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DiNapoli: NYC Pre-K Special Education Provider Claimed Nearly $3 Million In Ineligible Expenses

A Brooklyn preschool special education provider, Yeled v’Yalda Early Childhood Center, claimed nearly $3 million in ineligible expenses for reimbursement, according to an audit recently released by New York State Comptroller Thomas P. DiNapoli.

“Schools for special needs children must properly account for their use of public funds,” DiNapoli said. “We have found too many schools that fall short of state education requirements, which is why we are auditing preschool special education providers throughout New York. We’ve referred our findings to the State Education Department for recovery of the misspent funds.”

Yeled is one of many preschool Special Education Itinerant Teacher (SEIT) programs in New York state that provide one-on-one instruction for special needs children, usually at the students’ homes, schools or other programs they may attend. The New York City Department of Education (DoE) refers students to Yeled based on clinical evaluations and pays for its services using rates set by the State Education Department (SED), which reimburses DOE for 59.5 percent of the costs.

Unlike most other states, New York’s SEIT programs are privately-run, some for profit and some not-for- profit. The programs submit annual financial reports to SED that include their expenses for reimbursement. Yeled, like many SEIT programs, offers other services, but the expenses related to these cannot be reimbursed by the state’s SEIT program.

To qualify for reimbursement, expenses have to meet SED’s criteria and include documentation to support the costs. For example, when an employee works for both a provider’s SEIT program and one or more of its other non-SEIT services, the employee’s division of labor must be documented to qualify for reimbursement.

Over a three-year period ending June 30, 2014, Yeled reported $81 million in costs for reimbursement.

DiNapoli’s auditors recommended SED disallow $2,950,518 in expenses the school reported to the state for reimbursement, including:

  • $1,062,157 for mortgage interest, depreciation, and other costs related to 20 sites that were not approved by SED;
  • $683,915 in costs related to a Head Start program, an Early Intervention program, a portion of a building Yeled leased to a medical center, and other non-SEIT related programs;
  • $571,929 in salaries and fringe benefits for 14 employees who did not work for the SEIT program. Yeled’s internal records indicated they worked as administrators for other programs, such as the Women, Infants, and Children program, a Fitness Center, Early Intervention, Evaluations, Head Start and Early Head Start;
  • $215,528 in salaries for employees who worked for multiple programs, but whose pay was over- allocated to SEIT expenses;
  • $74,025 for unsupported expenses on 10 leased vehicles that Yeled failed to keep usage logs for as required; and
  • $19,597 for gifts, including $645 for flowers and $16,191 for gift baskets given to both employees and non-employees.

DiNapoli recommended that SED review the audit’s recommended disallowances and recoup the money through adjustments to Yeled’s reimbursement rates.

The full audit can be found at http://osc.state.ny.us/audits/allaudits/093016/15s19.htm.

There are approximately 81,000 preschool students with disabilities who receive special education services in New York. Each year, the state and municipalities spend more than $1.4 billion to help provide those badly needed services. Unlike in other states, preschool special education services in New York are predominantly provided by for-profit and not-for-profit private contractors rather than the school districts themselves. There are about 320 approved private preschool special education providers in the state.

In June 2012, after his audits uncovered waste, fraud and abuse of special education funds, DiNapoli announced an initiative involving a broad look at the special education sector and proposed legislation to improve oversight of preschool special education provider programs. Chapter 545 of the Laws of 2013 was signed into Law on December 18, 2013. This Law requires the Comptroller to audit, by March 31, 2018, the expenses reported to SED by preschool special education providers throughout the state. The audits have continued to find improper use of public funds for special education and in some cases, outright fraud. Investigations related to these audits have resulted in 10 arrests and five criminal convictions and the recovery of more than $5 million in misspent public funds.

A comprehensive look at past audits is available online: www.osc.state.ny.us/audits/seitannualrpt.pdf