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Special needs agencies faulted

Auditor says millions misspent; lax oversight cited in reports

Auditor Suzanne Bump said state laws and oversight of the special education system are badly outdated. Auditor Suzanne Bump said state laws and oversight of the special education system are badly outdated.
By Michael Rezendes
Globe Staff / August 31, 2011

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More than two decades of failed oversight have allowed the state’s special education collaboratives to misspend millions of taxpayer dollars, according to the state auditor’s office, which has found a pattern of excessive salaries, conflicts of interest, and possible pension law violations at six of the 30 publicly funded agencies.

“These common findings are indicative of a system that’s lacking in standards and oversight and is easily manipulated by folks who are not putting the interests of taxpayers and special needs kids first,’’ Auditor Suzanne M. Bump said yesterday.

Bump, who plans to release the two most recent audits today, said the laws and policies for state oversight of the special education agencies are badly outdated, clouding the state’s authority over them. The state Department of Elementary and Secondary Education has not revised its policy governing the collaboratives since 1988, while the state law allowing cities and towns to create them is more than 30 years old.

“The [state] clearly needs to have its current authority clarified and will need additional authority as well to provide the kind of oversight that most of us would expect,’’ Bump said.

The audits due to be released today focus on two southern Massachusetts collaboratives, the READS Collaborative and the Southeastern Massachusetts Educational Collaborative, where Bump found multiple instances of financial mismanagement.

Earlier this month, Bump released an audit of the Merrimack Special Education Collaborative in Billerica, finding that former executive director John B. Barranco and other officials may have misspent more than $30 million on salaries, inflated rents, alcohol, and luxuries such as country club outings.

“The Merrimack situation is far and away the most egregious example of how far these organizations can stray from what any taxpayer would think is reasonable activity,’’ Bump said. “But some of the problems at Merrimack also exist at these other collaboratives.’’

The collaboratives are organizations of public school districts that pool resources to lower the cost of instruction, therapy, and job training for children and, in some instances, adults. Typically, a collaborative is governed by a board of directors comprising the superintendents of the member school districts.

Bump’s office said the state’s 30 collaboratives serve approximately 8,500 children throughout Massachusetts.

Yesterday, state Education Commissioner Mitchell D. Chester released a statement saying he welcomed Bump’s findings, adding that they will be reviewed next month by a special committee on collaboratives established earlier this summer.

“The information contained in the auditor’s reports is both timely and helpful,’’ Chester said. “My foremost concern continues to be protecting student services and the public dollar.’’

At a July meeting of the committee, Secretary of Education Paul Reville said the state’s ability to monitor the collaboratives declined after steep staff reductions in the early 1990s.

Because of the staff reductions, the state has failed to adhere to a policy of sending nonvoting observers to collaborative board meetings.

The lack of state oversight of the collaboratives was cited by former auditor Joseph DeNucci more than a year ago in a critical review of the Dedham-based Education Cooperative. In the audit, DeNucci, too, noted the outdated policy governing the collaboratives, asserting that the state “does not have effective monitoring, financial reporting, and auditing systems for education collaboratives.’’ Three of the six audits cited by Bump were done under DeNucci.

Stephen J. Theall, executive director of the Massachusetts Organization of Educational Collaboratives, which represents 27 of the agencies, stressed the importance of the collaboratives to special needs children while pledging to open the records of its member agencies. He said that the organization already has voted to suspend the Merrimack collaborative’s membership.

“More than 75 percent of Massachusetts school districts rely on educational collaboratives to provide quality educations to their most vulnerable students,’’ Theall said. “We are hopeful that the allegations related to the Merrimack Special Education Collaborative will not detract from the critical work educational collaboratives are performing.’’

Last week, the Merrimack agency’s board voted to hire a part-time interim executive director and management team to replace two coexecutive directors who were placed on administrative leave following accusations of fiscal mismanagement by Bump and state Inspector General Gregory W. Sullivan.

Bump concluded that a pattern of mismanagement plagues the collaboratives. The latest audits examine fiscal management at the READS Collaborative, a consortium of 14 municipalities south of Boston, including East and West Bridgewater, Middleborough, and Taunton; and the Southeastern Massachusetts Educational Collaborative, an agency of eight municipalities including Dartmouth, Fairhaven, and New Bedford.

Bump said she discovered several fiscal practices at the READS Collaborative that mirror those she found at the Merrimack collaborative, including conflicts of interest, excessive compensation paid to the former executive director, and a complex - and inappropriate - relationship with a related nonprofit organization.

For instance, Bump found that the former director, a retired superintendent of the Carver school system, tried to circumvent state pension law by having 100 percent of his salary paid by the nonprofit. At the time, he was simultaneously the executive director of the collaborative and the nonprofit.

State law limits the amount of money that someone receiving a teachers pension may earn from a public agency, but not from private organizations.

Before shifting 100 percent of his salary to the nonprofit, Bump said, the former director received more than $100,000 in compensation that he was not entitled to receive.

Bump said that at least six members of the collaborative’s administrative staff were working for the nonprofit in an apparent effort to enhance their pensions inappropriately by appearing to work for a public agency.

In its official response to the audit, a law firm representing the READS Collaborative said the state Teachers Retirement System had reviewed the former director’s compensation and determined that he was paid “only $28,570, in excess compensation’’ over seven years.

Bump also cited READS for loaning money to the nonprofit to purchase a building for classroom space without a purchase and sale agreement, preventing accountability for the use of public funds. She also said the collaborative overcharged nonmember municipalities for services to pay for the structure.

The collaborative, in its response to Bump, noted that it dissolved the nonprofit in June.

At the Southeastern collaborative, Bump cited the agency for receiving more than 50 percent of its revenue from services that it delivers to disabled adults, not children. Many collaboratives offer therapeutic services and job training to adults with disabilities, but Bump said the practice at the Southeastern collaborative “may be unnecessarily increasing the state’s pension liability by millions of dollars.’’

Catherine S. Cooper, the collaborative’s executive director, objected to Bump’s findings.

“I completely disagree with the finding on providing services to people over 21. There is no basis for that,’’ Cooper said in a Globe interview. “We provide great services at low cost.’’

Bump cited several additional areas where there appeared to be a pattern of inappropriate management practices.

They include the hiring of teachers who are not fully credentialed, an apparent attempt to cut costs, and the accumulation of inappropriate cash surpluses - at a time when many public school districts are reducing staff.

“Some of the collaboratives are sitting on surpluses in excess of what you would prudently keep on hand,’’ Bump said.

Michael Rezendes can be reached at rezendes@globe.com.