oversees special education programs for students with disabilities between the ages of 3 and 21. In addition to services provided by local school districts, these programs include services delivered to about 75,000 students by more than 300 for-profit and not-for-profit entities at an annual state cost of $1.3 billion.

    In the closing week of this year’s official session, the legislature passed legislation mandating audits of every preschool special education services program provider in the state by the Comptroller’s Office. The legislation, a program bill of the Office of the State Comptroller, also tightens weaknesses in the program, including how students are evaluated and placed in programs, and how reimbursement is calculated. DiNapoli is urging the legislation be signed into law.

    For a copy of the legislation, visit: http://www.osc.state.ny.us/legislation/2013-14/oscb13.htm

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