Arizona schools chief Diane Douglas.

Arizona schools chief Diane Douglas says she is working with the federal government so that districts that received too much special-education funding won’t be forced to repay it.

Howard Fischer / Capitol Media Services

The Arizona Department of Education misallocated tens of millions of dollars from federal special-education funds that it distributed to schools in the past three years, according to a recent federal audit.

The department wrongly distributed more than $35 million in federal Individual with Disabilities Education Act (IDEA) funds — money aimed at paying for special-education teachers and support staff — to schools since 2015.

Some schools received too much money and could be forced to repay the funds, while others received too little and will likely see a windfall in the form of repayments over the next few years.

The error accounts for about 6 percent of the total IDEA funding the state has handed out in the past three years.

The finding comes on the heels of last week’s revelation that the department also misallocated more than $60 million in federal Title I funds designed for low-income schools.

“It’s a very similar problem,” said Stefan Swiat, a spokesman for the Department of Education. “It’s a pretty complex formula, and it was wrong.”

Ricky Hernandez, chief financial officer of the Pima County School Superintendent’s Office and president of the Arizona Association of School Business Officials, noted that schools are required by law to provide special-education services, whether they were given the correct amount of money to cover it or not.

“At some point, the non-special-ed kids are having to cough up their dollars to pay for special ed,” he said. “(Not having) money is not an excuse.”

The error was first identified in a federal audit completed in early 2015, but the actual scope and source of the problem wasn’t identified until this year, leaving a three-year period where state officials distributed money based on a faulty formula.

Arizona Superintendent of Public Instruction Diane Douglas sent a letter to schools this week informing them of the problem and saying her department is working with the federal Department of Education in hopes of repaying schools that were shorted and “holding harmless” schools that received more than they should have.

But the U.S. Department of Education has not yet seen, nor approved, that plan, and it’s unclear if they will forgive and forget the misallocations.

Swiat said that based on initial conversations, the Arizona Department of Education is optimistic its federal counterpart will forgive the error and not require schools that were overpaid to refund the money. But he acknowledged that at the end of the day, the decision is up to the federal government.

But Hernandez said that the department sounds overly optimistic that the federal government will agree to their plan.

“I don’t know. The experience I’ve had has been if you screw up, you gotta fix it. I wouldn’t be so cheery about the possibility of having millions of dollars in errors forgiven,” he said.

Douglas sent the letter to schools only after her staff was contacted by the Arizona Daily Star about the problem this week and did not tell districts the exact amount that they had been underfunded or overpaid.

“Jesus. What is going on up there?” Gabriel Trujillo, superintendent of the Tucson Unified School District, said when informed of the department’s latest error.

Records provided by the department in response to a public records request show most Pima County school districts were overfunded. Unless the federal government decides to forgive the error, the districts could end up on the hook for those funds.

Those records show TUSD was overallocated more than a quarter-million dollars in the past three years, the length of the audit, from the main pot of IDEA money, which covers costs for special-education students between the ages of 3 to 21. At the same time, the district received about $20,000 more than it should have from a separate, smaller pot of IDEA funding, which is targeted specifically at preschoolers.

Trujillo said TUSD relies heavily on IDEA funding from the federal government and if the district were forced to pay it back, it would strike at the heart of their efforts to educate special-needs student.

“That’s our speech therapists, our aides, our paraprofessionals, money to pay for special transportation, that’s vision, speech, hearing. That’s an important pot of money. That’s kind of scary. That’s scarier than Title I,” he said.

TUSD’s overpayments were the largest in Pima County but still make up just a fraction of the district’s overall special-education funding, which totals just over $9 million per year.

The Department of Education gave Flowing Wells Unified School District $178,000 more than it deserved over the past three years, which accounts for about 20 percent of the district’s total annual IDEA funding, according to the records.

Two school districts, Vail Unified and Sunnyside Unified, actually received less than they deserved, and should see repayments to make up for those funds over the next three to five years, according to the ADE plan.

Lisa Cervantez, chief administrative officer at the Vail Unified School District, said the department hasn’t provided the district with any numbers or specific information about their past allocations and hasn’t yet responded to questions from the district about the problem.

According to the records provided by the department, Vail was shortchanged $343,000 over the past three years.

“If that’s the case, we’ll be scrambling for every penny that we’re owed,” Cervantez said.

Swiat said schools haven’t been given details of the problem yet because the department didn’t have hard numbers on the problem until recently, when the federal Office of Special Education Funding completed their full fiscal audit of the state program.

“When leadership talks to schools, we want to have exact numbers, we want to have the details,” he said.

Many charter schools were also underfunded through the flawed formula, and Eileen Sigmund, president of the Arizona Charter Schools Association, said they will be working with the Department of Education to recoup those lost funds.

Douglas, in her letter to schools, said she plans to repay schools that were shortchanged by sweeping funds from past years and using set-aside money to make up the difference to wrongfully underfunded schools.

“However, since the top priority of ADE’s Exceptional Student Services is to make the field whole by completely emptying our coffers from set aside funds, ESS will be forced to make selectively identified priorities related to professional development and the provision of guidance for specifically designed instruction,” Douglas told schools in the letter.

Going forward, the allocations should be correct, she said, since the numbers have now been vetted by the U.S. Department of Education and others.

Douglas stressed that special-education leadership at the department has had a complete turnover since the initial problem was identified. But rather than identifying top leadership staff turnover as a problem contributing to the department’s string of recent funding formula errors, Swiat said the turnovers have actually been the reason the department is finally addressing the longstanding errors.

“The new leadership is not covering up or hiding the problems, but attacking the problems,” he said.

Asked if this is the final funding formula error the department expects to come to light, Swiat replied, “I certainly hope so.”

Contact reporter Hank Stephenson at hstephenson@tucson.com or 573-4279. On Twitter:

@hankdeanlight