Division of State Government Accountability
To determine whether the State Educaon Department (SED) provides adequate onsite scal andprogram monitoring of special educaon providers. The audit covers the period from July 1, 2008to November 2, 2012.
SED oversees special educaon programs for students with disabilies between the ages of 3and 21. In addion to services provided by local school districts, these programs include servicesdelivered to about 75,000 preschool students by more than 300 for-prot and not-for-protenes at an annual cost of approximately $1.3 billion. Fieen State Comptroller audit reportsof private special educaon providers have idened widespread fraud and abuse resulng in$13.2 million disallowances out of a total of $139.8 million examined costs which were fundedby the State and local governments. In addion, 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 idenfy necessary program reforms.
• There has been no scal audit oversight of individual providers since 2007. There is also nosystem to ensure programmac 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 informaon contained in the Consolidated Fiscal Reports (CFRs)
that providers submit annually.
• Because of the lack of other scal oversight, the Cered Public Accountants’ (CPAs) rolein cerfying the CFR has become a crical control in the process. However, our audits havedetermined – and SED agrees - that CPAs are not fullling the responsibility and as a result theinformaon is not suciently reliable. Sll, 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 informaon quesonable, but the process itself is complicatedand anquated requiring many manual calculaons and allocaons, all of which increase therisk of human error and/or the opportunity for abusive manipulaon.• SED has not taken advantage of opportunies to use technology to replace many of the manualsteps that sta must undertake. The 17 rate-seng sta work with CFR data from more than700 providers who operate over 1,400 programs, each of which could require several dierentrate calculaons and adjustments.• Providers receive limited training and instrucons from SED. Training is limited to an oponalCFR preparaon course oered twice each year. SED does give all providers manuals andperiodic updates describing regulaons, cost reimbursement rules and CFR claiming processes.However, it mainly relies on providers to ask quesons if they don’t understand something.• CFRs are oen led late and are oen rife with error. Exisng penalty provisions do not funconas an eecve deterrent to these problems.• Rates are usually not nalized unl a year aer services have been provided and paid for.However, when audit disallowances do occur, the State recovers its funding immediately by