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

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.

“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.

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.

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.

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.”

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