BERKELEY HEIGHTS, NJ - The Berkeley Heights Board of Education is being investigated by the New Jersey Department of Education for allegations that the district gives a yearly donation to a foundation for construction of a turf field. In a letter to board president Paul Beisser from Robert Cicchino, director of the Office of Fiscal Accountability and Compliance at the State Department of Education, the state received complaints that the district gives a yearly donation to the Highlander Foundation, a non-profit organization established to fund the installation of a synthetic turf field at Governor Livingston High School in Berkeley Heights.
According to the executive summary that accompanied the letter, after a public bond referendum in 2005 defeated the funding of the synthetic turf field, the Highlander Foundation was formed in an effort to raise the necessary funds. The foundation was unable to collect all of the necessary funds through donations and obtained a $252,838 loan for the balance needed to fund the project.
During June 2006, the board voted to allocate $23,000 of its capital improvement school budget to be paid to the foundation for 10 years, ostensibly in lieu of cost savings in maintenance charges for the field and to assist the foundation in the repayment of its debt.
During September 2006, the board accepted the foundation's donation of the synthetic turf playing surface at Governor Livingston, plus new football goal posts, soccer goals, sleeves and netting for lacrosse goals, pavement of the "D" zones, and the installation of the rubberized surface for the long jump, high jump and pole vault pits.
The district made the first of its scheduled $23,000 payments to the foundation on Sept. 26, 2006. The description of the payment is "annual payment for the GLHS Athletic Field." The yearly payments are charged to three separate accounts and the amount charged to each account is approximately one-third of the $23,000. The district has charged different accounts each year, but none of the payments have been charged to Capital Outlay - Construction Services. The payments are split between custodial and landscaping maintenance, supplies and athletic supplies.
According to the state's investigation, the payment of the $23,000 has not been for maintenance or supplies but would be more accurately described as a capital improvement.
"The use of district funds for capital improvement requires voter approval," the report states. "Additionally, the payments to the foundation cannot be traced to a line item in the budget that accurately represents the use of the funds."
The report goes on to say that expenditures related to the turn field installation should be charged as Capital Outlay - Construction Services, which is used to record activities funded by current revenues concerned with, among other things, improving sites.
The state now wants the Berkeley Heights school district to refund $4,724.65 in state aid to the Department of Education.
At its meeting on Thursday, Sept. 16, the Board of Education approved a resolution stating its intention to appeal the findings of the Department of Education. The resolution says the board's payments to the Highlander Foundation do not constitute a donation of public funds, and that the board received value in the form of the donated synthetic turf field far in excess of any funds paid to the Highlander Foundation. The resolution also states that the board did not enter into a contract with the Highlander Foundation, so it did not violate the state's bidding requirements.
The resolution goes on to say that even if the board did enter into an implied de facto contract with the Highlander Foundation, it was for a single project relative to the construction, reconstruction or rehabilitation of public property and therefore did not violate the provisions of the statute.
The resolution also claims the board's records accurately reflect the nature of the payments made. It also questions two of the statutes the state quoted in its findings, one of which the board claims doesn't exist.
In a letter to Superintendent Judith Rattner from Charles Heard, Jr., of Noke and Heard, LLP, Certified Public Accountants, Heard said the board's agreement with the foundation calls for a payment of $23,000. Since the board has a "qualified purchasing agent," the statutory bid threshold is $29,000 so, in his opinion, the expenditure was less than the bid requirement.
Heard goes on to say that the board's original resolution did not bind the board to future payments and as a result, each year's payment would be approved or not approved in future year's budget proposals. He added that the payment of $23,000 annually did not result in the purchase of a capital item and, as a result, should not be classified as a capital item.
"It was the intent of the board to reimburse the foundation for the annual savings which resulted from the donation of the turf field," Heard's letter says. "These savings resulted in lower costs for supplies, maintenance, labor, etc. It would seem, therefore, prudent to reflect these expenditures against budget categories from which the cost would have been applied had these been incurred under the uniform chart of account, established by the Department of Education."
The board's legal counsel is preparing the necessary paperwork to file an appeal with the state.
Click here to read the Board of Education resolution and the opinion of the certified public accountants.
Click here to read the letter from the New Jersey Department of Education in its entirety.