SCHI overcharged Lakewood, others by $340K

Payton Guion , @PaytonGuion Published 5:27 p.m. ET April 19, 2017
Asbury Park Press
LAKEWOOD — A high-cost school for special-needs children, whose founder and director was recently indicted on charges he stole hundreds of thousands of dollars in public money, overcharged the township's impoverished public school district and other schools by at least $340,000 in one year, the Asbury Park Press found.
The School for Children with Hidden Intelligence overbilled the districts by paying uncertified teachers; paying certain employees more than permitted by state law; and buying items deemed unnecessary for the school, according to an audit by the state Department of Education of the 2011-2012 school year. Some of those items were purchased at Costco, Staples and from merchants on eBay and mailed to the home of an employee not named in the audit. A large-ticket item, a power generator, was ostensibly purchased for the school's summer camp, but it could not be located by auditors.
The school also failed to do background checks on 71 of the 77 employees it hired that year, the audit found.
Rabbi Osher Eisemann, the school's founder and current director, was indicted earlier this month for allegedly stealing more than $630,000 in public funds and laundering much of the money. He was not blamed for the overbilling in the state's audit.
The state initially found in the audit that the school had overbilled by around $1 million, but the school is fighting the findings in court, saying that some of the charges were appropriate. The appeals process is ongoing in the state's administrative law division.
The school, commonly called SCHI (pronounced "shy"), won't have to reimburse the full $1 million noted in the audit, said Lisa McCormick, an audit manager with the state Department of Education. That's because it has successfully appealed a few of the audit findings. The state claimed that the school was employing too many instructors, that it was overpaying administrators and that it couldn't charge for unpaid lunches. Those three findings were overturned, meaning SCHI won't have to reimburse $563,164.
 
Still, McCormick said it's likely that SCHI would have to reimburse at least $341,000 to Lakewood and other school districts for overbilling on salaries for uncertified teachers, salaries that exceeded the maximum allowed by the state and for buying unrelated items. Some of the audit's other findings are still being decided.
"This is one of the highest money amounts we've found recently" in private school audits, McCormick said about the overbilling.
In New Jersey, public school districts must pay tuition for disabled students to attend private schools if the public school can't offer adequate care. In Lakewood, that often means sending students to SCHI. Other school      districts also send children to SCHI, including Toms River, Long Branch and Manalapan.
Lakewood paid more than $22 million to the school in the 2016-2017 school year, up from $18 million in the 2014-2015 school year. Average annual tuition at SCHI is around $97,000 per student.
It's unclear if SCHI has similarly overcharged Lakewood's school district in the school years since 2011-2012. The state only audits private schools for students with disabilities every six years. All other years, such schools are required to hire an independent auditor to review their books.
Those independent audits show that SCHI overcharged school districts by about $60,000 total in the last three school years, according to documents obtained by the Press.
Mike Azzara, a state-appointed monitor of Lakewood's school district and a former chief auditor in the state, questioned the independence of those audits. He said the district doesn't get full financial reports each year.
"What has happened is there's a real hesitation on the department's side to challenge these private schools," Azzara said about the state DOE.
Among the illegitimate charges noted in the audit were $13,219 in items that were shipped to a residential address of an undisclosed employee and $10,523 in goods purchased in Pennsylvania.
In addition to overcharging school districts, the state audit found that SCHI was employing teachers in positions for which they weren't certified and was not conducting criminal background checks on employees, as required by state law.
The state report says that at least three people were hired as "teachers of the handicapped" without having the necessary certification. Two other staff members were hired as a social worker and speech and language specialist, respectively, and didn't receive their certifications until after the school year was over.
The DOE also found that of the 77 employees hired in the 2011-2012 school year, SCHI didn't properly review the criminal histories of 71 of them.
Not much has changed in a decade, a review of other documents found. SCHI was hiring teachers who weren't certified and it wasn't conducting criminal background checks on its employees as far back as 2002, according to a DOE report from that year.
SCHI's attorney did not return calls seeking comment on any of the audit's findings.
Lakewood is one of the most unusual public school districts in the country. This fast-growing, low-income township of nearly 100,000 residents is dominated by Orthodox Jewish families who send an estimated 30,000 children to private religious schools. Under the law, the public schools pay to bus the children to the private schools, which costs more than $20 million a year. The public schools, meanwhile, have about 5,000 students and are facing a fiscal crisis this year with a $14.7 million shortfall.  Administrators said they may have to lay off 119 teachers to balance the budget.
David Shafter, a state-appointed monitor who oversees Lakewood's school district, said the district is still negotiating with the state and it's not yet clear how many teachers will have to be laid off or what programs may have to be cut.
Among the costs affecting the budget is the growing tuition for students sent to SCHI.
Over the years, the institution has drawn its share of criticism. Township residents have pointed to its costly tuition, set at more than $97,000 a year by the state Department of Education, and its majority white, Orthodox student body, despite the large population of black and Hispanic students in the district's public schools.
Although more than $22 million a year in tax dollars is spent at SCHI, the school has repeatedly denied Press reporters even a cursory look within its walls. It has, however, hosted tours for powerful politicians, like U.S.      Sen. Cory Booker, D-N.J., and governors Chris Christie and Jon Corzine.
SCHI continued its reticence this month, when  Eisemann, was indicted on charges of stealing more than $630,000 in public funds and laundering much of the money.
Eisemann was charged by a state grand jury with theft by unlawful taking, misapplication of government property, misconduct by a corporate official and money laundering — all second-degree offenses that carry up to 10 years in prison and a fine of up to $150,000.
The school's fundraising foundation, the nonprofit Services for Hidden Intelligence LLC, was also named in the indictment with the same charges. The school itself was not charged.
Eisemann remains free and will be arraigned at 9 a.m. Monday in Courtroom 307 at the Middlesex County Courthouse, according to his attorney, Lee Vartan. Eisemann is expected to plead not guilty to the charges, Vartan said.
 
 

 

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