Thursday, October 03, 2002

Monitoring Matters

In order for any kind of school privatization or contracting to work better than the government provider, the contracts must be monitored and measured. Oversight is always key. This story about private special education contracts in DC demonstrates what happens with poor oversight.

The District public school system paid $67 million over a 28-month period to private special education providers without reviewing their bills for accuracy, including $1.2 million in payments for students who may not have been eligible for the services they received, according to a city audit.

The D.C. auditor blamed poor oversight by the school system and its financial office, which is run by the city's chief financial officer. The audit also cited flaws in a payment system for private services that was set up as part of an ongoing class action lawsuit against the schools.

Private providers face the same incentives as public institutions when tax money is involved--especially when it is unclear who the customer is.

These overpayments appear to be the result of an earlier school management deficiency.

The audit examined payments under a special system established to pay many private schools and other providers. Under the plan, devised in the 1990s at a time when vendors were not getting paid on time, the providers send the school system estimates of their costs per child and are paid based on those estimates. The school system is later supposed to reconcile any differences between the estimates and the final costs.

A federal judge, the school system and the plaintiffs in the class action lawsuit signed off on the plan. A new plan, in which payments would be made based on actual bills, has been negotiated and awaits the judge's approval.

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