Forensic auditor hired to examine special ed expenses

Town financiers hired one of the nation’s largest accounting firms to perform a forensic audit into the school district’s expense reimbursements from the state for special education costs.

The Board of Finance chose CohnReznick, a firm with offices across the country and in the Cayman Islands and India, to perform the audit, which was ordered in October when the town learned that the schools’ applications for reimbursements might have included money for services that were never provided.

• Editorial: Darien Times calls for forensic audit

The firm’s fee estimate was $12,000 to $15,000, according to board member Jon Zagrodzky, who sat on the three-member team that vetted the accounting firms. Blum Shapiro estimated the audit would cost $25,000 to $40,000, but also told the town it wouldn’t be able to start until January. CohnReznick was able to start “within a week,” according to Kate Buch, town finance director.

“CohnReznick partners seem to have a little more of a background in broad and forensic analysis, which seems appealing to me,” Zagrodzky said at the board’s Nov. 19 meeting. “Given the amount of money that’s being spent on our special education effort, that while these are small amounts, a penny saved is a penny saved.”

The firm will audit 100% of the in-district costs related to students whose education costs surpassed $72,834, according to an email by Liz Mao, Board of Finance chairman. It will also examine 25% of the out-of-district students whose educations were also more than $72,834.

Buch told The Times in an email that the focus is on in-district costs “because we believe the problems are primarily in the district.”

“If there are any problems with the 25%, we will go further,” Mao added.

In a 2007 report by the Office of Legislative Research, Judith Lohman, chief analyst, explains that most schools do not apply for reimbursements for in-district costs. Darien, however, does.

“In practice, according to Kevin Chambers of the State Department of Education’s Grants Management Division, school districts rarely claim excess cost reimbursement for resident special education students being educated within the district,” Lohman wrote. “He is not sure why, but it may be that, in most such cases, district costs either do not exceed the 4.5 times threshold or, if they do, it is by such a small amount that districts do not think it is worthwhile to figure out and document the proportional costs of common services on a per-student basis.”

The $72,834 figure represents 4.5-times the per pupil expense in Darien. This number is the threshold above which a district can be reimbursed by the state for special ed expenses. Problems with how the district applies for reimbursements surfaced when investigator Sue Gamm spotted some discrepancies in some applications. She requested the town look into these numbers further, which it is now doing with the hiring of CohnReznick.

Some parents told The Darien Times that there were names of staff on their children’s education plans who no longer worked in the district, and that some employees’ names appeared on several students’ plans as full-time aides. This means that one person would have been listed as a full-time aide for several students. According to state law, if an aide works with five students, that aide’s cost must be split five ways. The allegation is that the district would list one aide’s full-time cost on each of the five students’ plans, instead of dividing it equally.

Staff members who had left the district were also included on some education plans, parents allege. This would raise the education cost for that child on paper, thus potentially making that child eligible for additional excess cost reimbursements. In reality, however, those services might not have been delivered. Buch earlier noted that other staff may have provided the services, but simply were not listed on the education plans. The audit should determine that.

If auditors find a substantial amount of evidence showing reimbursement applications were either fraudulent or suspicious, the firm would then go back to earlier years, the finance board said in October. It’s unclear, however, what that threshold would be to trigger a deeper look.

The board earlier decided not to hire current auditors McGladrey to prevent any appearance of possible conflict of interest. A typical annual audit checks 25% of the students who are eligible for excess cost reimbursements. If the forensic audit found errors in data that had already been vetted and approved by McGladrey, that firm could be put in a precarious position if it were performing the forensic audit, as pointed out previously by former Selectman David Bayne.

Blum Shapiro was the town’s auditor prior to McGaldrey, which has been the town’s auditor since 2010. Zagrodzky noted this was more reason to go with CohnReznick, since they hadn’t audited the town since the early 2000s.

Blum Shapiro “have been exposed to some of the special education work in a more proximate way,” Zagrodzky said. “So we really wanted to take a completely independent approach and get a completely independent auditor. The CohnReznick guys are even further way from all this in terms of any involvement with the town.”

The Board of Finance set aside $30,000 for an audit at a Halloween meeting, so CohnReznick’s fee estimation is within that figure. This cost would put the town’s expenses at more than $400,000 in fees related to cleaning up its special education problems.

Originally published in The Darien Times.

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