ALERT sent in by former lawyer, now publisher of The Special Education Muckraker, Dee Alpert:

It would appear that this really whopping scandal developed at the NYS Ed.Dept.'s Office of Vocational and Educational Services for Individuals with Disabilities (VESID) while Larry Gloeckler was VESID's head. Read the press release from Commissioner Mills and the audit which the release links to.
Of course, nothing is mentioned about how this all appears to have developed during Mills' tenure.

What can one say when it turns out that the State Ed. folk in charge of vocational ed. and services for adults w/disabilities have been - at least some - stealing quite successfully, while clients sure didn't get the computers, etc. which were allegedly provided to them.

What you can say is that since the same entity - VESID - handles special education in NYS, there should be another separate audit of how VESID handles special ed. funds, services, etc. The Medicaid audits of related services allegedly provided to NYS IEP kids by allegedly qualified personnel showed . . . well, 5 of the 6 audits are still politically sequestered in US Dept. of Health & Human Services. The first, concentrating on the Buffalo Public Schools, unearthed rather shocking frauds, for which nobody will ever be prosecuted. However, just for Audit One, NYS must repay over $170,000,000 to Medicaid. We hear that the other 5 audits will top it off at $1 billion.

All our kids deserve better. All the adults with disabilities deserve better. The taxpayers deserve better, too.

Dee Alpert, Publisher
The Special Education Muckraker

FOR IMMEDIATE RELEASE, September 7, 2004

For More Information Contact:

Jonathan Burman, Tom Dunn or Alan Ray (518) 474-1201

Internet: http://www.nysed.gov

COMMISSIONER MILLS ANNOUNCES RESULTS OF VESID AUDIT AND OUTLINES CORRECTIVE ACTIONS TO ELIMINATE PROBLEMS

State Education Commissioner Richard Mills today announced the results of an audit of VESID's Office of Vocational and Educational Services for Individuals with Disabilities, and outlined the corrective actions that have been taken to stop the problems found.

The VESID audit, just completed Friday, found that management failed to create strong financial controls and failed to provide enough oversight and monitoring of the purchase of equipment and services.

"We have imposed strict central and local controls over spending and reported our findings to the Attorney General and the Office of the State Comptroller," he said. " We identified the small number of individuals who may have broken the law and reported them to the Attorney General for prosecution."

VESID provides education to adults with disabilities and helps them obtain good, productive jobs. VESID has over 300 counselors in 15 district and 10 satellite offices serving over 106,000 consumers as year and spends about $120 million a year on support services, maintenance and transportation, and case services.

The audit covered three district offices and one satellite office. Investigations of the other offices will continue. Any other individuals suspected of breaking the law will also be reported for prosecution.

Commissioner Mills' report on the audit and corrective actions and a copy of the audit are attached.

Attachment

SUMMARY:

It is management's responsibility to establish and maintain financial controls. Financial controls in an organization are not to be regarded as a distraction from the main function of an organization but are integral to the success of the work.

The State Education Department has been conducting a detailed audit of financial controls in the vocational rehabilitation division of VESID, the Office of Vocational and Educational Services for Individuals with Disabilities. That audit has found that management failed to create strong financial controls and failed to provide enough oversight and monitoring of the purchase of equipment and services. The audit (attached) includes three district offices and one satellite office. Although the vast majority of VESID employees have acted honorably, the lack of controls may have enabled a small number of individuals (three) to break the law.

There are no acceptable excuses for financial control lapses. We must simply report and correct them. We have "turned off the spigot" by imposing strict central and local controls over spending and reported our findings to the Attorney General and the Office of the State Comptroller. We appointed a Department-wide team to develop improved financial systems and practices, imposed the tight controls that were needed to prevent abuses, identified individuals who may have broken the law, and provided information to the Attorney General for prosecution. We will also investigate VESID practices in other district offices. Any other individuals suspected of breaking the law will also be reported for prosecution.

BACKGROUND

The State Education Department initiated its own internal audit as a follow-up to the State Comptroller's audit of the VESID Utica District Office. The Comptroller's audit, issued in September 2003, found instances of non-compliance with the State's bidding requirements, potential conflicts of interest, and other potential problems. The Board of Regents reviewed that audit in November. The Department asked for and received assistance from the State Comptroller in conducting its own audit of three district offices and one satellite office, training staff, and imposing greater financial controls.

In February 2004, the Department's Office of Audit Services presented preliminary observations of weaknesses in VESID's financial control system and immediate steps were taken to correct them. At the same time, the Department contacted the offices of the Attorney General and the State Comptroller to advise them of the preliminary observations and seek their guidance. The internal audit was completed last Friday. On the basis of that, we have imposed additional controls. The Department will investigate all district offices.

Here are major findings, with corrective actions listed below:

Control Environment/Information and Communication

Findings:

The auditors found a "weak control environment" with inadequate supervisory oversight, inadequate emphasis on finance, and incomplete policies and procedures. The auditors urged the creation of a strong control environment  which sets the tone for an organization. They have described this as the foundation for all other aspects of internal control, providing discipline and structure. It includes such factors as integrity and ethical values, commitment to competence, assignment of authority, and organization structure. Creating a successful control environment requires "clearly communicating expectations to staff, assigning responsibilities and authority to make decisions to the appropriate level, and routinely monitoring performance."

Corrective Actions:

Referred individuals to the Attorney General for investigation and criminal prosecution. Directed SED Human Resources Office to begin disciplinary action against deficient employees. Reassigned three employees and eliminated their access to financial operations.

Informed Office of State Comptroller and requested assistance, which was provided.

Commissioner and Deputy met with district office managers to define expectations about financial controls. The Commissioner talked again today with managers and staff in the district offices and central office to make expectations clear, to reaffirm the importance of the mission of VESID and the work that staff do to enable persons with disabilities to secure jobs.

New York State Ethics Commission delivered ethics training to VESID managers. Office of General Services provided training on State procurement laws to VESID business managers. Office of State Comptroller provided training to regional coordinators and district managers on internal controls.

Installed and charged new leadership (Deputy Commissioner Cort and Assistant Commissioner Placke) with ensuring fiscal integrity. Deployed cross-agency Vocational Rehabilitation cabinet with fiscal, legal and management expertise to create financial controls. Deployed fiscal staff from Office of Management Services to VESID Central Office.

Control Activities

Written Policies and Procedures and Review

Findings:

VESID had some written policies and procedures but lacked policies and procedures for purchasing and business activities, including vendor approval, delivery of goods and services, compliance with State purchasing laws, conflict of interest, and supervisory approval.

For example, eight consumers reported they did not receive over $43,000 in computers and other equipment that were purchased by VESID and charged to the consumers' cases. And the cousin of a consumer was paid $7,000 for a one-month trial employment without a contract or written justification for the costs; after a month the services of the consumer were terminated.

Corrective Actions:


Developed strict, centralized fiscal procedures and directed immediate staff compliance:

Now requiring all initial vendor authorizations to be reviewed at district level and approved in writing by individuals designated by Assistant Commissioner Placke.

Now requiring all payments for high-risk items to be reviewed and approved at central office by individuals designated by Assistant Commissioner Placke.

Implemented new policies and procedures, including an on-line manual, with requirements for quotes and bid, contracts, vendor approval, architect services, transportation contracts, childcare, compliance with State purchasing rules, conflicts of interest and other aspects of purchases and services. Vehicle modifications, regardless of amount, and home modifications in excess of $15,000 must be procured through a contract and pre-approved by the State Comptroller.

Separation of Duties

Findings:

Duties were not adequately separated to ensure no one individual controlled all aspects of a transaction. This increased the risk of errors and illegal activities.

Corrective Actions:

Prohibited any one individual from having authority to issue authorizations and pay vouchers.

Now requiring all initial vendor authorizations to be reviewed at district level and approved in writing by individuals designated by Assistant Commissioner Placke.

Now requiring all payments for high-risk items to be reviewed and approved at central office by individuals designated by Assistant Commissioner Placke.

Documentation

Findings:

Certain records were not required or maintained to support key transactions. For example, invoices were not required in some district offices. Instead, payment was made based on a signed voucher from the vendor. Similarly, district staff processed vouchers for payments without documentation or verification that the goods or services were received. Some services distributed to several consumers were erroneously reported as provided to one consumer.

For example, eight laptop computers were purchased for one consumer over a 17-month period, but documentation such as authorizations and invoices was not available in the case file to support the expenditures. Besides being undocumented, these purchases were not reasonable or necessary. And an authorization showed that $1,414 in "equipment/tools" was purchased for a consumer but documentation, such as an invoice to show the specific items purchased, was not required.

Corrective Actions:

Stopped authorizing payment for any equipment purchased unless invoices and records of receipt are provided.

Now requiring that all transactions are clearly documented and appropriately assigned to each consumer's case file.

Now requiring all initial vendor authorizations to be reviewed at district level and approved in writing by individuals designated by Assistant Commissioner Placke.

Now requiring all payments for high-risk items to be reviewed and approved at central office by individuals designated by Assistant Commissioner Placke.

Supervisory Review

Findings:

VESID supervisors reviewed case files to assess programmatic issues but did not systematically review purchases and did not review the case files to assess compliance with purchasing requirements or the adequacy of documentation.

For example, nine authorizations for $17,987 were issued on a closed case. Vouchers for eight of those authorizations were subsequently submitted for payments totaling $16,982 for purchases from a computer and camera/photo vendor. In addition, documentation was not available in the case folder to support the purchases.

Corrective Actions:

Installed and charged new leadership with ensuring fiscal integrity.

Now requiring all initial vendor authorizations to be reviewed at district level and approved in writing by individuals designated by Assistant Commissioner Placke.

Now requiring all payments for high-risk items to be reviewed and approved at central office by individuals designated by Assistant Commissioner Placke.

Deployed fiscal staff from Office of Management Services to VESID central office.

Transferred responsibility for vendor approval and database to VESID's fiscal management office.

Vocational Rehabilitation cabinet assigned to create monitoring system of all vendor performance.

Directed the Department's Bureau of Proprietary School Supervision to assume oversight responsibility for schools that serve VESID consumers.

Safeguarding of Assets

Findings:

Procedures did not exist to ensure records are maintained to show the receipt, use, and disposition of all goods.

For example, invoices from two vendors showed 33 laptop computers, valued at over $41,000, were shipped to a district office. The disposition of the computers is not known. And a counselor authorized the purchase of three camcorders for a consumer in a four-month period, but the consumer indicated he only received one camcorder.

Corrective Actions:

Central Office review of all high-risk purchases, including computers and other equipment items, will ensure that payments are only made after verification that consumers have received the appropriate services.

The VR Cabinet is developing additional procedures to ensure the receipt, use and disposition of all goods purchased for consumer use are properly documented and tracked.

Computer Controls

Findings:

Controls were not in place to limit access to authorized users, no adequate audit trail existed for the history of each transaction, and a detailed description of the goods or services authorized or purchased was often lacking.

For example, over 11,000 transactions were backdated over a 3-year period. In a review of a sample of these transactions, the auditors did not find adequate explanations or documentation. In one 10-month period, 11 authorizations worth $8,241 for one consumer were backdated by as much as 2.5 years and issued to the same computer vendor for the same consumer.

Corrective Actions:

Limited users' access to terminals and transactions to only those that are essential for their responsibilities.

New financial system being developed will create audit trail of the history of each transaction and require detailed description of the goods or services authorized or purchased. Meanwhile, the controls on approval of all authorizations and payments now in effect will ensure the validity of each transaction.

Eliminating backdating of authorizations except in specific conditions articulated in writing. Current exceptions are strictly limited to such things as payments for higher education expenses in which the final cost is not known until after the beginning of the academic year.

Risk Assessment

Findings:

VESID did not respond to a risk assessment conducted in 2000 to correct potential problems.

Corrective Actions:

Used risk assessment from 2000. Updated risk assessment and assessed all risks in accordance with the recommendations of the audit and will reassess risk annually.

Three VESID district offices and one satellite office have been audited (out of 15 district offices and 10 satellite offices); the investigation of VESID practices in other offices will continue. We will continue to work closely with the Office of the State Comptroller and the Attorney General and other agencies.


The vast majority of VESID staff behaved honorably. They worked hard on the mission, which is to enable persons with disabilities to find jobs. The Deputy Commissioner and I talked with them this morning. Next week we will again talk to all district office managers. I know that I can depend on VESID staff to work with me to ensure that the problems I have reported here will not happen again.

Internal Audit Report

Determine extent of misused funds
PoughkeepsieJournal.com, September 20, 2004

It's outrageous that three employees of the state Department of Education allegedly misused or stole cash and equipment intended to help some of New York's most vulnerable residents -- the disabled. Education Commissioner Richard Mills has made an impressively firm immediate response, but more is needed.

This far, the commissioner has:

- Turned over these allegations to the state Attorney General's Office, which will review them for possible criminal charges.

- Instituted strict new controls on accounting and purchasing in the agency where the employees worked -- Vocational and Educational Services for Individuals with Disabilities, or VESID.

The Department of Education does deserve praise for launching an internal audit several months ago, after reports were received of apparent wrongdoing at four VESID offices.

Staffers learned, for instance, that some $43,000 in equipment, such as computers and camcorders, were ordered but never received by disabled clients.

However, despite taking nearly a year, the audit didn't go beyond those four agency offices. VESID operates 25 offices statewide, including one in Poughkeepsie. Mills has refused to say which four offices were audited, or to name the three accused workers.

The Attorney General's Office has formally agreed to consider whether to charge the three accused VESID employees.

What's going on at the other 21 branches, however, no one can be certain. While no evidence has been revealed pointing to trouble elsewhere, this matter won't be fully resolved until an exhaustive investigation has been performed at every VESID office.

This inquiry should also be performed by the Attorney General's Office, which has the necessary expertise -- and not the Department of Education, which is focused on schooling, not prosecuting.

The Attorney General's Office has not decided yet whether to accept this responsibility as well. It should. There should be no concern about misuse of taxpayer money, or that New York's disabled population isn't getting the services it needs.