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City school officials have underreported the number of students who dropped out of high school in the past by reclassifying some of them, according to a report released by the State Comptroller today.

The report, which comes out of an audit completed by Comptroller Tom DiNapoli’s office in January, examines a group of students that are labeled as “discharged,” meaning they have left the school system for legitimate reasons, such as moving to another state or deciding to enroll in a G.E.D. program. It finds that some of these students should actually have been labeled as drop-outs, but because of paperwork errors or school officials’ failure to follow state regulations in certain cases, they were counted as discharged.

Students who are discharged don’t count towards the city’s drop-out rate and some advocates have argued that principals can misuse the discharge code, entering students who simply dropped out in order to inflate their graduation rate artificially. Overall, the comptroller’s report found that even with the improper discharge classifications taken into account, the city’s graduation rate was “generally accurate.”

To determine whether the city’s Department of Education was improperly classifying drop-outs as discharges, auditors in the comptroller’s office examined the records of students who started high school in 2004 and should have graduated in 2008, but were discharged along the way. They randomly chose 500 of the 17,025 general education students who were discharged and 100 of the 1,923 discharged special education students.

Through interviews with principals and guidance counselors and analysis of students’ records, auditors found that 74 of the 500 (about 15 percent) discharged general education students and  should have been considered drop-outs. For special education students, 20 of 100 did not have enough documentation to prove they had been discharged.

The report notes that in the vasty majority of these cases of improperly labeled students, schools weren’t able able to find enough documentation of students’ new schools or entrance in G.E.D. programs to satisfy the State Education Department’s requirements for discharge.

But in some cases, the report says, the students had clearly dropped out. According to the report, one student who quit high school to join the military was classified as discharged. Another dropped out and was labeled as such, but then the school changed the students’ classification to discharged and couldn’t provide auditors with documentation to show why.

DOE officials responded to the report by saying that most of the students who the comptroller designated as erroneously discharged were not hidden drop-outs. Instead, they are victims of a discrepancy between the city and state’s standards for proving students have been discharged.

“We believe that, in practice, they [the state standards] impose an unfair and unwarranted burden on school principals, administrators, counselors, and outreach workers,” said Chief Academic Officer Shael Polakow Suransky in his written response to the audit.

In response to the audit, school officials challenged some of the report’s findings. One example they cited as evidence of the state’s overly strict standards was the case of a student who left her New York City high school and returned to West Africa after her father was deported. Her uncle confirmed that she had left but because her school couldn’t verify this directly with the student’s father, auditors said she should have been labeled a drop-out.

In the report, the comptroller’s office responds that the student was discharged in 2004 but it wasn’t until May of 2010 that city officials interviewed the girl’s uncle and learned that she had returned to West Africa in 2007. For the three years between when she stopped going to high school and when she left the country, the city had no documentation proving she had been in school.

Lower East Side Prep High School Principal Marth Polin said that properly discharging students is not easy. Many of her students are recent immigrants from China and it’s not unusual for them to leave the U.S. or New York City without telling anyone at her school.

“It’s very arduous,” she said of the discharge process. “The problem is they often don’t tell us they’re leaving, and then we’re held accountable for them.”

When Polin’s students do tell her where they’re going, they still have to sit for a planning interview, sign papers saying they are discharging themselves (or their parents are), and provide a plane ticket proving they are leaving the country. Once they’ve left, they have to prove they’ve enrolled in a new school, otherwise they’re classified as drop-outs.

“I don’t think it’s entirely fair because any of us that do take a lot of immigrant kids, we do take the biggest hit,” Polin said.

“It may be arduous but there’s no other way to get around to actually verify this stuff,” said Leonie Haimson, executive director of the advocacy group Class Size Matters. Two years ago, Haimson and Jennifer Jennings, an assistant professor of sociology at New York University, released a report on the city’s increasing number of discharged students.

Haimson said that because schools are graded — and sometimes closed — based on their graduation rates, principals have an incentive to use the discharge label for their students who drop out.

“It’s a combination of sloppy oversight and an accountability system which really hurts these kids the most, by having schools push them out and then lie about it,” she said.