ELIZABETH, NJ – The Elizabeth Board of Education worked out a deal with the U. S. Department of Justice to pay $322,310 in costs and penalties in order to settle claims that they used federal and state funds for catering services at school board meetings and other special functions.
The school district agreed to settle charges that it improperly provided free meals and catering over a six-year period but as part of the agreement did not have to admit any wrongdoing. The district said it decided to settle the entire matter to avoid costly litigation.
The school district participates in the U.S. Department of Agriculture’s National School Lunch Program, which provides reimbursement payments to ensure low-cost or free meals, including breakfast, lunch and snacks, for certain qualifying students.
The program is administered by the USDA, while oversight, compliance and general administration is handled by the N.J. Department of Education, Office of Fiscal Accountability and Compliance and the state Department of Agriculture, Division of Food and Nutrition.
The Elizabeth School District has been under the microscope by the state since 2013 when it was discovered former school board president Marie Munn falsified applications for the federally subsidized free and reduced lunch program so her children could participate even though she was not eligible.
Munn underestimated her household income by close to $100,000, which allowed her children to receive $2,649 in free lunches they were not entitled to receive. Munn was prosecuted, convicted and sentenced to probation.
The investigation sparked further inquiry by the New Jersey comptroller who found widespread fraud was taking place in other school districts. The comptroller found more than 100 ineligible people also lied about their income so their children could participate in the free lunch program.
According to the settlement agreement, the Elizabeth School district signed, between July 1, 2008, and June 30, 2014, the school district “failed to collect, reimburse or apply $182,243 to its lunch program for catering services provided to its board of directors and $90,567 for other catering services that were provided to various schools, principals and administrators within the district for special functions.
U.S. Attorney Paul Fishman contends the district’s school lunch program was “deprived of the use of $272,810,” and as a result they had to credit or transfer this amount to the Food, Nutrition Services account and also hand over a penalty amount of $49,500.
The problem, according to Don Goncalves, assistant school board secretary and spokesperson for the Elizabeth School District, actually had to do with a bookkeeping adjustment that transferred the availability of funds to the federal food services program from the district’s surplus fund.
“This was recommended by the district’s auditors in the fall of 2013,” Goncalves said. “There was no behavior deemed illegal in this matter as it was exclusively related to the allocation of food expenses to a different account within the district budget.”
Goncalves adding that these overtime and food expenditures were “part of the transfer that would have been paid in the ordinary course by the board since 2008 but instead were charged to food services and were not reimbursed to food services.”
Goncalves said the entries were already corrected in 2013 and since then the food services line item has been completely reimbursed.
“It was essentially a bookkeeping error,” he said, pointing out the board fully cooperated with the attorney general in the “thorough review of our accounts.”
Fishman explained the school district receives federal and state funds designated specifically for the lunch program and those funds must be kept separate and independent from other funds. These funds also must be used “solely for approved lunch program purposes.”
“The district may generate revenue for its lunch program by selling the snacks and meals and providing catering services, but all money used for and earned from these services must be used solely for the lunch program,” said the U.S. Attorney.
According to the 8-page agreement, in addition to repaying the lunch program and paying the penalty of $49,500, the school district will have to participate in training and be subjected to three years of monitoring by the OFAC and NJDA.
The school district agreed to being monitored until
June 30, 2018, as part of the agreement, which is in addition to any standard or routine monitoring and compliance going on.
The school district also has to submit a corrective action plan to address the findings of the federal program and relinquish all civil, administrative and equitable claims they may have. Likewise, the OFAC and NJDA agreed to not seek any further financial recovery or penalties against the school district.
Both parties concurred that the agreement did not constitute any admission of guilt on the part of school district.
Meanwhile, earlier this week, Elizabeth Mayor Chris Bollwage requested that Department of Education Commissioner David Hespe appoint someone to oversee the city’s board of education to ensure they are placing their responsibilities over other agendas.
In a statement, Bollwage specifically mentioned contracts the board approved for an insurance consultant and auditor, claiming neither received majority approval by the board.
“Voting should not be a show that is put on to entertain the public nor should the results be disregarded or altered when they do not return the anticipated or hoped for outcome,” said Bollwage in the statement.
According to the school district, though, the board passed a resolution for the contract renewals Jan. 14 with a 5 to 4 vote, although Board Member Tony Monteiro abstained from portions of the vote, including contracts with Mendonca and Partners, and ICA.
Bollwage, on the other hand, felt the school district should have stopped using the two firms involved in the contract renewals since there was not a majority vote.
The mayor said by the school district voting in this manner, the board violated the process required of all public contracts.
“This is one more example of the reckless activity, disregard for laws and regulations, as well as mismanagement of public funds,” Bollwage said.
Goncalves, however, disagreed with the mayor’s view of what took place.
“This is a case of the school district needing to continue providing services,” he said, adding that this is the school district policy when the board fails to agree on contract renewals so they are not left without a vendor to provide services that are needed.
This is the second time in a month Bollwage called for an investigation by the state department of education, requesting on April 8 that Hespe review the 2015-2016 school budget.