Lakewood Final Report

May 19, 2014
Mr. Isaac Zlatkin, Board President

Lakewood Board of Education
200 Ramsey Ave.
Lakewood, NJ 08701

Dear Mr. Zlatkin:

The Department of Education, Office of Fiscal Accountability and Compliance has completed a
fiscal audit of the No Child Left Behind (NCLB) Title I Grant of the Lakewood Board of
Education. The review covered the period September 1, 2011 through August 31, 2012. The
resulting report is enclosed.

Utilizing the process outlined in the attached Procedures for LEA/Agency Response, Corrective
Action Plan and Appeal Process, the Lakewood board is required, pursuant to N.J.A.C.
6A:23A-5.6, to publicly review and discuss the findings in this report at a public board meeting
no later than 30 days after receipt of the report. Within 30 days of the public meeting, the board
must adopt a resolution certifying that the findings were discussed in a public meeting and
approving a corrective action plan which addresses the issues raised in the undisputed findings
and/or an appeal of any findings in dispute. A copy of the resolution and the approved corrective
action plan and/or appeal must be sent to this office within 10 days of adoption by the board.
Direct your response to my attention.

Also, pursuant to N.J.A.C. 6A:23A-5.6(c), you must post the findings of the report and the
boards corrective action plan on your school districts website.

By copy of this report, your auditor is requested to comment on all areas of noncompliance and
recommendations in the next certified audit submitted to the New Jersey Department of
Education. If you have any questions, please contact Lisa D. McCormick at (609) 292-7742.

Sincerely,

Robert J. Cicchino, Director
Office of Fiscal Accountability and Compliance

RJC/LDM/tc: Lakewood Cover Letter

Distribution

David Corso
Susan Martz
Robert Bumpus
Michael Yaple
Glenn Forney
Michael Azzara
Anne Corwell
Karen Campbell
Vanessa Davenport
Lisa D. McCormick
Thomas Dowd
Andrea Sunderville
Joanna Shinn
Stephen M. Eells
Laura A. Winters
Thomas A. DAmbola
Tobree Mostel
Neva Musella
Dieter P. Lerch, CPA

STATE OF NEW JERSEY
DEPARTMENT OF EDUCATION
OFFICE OF FISCAL ACCOUNTABILITY AND COMPLIANCE
PO BOX 500
TRENTON, NJ 08625-0500

LAKEWOOD BOARD OF EDUCATION
200 RAMSEY AVENUE
LAKEWOOD, NJ 08701
PHONE: (732) 364-2400

REPORT ON EXAMINATION
NCLB TITLE I AUDIT
OPERATIONS DURING THE PERIOD
SEPTEMBER 1, 2011 TO AUGUST 31, 2012

District: Lakewood
County: Ocean

AUTHORIZED REPRESENTATIVE: Thomas A. DAmbola, School Business Administrator

DIRECTOR OF PROGRAM: Tobree Mostel, Director of Grants

PERSONS CONTACTED (Name & Title):
Thomas A. DAmbola, School Business Administrator
Neva Musella, Title I Grant Coordinator

FUNDING SOURCES

PROGRAM
YEAR
N C L B
TOTAL PART A C/O S I A SIA C/O

APPROVED FUNDING
2011-2012 $8,727,354.00 $0.00 $8,727,354.00
2010-2011 $0.00 $132,259.00 $132,259.00

TOTAL $8,727,354.00 $0.00 $0.00 $132,259.00 $8,859,613.00
NCLB TITLE I AUDIT
FISCAL YEAR 2011-2012

Page 1 of 18
INTRODUCTION

The Office of Fiscal Accountability and Compliance (OFAC) conducted a fiscal audit of the
districts FY 2011-2012 NCLB, Title I, Part A Program to determine whether the funds were
spent in accordance with applicable law, regulations, and cost principles.

The scope of work performed included, but was not necessarily limited to: a) an examination of
various documents - the grant application, board meeting minutes, payroll records, time and
activity reports, teacher certifications, employment contracts, purchase orders, invoices,
cancelled checks, Title I Unified Plans, budget reports and corresponding account analyses; b)
reconciliation of disbursements to the Final Report; c) the selection of samples from payroll and
non-payroll transactions; and d) the performance of related expenditure testing.

During the sample selection process, the OFAC was informed that a contract issued to a
nonpublic service provider in the amount of $2,641,323 for instructional services to students was
under review by a federal agency. Consequently, the aforementioned contract was excluded
from the scope of work performed by this office. The OFAC reserves its right to examine and
evaluate the document in the future to determine whether the associated disbursements constitute
allowable program costs pending disposition by the federal agency.

NCLB TITLE I AUDIT

PUBLIC SCHOOL EXPENDITURES -
FINDINGS, FURTHER ACTION REQUIRED OR RECOMMENDATIONS

Page 2 of 18
1. The LEA improperly included unexpended FY 2011-2012 Title I, Part A and SIA Part
A funds of $1,298,832.50 and $29,914.53 on corresponding Final Expenditure Reports
(FERs).

Pursuant to a September 11, 2012 broadcast memorandum issued by the Office of Grants
Management (OGM)
1
, LEAs were required to submit one final expenditure report for each title
in which FY 2012 NCLB funds were accepted and expended on allowable programs, services
and/or activities.(emphasis added) A reconciliation of the districts FY 2011-2012 general
ledgers maintained for Title I, Part A and SIA Part A to corresponding FERs disclosed that
expenditures for several line items were overstated/(understated), as summarized below:

Title I, Part A SIA Part A
Expenditure
Category
General
Ledger
Final
Report Difference
Expenditure
Category
General
Ledger
Final
Report Difference
100-100 $12,700.00 $14,604.00 $1,904.00
200-100 $28,186.46 $37,186.00 $ 8,999.54
200-200 55,854.20 75,527.00 19,672.80 200-200 2,847.50 3,819.00 971.50
200-300 5,065,784.61 6,412,163.00 1,346,378.39 200-300 24,220.00 28,220.00 4,000.00
200-500 25,658.22 28,058.00 2,399.78 200-500 19,523.00 38,000.00 18,477.00
200-600 210,607.73 210,638.00 30.27 200-600 5,053.97 9,616.00 4,562.03
Admin 288,821.28 210,173.00 (78,648.28)
Subtotal $1,298,832.50 Subtotal $29,914.53

Total $1,328,747.03

Despite multiple inquiries concerning the variances shown, district personnel failed to produce
spreadsheets or other records which demonstrate how the amounts reported on the FERs were
computed. The OFAC arrived at figures reported on the LEAs Title I, Part A FER, with
exception of the Administrative line item, by recording appropriations from the Title I, Part A
Budget Report, net of applicable adjustments and subtracting amounts used to establish FY
2012-2013 carryover
2
. This raised concern as the calculated expenditures included amounts
that were not actually disbursed (emphasis added).

LEAs were required to liquidate all FY 2012 NCLB funds by October 15, 2012 in accordance
with the aforementioned broadcast memorandum. Further inspection disclosed the district
reduced appropriations in its P2-231 accounts by balances of purchase order amounts not
liquidated by November 30, 2012. The LEA posted various adjustments to combine unexpended

1
This memorandum pertained to FY 2012 No Child Left Behind (NCLB) Final Expenditure Reports and was issued
by Anne Corwell, Director of the OGM.
2
The LEA posted aggregate appropriations of $972,290.63 on September 30, 2013 via adjustment #126 to establish
FY 2012-2013 carryover. This figure differs slightly from the reported carryover of $972,295.00.
NCLB TITLE I AUDIT


Page 3 of 18
funds from its P2-231 accounts with carryover of $972,290.63 in 20-234 account numbers; refer
to the table below:

The combined total of $2,235,763.27 ($1,263,472.64 + $972,290.63) represents 25.62% of the
districts FY 2011-2012 Title I, Part A award of $8,727,354.00. The aforementioned percentage
exceeds the carryover limit of 15%, which would have necessitated the LEA to request the
NJDOE to waive the restriction or forfeit all unexpended funds not authorized for carryover.
Pursuant to section 1127(b) of NCLB, the NJDOE may waive the percentage limitation once
every three years if the state determines the request is reasonable and necessary or supplemental
appropriations become available. However, the LEA improperly reported carryover of
$972,295.00 in lieu of the actual $2,235,763.27
4
balance of unencumbered funds on its Title I,
Part A FER.

This apparent lack of adherence to legislative, regulatory and departmental requirements
governing carryover and unexpended funds is not an isolated case. Although the Step 4, Title I
Eligibility page of the LEAs NCLB Consolidated Grant Application disclosed no indication that
funds from FY 2010-2011 were transferred into or added to the FY 2011-2012 Title I, Part A
award, the district provided records which indicate otherwise. Specifically, a FY 2010-2011
Carryover Budget Report showed appropriations of $849,259.63 (established during FY 2011-
2012) and a residual balance $119,589.20.

The NCLB New Jersey Consolidated Formula Subgrant Fiscal Year 2011 Reference Manual
(FY2011 Reference Manual) specified LEAs that have not obligated or spent all of the funds
generated on the basis of the number of either public or nonpublic schoolchildren by the end of
the current school year may carry over these funds into the next year, provided that the amount
carried over does not exceed 15 percent (15%) of the LEAs total Title I, Part A, allocation. . . To
carry over more than 15% of Title I, Part A funds, a district must apply for a waiver as a

3
This figure accounts for most of the Title I, Part A overstatements of $1,298,832.50. The remaining difference of
$35,359.86 is explained by unspent funds that were accounted for as expenditures on the Title I, Part A FR which
originated from: a purchase order adjustment of $19,676.76; corresponding balances of $4,175.15 in P2-231 and
$11,513.43 in 20-233 accounts; and an immaterial variance of $(5.48).
4
On June 1 2013, the district reduced the total amount appropriated in its 20-234 account by $168,214.81 via
adjustment numbers 397 and 491.
From Fund-Program
(Adjustment Nbr.) to 20-234 Amount
P2 -231 (#130) $ 300,000.00
P2-231 (#182) 277,338.56
P2-231 (#183) 430,000.00
P2-231 (#184) 256,134.08
Total $1,263,472.64
3

NCLB TITLE I AUDIT


Page 4 of 18
component of its Final Report using the [Electronic Web-Enabled Grant] EWEG system. The
NJDOE will conduct a desk audit and review the districts waiver request.

The OGM further advised LEAs, All funds that a district cannot carry over must be released to the
NJDOE to be reallocated via its September 11, 2012 broadcast memorandum. This obligation
would have been satisfied through the FER process had the district reported the actual amount of
Title I, Part A and SIA Part A funds disbursed for allowable program activities and services in
the EWEG system. In particular, any funds that were over paid would have been subtracted from
unexpended balances in the EWEG system. Based on the foregoing, the district is required to
remit funds of $2,178,006.66 ($1,328,747.03 + $849,259.63) that were improperly retained for
use without the requisite approval to NJDOE (refer to the Schedule of Audit Recovery Due to
SEA at the end of this report).

Further Action Required
Due to the significance of this finding, the district is required to prepare and submit: 1) a
reconciliation of Title I, Part A and Carryover disbursements from applicable account analyses to
the FER for the 2012-2013 and 2013-2014 project periods; 2) copies of Budget Reports and
corresponding account analyses; and 3) the Expense Account Adjustment Analysis by
Adjustment # Report. The FY 2012-2013 and 2013-2014 reconciliations and supporting
documents requested must be furnished within 30 days from the date of this report and 15 days
from submission of the FY 2014 NCLB FER to OGM, respectively.

The district is directed to email all records to the attention of Lisa D. McCormick at
Lisa.McCormick@DOE.STATE.NJ.US in portable document and EXCEL formats even if
the finding is subsequently appealed (emphasis added). By copy of this correspondence, the
OFAC requests OGM to notify our office following receipt of the districts FY 2013-2014 FER.

Finally, the LEA is reminded of its responsibility to prepare FERs using actual expenditures
incurred during the applicable project period (emphasis added).

2. Inadequately documented non-salary expenditures of $468,484.83 were improperly
charged to the Title I, Part A grant.

Approximately one-half million dollars was spent to acquire several hundred
technological/computing devices and related professional development (PD) sessions absent any
mention or rationale in the LEAs Title I Unified Plans. In addition, district personnel were
unable to provide: any explanation why the devices were purchased in response to multiple
inquiries; furnish listings of recipients; records acknowledging the receipt/possession of these
devices and/or some indication where the items are kept, refer to the table on the next page:

NCLB TITLE I AUDIT

FINDINGS AND RECOMMENDATIONS

Page 5 of 18
Line
Item
Purchase
Order # Date Vendor Description Amount
200-300 1204046 3/31/12 Apple, Inc. 480 iPads, 10 MacBook Pro Laptops, three 8-
day professional development (PD) series
$ 320,902.28
200-600 1202074 10/25/11 Staples Advantage 10 wireless internet routers 1,799.90
1203284 2/1/12 Apple, Inc. 9 days of PD, split w/multiple grants & fiscal
years
2,456.89
1205153 6/1/12 Apple, Inc. 280 iPads with AppleCare 131,240.00
1205155 6/1/12 STM Bags, LLC 280 iPad cases 9,123.98
1205496 6/30/12 Staples Advantage 2 Epson multimedia projectors 1,675.78
Admin 1301828 8/1/12 Hewlett-Packard 2 laptops 1,286.00
Total $468,484.83

OMB Circular A-87, Attachment A, Section (C)(1) provides that costs must be necessary and
reasonable for proper and efficient performance and administration of federal awards, be
allocable to federal awards, and be adequately documented (emphasis added). A cost is
reasonable if, in its nature and amount, it does not exceed that which would be incurred by a
prudent person under the circumstances prevailing at the time the decision was made to incur the
cost. A cost is allocable to a particular cost objective if the goods or services are chargeable or
assignable to such cost objective in accordance with relative benefits received.

The items acquired were not deemed to be necessary and reasonable for the proper and efficient
performance and administration of federal awards as set forth by the requirements of OMB
Circular A-87, Attachment A, Section (C)(1). As a result, the sum of $468,484.83 must be
refunded to the NJDOE (refer to the Schedule of Audit Recovery Due SEA at the end of this
report).

Recommendation
The LEA must ensure that expenses charged to Title I are allowable and support authorized
program activities.

3. Unsupported/unallowable payroll expenditures of $56,851.03 were erroneously charged
to the Title I, Part A program.

During the audit, copies of payroll records and purchase orders were requested to document
salary and non-salary expenditures charged to the FY 2011-2012 Title I, Part A grant. The audit
disclosed unsupported/unsubstantiated payroll costs were included in line item figures recorded
on the LEAs FER as summarized on the next page:

NCLB TITLE I AUDIT


Page 6 of 18
Account Number Date
J/E
Amount Unsupported Account Number Date
J/E
Amount Unsupported
20-233-100-100-00-0000 7/13/12 $ 120.00 $ 120.00 20-231-200-100-00-0000 6/29/12 $3,837.89 $ 348.00
20-233-100-100-00-0000 8/24/12 4,760.00 4,760.00 20-233-200-100-00-0000 8/10/12 3,576.91 3,576.91
20-233-100-100-15-0000 7/13/12 240.00 240.00 20-233-200-100-00-0000 8/24/12 4,290.91 3,576.91
20-233-100-100-15-0000 7/27/12 375.00 375.00 20-233-200-105-00-0002 7/13/12 2,653.84 2,653.84
20-231-200-100-00-0000 3/9/12 163.52 163.52 20-233-200-105-00-0002 7/27/12 1,001.82 1,001.82
Subtotal $5,658.52 $5,658.52 Subtotal $15,361.37 $11,157.48
Total $16,816.00

Additionally, the LEA charged workers compensation of $52,761.03 for Andrea Adams to the
Title I, Part A grant. Ms. Adams was out for nearly the entire 2011-2012 school year. The LEA
should have only charged those costs attributable to her actual work performed on Title I
activities to the federal program. Conversely, Jennifer Korkowski served as a replacement for
Ms. Adams during part of the school year and was paid a total of $12,716.00. Based on the
foregoing, Ms. Adams workers compensation of $52,761.03 less $12,716.00 or $40,045.03
constitutes unallowable program costs.

allocable to federal awards, and be adequately documented. Furthermore, EDGAR, 34 CFR
76.730(e) requires the district to keep records in a manner that facilitates an effective audit. As
a result, the LEA is required to return the sum of $56,851.03 ($16,816.00 + $40,035.03) to the
department for questioned costs attributable to the Title I, Part A program (refer to the Schedule
of Audit Recovery Due to SEA at the end of this report).

Recommendation
The LEA must improve procedures for the payment of expenditures related to the Title I, Part A
program in accordance with the requirements of OMB Circular A-87.

4. Aggregate expenditures of $22,715.00 were improperly charged to the Title I, Part A
and SIA Part A programs without any indication of an academic purpose.

According to the Step 4, Title I Eligibility Page of the districts NCLB Consolidated Application,
the LBOE was approved to operate schoolwide programs at all Title I eligible schools. The audit
disclosed LEA charged various items which do not appear to advance the intent and purpose of
the Title I, Part A and SIA Part A programs. The following questioned costs were identified:
NCLB TITLE I AUDIT


Page 7 of 18
Program
Line
Item
Purchase
Order # Vendor Date Description Amount
Title I,
Part A
200-600 1202147 Honeywell 11/1/11 Web-based emergency alert
system
$ 12,275.00
SIA Part A 200-300 1204344 Allegheny Educational System 4/1/12 Training on laser engraver 250.00
Total $12,525.00

USDOE Non-Regulatory Guidance on Designing Schoolwide Programs Children (March 2006)
indicates, in part, A schoolwide program is a comprehensive reform strategy designed to
upgrade the entire educational program in a Title I school; its primary goal is to ensure that all
students, particularly those who are low-achieving, demonstrate proficient and advanced levels
of achievement on [s]tate academic achievement standards. It is unclear how the use of federal
funds for these items advanced the educational needs of students.

In addition, district personnel indicated the partial salary of a Lakewood Middle School gym
teacher was incorrectly posted to account 20-247-100-100-04-0004 on June 30, 2012 via
disbursement adjustment #219. The related salary costs of $10,190.00 were subsequently
charged to the Title I, SIA Part A grant in error.

The FY 2011 Reference Manual states in part that Title I, SIA Part A funds can be used to
expand the programs and services being funded by Title I, Part A or can help the school address
additional priority problems the school identified in its needs assessment. The aforementioned
salary costs neither expands the program being funded by Part A funds, nor addresses an
additional priority problem identified in its needs assessment.

Furthermore, OMB Circular A-87, Attachment A, Section (C)(1) provides that costs must be
necessary and reasonable for proper and efficient performance and administration of federal
awards, be allocable to federal awards, and be adequately documented. As a result, the sum of
$22,715.00 ($12,525.00 + $10,190.00) must be refunded to the department for the questioned
costs identified above (refer to the Schedule of Audit Recovery Due to SEA at the end of this
report).

Recommendation
The LEA must improve procedures to ensure funds disbursed from federal funds represent
allowable costs and conform to the requirements of OMB Circular A-87.

NCLB TITLE I AUDIT


Page 8 of 18
5. Expenditures of $19,200.00 incurred and charged to the Title I, SIA Part A grant were
inadequately documented and/or deemed to be excessive and unnecessary for the
efficient performance of the federal programs.

The audit disclosed that various inadequately documented and/or excessive and unnecessary
costs were included in line item figures recorded on the LEAs FERs. In particular, the LEA,
disbursed Title I, SIA Part A funds of $19,200.00 to LEAD America, a non-profit organization
which helps prepare high school age students for college. The top 12 students from Lakewood
High School (four freshman, sophomores and juniors) participated in a multiple day/night
leadership program organized by LEAD America. The program was held at George Washington
University in Washington, D.C. from June 23-27, 2012.

District personnel were unable to locate the corresponding invoice or provide a list of attendees.
Notwithstanding, the costs incurred for this career and college ready activity equates to $320.00
per day (for a five day total of $1,600.00 per person) and were deemed to be excessive,
particularly in this time of budgetary constraints. According to the FY 2011 Reference Manual,
Title I, SIA Part A funds are allocated to schools in need of improvement to help low-
performing students achieve academic proficiency and complement the use of these schools
Title I Part A funds. The expenditures incurred were not considered to be necessary and
reasonable to advance the statutory purpose of the Title I, SIA Part A program.

cost. Based on the foregoing, the district must refund the sum of $19,200.00 to the department
for these disallowed costs (refer to the Schedule of Audit Recovery Due to SEA at the end of this
report).

Recommendation
The LEA must improve procedures for the payment of expenditures related to the Title I, SIA
Part A program in accordance with the requirements of OMB Circular A-87.
NCLB TITLE I AUDIT

NONPUBLIC SCHOOL EXPENDITURES -

Page 9 of 18
6. Nonpublic expenditures of $1,062,220.74 charged to the Title I grant supplanted local
funding sources and are therefore deemed to be unallowable program costs.

The district contracted with Tree of Knowledge, a third-party vendor to provide instructional
services to nonpublic school students throughout the 2011-2012 project period. Three purchase
orders were issued to cover the related costs as summarized below:

Line
Item
Purchase
Order # Date Description Amount
Admin. 1202101 12/27/11 Administrative charges for instructional services $ 16,325.49
1203882 3/1/12 Lease agreement 30,320.83
200-300 1202101 10/27/11 Instructional services 1,007,216.30
Total $1,053,862.62

The audit disclosed no indication how the services charged to the Title I, Part A grant
supplemented those provided through other sources, such as Chapter 192 and 193. This serves to
explain why in part the OFAC asked a district staff member to send an email to request
nonpublic school officials bring their teacher schedules and information concerning their
curriculum for the 2011-2012 school year to the Lakewood Board of Education (LBOE) offices
for examination. Neva Musella conveyed our request for records to nonpublic school officials
through an email dated August 28, 2013. The documents were not furnished for review. The
OFAC asked Ms. Musella to resend the email to appropriate nonpublic personnel. A second
email was sent on March 5, 2014. Only three out of 142 nonpublic school officials responded to
Ms. Musellas email. As of the present date, no records have been produced for inspection.

Pursuant to section 1120 of NCLB, the LEA must provide an instructional program that meets
the educational needs of nonpublic students who are failing or at risk of failing and supplements
the classroom instruction provided by the private school. Educational services provided with
Title I funds must be in addition to those services that the private schools provide all its children.
The OFAC could not determine if the instructional services provided by the aforementioned
vendor satisfied this legislative requirement due to the nonpublic school officials failure to
produce the records requested for examination (emphasis added). Therefore, the expenditures
summarized above are disallowed.

It was also noted that the LEA disbursed Title I, Part A funds to place advertisements for
nonpublic consultation meetings, a parenting course and employment opportunities for teachers
in various publications, refer to the following table:

NCLB TITLE I AUDIT


Page 10 of 18
Line
Item
Purchase
Order # Date Vendor Amount
Purchase
200-500 1301777 8/1/12 Yated Ne-Eman $ 240.00 1301780 8/1/12 Hamodia $ 400.00
1301779 8/1/12 The Voice of Lakewood 70.00
200-600 1203790 8/1/12 The Voice of Lakewood 31.27 1204956 6/1/12 The Voice of Lakewood 125.00
1204955 6/1/12 The Lakewood Shopper 200.00 1204957 6/1/12 Gannett NJ Media 391.85
Subtotal $ 541.27 Subtotal $ 916.85
Total $1,458.12
The classified teaching position ad stated, in part, the Lakewood Board of Education is
searching for staff to work in nonpublic schools. The advertisement did not mention Title I at
all and appeared to benefit the entire nonpublic school population. The parenting course
announcement essentially opened the event to all parents within the community. The nonpublic
consultation meeting ad stated Lakewood Board of Education NCLB Title I, IDEA, Chapter
192, 193 & 226 will hold a general consultation meeting. This meeting covered topics relevant
to Title I, other federal funds and state financial assistance and would have occurred regardless
of whether the LEA received Title I funds.

Further, Leopold Slomivc presented, "Dealing and Coping w/Struggling Students" workshops to
11 teachers (less than 20 in total) at the United Talmudical School. However, related documents
show there were at least 45 different participants. Chaya Decklebaum was hired to work with 37
teachers at Bais Tova School to enhance the curriculum of the entire school.

Line
Item
Purchase
200-300 1301630 Leopold Slomivc 7/30/12 Workshops for teachers $ 4,400.00
1301630 Chaya Deckelbaum 8/1/12 Curriculum development 2,500.00
Total $ 6,900.00

United States Department of Education (USDOE) Non-Regulatory Guidance Title I Private
Services to Eligible Private School Children (March 2003) states The professional development
activities for private school teachers should address how those teachers can serve Title I students
better, such as by providing information on research-based reading and mathematics instruction.
It is inappropriate to use these funds to upgrade the instructional program in the regular
classroom of the private school.

Section 1120A(b) of NCLB requires an LEA use Title I funds only to supplement the level of
funds that would, in the absence of Title I funds, be made available from non-federal sources for
the education of students participating in Title I programs. This supplement not supplant
provision bars the district from expending funds generated by private school students on
classroom instruction nonpublic school personnel are obligated to provide its children. Based on
NCLB TITLE I AUDIT


Page 11 of 18
the foregoing, the sum of $1,062,220.74 ($1,053,862.62 + $1,458.12 + $6,900.00) must be
refunded to the department for these disallowed costs (refer to the Schedule of Audit Recovery
Due to SEA at the end of this report).

Recommendation
The LEA must ensure Title I program expenditures supplement, not supplant, state and local
funds.

7. Adequate documentation was not provided which demonstrates nonpublic expenditures
of $83,892.72 allocated to the Title I, Part A program represent allowable costs.

During the audit, copies of payroll records and purchase orders were requested to document
salary and non-salary expenditures charged to the FY 2011-2012 Title I, Part A grant. The audit
disclosed that various inadequately documented or unsupported costs were included in line item
figures recorded on the LEAs FERs as summarized below:

Several purchase orders were issued on January 1, 2012 on behalf of nonpublic schools to
cover the registration costs for individuals to attend an annual conference offered by the;
Torah Umesorah, National Society for Hebrew Day Schools; refer to the table below:

Line
Item
Purchase
Order # Nonpublic School Amount
Purchase
Order # Nonpublic School Amount
200-300 1202940 Yeshiva Toras Aron $ 9,600.00 1202955 Yeshiva Masoras Avos $ 4,000.00
1202941 Yeshiva Tiferes Torah 4,150.00 1202956 Yeshiva Yishrei Lev 2,611.72
1202942 Lakewood Cheder 15,500.00 1202958 Yeshiva Kol Torah 2,700.00
1202943 Talmud Torah Orh Elchonon 1,350.00 1202959 Bais Reuven Kaminatz 3,150.00
1202944 Tashbar 3,594.00 1202960 Yeshiva Bais Hatorah 3,600.00
1202947 Yeshiva Shagas Aryeh 3,060.00 1202961 Yeshiva Toras Manachem 1,477.00
1202948 Yeshiva Orchos Chaim 9,800.00 1202962 Talmud Torah Bais Avrohom 3,600.00
200-500 1203340 Cheder Bnei Torah 4,950.00
Subtotal $52,004.00 Subtotal $21,138.72
Total $73,142.72

Approximately 200 nonpublic teachers attended the conference on February 17-18, 2012
which cost $450.00 per person. Registration fees for roughly 140 people were charged to
the Title I grant. District personnel were unable to locate a copy of the actual agenda and
list of participants requested for inspection. A staff member indicated such listings were
too difficult to maintain due to the numerous additions and deletions of attendees.
NCLB TITLE I AUDIT


Page 12 of 18
Social services were provided to nonpublic students by Esther Gersten, a licensed social
worker. In addition, one student underwent a psychiatric evaluation by Sabine Hack,
M.D. in New York. Contemporaneous records evidencing funds were not reasonably
available from other public or private sources to provide such services, the students
eligibility for Title I comprehensive services, and the students served were not provided:

Line
Item
Purchase
200-300 1204348 4/1/12 Esther Gersten $ 3,200.00
1302407 9/1/12 4,800.00
1302409 9/1/12 1,800.00
200-300 1205480 6/30/12 Sabine Hack 950.00
Total $10,750.00

Psychiatric services are deemed to be outside the scope of comprehensive services set
forth by Section 1115(c)(e) of NCLB and would otherwise be disallowed.

allocable to federal awards, and be adequately documented. As a result, the sum of $83,892.72
($73,142.72 + $10,750.00) must be refunded to the NJDOE for these questioned costs (refer to
the Schedule of Audit Recovery Due to SEA at the end of this report).

Recommendation
The LEA must improve procedures for the payment of expenditures related to the Title I

8. Nonpublic expenditures totaling $27,770.86 were improperly charged to the Title I, Part
A program without any indication of an academic purpose.

The LEA expended Title I funds for various supplies which are summarized on the next page.
The items purchased do not appear to advance the intent and purpose of the Title I, Part A
program.

A variety of arts and craft items were purchased primarily in the spring and summer of 2012 for
Bais Tova School, a nonpublic school. The items included, but are not limited to: numerous
cases of colored paper, 180 packages of velcro dots, tissue paper, glitter, buttons, oaktag, plastic
baby dolls, sequins, foam shapes, beads, table cloths, floral tape, stickers, and popsicle sticks.
Following is a summary of the related purchase orders:

NCLB TITLE I AUDIT


Page 13 of 18
Line
Item
Purchase
Order # Vendor Date Amount
Purchase
Order # Vendor Date Amount
200-300 1201704 W.B. Mason Co Inc. 10/1/11 $ 579.80 1205476 The Craft Shop of NY 6/30/12 $ 1,561.27
1201705 The Craft Shop of NY 10/1/11 2,274.45 1205483 Hygloss Products, Inc. 6/30/12 2,023.86
1201707 XPEDX 10/1/11 1,351.04 1205484 Gramco School Supplies 6/30/12 2,224.33
1205269 Roselle Paper Co 6/21/12 2,633.84 1301608 Hygloss Products, Inc. 7/30/12 1,547.10
1205268 Crafts N More 6/30/12 3,011.18 1301693 The Craft Shop of NY 8/1/12 1,970.78
1205448 Oriental Trading Co 6/30/12 2,017.92 1301706 Hygloss Products, Inc. 8/1/12 990.87
1205475 The Craft Shop of NY 6/30/12 3,920.17 1301748 The Craft Shop of NY 8/1/12 1,664.25
Subtotal $15,788.40 Subtotal $11,982.46
Total $27,770.86

Section 1120 of NCLB requires LEAs to provide eligible children attending private elementary
and secondary schools, their teachers, and their families with Title I services or other benefits
that are equitable to those provided to eligible public schoolchildren, their teachers, and their
families.

USDOE Non-Regulatory Guidance on Title I Private Services to Eligible Private School
Children (March 2003) clarifies, Simply providing the private school with instructional
materials and supplies is NOT an option available to the LEA because it is neither a proper Title
I program implemented by the LEA nor meets the equitability requirement.(emphasis added).
Any supplies, materials or equipment purchased with Title I funds should be provided for the
sole use of the Title I-funded staff to support the Title I services being provided. The acquisition
of arts and craft supplies for nonpublic schools is not deemed to be an allowable use of Title I
funds. Consequently, the district is required to remit the sum of $27,770.86 to the NJDOE for
these questioned costs (refer to the Schedule of Audit Recovery Due to SEA at the end of this
report).

Recommendation
The LEA must ensure that expenses charged to Title I are allowable and support authorized
program activities.

9. Nonpublic expenditures of $19,953.57 incurred and charged to the Title I, Part A grant
were inadequately documented and/or deemed to be excessive and unnecessary for the
efficient performance of the federal programs.

The audit disclosed that various inadequately documented and/or excessive and unnecessary
costs were included in line item figures recorded on the LEAs FERs. Following is a summary
of the questioned costs identified:
NCLB TITLE I AUDIT


Page 14 of 18
Title I, Part A - Consulting Fees
An invoice submitted by Michelle Doyle, a consultant indicated her time was split/billed
equally between Title I and IDEA, therefore only $1,612.62 or 50% of $3,225.24 of purchase
order #1202597 should have been allocated to Title I.

Purchase order #1203808 in the amount of $5,287.20 was issued on March 1, 2012 to cover
fees for Bowman and Company to review invoices submitted to the district by Tree of
Knowledge (TOK) for instructional services. The Lakewood Board of Educations approval
of this charge stated payment for this service was the responsibility of TOK.

David Rubel provided consultation services related to Title I, IDEA, and Chapter 192/193
funding for nonpublic beneficiaries. Mr. Rubel was paid, in part, to research ways to help the
nonpublic students obtain more funds through Medicaid, among other things. It is unclear
how much time was devoted specifically to the Title I program from the description of
services rendered. However, the entire amount of purchase order #1205470 for $7,550.00
was improperly charged to Title I.

The LEA disbursed payments of $5,503.75 to Elie Wizman for consultation services with
district attorneys, Mr. Rubel and a nonpublic school official from the IGUD organization
regarding Title I and IDEA. However, the entire amount of purchase order # 1205471 was
improperly allocated to Title I. Further, the hourly rate paid of $175.00 for over 30 hours of
inadequately described meeting/conversations was deemed to be excessive.

cost. Based on the foregoing, the district must refund the sum of $19,953.57 to the department
for these disallowed costs (refer to the Schedule of Audit Recovery Due to SEA at the end of this
report).

Recommendation
The LEA must improve procedures for the payment of expenditures related to the Title I, Part A
NCLB TITLE I AUDIT

NONMONETARY FINDINGS AND RECOMMENDATIONS

Page 15 of 18
10. On various occasions, the LEA failed to issue purchase orders prior to services being
rendered (confirming order).

Various purchase orders, particularly those issued on behalf of nonpublic (NP) schools, were
issued after the services were performed and/or invoices were received. Examples include, but
are not limited to the following:

Line
Number
Purchase
200-300 1202602 Speech and Auditory Services 12/1/11 NP professional development (PD) $ 189.00
1203560 American Friends of YMS 2/27/12 NP PD on 2/9/12 825.00
1203718 Shani Loketch 3/1/12 NP PD during 10-11 grant period 3,800.00
1204274 Mary Courtney 4/1/12 NP PD from Sept. 11-Feb. 12 7,500.00
1204348 Esther Gersten 4/1/12 Therapy for one student 3,000.00
1301607 Pearl Blau Learning 7/30/12 NP PD throughout 11-12 school year 2,925.00
1301970 Zissel Munk 8/1/12 NP parent workshop on 3/27/12 2,100.00

N.J.S.A 18A:18A-2(v) indicates, in part, Purchase order" means a document issued by the
purchasing agent authorizing a purchase transaction with a vendor to provide or perform goods
or services to the board of education (emphasis added). Therefore, a properly executed PO must
be issued prior to services being rendered.

Recommendation
The LEA must implement a process to ensure purchase orders are issued before the receipt of
goods and services from vendors.

11. Expenditures should have been allocated to the 2010-2011 project period.

A review of the general ledger revealed the district charged costs for the following purchase
orders to the FY 2011-2012 Title I, Part A grant:

Line
Number
Purchase
200-300 1203718 Shani Loketch 3/1/12 NP PD during the 2010-2011 grant period 3,800.00
200-600 1301626 The Chronicle of Philanthropy 7/30/12 Annual Subscription to Chronicle of
Philanthropy
52.50

Although no benefit was derived from these expenditures during the 2011-2012 project period
which began on September 1, 2011, the associated costs were reported on the districts 2011-
2012 FER. These expenses incurred for purchase order #1203718 and 1301626 were allocable
to FY 2010-2011 and FY 2012-2013 Title I grants, respectively.
NCLB TITLE I AUDIT


Page 16 of 18
Recommendation
The district must implement procedures to ensure program costs are charged to the appropriate
grant year.

12. The LEA did not liquidate a Title I purchase order in a timely manner.

The audit revealed purchase order #1301777 in the amount of $240.00 was obligated during FY
2011-2012, but was not liquidated until January 23, 2013. The payment was disbursed months
following the liquidation deadline of October 15, 2012 established by OGM pursuant to the
broadcast memorandum mentioned in Finding One.

Recommendation
The LEA must ensure that charges incurred during the grant year are liquidated in a timely
manner as prescribed by departmental guidelines.

13. Title I funded personnel did not prepare detailed time and activity reports in a manner
consistent with the requirements of OMB Circular A-87.

The LEA furnished copies of time and activity reports for Title I funded personnel, with the
exception of one employee. However, the reports provided disclosed no indication of the
amount time charged to the federal program and were not signed by a supervisor.

In particular, fully funded Title I personnel must prepare and sign periodic time and activity
reports, at least twice a year and have them signed by a supervisor to support their time
chargeable to the Title I program in accordance with EDGAR, 34 CFR 80.(b)(6) and OMB
Circular A-87, Attachment B, Section 8(h)(3). Split funded Title I personnel are required to
complete and sign monthly time and activity reports pursuant to EDGAR, 34 CFR 80.(b)(6)
and OMB Circular A-87, Attachment B, Section 8(h)(4) (emphasis added).

USDOE Non-Regulatory Guidance on Title I Fiscal Issues: Maintenance of Effort;
Comparability; Supplement, Not Supplant; Carryover; Consolidating Funds in Schoolwide
Programs; and Grantback Requirements (February 2008) states that if schools do not
consolidate funds, then they must follow the requirements for personal activity reports. The
LEA did not consolidate funds for schoolwide schools.

In order to avoid potential audit findings and the recovery of funds, the LEA is directed to
refer to a broadcast memorandum dated December 18, 2012 issued by the Office of Title I
regarding Time and Effort Reporting for Title I Funded Staff (emphasis added). The
memorandum can be accessed from NJDOEs website at: http://education.state.nj.us/broadcasts/
2012/DEC/18/8643/Time%and%Activity%Reporting.pdf.
NCLB TITLE I AUDIT


Page 17 of 18
Anytime a change of funding source occurs, the event must be recorded in the board of education
meeting minutes. A revised certification must be prepared and signed by the appropriate parties.
The LEA must be aware that the supplanting of local funds is in violation of NCLB statutes and
subject to SEA recovery.

Recommendation
The LEA must develop procedures to ensure that Title I funded personnel prepare time and
activity reports which conform to the requirements of EDGAR, 34 CFR 80.(b)(6) and OMB
Circular A-87, Attachment B, Sections 8(h)(3) and 8(h)(4).

14. Appointments of Title I, Part A personnel, including their related salary and funding
percentages, were not recorded in the board of education meeting minutes.

The funding percentages and appointments of all instructional personnel charged to the Title I,
Part A grant were not included in the board of education meeting minutes provided for our
examination.

Federal regulations pursuant to OMB Circular A-87 and New Jersey Department of Education
guidelines require LEAs to document all program related costs. To achieve compliance with
these requirements, the designation of all Title I employees, both Part A and Carryover (if
applicable), and their salaries, assigned school and funding percentage must be documented in
the board minutes to provide a public record of approval for these expenditures.

Recommendation
The LEA must ensure all Title I employee appointments, including their salaries and funding
percentages, are recorded in the board of education meeting minutes documenting proper
authorization of these expenditures.

15. Certain records were not maintained in accordance with departmental and federal
guidelines.

A review of the districts FY 2011-2012 general ledger disclosed program codes 247 and 249
were used to account for certain SIA Part A expenditures. The Uniform Chart of Accounts for
New Jersey School Districts (Chart of Accounts), as required by N.J.A.C. 6A:23-2.2(g),
designates program codes 231-239 for NCLB Title I, Part A; Improving Basic Programs and
SIA, Part D, Neglected Delinquent or at Risk expenditures.

Recommendation
To facilitate an effective audit, the LEA must revise its coding system to conform to the
departments prescribed Chart of Accounts and ensure the proper recording of all financial
transactions.
NCLB TITLE I AUDIT

SCHEDULE OF RECOVERY DUE TO SEA

Page 18 of 18
Audit Finding Recovery

Number One $2,178,006.66

Number Two 468,484.83

Number Three 56,851.03

Number Four 22,715.00

Number Five 19,200.00

Number Six 1,062,220.74

Number Seven 83,892.72

Number Eight 27,770.86

Number Nine 19,953.57

Total Recovery Due to SEA $3,939,095.41

The check is to be made payable to Treasurer, State of New Jersey and mailed with the
corrective action plan.

Robert J. Cicchino, Director
State of New Jersey
Department of Education
PO Box 500
Trenton, NJ 08625-0500

Submitted by: Approved by:

_______________________________________ _______________________________________
Lisa D. McCormick, Manager Robert J. Cicchino, Director
Office of Fiscal Accountability and Compliance Office of Fiscal Accountability and Compliance

Auditor
Joanna Shinn

Rev. 8/2009
State of New Jersey
Department of Education

PROCEDURES FOR LEA/AGENCY
AUDIT RESPONSE CORRECTIVE ACTION PLAN AND APPEAL PROCESS

Resolution:

Pursuant to N.J.A.C. 6A:23A-5.6, within 30 days of receipt of the report, the school board must
discuss the findings of the report at a public meeting of the board. Within 30 days of the public
meeting, the board must adopt a resolution certifying that the findings were discussed in a public
board meeting and approving a corrective action plan to address issues raised in the undisputed
findings and/or appeal of any findings in dispute. Within 10 days of adoption of the resolution
by the board, such resolution together with the approved corrective action plan and/or appeal
must be submitted to the Office of Fiscal Accountability and Compliance. The findings of the
Office of Fiscal Accountability and Compliances report and the boards corrective action plan
must be posted on the districts website.

Corrective Action Plan:

The corrective action plan is to be used when the board is in agreement with any of the audit
findings. To contest a finding the appeal process must be used. After the appeal is settled a
corrective action plan must be filed for any finding upheld during the appeal process.

The corrective action plan must be prepared by completing the attached form. The school must
submit the following information:

Recommendation number
Corrective action (approved by the board)
Method of implementation
Person responsible for implementation
Completion date of implementation

If the corrective action plan is acceptable, a letter will be sent to the board indicating that it has
been accepted.

If the corrective action plan is not acceptable, a letter will be sent to the board indicating whether
further clarification is required or further action is necessary.

Rev. 8/2009
- 2 -

Appeal Process:

The appeal process is used to contest audit findings.

Within 10 days of the boards adoption of the resolution approving an appeal of the findings of
the report, a written request by the board to review the aggrieved findings, recommendations
or questioned costs must be submitted to the director, Office of Fiscal Accountability and
Compliance. The notice of appeal must indicate the findings to be appealed.

The appeal itself may be written or a hearing may be scheduled so that the board can present its
case. In either instance, documentation must be presented supporting the appeal. The director,
Office of Fiscal Accountability and Compliance will issue a written decision.

If the decision is unsatisfactory to the board it may, within 10 calendar days, file a notice of
appeal to the Chief of Staff.

If the final determination made by the Chief of Staff is still unsatisfactory to the board, it may
access the formal appeal process described in N.J.A.C. 6A:3-1.3.

Rev. 8/2009
NEW JERSEY DEPARTMENT OF EDUCATION
OFFICE OF FISCAL ACCOUNTABILITY AND COMPLIANCE
CORRECTIVE ACTION PLAN

NAME OF SCHOOL DISTRICT _______________________________ COUNTY _____________________________

TYPE OF EXAMINATION ____________________________________

DATE OF BOARD MEETING _________________________________

CONTACT PERSON ________________________________________

TELEPHONE NUMBER ______________________________________

CORRECTIVE

PERSON

COMPLETION
RECOMMENDATION ACTION REQUIRED METHOD OF RESPONSIBLE FOR DATE OF
NUMBER BY THE BOARD IMPLEMENTATION IMPLEMENTATION IMPLEMENTATION

CHIEF SCHOOL ADMINISTATOR DATE BOARD SECRETARY/SCHOOL BUSINESS ADMINISTRATOR DATE

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May 19, 2014

Mr. Isaac Zlatkin, Board President

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