Fraud in Special Education

Fraud in Special Education
Published: August 7, 2012
Over the last several weeks, Comptroller Thomas DiNapoli of New York has issued audits detailing millions of dollars in fraud by private companies that provide special education services to preschool children with learning, developmental or other disabilities.
With more than a dozen audits in the works, the bad news about the troubled program is clearly not over. And the scope of the wrongdoing could be broader still given that many of the companies that provide such prekindergarten services also work with special needs populations in programs financed through other state agencies. The Legislature needs to conduct a full review of the $2 billion preschool program, which is financed by counties and the state, and create an effective oversight system.
The most recent comptroller audit, made public last week, found overbilling at a Long Island company called IncludEd Educational Services similar to that uncovered in other companies earlier this year. The company is said to have misused millions of dollars in public money, employing nearly a dozen family members. It closed in April owing New York City’s Education Department $3.15 million, including for services that it billed for but did not provide. The audit found an additional $2.6 million in overbilling between 2007-9. The findings have been referred to prosecutors, who have opened several investigations based on previous audits.
The Department of Education, which does a cursory examination of the provider cost reports and then passes them on to the comptroller for payment, lacks the resources or expertise to perform comprehensive audits. The obvious first step would be for the Legislature to create a permanent audit division within the comptroller’s office that would handle preschool special education — monitoring the programs as well as processing and auditing the financial statements. That would mean hiring more auditors, but they could also examine all the special needs services that companies furnish to the state.
Beyond that, the Legislature needs to rethink the way the state delivers these services. David Halbfinger reported in The Times earlier this year that New York is the only state that turns over preschool special education to private contractors, many of which are for-profit companies.
In most of the country, The Times reports, these services are provided through the public school districts. State officials in New York place the annual average cost at about $17,000 per preschooler. The Times reported earlier this year that the average cost for children in Massachusetts, which is said to have a generous program, was less than $10,000 per child.
New York’s program also allows companies to both identify children’s disabilities and then provide the services. That sets up an inherent conflict of interest, making it easy to overbill simply by claiming more and costlier services than the children actually need.
The politically powerful special education lobby has been able to stonewall reform. But given the abuse found in audits recently, it’s clear the preschool program is long overdue for an overhaul.