TRENTON – The Educational Services Commission of New Jersey (ESCNJ) amassed a surplus that ballooned to more than $69 million, without an official plan for the money and without seeking to return any of the excess taxpayer funds to the school districts and municipalities it serves, according to a newly released audit by the New Jersey Office of the State Comptroller.
ESCNJ, which serves more than 700 school districts and local governments, has an official mission to save tax dollars by providing educational and business services cost-efficiently. OSC’s audit found, however, that ESCNJ regularly collected revenues that “substantially” exceeded actual costs and accumulated a surplus that jumped from $32.8 million in fiscal year 2020 to $69.6 million in fiscal year 2023. By comparison, other ESCs in New Jersey maintain relatively stable fund balances, with most falling far below $30 million, OSC’s report said.
Other deficiencies identified in OSC’s audit include:
Additionally, public entities are required to submit procurements valued at $2.5 million or more to OSC for review in order to ensure compliance with procurement laws and guard against cronyism, corruption, and waste. ESCNJ never submitted contracts despite receiving multiple notices from OSC directing ESCNJ to do so.
“The routine lack of compliance with procurement laws and sound financial controls is a red flag because it raises the risk of waste,” said Acting State Comptroller Kevin Walsh. “And when an entity has tens of millions of dollars sitting around, along with these red flags, the potential for waste grows exponentially."
Founded in 1977, ESCNJ says it is now the largest of the state’s ten educational service commissions, with revenues of more than $147 million in FY 2023. It operates six special education schools provides bus service for 14,000 students and manages a cooperative purchasing program that procures for members everything from computers to commodities like electricity.
By law school districts are subjected to statutory limits on the amount of general fund balance they can maintain from one year to the next. ESCs are not subject to these legal constraints. According to OSC’s report ESCNJ said it deliberately grew its fund balance in order to have adequate funds for operations and future capital projects. However OSC found ESCNJ had no officially approved plans for capital projects nor did it have a process or policy in place to identify how much general fund balance is necessary to maintain or when to return funds or reduce fees when revenues far exceed what is spent. As a result the ESCNJ fund balance grew to more than $69 million in FY 2023 likely resulting in higher costs for local governments school districts and taxpayers.
OSC also found that ESCNJ hired seven professional services firms and consultants paying them a total of $14.6 million without using a competitive procurement process or obtaining documentation required by Public School Contracts Law. OSC found this reduced the likelihood that ESCNJ secured the best deal for taxpayers. One of those seven vendors –a lobbying firm– was paid $42 000 in fiscal year 2022 but ESCNJ was unable produce contract substantiate necessity retaining lobbying firm firm invoices also did not contain itemized description services rendered.
In New Jersey public entities including ESCs are required submit procurements exceeding $2.5 million for OSC’s review; if contracts valued at $12.5 million or more agencies must seek OSC’s review approval before even seeking proposals .OSC found that until receiving draft this report FY 2024 ,ESCNJ had never submitted contract review In FY alone failed submit about contracts valued at more than$900million
OSC made recommendations
