State: Do your paperwork next time

Education Dept chides board and city for lack of record in ‘missing millions’ case

The Bayonne Board of Education and city administration were both slammed by the state in a report issued late last month for not keeping accurate records and making it hard to determine where millions of dollars in school capital project funding went.
Since the spring, the New Jersey Department of Education’s Office of Fiscal Accountability and Compliance was investigating the whereabouts of $11.8 million the city had bonded for projects undertaken over a period of several years.
In December last year, the city sent a letter to Schools Superintendent Patricia McGeehan contending that the Bayonne Board of Education had not reimbursed it for $11.8 million the city bonded to use for the Bayonne School District beginning in the 1990s.
Because of the type of school district Bayonne was at the time, the city had to bond for school construction and renovation projects and wait for reimbursement from the district – after the district received the money back from the state School Development Authority.
The board maintained that it had reimbursed the funds to the city via a $6 million check payment in 2011 and by the money it had written off on what it said were cooperative projects undertaken with the city.
In the report issued on Oct. 29, the state office said it could not verify the total amount of reimbursements that were paid to the city by the board.
“Although the OFAC was provided with the best available documentation for this review, documents in support of all claims made regarding the receipt and transfer of funds necessary to support an unqualified opinion were unavailable,” said the report submitted by Thomas Martin, investigations unit manager.
The state faulted verbal agreements between the board and city “on numerous transactions” as one of the reasons for it not being able to verify what had occurred. It also charged that the school district did not provide specific documentation – with one exception, the $6 million check – to support its contention that items it said were reimbursements to the city were actually what they said they were.
The state said that the city provided various documents refuting the claims by the board that the payments beyond the $6 million were for capital projects.
Corporation Counsel Jay Coffey said he was frustrated by the state report.
“We’re asked to prove a negative, that we didn’t get money – which is impossible,” Coffey said. “They don’t have to prove their case.”

What the situation is

The city claimed that approximately $4.4 million in outstanding payments were still owed to it for open projects. The school district said the figure was $2.7 million. The state said that as of May 31 of this year, the district should receive from the state an additional $3.1 million in payments.
Of the $11.8 million the city said the BBOE owed it — $7.4 million for closed projects and $4.4 million for open projects – the state said the city has been paid $6 million and is owed another $3.1 million. Board President William Lawson said reimbursements received since the spring, which the board is still combining and tallying, should amount to about $2.9 million.
The state based its conclusion on the fact that the city and the board were unable to provide “complete, verifiable, factual documentation” of their respective positions beyond the $6 million check.
However, the state said it did not find evidence “of the misappropriation or misallocation of SDA grant funds.”


“Although the OFAC was provided with the best available documentation for this review, documents in support of all claims made regarding the receipt and transfer of funds necessary to support an unqualified opinion, were unavailable.” – State report

State recommendations

The state also said that it did not find that a failure by the BBOE to appropriately document and comply with grant provisions resulted in a loss of SDA grant funding.
The state made several recommendations for the board and city going forward.
It directed the school district to forward to the city any future SDA funds received, if they were for projects bonded for by the city, to reduce outstanding bond debt.
It also suggested that future agreements between the two entities be executed in statute, regulation, and accounting best practices, and that they be commemorated by appropriate written agreements and be approved by board resolutions.

Board and city reactions

Mayor James Davis released a statement in which he said the state’s report confirms the city’s position.
“For the past several years, there was no paper trail kept between the city and the Board of Education,” Davis said Nov. 20. “This report clearly states that the historical lack of record keeping makes it impossible to verify payments between the agencies.”
Board President William Lawson said that with the release of the state’s report, the controversy is now over.
“I think in the end everybody will be okay,” Lawson said. “Now everything is squared away.”
The reimbursements received since the spring will be turned over to the city, possibly within the next month, Lawson said. “It will be done through an interlocal agreement. First, we’ll pass a resolution on the board side to submit it, and then they’ll do that on the city side, to receive it.”

Joseph Passantino may be reached at

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