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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 City’s Department of Education (DoE) by nearly $1.5 million for salaries, vehicle leases and items such as cosmetics and children’s furniture, according to an audit released today by State Comptroller Thomas P. DiNapoli. The findings were referred to the Queens County District Attorney’s 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 shouldn’t have to cover, no-show jobs and other perks. This cannot continue.”

The audit released today is part of an in-depth review by DiNapoli’s office of New York’s 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.

DiNapoli’s 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 Bilingual’s 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 children’s bedroom furniture, as well as other charges for cosmetics and cell phone 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 Bilingual’s 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 Bilingual’s 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 audit’s findings and intend to implement the recommendations as appropriate. Bilingual officials, through their attorneys, also agreed with most of the report’s 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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