Press-Republican

April 27, 2013

Comptroller finds $7.7 million state funds unaccounted for by special-ed schools

By KIM SMITH DEDAM
Press-Republican

---- — LAKE PLACID — Two schools for disabled youth, including the Mountain Lake Academy here, have been cited for overcharging taxpayers $7.7 million.

State Comptroller Thomas P. DiNapoli released an audit that uncovered, among inappropriate payments, some $4.4 million in undocumented management fees.

Mountain Lake Academy is a boarding-school environment for boys and young men ages 12 to 21 with various behavioral challenges, among them conduct disorders, attention deficit hyperactivity disorder and post-traumatic stress disorder.

Lake Grove School, in Suffolk County, is a sister school.

And both were managed by Windwood Meadow Inc., based in Suffolk County, according to the comptroller’s documents.

SEVERED TIES

Carol Prevost, executive director at Mountain Lake, said Friday that the facility in Lake Placid is no longer affiliated with Windwood Meadow.

“None of the expenditures in the report were authorized or approved by any Mountain Lake personnel,” she said in a statement.

“When Mountain Lake became aware of some of the fiscal concerns raised in the report, we immediately began attempts to separate from the parent/management organization.”

That was accomplished earlier this year.

CEO SALARY

The Comptroller’s Office reviewed four years of school business records, from 2005 to 2009, for the audit released Friday.

It found “Windwood allocated its management fees among several of its affiliates, including Lake Grove and Mountain Lake, but could not explain those allocations. 

“Because of that, (the comptroller) could not verify if the $5.4 million in management fees allocated to Lake Grove and Mountain Lake were proper.”

Chief among undocumented costs were salary payments to Windwood’s former chief executive officer John Claude Bahrenburg.

“Bahrenburg was paid $450,521 in fiscal year 2006-07; $480,619 in (fiscal year) 2007-08 and $480,619 in (fiscal year) 2008-09,” the report says.

“Program reimbursement guidelines for both the State Education Department and Office of Children and Family Services (OCFS) require salary costs to be supported by time and attendance records for the funded program. 

“Auditors found that Bahrenburg did not maintain such records or any other documents to show how his actual time was allocated. 

“His salary also significantly exceeded executive compensation for other not-for-profits of comparable size.”

‘STUDENTS SHORTCHANGED’

The audit found that Windwood’s CEO also received “a $14,000 vehicle allowance for three years and $30,000 for charitable donations for two years.”

DiNapoli said those two expenses are not legally reimbursable under State Education Department guidelines, and no documentation indicated the costs were program-related.

In a statement released with the audit report, DiNapoli said special-education students were being shortchanged.

“The State Education Department and the Office of Children and Family Services need to step up and do a better job policing providers and making sure they only charge for appropriate costs they incur for their services, not exorbitant salaries and perks,” he said.

The comptroller reported that State Ed had “not conducted any on-site provider audits since 2007.”

LOAN TO BAHRENBURG

Other management fees paid by Windwood were also unsupported in school business records, according to the audit report.

These included “$55,395 in interest (Windwood) paid on a $250,000 loan obtained for the CEO over the three years ended June 30, 2009. Bahrenburg was supposed to repay $50,000 per year, but Windwood excused the annual repayment for two years. 

“That resulted in both the interest and annual payments being charged to the company’s affiliates as part of the management fees.”

DiNapoli said New York’s Not-For-Profit Corporations Law prohibits facilities from making loans to corporate officers. 

‘NO CRIMINAL ASPECT’

Mark Johnson, a spokesman for the Comptroller’s Office, told the Press-Republican that it is the State Education Department’s responsibility to recoup the funds and “to rectify the situation.”

The audit found no criminal aspect, he said.

“We have not referred this to any law enforcement organization.”

NOT ON STAFF

In response to the audit report, State Ed officials said in writing that they would “review and make adjustments to the Consolidated Fiscal Reports for inappropriate and/or unsupported expenses … and recover any overpayments as appropriate by recalculating tuition rates.”

In their response to DiNapoli, officials at Lake Grove said Bahrenburg “is no longer on staff. The current CEO earns a salary 80 percent less than his predecessor.”

Bahrenburg is listed on LinkedIn as a practicing attorney in Killingworth, Conn.

NEW BOARD

In a letter to the state comptroller dated Jan. 18, Prevost said the new board would amend bylaws to “avoid conflicts of interest or even the appearance of such.”

Her letter indicated that Mountain Lake had an Office of Children and Family Services agency review last November.

“We are now totally independent and have a new Board of Directors comprised of prominent and local business and educational leaders,” she said in her statement Friday.

View a copy of the comptroller’s report at: http://tinyurl.com/cjtf6ka.

Email Kim Smith Dedam: kdedam@pressrepublican.com