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New York City Comptroller William C. Thompson, Jr. today charged that the Department of Education must explain why it continues to route money to outside vendors instead of into classrooms.

“As we confront an economic downturn of historic proportions, Schools Chancellor Joel Klein must explain to parents why diverting money to outside contractors is more important than providing precious funds for our classrooms,” Thompson said. “New Yorkers across the city are paying close attention to their budgets. The Department of Education must do the same.”

Thompson made the remarks in testimony submitted to the New York City Council Committees on Finance and Education regarding the Department of Education’s (DOE) proposed Expense Budget for Fiscal Year 2010. The testimony was read into the record by Deputy Comptroller for Budget Marcia Van Wagner.

“With the Department’s $18 billion cost accounting for nearly one-third of the total City budget, New Yorkers have a right to expect the Department to follow the strictest standards of transparency and accountability,” the testimony read. 

Thompson’s testimony – available at www.comptroller.nyc.gov – noted that the DOE budget is ballooning from roughly $17.65 billion in FY 2009 to $18.3 billion in FY 2010, an increase of more than $650 million.

However, Thompson noted that the increase will not benefit most classrooms because it is limited to Units of Appropriation – or U of As - outside the core of the DOE’s budget.
“It is very concerning that spending in these areas continues to expand as city classrooms have been asked to do more with less and core U of A’s are taking a hit, evidenced by the 5 percent reduction that school budgets are being asked to absorb,” Thompson said.

During his tenure, Thompson has charged that the Department of Education had allowed U of As to grow so large – as high as $5.2 billion – that they surpassed the entire budgets of most City agencies. Amid these criticisms, Mayor Bloomberg agreed in principle to provide more meaningful budget categories so that New Yorkers could understand how their tax dollars are being spent.

Nevertheless, Thompson said, the Department’s budget “remains frustratingly opaque.”

“At the very least, the U of A structure should give the public the tools to assess the city’s charter expenditures separately,” Thompson said. “Right now this growing expense is buried in the Department’s budget.”

Thompson pointed out how the Department continues to reach into the school supply budget – to the tune of $50 million last year – to pay for outside contracts that went way over budget.

Last month, Thompson exposed out-of-control contract spending at the Department, releasing an analysis detailing how the Department routinely let hundreds of contract expenditures balloon far beyond their expected costs, including one that swelled by 6,700 percent.

Furthermore, one out of five of the Department’s contracts that ended in the last two fiscal years ultimately cost some 25 percent or more over the Department’s estimates. The amount that the Department overspent on those contracts was $726.7 million.

“Sadly, the Department’s overspending on its contracts continues,” Thompson said. “We found that in the current fiscal year, 27 percent of these contracts have costs topping 125 percent. If the Department properly monitored its contracts, it would have been aware that its spending was far exceeding its own estimates. Such sloppy accounting calls into question the Department’s oversight of its entire contract payment process.”

He added: “As we face an extended period of limited resources and doubts about the State’s ability to live up to its promises regarding school funding over the long run, the Department of Education is going to have to adopt a much stricter budget regimen, reining in runaway contracts.”

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