Audit Reveals NYC Schools Left $431 Million in Medicaid Funds Unclaimed

A new audit from the city comptroller has brought renewed scrutiny to the New York City Department of Education (DOE), revealing that the agency failed to claim $431 million in federal Medicaid reimbursements over a two-year period. The funds, which are intended to support legally mandated services like physical, occupational, and speech therapy, remained unclaimed between mid-2023 and mid-2025 due to widespread administrative and documentation errors.

According to the audit, nearly half of the 17.2 million therapy sessions eligible for reimbursement lacked the necessary paperwork to meet federal evidentiary standards. This includes missing progress notes, service orders, and updated Individualized Education Plans (IEPs).

City Council Education Committee Chair Eric Dinowitz (D-Bronx) described the shortfall as "completely unacceptable," noting that the issue has persisted for years despite repeated warnings from previous audits. Advocates argue that these lost funds represent a missed opportunity to bolster staffing and resources for students with disabilities.

Much of the criticism centers on the Special Education Student Information System (SESIS), a reporting platform that has faced technical complaints and privacy concerns since its 2011 launch. While the DOE previously announced plans to replace the system, its continued use remains a point of contention. Leonie Haimson, executive director of Class Size Matters, expressed frustration that the agency is still relying on the platform years after promising a transition.

Parents and advocates also raised concerns regarding transparency and the quality of services provided. Paulette Ha-Healy, a special education advocate, noted that many families are hesitant to consent to the release of health information for Medicaid billing when they feel their children are not receiving the services mandated by their IEPs. "Parents are very mistrustful of what the schools are doing because of past experiences," Ha-Healy said.

In response to the audit, the DOE has indicated plans to implement a new system called MedSys, which is designed to improve monitoring and alert staff to documentation failures. A limited rollout is scheduled for July 2026, with a full citywide implementation expected by December. However, the status of previous contracts intended to modernize these systems remains unclear, leaving many stakeholders uncertain about whether the proposed changes will resolve the long-standing administrative breakdown.