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SED Preschool Sped Audit

SED Preschool Sped Audit

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New York State Oce of the State Comptroller
Thomas P. DiNapoliDivision of State Government Accountability
Report 2012-S-103December 2012
Fiscal and Program Oversight of Special Educaon ProvidersState Educaon Department
 
2012-S-103
Division of State Government Accountability
1
Execuve Summary
Purpose
To determine whether the State Educaon Department (SED) provides adequate onsite scal andprogram monitoring of special educaon providers. The audit covers the period from July 1, 2008to November 2, 2012.
Background
SED oversees special educaon programs for students with disabilies between the ages of 3and 21. In addion to services provided by local school districts, these programs include servicesdelivered to about 75,000 preschool students by more than 300 for-prot and not-for-protenes at an annual cost of approximately $1.3 billion. Fieen State Comptroller audit reportsof private special educaon providers have idened widespread fraud and abuse resulng in$13.2 million disallowances out of a total of $139.8 million examined costs which were fundedby the State and local governments. In addion, six of these audits have been referred to lawenforcement. In response to the audit ndings, the New York State Board of Regents has directedSED to idenfy necessary program reforms.
Key Findings
• There has been no scal audit oversight of individual providers since 2007. There is also nosystem to ensure programmac review of providers on any cyclical basis. In the past four years,only about one-third of providers have been reviewed. Other scal oversight is limited to thedesk reviews of self-reported informaon contained in the Consolidated Fiscal Reports (CFRs)
that providers submit annually.
• Because of the lack of other scal oversight, the Cered Public Accountants’ (CPAs) rolein cerfying the CFR has become a crical control in the process. However, our audits havedetermined – and SED agrees - that CPAs are not fullling the responsibility and as a result theinformaon is not suciently reliable. Sll, prior to our audits, SED had no formal process torefer CPAs for professional discipline or to follow up on such cases.Not only is the reliability of the CFR informaon quesonable, but the process itself is complicatedand anquated requiring many manual calculaons and allocaons, all of which increase therisk of human error and/or the opportunity for abusive manipulaon.SED has not taken advantage of opportunies to use technology to replace many of the manualsteps that sta must undertake. The 17 rate-seng sta work with CFR data from more than700 providers who operate over 1,400 programs, each of which could require several dierentrate calculaons and adjustments.• Providers receive limited training and instrucons from SED. Training is limited to an oponalCFR preparaon course oered twice each year. SED does give all providers manuals andperiodic updates describing regulaons, cost reimbursement rules and CFR claiming processes.However, it mainly relies on providers to ask quesons if they don’t understand something.• CFRs are oen led late and are oen rife with error. Exisng penalty provisions do not funconas an eecve deterrent to these problems.• Rates are usually not nalized unl a year aer services have been provided and paid for.However, when audit disallowances do occur, the State recovers its funding immediately by
 
2012-S-103
Division of State Government Accountability
2
reducing payments to the eected county, which is then le to handle any possible collecon
from the provider.
Informaon sharing between SED and other funding agencies is ad-hoc at best. Cost adjustmentsdo not result in a revised CFR available to other funding agencies. Although some sharingdoes occur through the CFR Interagency Commiee in the case of large audit adjustmentsor suspected fraud, many programs funded by these other agencies are not cost-based andtherefore not aected.
Key Recommendaons
• Develop and implement a strategy, including necessary resources, for providing adequate onsitescal and program monitoring of special educaon providers.• Establish a formal process for idenfying and reporng CPAs who appear negligent in theircercaon of CFRs to the Oce of the Professions.Coordinate with other State agencies to develop a system to ensure that CPAs cerfying providerCFRs demonstrate appropriate training, competence and performance.Review the CFR and rate-seng processes to idenfy opportunies for streamlining operaons,updang technology and reducing complexity and the occurrence of errors.• Assess the feasibility of meaningful monetary penales for providers failing to provide anaccurate and mely CFR.• Formalize policy and procedures for sharing idened provider problems with other State
agencies that are also funding the provider.
• Reevaluate and enhance provider training requirements, including frequency, content andrequirements for aendance.
Other Reports of Interest
 

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