Audits reveal waste in Abbott spending 29 percent of expenditures not 'reasonable' Sunday, May 11, 2008 • BY TED SHERMAN AND JOHN MOONEY • Star-Ledger Staff New audits of New Jersey's most troubled school systems question more than $83 million in spending by the heavily state-subsidized districts -- from excessive travel expenses and legal fees to Christmas parties and food. While 71 percent of all purchase orders examined were found to be "reasonable," the auditors concluded more than 25 cents of every dollar spent by the districts was unnecessary, excessive or lacking documentation. The audits looked at all 31 of the state's neediest school districts -- known as "Abbott districts" -- which have been coming under increasing fiscal scrutiny in recent years. Overall, the Abbott districts -- serving about 275,000 students -- spent nearly $4 billion this school year, with about $3.1 billion funded by the state. One school district, Pleasantville in Atlantic County, is the focus of an ongoing federal criminal investigation, while at least one other, Asbury Park, is being probed by the state Attorney General's Office, officials confirmed. The performance audits, some in excess of 300 pages, paint the first detailed picture of overall spending by the districts. Auditors reviewed more than 30,000 purchases totaling nearly $290 million in the 2004-05 and 2005-06 school years -- everything from textbook contracts and teaching materials to cell phones and hotel bills -- to determine whether amounts spent were excessive, benefited students and were properly approved. The state Department of Education released the audits after The Star-Ledger and other newspapers requested them under the Open Public Records Act. The full reports have now been posted on the department's website. Among the findings: In Irvington, which accounted for more than a quarter of questionable expenses within the latest round of audits, examiners from the accounting firm KPMG flagged $6,421 for a school board retreat in Atlantic City; $56,721 for advertising; $33,102 worth of office furniture for unspecified employees and $126 for a floral arrangement for one board member. Some 250 purchase orders totaling more than $15.5 million were not supported with invoices, auditors said. Nearly $1 million in legal fees incurred by the East Orange Board of Education lacked proper documentation or appeared excessive. The district also spent $10,836 for a superintendent's convocation; $23,834 for 14 Dell laptop computers for board members, and $753 to cover the cost of 34 cakes -- with no explanation as to why the cakes were purchased. The Orange Board of Education spent $3,100 for a Christmas party for teachers and support staff and $12,144 for wireless phone services for district administrators. The Orange Board of Education spent $3,100 for a Christmas party for teachers and support staff and $12,144 for wireless phone services for district administrators. The Gloucester City school district spent $14,901 for a goose-chasing service to remove birds from an athletic field; $70,900 for the installation of sod at the high school; and $6,000 for meals for teachers and administrators. It also spent $2,251 for snacks for a health fair at the high school. Several district officials bristled at the criticism, calling it a "gotcha" exercise, arguing other, non-Abbott districts were not being held to the same standards. However, state Education Commissioner Lucille Davy called the audits valuable in pointing out areas districts can improve -- especially their internal controls. "We see some places where controls are weak and things shouldn't get through and others where maybe they shouldn't be spending public money on those kinds of things," she said. State Sen. Leonard Lance (R-Hunterdon), a longtime critic of the system, said the audits demonstrated that far more accountability was needed. "This is money that is completely unrelated to the education of schoolchildren," he said. "Because it is state money, it is imperative that every penny be well accounted, and this shows that obviously this has not always occurred." PREVIOUS COMPLAINTS The audits have had a twisting and controversial history since first proposed by the Corzine administration to the state Supreme Court two years ago. State lawyers in 2006 received permission from the court to freeze new aid to the Abbott districts in light of the government's fiscal crisis, pledging to review Abbott spending to ensure the aid was being well-spent. The first audits came out last year and focused on New Jersey's three largest and state-controlled districts -- Newark, Paterson and Jersey City -- as well as Camden, where state intervention is already heavy. In each case, KPMG found weak internal controls and millions in what it called "questionable" expenses, ranging from overseas trips by Jersey City educators to high overtime costs for custodians in Camden. But those audits brought a backlash from districts claiming the process was flawed and the state was nickel-and-diming them on expenses to justify pulling back aid -- while far larger needs were being ignored. David Sciarra, director of the Education Law Center, the advocacy group that led the effort to force more state support for special-needs districts, said, if read objectively, the documents were actually good news for the Abbott districts. Last year, the president of the urban superintendents' association complained in a letter to Davy that the auditors had "little or no experience with the needs of urban school districts" and appeared more beholden to the state's agenda. "The audits were designed and implemented to reach a preordained result -- that the Abbott districts have been spending state funds in a questionable manner," wrote Mary Stansky, who recently retired as superintendent of Gloucester City schools. The complaints led to some toning down of the audits, including the insertion of language stating their intention was not to punish or even insinuate waste or abuse. Even the word "questionable" used in the initial audit in regard to expenses was changed to "inconclusive" in later reports. Davy, in an interview, said the 27 audits recently released are less punitive than the first four; in no case is the state withholding money from districts for questionable expenditures. "Overall, it doesn't show they are off the wall," Davy said, adding that Irvington in particular had shown improvement. "But still there are things that maybe happened for years and now are unacceptable. It is a different time." Questioned specifically about the Asbury Park district, where auditors could not get at much of the documentation because it had been "taken by other agencies," she confirmed an ongoing investigation by the state Division of Criminal Justice. "That's a district with a lot of difficulties," Davy said. "They spent more on these audits than we ever did on legal fees," he said. "Talk about waste." The Elizabeth school district had the highest percentage of purchase orders found to be "reasonable," but was nonetheless slapped over its travel expenses and other costs -- including $2,700 for a portrait of an assistant school superintendent for a school being named for him and $4,880 for name plates for new school board members. District officials there raised a host of concerns about the process and openly questioned whether department officials tried to influence the auditor's results. "They were here for a year and a half and took years to get it out," said Harold Kennedy, the district's business administrator. "I guess I should be happy they didn't find us paying any dead people or anything." A KPMG spokesman, Dan Ginsburg, said he could not comment, citing client confidentiality. Not all school officials were critical. Some called the audits mostly fair. Others acknowledged that such probing comes along with the Abbott status. "There was some nitpicking, but I didn't take it that way," said Mel Wyns, who was fiscal administrator for the Trenton district when it went through the audit but is now retired. Ethel Davion, superintendent of the Irvington school district, took issue with the high percentage of expenditures that KPMG listed as "inconclusive," saying part of the problem was that "individuals conducting the audit did not seem familiar with the school district environment." However, she acknowledged problems with the district's fiscal operations prior to her arrival. Still, Davion thought it petty that KPMG singled out expenditures for flowers at a graduation event. "Somebody may say that's frivolous," she said. "Without flowers, it would be bland." Staff writer Ron Marsico contributed to this report. © 2008 The Star-Ledger. Used by NJ.com with permission.