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Auditors: TEA violated state rules with special education contract

September 7, 2018

The Texas Education Agency violated state rules when it awarded a multi-million-dollar no-bid contract to a group tasked with collecting data about special education students and spent millions on services that never were provided, according to the State Auditor’s Office.

Auditors said the agency ultimately paid Atlanta-based SPEDx $2.5 million even though it only received $150,000 worth of services. TEA officials also failed to check SPEDx’s security controls, potentially jeopardizing the data of thousands of special education students statewide, and failed to mention a professional relationship between a top TEA official and a SPEDx subcontractor, the auditors found.

Parents and special education advocates had raised concerns over the $4.4 million contract from the time it was awarded in May 2017, until TEA Commissioner Mike Morath canceled it last December. Dustin Rynders, an attorney with Disability Rights Texas, said his group and others were concerned that students’ private data was at risk of being breached.

“The auditor’s office findings are belated validation for the concerns parents had from the beginning,” Rynders said. “That money could have been better spent on services for Texas’ students.”

Problems with the TEA’s procurement practices with SPEDx began in January 2017, shortly after the agency identified a need to analyze and collect special education data for thousands of students across the state, auditors said.

Personal emails from that month showed the TEA’s Chief Deputy Academic Commissioner Penny Schwinn was introduced to SPEDx CEO Richard Nyankori by a professional development coach, with whom the deputy commissioner had a previous professional relationship. The three discussed special education projects that at least six of the agency’s 20 education service centers were interested in pursuing before switching their conversations to work emails.

By April, the report said, Schwinn had drafted and other TEA officials approved a justification letter for why the multi-million-dollar contract should go through a no-bid process, side-stepping required approval from the Texas Comptroller’s office. The contract went into effect May 24, and the professional development coach who introduced Schwinn and Nyankori ultimately was hired as a subcontractor by SPEDx.

During the contracting process, the TEA failed to analyze its needs for the contract would be and did not develop an estimate of how much those services would cost. Officials did not advertise the potential contract to other groups that could have completed the work, did not require SPEDx to answer questions related to conflicts of interest and did not seek an assessment of potential fraud, abuse or waste risks, as required by the Texas Government Code.

The contract itself had issues, according to the audit, which was first reported by the Dallas Morning News on Wednesday. TEA officials agreed to a payment schedule created by SPEDx, which did not tie payments to demonstrated progress on goals. A subsequent amendment to the contract approved in September outlined some goals but required the TEA to pay $420,000 up front, before any services were delivered, and an additional $386,735 up front for “incidentals.” The amendment also raised the cost of the contract from $2.1 million to $4.4 million.

TEA officials also never reviewed SPEDx’s data security practices before handing over confidential information for thousands of special education students in mid-September 2017, auditors found. The TEA’s security protocols require it to test the security of vendors systems, but that testing never happened. It never required SPEDx employees or subcontractors to sign non-disclosure agreements relating to student data, which was required by the contract.

Morath canceled the contract a month later, but TEA ultimately paid SPEDx a total of $2.5 million after receiving only $150,000 worth of services due to how the contract and amendment were worded, the auditors said.

The report’s findings come as the TEA prepares to ask the Texas Legislature for $3.2 billion to provide appropriate special education services to students who previously were denied them. A U.S. Department of Education probe, sparked by a 2016 Houston Chronicle investigation, found that the TEA created an artificial cap on the percentage of students to whom districts could provide special education services. The TEA encouraged districts to provide services no more than 8.5 percent of their students — well below the national average of around 13 percent — or risk being rated lower on the state’s accountability rating system. The de facto cap meant tens of thousands of Texas children were denied special education services as far back as 2004.

In a corrective action plan approved by U.S. Department of Education earlier this year, TEA officials pledged to monitor school districts’ efforts to identify special education students, help districts provide compensatory services to eligible students who previously were denied services, better engage parents in state-level actions, redesign the state’s special education-related grants and ensure the state’s dyslexia programs no longer will be used to delay or deny special education services.

In response to the audit’s findings and in a statement provided to the Chronicle, TEA officials said they have spent the past 10 months reviewing and shoring up the agency’s procurement and purchasing procedures, with the goal of having most changes in place by Sept. 30. Among the coming changes: a new department to oversee contract compliance, a new policy prohibiting advance payments to contractors, additional staff training, an automated contract-tracking system and updates to the TEA Contract Management Handbook.

“Our program staff have consistently followed what they believed were appropriate procedures,” Morath wrote in the statement. “However, the SAO noted our internal procedures would not adequately guide staff when exercising due diligence in the contracting process, a sentiment with which we agree given our review. We are committed in all we do to improving student outcomes and getting the best value for taxpayers.”

While Rynders said the TEA has gotten better at collecting feedback from parents and other stakeholders, he worried some of the issues with the SPEDx agreement could arise again and drain more resources from special education students.

“The corrective action plan requires a lot of contractors, and multiple contracts are out for bid right now to help implement the corrective action plan submitted to the U.S. DOE,” Rynders said. “It’s important that the state use best practices in utilizing those contracts, utilizing stakeholder input and completing conflict of interest forms to make sure they’re not just giving money to their friends.”

shelby.webb@chron.com

twitter.com/shelbywebb

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