State auditor: Bayonne BOE technically ‘broke the law’ with budget deficit

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State Auditor Stephen E. Eells said the Bayonne Board of Education technically “broke the law” by taking their 2016 budget into a deficit, though later added he felt that no one committed fraud or wrongdoing during last night’s meeting.

Eells, who prepared the 13-page report - which reviewed the budget between July 1, 2015 and June 30, 2016 and was released on November 14 – attended the meeting to summarize his findings and answer questions.

The audit, which reviewed the time period between July 1, 2015 and June 30, 2016, also reveals that the Bayonne school district went over budget by $5.7 million, for a total of $79.9 million, due to transferring money to under-budgeted accounts.

This budget shortfall led to nearly 300 staffers being laid off in April, though a number of them were rehired by July.

But before he did, Bayonne Mayor Jimmy Davis addressed the board and audience of about 50 people, offering any assistance he could provide.

“We all know that this has been a tumultuous year. I don’t know that we’re going to answer all of our questions tonight, I don’t know what’s going to happen going forward, what I do know is our job is not done,” stated Davis.

“And I’m here to say to each and every one of you: as the leader of this city, I will do anything and everything you need to work side by side with each and every one of you.”

Next, Board President Joe Broderick made remarks defending the district’s practices.

“Our auditors performed a 2016 audit and they reported that the entire $5.9 million encumbrances were valid and when you dedicate or set aside fund balance for the $5.9 million in commitments, the district would be in a deficit of $2 million,” explained Broderick.

“That is calculated by subtracting the $5.9 million in commitments from the $3.9 million fund balance that both the state and local indicated was our surplus balance.”

Eells then took the podium, explaining that the district should have never shown a deficit for fiscal year 2016.

“The most significant conclusions from our audit was the fact that the district should have never shown a budgetary general fund deficit for fiscal [year] 2016 and in fact the deficit was caused by the inappropriate budgetary encumbrances of general fund balances for obligations and liabilities pertaining to fiscal year ’17 and not to fiscal year ’16,” Eells said.

While fielding questions from Broderick, Eells said that the Bayonne BOE had “broken the law by taking your unassigned budgetary balance into a deficit.”

“Any time a school district runs their unassigned general fund, unassigned budgetary fund balance, to a deficit, that triggers a state audit,” began Eells.

“It’s gonna trigger, what it triggers is a report from the Department of Education putting Bayonne on a list of school districts that, quite frankly, have broken the law. By taking your unassigned budgetary fund balance into a deficit, you basically spent or allocated, contracted for funds, that the voters have not approved for you to spend.”

Eells also said that it wasn’t up to his office to decide whether or not layoffs or tax increases were necessary since “we would never set policy for any school district.”

Later, Broderick wanted to clarify that the school district’s woes were a result of accounting mistakes, as opposed to illegal actions.

“In the budgetary process, there is some leeway … to make the determination of whether somebody just made a bad decision, or whether something was intentional, is a very, very fine and tough line to draw,” stated Eells.

“If we actually felt that something intentional was trying to be hidden, I have an obligation to report that, and we have done that in the past – not in this case – to the Division of Criminal Justice if we think there’s any type of fraud or wrongdoing occurring. Not the case of what we felt here, we just felt some decisions were inappropriate, as we reported.”

Other dignitaries in attendance included Council President Sharon Nadrowski, 2nd Ward Councilman Sal Gullace, Jersey City Board of Education Trustees Sudhan Thomas and Lorenzo Richardson, as well as former Assemblyman and current mayoral hopeful Jason O’Donnell.

The board took no formal action on the report at the meeting, which was streamed on its entirety on our Facebook page.

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