Two small nonprofit schools for disabled children run by a Suffolk-based company overbilled taxpayers by as much as $7.7 million over four years, the state comptroller said Friday.
Windwood Meadow Inc. can't account for how it divided $5.4 million of state management fees between the two schools, according to an audit released by Comptroller Thomas DiNapoli.
The Lake Grove company's former chief executive, John Claude Bahrenburg, also reaped significantly higher compensation than executives at nonprofits of comparable size, the audit found.
His compensation package totaled $580,000 in fiscal 2008-09, including a car allowance and interest payments on a loan that were forgiven, DiNapoli said.
Auditors found that Bahrenburg "did not maintain records or any other documents" to show how his time was allocated among Windwood's various facilities.
In addition, auditors found that Windwood inappropriately paid a board president $180,000 over a three-year period, and identified nearly $1 million in "inappropriate or unsupported" payments, including consultant fees, non-program-related travel and lobbying expenses.
The schools singled out in the audit are the Lake Grove School on Suffolk's North Shore and Mountain Lake Children's Residence in upstate Essex County.
The schools serve about 100 kids with severe emotional and learning disabilities, many from troubled homes.
Windwood officials and Bahrenburg could not be reached for comment.
The audit, which covered the period ending June 30, 2009, also cites flaws in monitoring of the statewide $2-billion-a-year special education program.
"Children are getting shortchanged by some special education providers taking advantage of lax oversight to bilk taxpayers," DiNapoli said in a statement.
The state Education Department and Office of Children and Family Services "need to step up," he said.
Dennis Tompkins, a state Education Department spokesman, said the department "welcomed" the comptroller's help in uncovering potential abuse.
"The Board of Regents has taken several steps to increase oversight, and more needs to be done," he said.
Lake Grove School executive director Gerard Cairns said DiNapoli's demand for reimbursement could be a death blow for a school already dealing with financial woes.
"We're trying to really salvage the school. We don't know if we're going to be able to do it," he said.
Carol Prevost, executive director of Mountain Lake Children's Residence, said the school has addressed some of the audit concerns by becoming "totally independent" from Windwood.