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City Comptroller Bill Thompson says the city's Department of Education did not make good use of state funds to lower class sizes in elementary grades. His audit found the DOE did not spend 27 percent of the money, or $48 million, in accordance with state guidelines. He says some funds went to schools that didn't need it. Schools Chancellor Joel Klein defends the DOE.

KLEIN: We've put all the state money, we got lots of state money for that and it's all been put into lower class size. People say, well last year it went up a few tenths of a point or something like that, but last year we had budget cuts.

A Department of Education spokesman says the funds were not restricted as the comptroller claimed.

Klein also called the audit "bizarre" because the funds came two years ago and the state program no longer exists.