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Finance board: If there’s fraud, we will find it

$30,000 set aside for forensic audit into special ed expenses

While the town teemed with ghosts and goblins making their trick-or-treat rounds, a room full of Darien’s most powerful public figures sat to discuss how to engage a forensic audit into the school district’s special education grant applications.

The Board of Finance took the main dais, while the Board of Selectman sat at a table brought in for the special meeting between the two town bodies. Four Board of Education members sat in the audience. The moderator for the Representative Town Meeting was there, as was a selectman candidate. Just five days before an election, one finance board member was at her last meeting, and two selectmen had their last audience with the finance board.

The Board of Finance chose to hire a new auditing firm to perform the audit, for which the financiers set aside $30,000 for payment. McGladrey, the town’s auditors since 2010, was not chosen because of the sensitivities surrounding the issue, according to Liz Mao, Board of Finance chairman.

The issue came to light when special ed investigator Sue Gamm became aware of some discrepancies in the district’s applications for reimbursement for excess cost expenses. The excess cost grant is money the state reimburses a district for special education-related expenses that surpass the per pupil cost by 4.5 times.

Several parents claim that school officials applied for money from the state to reimburse the district for services the district did not provide. Names of people who had resigned appeared on some children’s education plans, which means that the district could have gotten money for services that never happened, parents said.

• Special ed fraud in Darien?

“We had reported providers as providing services for students who had left the district’s employ,” said Kate Buch, town finance director, clarifying, “We reported them as having provided services after they left the district’s employ.”

However, as Buch pointed out, it’s possible that someone else provided the services. But the results of a state Department of Education investigation could belie that possibility, as the state found that school officials made substantive changes to some children’s special education plans without parental consent, which violates the federal Individuals with Disabilities Education Act.

These changes included removing services that children received prior to the hiring of Deirdre Osypuk, special education director, in 2012, parents allege. It’s been said that Osypuk directed some staff members to cease services that were implemented under former director Robin Pavia.

• Silence broken: Former special ed director claims Falcone not culprit

Julie Bookbinder, a long-time speech and language pathologist with the district, resigned after Osypuk was hired. In an email sent to former Superintendent Steve Falcone in September 2012, long before the special ed issues became public, Bookbinder noted Osypuk’s changes could be illegal.

“The sweeping decisions… give the impression that Darien is providing one-size-fits-all special education services, not individualized programs,” said Bookbinder, whose nickname in Darien was St. Julie for her strong ethical stance. She also said that she and her colleagues felt pressure to do as they were told, and risk violating their professional code of ethics.

A district in turmoil: Special ed problems exposed

The changes made under Osypuk could be related to the problems now surfacing, some parents said. [Read more on Osypuk’s response to Bookbinder’s email, and other former district employees’ responses, on Monday at DarienTimes.com]

“We do have potential liability,” Buch said. “We don’t know how big it was, we don’t know what services weren’t provided. We don’t know that without going into further detail,” which the audit should provide.

The town keeps $14 million in a reserve fund. The district received $2.2 million from the state from the excess cost reimbursement this year. Buch said that the amount at stake “is a non-material number as far as the auditors are concerned.”

“This should not hold up our regular audit,” she said. “At worst, there might be a subsequent event footnote… saying a special audit was done.”

Mao urged those in attendance to keep the issue in perspective, especially at such a difficult time with all that’s happening with the school district.

“We don’t have any allegations of financial impropriety at this point,” Mao said. “At this point, we just don’t know.”

The forensic auditor is expected to look at 50% of excess cost applications to see if there are a high number of errors. Normally, the auditors examine a random sampling of 25%, Buch said. Selectman David Bayne asked if the audit should look at more than 50%, but Buch said that number is the standard for forensic audits.

“They do a random sampling,” she said, noting that if a “significant” percentage shows errors, they will examine the entire year. If more errors are found, they could go back to 2012 and check those numbers. It’s unclear what number would be considered “significant” enough to require further examination.

Buch said the auditors could have a percentage in mind, and the town could request a more stringent threshold to trigger a deeper look, but not a more lenient one.

Mao recommended that the board choose a new auditor, in light of the intense spotlight on this issue. Board member Jon Zagrodzky agreed.

“It’s such a high profile topic, and it’s so important to get this right and for people in town to see, and so there’s no chance of bad appearance,” Zagrodzky said. “Just for this reason, we should go with a different firm.”

The board hasn’t decided which firm it would choose. The name CohnReznick came up, and Buch said most firms would be ready to perform the audit soon, since now is the time when many annual audits begin anyway.

Some confusion surfaced over the actual course of events surrounding the upcoming audit when board member Gwen Mogenson said the problems were found as part of the normal “audit procedure.”

This contrasted what was released by the first selectman’s office, which stated that the problems were exposed by investigator Gamm, who found some discrepancies in the district’s expense reimbursement reporting while examining the district’s special ed practices. Gamm is slated to present a “key findings” report to the public at the high school auditorium on Monday, Nov. 4, at 7 p.m.

Gamm to share ‘key findings’ report publicly Monday

Betsy Hagerty-Ross, Board of Ed chairman, clarified the order of events. Gamm told the Board of Ed about the problems, and the board gave her permission to contact McGladrey, the town’s auditors. Gamm did so through the school board’s attorney, Andi Bellach from Shipman & Goodwin. McGladrey then informed Buch, who told Jayme Stevenson, first selectman. Mao was then informed, and a special meeting was scheduled.

The finance board unanimously chose to hire a different auditor to avoid any appearance of impropriety. Members lauded McGladrey as a having done a good job, but the decision was made to assuage any assumptions of a conflict of interest. If the audit went back to 2012 and found errors in the random sampling that had already been vetted and approved by McGladrey, that firm could be put in a precarious position, Bayne pointed out.

Resident Walter Casey commended the Board of Finance for choosing an independent auditor, but urged them to look at 100% of the cases immediately.

“I’ve been an auditor,” Casey said. “I would go 100% and bury this thing… The elephant in the room is fraud. That’s what people think is out there. Find out how much, who did what… you gotta bury that.”

“I assure you if there is any fraud, we will find out,” Mao said. “I promise you, we will find out.”

• Explore all stories, letters to the editor and editorials related to the special education crisis here

• View the state reports, parent complaint documents, and other PDFs here

 

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  • Vickie Riccardo

    Correction for 2nd paragraph — “Representative” Town Meeting. Thanks for your continuing coverage of this important matter.

  • mom50

    The town keeps $14 million in a reserve funds?

    Wow. Unrestricted? Boy.

    And of course we now know that surplus cash has been transferred two years running from education to the town, according to previous posts by the Chairman.

    That is a lot of cash. You would have thought, based upon the overwhelming rhetoric last year by the RTM, BOF, all loudly proclaiming, in panicky letters, how special education was sucking the wind out of our town, that we were starving for cash, all due to special needs children.

    ” I feel compelled to remind everyone that a little more than a year ago, the hot controversy in town was over the rising cost associated with special education. The administration and board of education were told in 2012 that they needed to reign in costs for special education….Reimbursement from the state has fallen for several years so we need to decide, are we lowering our standards, or paying more to maintain high ones?”
    Robert Kernan RTM

    Remember?

    And the best. Ms Mao posted in the comment section to Vicky Riccardo’s July 29 letter :
    “ For several years in a row, the Board of Finance fully funded the BOE requested budget , and it still was not enough because of the explosion of special education expenses. In the springtime, the administration would start cutting back spending in other areas like the library…:”

    We had visions of unemployed librarians wandering the streets, whilst disabled children existed in luxurious classrooms with butlers and nannies …

    Of course the only expenses that went up in sped, we later learned, were outplacement. Period. (pssst..they went after in house– not outplacement– with a fury! so obsessed with cutting in-house costs they broke the law!!)

    And the minute someone says, well, maybe this audit will impact our bond ratings…whammo= we learn we have about $14 million in unrestricted cash.

    Dear God. Shame on these people. Unbelievable.

  • lisbeth ehrlich

    there are only 17 outplaced students, there isn’t enough cash in that pool to get their toes wet. btw, my kid is outplaced and it certainly isn’t butlers and equine therapy. i am grateful to the teachers who help him, but his school just got a library , they have no fields to maintain and no afterschool programs so i cant believe the tuition is all that much.

    • mom50

      Lisbeth, I was joking, being ironic. And referring to our system, not outplacement.

      They were implying special education- every spring- was squeezing gen ed so much the administrators were having to cut back on certain items, like the library, simply to make budget. This statement of course pitts our disabled against the gen ed population, as if this were some kind of us versus them war. We were scrambling so desperately for money were had to cut library books to pay for the aides over in sped. You know..

      All along we had $14 million in unrestricted cash reserves!! (where are they invested? And why is our mill rate going up? I don’t understand, but of course I am not trained in this….so I am not going to go there)

      I realize I could have hunted down our town’s balance sheet, then, with no training in fund accounting, waded through it. But we depend upon our experts to do that. We trust them when they issue alarming warnings to us. We trust them when they say that gen ed is being squeezed out by special education etc.

      Then to find out we have all this cash.

      I don’t know. I am seriously thinking about finding some retired or existing analysts to act as an outside advocacy group and look at everything in detail. It’s very complicated but someone out there can help.

      I don’t trust anyone anymore.

      • lisbeth ehrlich

        i am a budget analyst. 10 years on wall st tracking and allocating expenditures company wide for securities firms,down to the individual trading desk, in dual currencies. also developing cost allocation methodolgies for expenditures based on useage, space allocation and headcount in addition to tracking large and small projects including allocation of staff and resources devoted to said projects, on long and short term bases. also versed in asset management, amoritization, accounts payable/ receivable, depreciation and accruals.

        someone like that?

  • lisbeth ehrlich

    to clarify, the pool i was referring to was the pool of money spent on outplacement. it may have gone up but they number of kids outplaced over the past 5 years has been pretty steady so unless tuition has increased dramatically something is amiss.

  • lisbeth ehrlich

    sorry to hog the comment space but i just double checked some numbers:
    Osypuk’s budget presentation listed about $3.7 million on out of district tuition.

    Robin Pavia’s budget in Jan 2010 for the 2010-11 school year listed out of district tuition as $1.067 million in 07-08, $1.343 million in 08-09, $1.4 million in 09-10 and $1,158 million in 2010-2011.

    The state lists reported out of district tuition as $1.274 for 07-08, $1.647 for 08-09, and $1.275 for 09-10 – the last year available.

    so why the discrepancies between the state and the 2010 presentation (neither included transportation costs, tuition only) and how the heck did Osypuk get to $3.7 million in her presentation? anyone?

  • John

    The CDSP’s 2012 budget presentation included a slide which documented per pupil SPED operating expense increases of 25 percent each year between the ’07/08 and ’10/11 school years. SPED’s per student operating expenses jumped from $488 to $949 budgeted
    in ’11/12– a pace that was simply unsustainable if continued. It is important to note that this pace was not nearly matched by any other school district in the region.

    Needless to say, the program must be repaired to correct the faulty “remedies” the administration put in place over the last year. Such tactics were inexcusable.

    As the district begins to move forward, it is crucial that we understand what led to the rapid and extraordinary expense increases before this year’s events unfolded. Was staff /resources mismanaged? Were excess services provided? Were efficiency opportunities ignored? Or perhaps they were justified, but how and why?

    The ultimate goal of our district to provide a fair and appropriate education services for ALL of our students, nothing more and certainly nothing less.

  • lisbeth ehrlich

    Yes all that should be taken into account, but presentations are one thing, and the numbers listed above are taken from the actual budgets, with the exceptions being Mrs Pavia’s numbers. her 09-10 were estimates to year end and her 10-11 were projections. we should be looking at actual line iten expenses, not just a slide. and yes ALL expenses should be scrutinized in this manner. If the BOE would make its budget available online like the Town does, it would greatly increase transparency.

  • mom50

    John, your the sound bites contain no detail or explanation. You start by not even looking at the numbers. Just a total number and then all this talk about being so confused as to why this happened. This out of control expenditure.

    Down at the bottom of operating expenses on the BOE budget is an item referred to as tuition–public (CES) and private . If one were to add those numbers to out of district transportation, one could see why operating expenses jumped.

    Operating expenses jumped and the primary reason had nothing to do with any “program”. It related to outplacement tuition.

    That is not to say that there are not inefficiencies. I am not an educator or even an analyst but I do understand how to add and subtract. I am sure there are ways to make for a more inefficient education system. One way is to follow the law.

    The BOE budget, projected and final, is on the public school web site. They have historical numbers, then year end estimates, then projections. I don’t think they are audited, but it at least can give a person an idea about trends and accountability. I think someone pointed that out in a post–to look at the operating expenses in detail–so I did.

    the tuition jumped from something just below $1 million back in 2009 to $3.6 million for projected 2013. Out of district transportation doubled to something like $619 million by 2013. I would have to go look at what it all came in at. So total outplacement is over $ 4 million. I don’t know what the number is for 2013.

    It’s hard to know how many students this tuition relates to. The true outplacement number, Lisbeth, for district (district) placement is, like 22, or something. The IEP follows those kids. But they also have cost sharing arrangements, where the parent mediates a settlement and obtains reimbursement. I suspect some of the tuition includes that type of reimbursement. That would be a great question for anyone to ask. Maybe Ms. Gamm asked them.

    If you take total operating expenses and deduct legal fees, tuition payments, out of district transportation, you get a better number for what we are spending for our special needs kids. That is the number to look at,. And since the big rush to slash special education had ONLY to do with that number, perhaps we should all look at that numbers trend over the years. We should look at it on per students enrolled inside the school. I.E. total students minus outplaced students.

    I did.

    Flat. Actually down, since 2010.

    • mom50

      I meant to say total expenses –including personnel and operating–. Not just operating. Personnel is an important trend too.

      • lisbeth ehrlich

        hey mom50, where on the website is the boe budget? i have looked but couldnt find it. can you post a link? btw i believe the extra 5 students ( 22 vs 17) are be magnet school placed students who are NOT sped. it is referenced in to 2010 budget that way. maybe they forgot a footnote?

  • Vickie Riccardo

    It makes sense to me to examine the expenses associated with educating special education students who receive their instruction and services within Darien’s public schools separately from the expenses associated with outplaced students, as the former were the focus of changes implemented for 2012-2013.

    It also makes sense, as Shannon Silsby observed during the BOE Candidates Forum, to expand our view and look at programs offered elsewhere that may reduce service needs for some children. Years ago, the Windward School’s administration told parents that the White Plains public schools were then using Windward’s phonics based reading and writing programs as the curriculum for their elementary schools. (“It’s good pedagogy for all,” they said.) Result: no students from White Plains then enrolled at Windward. Darien sends more children to Windward than any of our neighboring towns. Discuss: Do we have a correctable curriculum problem?

    As the special audit progresses and budgeting for 2014-2015 begins, it will be important to separate all costs to uncover and recover from the SPED controversy from the costs to educate children who receive special education services. Costs incurred by grownups for grownups (from answering FOIA requests to hiring the ombudsman — especially while D. Osypuk is still on the payroll) should not be thrust upon the shoulders of children.

    With the 9/7/2012 Bookbinder e-mail in hand, we know that much of the controversy’s expense was avoidable. Create a separate line or category for controversy-related expenditures, so there is no risk that those numbers will be wrapped into special education, and perhaps construed as part of the “unsustainable rate of per pupil increase.” This is not their fault.

  • John

    Mom, Sure, if we peel back all the rapidly growing areas of the school budget, we’ll find that the other expenses didn’t grow.

    I’m glad people are beginning to realize is that there were significant expense problems brewing under Mrs. Pavia’s watch. The remedies employed by the administration were inexcusable, but that doesn’t mean we shouldn’t discover the roots of the budget issues, for the benefit of EVERY child in the district.

  • lisbeth ehrlich

    but if what i read was true, and some legal expenses were moved to the out of district tuition line, that would not only account for the appearance of hyperinflation in outplacement costs, but would be a mischarecterization of those expenses. legal expenses should be what we pay to lawyers, both district and the parents’ when made part of a settlement, and any reimbursement made to parents – even if that reimbursement is for tuition they paid for on behalf of their child, it is a settlement cost and therefore a legal expense. The only thing that should show up under tuition is monies paid directly to schools for children placed in those schools. this is an important distinction especially if we are considering ECS reporting and truly understanding how we are incurring these expenses.

    • mom50

      The only thing that should show up under tuition is monies paid directly to schools for children placed in those schools. this is an important distinction especially if we are considering ECS reporting and truly understanding how we are incurring these expenses.

      Completely agree.

      We should have examined this closely. Very closely.

  • John

    Lisabeth, it would be easy if we could simply attribute the expense growth to lawyers and outplacements. But, looking back to 2010/11 the fact is Darien had significantly higher SPED admin: student, speach & language FTEs:student, teacher:student, and aid:student ratios than EVERY school district in our DRG under Mrs. Pavia’s watch.

    Given the focus this district’s budget will face, I’m very confident that the new administration, will have one of the most comprehensive plans in place to run a program that delivers a great education experience for all of our students, but with expense base that is more in-line with our peer communities.

    • mom50

      Hey Mr. Sinni

      I think everyone who reads this board (about, what, 10 people? But, hey, that’s a start!) should be enlightened by this discussion.

      You started off with a huge complaint about sped total operating expenses, didn’t you? Supplied by the CDSP– our experts in town on finance.

      OK. So, let’s do some basic math, shall we?

      Let’ look at operating expense increase between 2009/10 to 2012/13 (estimate from BOE budget)

      That change is about $2.018 million.

      OK. Let’s look at the change in dollars spent on outplacement and transportation associated with it for the same period.

      That change is–$2.551 million.

      So, let’s review.

      Operating expenses–what you have been complaining about–has gone up. Yes, indeed!

      Why?
      Well about 126% (YES, THAT IS 126%!!– meaning other expenses had to go down.) was related to placing students elsewhere.

      I.E. it had nothing at all to do with in house expenditures.

      • mom50

        let me say, that I do think the CDSP supply excellent information, they do a good job with that, and you do have to work with what goes public.

        All I am saying is the details are important.

    • lisbeth ehrlich

      but it should only be in line with our peer communities if the needs of our population is in line with our peer communities, right? now i tend to agree with you, that our money is not necessarily spent in a way that maximizes its benefit to our children, but let’s look at why. the answers may come from asking different types of questions, like why does darien have almost 4 times the number of yearly incidents of seclusion and restraint as new canaan? is our population that much more needy? are the staff in darien under trained? or over taxed? new canaan has many more paras than we do but fewer teachers. is that the answer? we have to look at numbers, but not just the numbers with dollar signs in front of them to find out what is really going on.

      • John

        All great points!

  • John

    Hey Mom, your ignoring the fact that your base year already had expenses in it that were hugely out of line with our DRG – driven by ratios of teachers, students and aids that were much, much higher than our surrounding districts. So yes, outplacements drove the increases in later years, but internal expenses drove the increases in earlier years. We need to understand why this occurred and why our resources were so out of whack with our peers.

    My data is not solely from the CDSP, and published budget docs, but the RTM F&B Committee’s presentation which sparked the March 22, 2011 BOE meeting that reviewed the program and left several goals unmet.

    And yes, the CDSP does an awesome job in dissecting and presenting our district expenses. Kudos to the group for a job well done, year after year.

  • John

    Sorry, should have read “student aids” – not students aids.

  • mom50

    “driven by ratios of teachers, students and aids that were much, much higher than our surrounding districts. ”

    Hey John.

    Teachers, and aides would be in personnel category. That is than operating expenses.

    The year I starte was 2009/10. That is the base year.

    In the 2010 Badway report, Darien SPED cost per student was in the LOWER THIRD OF THE DRG-A.

    Yes. Lower third.

    The increase started then. And that is what I explored.

    Goodnight. I am now out for the evening. Have a great weekend.

    And, John, let me say, seriously, that I do appreciate now hard you work for this town. Your dedication is admirable. I simply disagree with you.

    I disagree with you and am disappointed in the lack of adequate research some of you have done (and it’s all available online).

    I will also say in closing, that in the last few months I have been very proud of the BOE (and Betsy HR) for stepping up to the plate. It takes courage to reflect, to listen to the other side, and admit that mistakes have been made.

    Still, I think a change is needed. A fresh change. It will help our town

    But, that said, the current BOE has turned things around and are trying. I applaud that.

    • mom50

      Teachers, and aides would be in personnel category. That is than operating expenses.

      I think my Mac makes changes in my typing. I meant to say. “That is a DIFFERENT category than operating expenses. “

  • lisbeth ehrlich

    well i know that turning parents away without investigating their concerns is one huge problem that costs money. why do so many parents feel they need advocates and lawyers to get their kids educated? because otherwise, i think most parents feel they are not really listened to. add this to lack of transparency (aides that aren’t supposed to talk to parents, failure to notify parents if a service provider is absent, lack of data to support iep ratings and a myriad of other things that the schools wont voulenteer information on) plus no internal appeal process and parents are forced into begining due process, even if they don’t want to. most people can send their kids to school and they get tests, papers, quizes and can easily track progress. they dont have to justify why bobby needs math class, but i have to justify to an entire team why my kid needs ANYTHING. this sets the tone for an adversarial process from the get go. this needs to change as well.

  • John

    Hey Mom , the admin/teacher/aid:student ratios tell a much different narrative. It is simply undeniable that Darien was significantly over-staffed relative to its peer communities. The key question is why?

    That said, I’m quite confident we’ll eventually find the reason of what was going wrong before things went really wrong this year. The ombudsmen has a fabulous record of ensuring fair and appropriate services will be delivered within today’s budget realities.

  • mom50

    “Hey Mom , the admin/teacher/aid:student ratios tell a much different narrative. It is simply undeniable that Darien was significantly over-staffed relative to its peer communities. The key question is why?”

    Yes, I do remember we have more special education teachers than most others. I don’t know why. (aides fluctuate, and could be related to the make up of our population of special ed kids). And then why were costs per student so low? And why in the world were we sending kids elsewhere? With all those teachers we should be able to manage them in-house, right? I think, lisbeth has a good point. Sometimes, simply listening and treating a parent like a partner can avoid heavy spending. It certainly could have avoided all this extraordinary spending this year. Transparency is efficient.

    Obviously there must be other inefficiencies and parents can help with that. They know little things, small hiccups that can save money. Ask them!

    Reassessing should not be panicked and negative. You don’t come in and encourage dramatic changes that obviously, inevitably lead to illegal activity. It was bad management all around. You come in and get along first– understand, listen. Then train.

    Look at how Terri DeFrancis operates. And Verre. They are people who can pause and listen. Just having good managers come in to provide role models is a good first step.

    • John

      I agree! Time to clean this up and move forward with much better management than we’ve had over the last several years.

  • lisbeth ehrlich

    i think it is time to work together, listen to each other and be creative. Ask the parents of special needs kids what they want most for their kids, and you may find it costs very little. (in my experience it is acceptance, friends, stability and a solid educational experience) I hate the term think outside the box, but if we look for unusual solutions to our problems this is the time to enact them. How About a magnet school using the co-teaching model where parents with kids can choose to send their kids? we have space issues in the elementary schools that could be alleviated if we opened a small magnet school, maybe in the town hall space the BOE vacated? it used to be a school, would renovating the space be faster and cheaper than trailers or an addition to Tokeneke? Make it a 6 to 6 school and that alone would attract students, but i think you might find that the idea of having two teachers in each class, one special ed and one regular, might attract parents too. it would help consolidate expertise and as it would be placement by choice, it would avoid the educational setting issue of kids not being in their “home school”. if we look we may already have the necessary staff to do this, and if class sizes are kept small all kids will benefit. but please remember that there will always be a small number of students who must be outplaced, no matter how good our inhouse program is. you can have the best dentist in the world, but you don’t want him taking out your tonsils! in the same vein you cant expect a school to have the resources for every kid, but you can expect them to serve the vast majority with the same quality they provide the regular ed kids.

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