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NYS Comptroller

THOMAS P. DiNAPOLI

NEWS from the Office of the New York State Comptroller

Contact: Press Office 518-474-4015

DiNapoli: State Should Recoup $11.7 Million from Special Education Contractors


February 7, 2020

State Comptroller Thomas P. DiNapoli announced today his auditors found a total of $11.7 million in costs that should be recouped after examining eight preschool special education providers.

Preschool special education services are predominantly provided by more than 400 private providers across New York to approximately 79,000 preschool children with physical, developmental and emotional disabilities. DiNapoli’s office identified fraud and improper use of taxpayer funds in a series of audits that led to legislative changes that granted the Comptroller’s office audit authority to examine these private providers.

“Special education programs fulfill a great need across New York, providing children with disabilities a quality learning experience, but over the last decade, we have found a persistent pattern of mismanagement, waste and even fraud by preschool special education providers,” DiNapoli said. “The State Education Department has pledged to make adjustments to reimbursable costs, recalculate tuition rates and recover millions, but more needs to be done. My office is working with SED to account for every dollar and make certain that children are getting the services they were promised.”

Since taking office in 2007, DiNapoli has completed 126 audits of preschool and school-age special education providers, recommending the state recover approximately $85 million.

The audits have led to 13 arrests and 11 guilty pleas as well as $18.6 million in court-ordered recoveries. DiNapoli’s investigators have also referred 19 additional cases to law enforcement.

Hebrew Academy for Special Children Inc.: Compliance with the Reimbursable Cost Manual (2018-S-68)
Hebrew Academy is a New York City-based not-for-profit organization providing programs to children with disabilities who are between the ages of three and five years. For the three fiscal years ended June 30, 2017, auditors identified $2,873,898 in reported costs that did not comply with the requirements for reimbursement, including $792,672 in compensation for 174 employees who did not work in the special education programs and $766,955 in fringe benefit costs. Auditors also found Hebrew Academy improperly charged the state for $479,596 in property costs and $113,552 in excess executive compensation.

League Treatment Center (LTC): Compliance with the Reimbursable Cost Manual (2018-S-56)
LTC is a New York City-based not-for-profit organization authorized by the State Education Department (SED) to provide preschool special education services to children with disabilities between the ages of three and five years. Auditors identified $3,759,935 in reported costs that did not comply with the requirements for reimbursement including: $2,779,515 in compensation for 53 employees whose services were incorrectly allocated; $296,057 in unsupported compensation; and $239,222 in ineligible consultant costs. Compensation costs for the executive director, CFO, and assistant executive director over three years exceeded the regional median limit by $1.1 million. Of this amount, $324,603 was allocated to the preschool cost-based programs.

Parsons Preschool: Compliance with the Reimbursable Cost Manual (2018-S-26)
Parsons, based in New York City, is a for-profit organization authorized by SED to provide full day preschool special education services to disabled children between the ages of three and five years. Auditors identified $1,782,360 in reported costs that did not comply state requirements. Those included $612,855 in non-reimbursable personal service costs for paid lunch periods for employees and $394,811 in undocumented rental expenses.

Block Institute School: Compliance with the Reimbursable Cost Manual (2018-S-69)
Block is a New York City-based not-for-profit organization authorized by SED to provide services to children with disabilities between the ages of three and five. The New York City Department of Education (DOE) refers students to Block and pays for its services using rates established by SED. Auditors identified $1,761,867 in reported costs that did not comply with the requirements for reimbursement, including $922,765 in inadequately documented compensation costs for teaching staff and $588,874 in other costs, including $32,682 for legal expenses that were not supported by invoices.

Auditory Oral Learning Center (AOLC): Compliance with the Reimbursable Cost Manual (2016-S-94)
AOLC, based in New York City, is not-for-profit organization authorized by SED to provide services to children with disabilities between the ages of three and five. AOLC provides programs to children in 21 different school districts in four counties in New York City excluding the Bronx. Auditors identified $1,025,977 in costs the center reported for reimbursement that did not comply with state requirements. Among the ineligible costs identified were: $334,774 in employee compensation that was not properly supported by time and attendance records, and $691,203 in other than personal service costs and depreciation.

Marie Pense Center LLC: Compliance with the Reimbursable Cost Manual (2019-S-36)
Marie Pense is a New York City-based proprietary organization providing SEIT services to children with disabilities between the ages of three and five. Auditors identified $152,967 in reported costs that did not comply with the requirements for reimbursement. These ineligible costs included $109,101 in personal service costs and $43,866 in other costs. The total included nearly $72,000 in ineligible pension costs.

Quality Services for the Autism Community: Compliance with the Reimbursable Cost Manual (2018-S-8)
QSAC is a non-profit organization that supports children and adults with autism in New York City and Long Island. QSAC has 13 classrooms attended by children from various school districts in New York City’s five boroughs and Long Island. Auditors identified $128,294 in reported costs that did not comply with requirements for reimbursement. The ineligible costs included $111,791 in personal service costs for 107 direct care employees and 34 administration employees.

Children's Development Group (CDG) PLLC: Compliance with the Reimbursable Cost Manual (2019-S-30)
CDG, based in Keeseville, is a for-profit provider of preschool special education services to children with disabilities between three and five years of age. Auditors identified $166,676 in reported costs that did not comply with requirements for state reimbursement. Of the $166,676, $110,989 was for personal service costs for which CDG could not provide documentation to prove the money was for work related to the Preschool Integrated Special Class program. 

Find out how your government money is spent at Open Book New York. Track municipal spending, the state's 160,000 contracts, billions in state payments and public authority data. Visit the Reading Room for contract FOIL requests, bid protest decisions and commonly requested data.


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