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May 28, 2014, Contact: Press Office (518) 474-4015

DiNapoli: New York was Overbilled $3 Million by Special Education Contractor

The Churchill School and Center, a New York City-based special education provider, claimed reimbursement for more than $3 million in inappropriate expenses, according to an audit released today by State Comptroller Thomas P. DiNapoli.

“Time and again my office has uncovered special education contractors trying to evade the rules,” said DiNapoli. “This taxpayer money, intended to help children with special education needs, was misused for inappropriate and non-educational purposes. We have forwarded our findings to the State Education Department for review and to recover any money that was misspent.”

Churchill provides special education services to nearly 400 children in grades K-12 who are classified as having a learning disability or speech-language impairment. Under Section 853 of the State Education Law, the school is reimbursed by the State Education Department (SED) based on expenses it reports in its consolidated fiscal reports (CFR). Expenses have to meet with rules set forth in SED’s Reimbursable Cost Manual.

DiNapoli’s audit examined the school’s CFRs from 2008 to 2011, during which Churchill reported $43 million in reimbursable costs. Auditors determined $3 million charged by Churchill were either unsupported, inappropriate or non-program related.

Of this total, there were $439,000 in food, parties, gifts, and other ineligible, inappropriate or insufficiently documented expenses, including nearly $10,000 that was spent on alcohol and $1,750 in stipends for two employees to travel to Puerto Rico with students on a seven-day surfing trip.

The school also compensated its executive director and chief financial officer $376,000 in excess of SED’s allowable compensation levels.

DiNapoli’s auditors also revealed that Churchill:

  • Provided $430,000 for employee bonuses that did not comply with requirements;
  • Charged $1.4 million in compensation costs incurred by the center and its development office to the Churchill school inappropriately;
  • Spent $220,000 on unnecessary transportation costs; and
  • Claimed $144,000 in unallowable equipment depreciation expenses.

DiNapoli made several recommendations to the school and SED:

  • SED should review the disallowances identified in the audit, adjust Churchill’s CFRs and reimbursement rates accordingly, and recover overpayments as appropriate;
  • SED should review the program matters pertaining to computer utilization and disposal, student-to-staff ratios, and non-certified teachers as identified. Require Churchill to develop remedial action plans, as warranted;
  • Churchill should ensure that costs reported on CFRs fully comply with the applicable provisions of the Manual; and
  • Churchill should establish effective inventory controls over computers and comply with applicable SED guidance and approvals with respect to teacher staffing ratios and certifications.

SED has indicated it has already begun to implement the recommendations. Churchill officials disagreed with several of the audit’s findings. Their response is included in the final audit report, which can be viewed here:

DiNapoli encourages the public to help fight fraud and abuse. New Yorkers can report allegations of fraud involving taxpayer money by calling the toll-free Fraud Hotline at 1-888-672-4555, by filing a complaint online at, or by mailing a complaint to: Office of the State Comptroller, Investigations Unit, 14th Floor, 110 State St., Albany, NY 12236.


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