oversight

Camden City Public School District's Administration of Federal Education Funds

Published by the Department of Education, Office of Inspector General on 2011-06-06.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

    Camden City Public School District’s Administration of 

                 Federal Education Funds


                                 FINAL AUDIT REPORT





                                    ED-OIG/A02J0002 

                                       June 2011 



Our mission is to promote the                           U.S. Department of Education
efficiency, effectiveness, and                          Office of Inspector General
integrity of the Department's                           New York, New York
programs and operations.
                                    NOTICE

  Statements that managerial practices need improvements, as well as other
conclusions and recommendations in this report, represent the opinions of the
Office of Inspector General. Determinations of corrective action to be taken
     will be made by the appropriate Department of Education officials.

  In accordance with the Freedom of Information Act (5 U.S.C. § 552), reports
issued by the Office of Inspector General are available to members of the press
 and general public to the extent information contained therein is not subject to
                             exemptions in the Act.
                         UNITED STATES DEPARTMENT OF EDUCATION
                                OFFICE OF INSPECTOR GENERAL

                                                                                                                    Audit Services
                                                                                                            New York Audit Region
                                                                        June 6, 2011


Mr. Christopher D. Cerf
Acting Commissioner of Education
New Jersey Department of Education
100 River View Plaza
P.O. Box 500
Trenton, NJ 08625

Dear Mr. Cerf,

Enclosed is our final audit report, Control Number ED-OIG/A02J0002, entitled “Camden City Public
School District’s Administration of Federal Education Funds.” This report incorporates the comments
you provided in response to the draft report. If you have any additional comments or information that you
believe may have a bearing on the resolution of this audit, you should send them directly to the following
Department of Education officials, who will consider them before taking final Departmental action on this
audit:

                                           Thelma Meléndez de Santa Ana, Ph.D.
                                           Assistant Secretary
                                           Office of Elementary and Secondary Education
                                           U.S. Department of Education
                                           400 Maryland Avenue, S.W.
                                           Washington, DC 20202

                                           Alexa E. Posny, Ph.D.
                                           Assistant Secretary
                                           Office of Special Education and Rehabilitative Services
                                           U.S. Department of Education
                                           400 Maryland Avenue, S.W.
                                           Washington, DC 20202

It is the policy of the U. S. Department of Education to expedite the resolution of audits by initiating
timely action on the findings and recommendations contained therein. Therefore, receipt of your
comments within 30 days would be appreciated.

In accordance with the Freedom of Information Act (5 U.S.C. § 552), reports issued by the Office of
Inspector General are available to members of the press and general public to the extent information
contained therein is not subject to exemptions in the Act.

                                                                 Sincerely,

                                                                 /s/

                                                                 Daniel P. Schultz
                                                                 Regional Inspector General for Audit

Enclosure

 The Department of Education’s mission is to promote student achievement and preparation for global competitiveness by fostering educational
                                                   excellence and ensuring equal access.
                         TABLE OF CONTENTS


                                                                         Page

EXECUTIVE SUMMARY……………………………………………………………………...1

BACKGROUND…………………………………………………………………………………3

AUDIT RESULTS……………………………………………………………………………….5

     FINDING NO. 1 – Camden Had an Inadequate Contract Administration
                     System……………………………..……………………..…...….…5

     FINDING NO. 2 – Camden Had Inadequate Documentation to Support
                     Expenditures of ESEA Funds……………………..…….....…..….8

     FINDING NO. 3 – Camden's Procurement Process Did Not Comply with
                     Federal Procurement Requirements ….…………..………...…..12

     FINDING NO. 4 – Camden Had Internal Control Weaknesses in Its
                     Accounting for Procured Goods and Services …………..…..….17

OBJECTIVE, SCOPE, AND METHODOLOGY ………………....…………………………20

Enclosure 1: Missing or Improperly Executed Contracts.…...……………….…...…………23

Enclosure 2: Unsupported ESEA Expenditures………………………………………..…….24

Enclosure 3: Misallocation of Federal Funds per Check Payment………………………….26

Enclosure 4: NJDOE Comments………………………………………………………………27
     ABBREVIATIONS, ACRONYMS AND SHORT FORMS USED IN THIS REPORT 


34 C.F.R.        Title 34 of the Code of Federal Regulations
ARRA             American Recovery and Reinvestment Act of 2009
Board            Board of Education
CAFR             Comprehensive Annual Financial Report
Camden           Camden City Public School District
CCESC            Camden County Educational Services Commission
CY               Calendar Year
Department       U.S. Department of Education
ESEA             Elementary and Secondary Education Act of 1965, as amended by the No
                 Child Left Behind Act of 2001
FY               Fiscal Year
IDEA             Individuals with Disabilities Education Act of 2004
IPA              Independent Public Accountant
NJDOE            New Jersey Department of Education
N.J.S.A.         New Jersey Statutes Annotated
OIG              Office of Inspector General
OMB              Office of Management and Budget
PO               Purchase Order
SOP              Standard Operating Procedure
SY               School Year
Title I          Title I, Part A (Improving Basic Programs Operated by Local Education
                 Agencies)
Final Report
ED-OIG/A02J0002                                                                     Page 1 of 33


                               EXECUTIVE SUMMARY 



The objective of our audit was to determine whether the Camden City Public School District’s
(Camden) contract related expenditures funded through the Elementary and Secondary Education
Act of 1965, as amended by the No Child Left Behind Act of 2001 (ESEA), were allowable and
spent in accordance with applicable laws and regulations for the audit period July 1, 2005,
through June 30, 2009.

To accomplish our objective, we reviewed Camden’s contracts that were paid with ESEA funds
and the process it used to procure goods and services. We reviewed 50 contracts totaling
$11,749,080 in expenditures funded with ESEA funds during our audit period. We determined
that some of the contract related expenditures were not allowable and were not spent in
accordance with applicable laws and regulations for our audit period. Camden had an inadequate
contract administration system, had questioned and unsupported expenditures, did not comply
with Federal requirements when procuring goods and services, and had internal control
weaknesses in its accounting for procured goods and services.

Specifically, Camden did not have a system to maintain and track contracts and, therefore, could
not provide a universe of contracts funded with ESEA funds. Camden could not support
$4,526,936 for contracts that were missing or improperly executed and had inadequate
documentation to support expenditures of $1,039,661 for some of these contracts. In addition,
Camden had inadequate documentation to support expenditures of $3,007,489 for properly
executed contracts. Camden also did not perform cost or price analysis for competitive and
noncompetitive contracts, did not comply with Federal requirements for competitive or sealed
bids, and did not comply with State statutes. In addition, Camden misallocated $79,260 in
expenditures for Individuals with Disabilities Education Act of 2004 (IDEA) services to the
Title I, Part A program (Title I) and $58,519 in expenditures for Title I services to IDEA.

We recommend that the Assistant Secretary for Elementary and Secondary Education require the
New Jersey Department of Education (NJDOE) to direct Camden to:

      develop and implement a contract administration system to properly track the
       administration of contracts;
      provide support to show that contracts were properly executed; and
      provide adequate supporting documentation for unsupported ESEA expenditures.

NJDOE should also require that Camden develop and implement controls over maintaining
documentation that will support its compliance with Federal procurement requirements. NJDOE
needs to monitor Camden to ensure it manages its ESEA funds in compliance with laws,
regulations, and the provisions of contracts and grant agreements. In addition, we recommend
that the Assistant Secretary for Elementary and Secondary Education in conjunction with the
Assistant Secretary for Special Education and Rehabilitative Services require NJDOE to work
with Camden to ensure proper allocation of expenditures and proper disbursement of and
accounting for Federal funds in Camden’s accounting system.
Final Report
ED-OIG/A02J0002                                                                       Page 2 of 33

We provided a draft of this report to NJDOE. We reviewed NJDOE’s response, dated
April 1, 2011, and revised Finding No. 2 based on additional documentation received. In its
response, NJDOE neither agreed nor disagreed with our findings; however, NJDOE concurred
with 12 of the 15 recommendations. NJDOE stated that the State Monitor worked with Camden
officials to locate the missing contracts and that a number of the contracts were enclosed with its
comments. NJDOE further stated that Camden officials would provide supporting
documentation for contracts that lacked such documentation, as stated in Finding No. 2. Camden
was able to locate two of the missing contracts, a properly executed contract, and additional
supporting documentation for two contracts.

NJDOE also stated that Camden developed and planned to implement standard operating
procedures (SOP) over contract administration, payments of goods and services, and
procurement requirements. If implemented correctly, the planned SOPs would establish a
database to track contracts, maintain proper documentation to support contract expenditures and
prevent overpayment of contracts, establish a system that properly identifies purchase orders
(POs) for payment and maintains proper documentation to support expenditures. However, some
of the SOPs did not specifically describe how the database would interface with Camden’s
existing financial system to ensure overpayments were prevented, which documents would be
retained to support expenditures, or which accounting controls would be implemented to prevent
duplicated encumbrances. Therefore, the SOPs would not be sufficient to fully address
Recommendations 1.1, 1.3, 2.4, and 4.3.

We have summarized NJDOE’s comments and our response after each finding. A copy of
NJDOE’s comments is included as Enclosure 4. However, because of the volume of the
attachments included with NJDOE’s comments, we have not included them in this enclosure. A
complete copy of NJDOE’s comments with all attachments is available upon request and will be
forwarded, under separate cover, to the Assistant Secretary for Elementary and Secondary
Education and the Assistant Secretary for Special Education and Rehabilitative Services.
Final Report
ED-OIG/A02J0002                                                                                      Page 3 of 33



                                             BACKGROUND 



Camden was awarded $88,468,141 in ESEA subgrants for the September 1, 2005, through
August 31, 2009, school years (SYs). During our audit period, which covered July 1, 2005,
through June 30, 2009, Camden expended $11,749,080 of its ESEA funds for contract related
goods and services.1 Camden operated 29 to 30 schools and had an average annual student
enrollment of more than 14,000 students. For SYs 2005-2006 and 2007-2008, 28 schools
operated as school-wide schools and 29 schools operated as school-wide schools for
SYs 2006-2007 and 2008-2009.2 (See Table below)

                     Table: Camden School and Enrollment Data
                             Total  School-wide
               School Year                           Enrollment
                            Schools   Schools
                2005-2006     30         28             14,905
                2006-2007     30         29             15,331
                2007-2008     29         28             12,954
                2008-2009     29         29             13,636

During our preliminary review conducted for the period July 1, 2005, through June 30, 2006, we
became aware of numerous deficiencies regarding Camden’s administration of the U.S.
Department of Education (Department) funds.3 Although Camden recently implemented
changes to address issues in the district, the numerous deficiencies found during the review
warranted additional audit work to ensure that the actions implemented protect Federal subgrants
from the risk of misuse. There also was a significant increase in Federal funding through the
American Recovery and Reinvestment Act of 2009 (ARRA), which could be at risk of misuse.
For the period July 1, 2009, through June 30, 2010, Camden received $49,038,760 in ARRA
funds, which included $38,485,861 in State Fiscal Stabilization Fund grant funds, $6,397,060 in
Title I ARRA funds, and $4,155,839 million in IDEA ARRA awards.

During our review, we obtained an understanding of internal controls and policies and
procedures related to Camden’s procurement process. The Purchasing Department, which
operated under the Business Office, was responsible for procuring goods and services through a
bidding process. Camden’s certified purchasing agent was authorized to approve contracts for
purchases of goods and services up to the State’s threshold of $29,000. If the contract cost was
more than $29,000, then, barring exceptions, the purchasing agent issued a request for proposals
to solicit proposals from qualified vendors. The Camden Board of Education (Board) selected a
committee to review the proposals. The committee selected the vendor and the Board approved
1
  NJDOE awarded ESEA subgrants for September 1 through August 31. However, for reporting purposes, we
reviewed expenditures for Camden’s fiscal year (FY) July 1 through June 30, as reported in Camden’s
Comprehensive Annual Financial Report (CAFR).
2
  School-wide schools are those with State approved comprehensive plans that allowed schools to blend their
Federal, State, and local funds to upgrade the entire educational program of a school serving eligible children.
3
  The review was performed from November 14, 2007, through March 20, 2008. We resumed the audit work on
November 10, 2008.
Final Report
ED-OIG/A02J0002                                                                   Page 4 of 33

through resolution the selected vendor before the goods and services were procured. This same
procurement process was followed by Camden during our audit period.

Camden used its financial accounting system to create POs and pay vendors. The payments were
processed by the accounts payable department upon approval from a Business Office official.
Camden used accounting codes to identify the funding source and other account information
related to the purchase. Each PO was assigned an accounting code when the PO was created,
which identified federally funded expenditures.
Final Report
ED-OIG/A02J0002                                                                                  Page 5 of 33


                                              AUDIT RESULTS



We determined that some of Camden’s contract related expenditures funded through the ESEA
were not allowable and spent in accordance with applicable laws and regulations for the audit
period July 1, 2005, through June 30, 2009. We found that Camden did not have a contract
administration system that adequately maintained and tracked contracts. As a result, Camden
could not provide a universe of contracts expended with ESEA funds and overpaid contracted
vendors. Camden could not support $4,526,936 for contracts that were missing or improperly
executed. In addition, Camden had inadequate documentation to support expenditures of
$1,039,661 for some of those missing or improperly executed contracts and $3,007,489 for
properly executed contracts. Camden also did not comply with applicable Federal requirements
when procuring goods and services. Specifically, Camden did not perform any cost or price
analysis for competitive and noncompetitive contracts and did not maintain sufficient
documentation to support its competitive procurement process. Further, Camden’s rationale for
awarding noncompetitive contracts did not comply with State statutes, and contracted vendors
provided services before the Board approved them or before Camden signed the contract. We
also found that Camden did not date all signed contracts. Lastly, we found that Camden lacked
internal controls in its accounting for procured goods and services, which resulted in
misallocated expenditures, duplicated budgets, and duplicated encumbrances.

FINDING NO. 1 – Camden Had an Inadequate Contract Administration System

Camden did not have an adequate contract administration system. Camden used a manual
process for procuring contracted goods and services that did not ensure supporting contract
information was adequately documented, maintained, and tracked. As a result, Camden could
not provide a universe of contracts funded with ESEA funds and overpaid contracted vendors
$11,453.

Camden Could Not Provide a Universe of Contracts Funded with ESEA Funds

Camden did not have a contract administration system that adequately maintained and tracked
contracts. We requested a list of all contracts that had been funded with ESEA funds during the
course of our audit period. Camden’s purchasing agent provided a list of 17 contracts funded
with ESEA funds for the period July 1, 2005, through June 30, 2008. The list was based partially
on the purchasing agent’s memory. We concluded that the purchasing agent’s list was
incomplete because we found contracts through Board resolutions and contract files that were
not included on the list.4 When we expanded our scope to the period July 1, 2008, through
June 30, 2009, the purchasing agent provided an Excel spreadsheet that he had maintained for
301 Board resolutions. The Excel spreadsheet of resolutions was insufficient because it did not
provide details regarding which resolutions were for contracted goods and services and did not
indicate the source of funding used. Because Camden could not provide a complete and reliable
universe of contracts funded with ESEA funds for the period July 1, 2005, through
June 30, 2009, we developed and performed alternative procedures to determine the universe of

4
    Board resolutions documented the approval of contracts and various other district matters.
Final Report
ED-OIG/A02J0002                                                                                        Page 6 of 33

contracts. Based on the alternative procedures, we determined that Camden awarded
88 contracts, with a total value of $14,899,894, funded with ESEA funds during the period
July 1, 2005, through June 30, 2009. Of the 88 contracts, we reviewed all 50 contracts that were
awarded for amounts above New Jersey’s bid threshold of $29,000. The remaining 38 contracts,
which were under the bid threshold and awarded directly by Camden’s certified purchasing
agent, were not reviewed.

According to Title 34 of the Code of Federal Regulations (34 C.F.R.) § 80.36 (b)(2), “[g]rantees
and subgrantees will maintain a contract administration system which ensures that contractors
perform in accordance with the terms, conditions, and specifications of their contracts or
purchase orders.”5

Camden’s contract administration system was inadequate because Camden could not provide a
universe of contracts funded with ESEA funds during our audit period. Although we performed
alternative procedures to determine the universe of contracts funded with ESEA funds, there is
no assurance that the 88 contracts we found constituted a complete universe. Without an
adequate contract administration system, there is no assurance that all goods and services were
provided to Camden in accordance with the contract terms, conditions, and specifications.

Camden Overpaid for Contracted Services

For 6 of the 50 ESEA funded contracts we reviewed during our audit, Camden overpaid the
contracted vendors $30,534, of which $11,453 was allocable to ESEA.6 Specifically, we found
that:

       	 For the period July 1, 2008, through June 30, 2009, Camden’s Board approved a contract
          for a vendor to provide uniforms and accessories for the food services, maintenance, and
          security departments for an amount not to exceed $84,995. Camden expended
          $104,458 for this contract representing an overpayment of $19,463 to the vendor.
       	 For the period July 1, 2007, through June 30, 2008, Camden’s Board approved a contract
          for a vendor to provide temporary staff at a rate of $14.25 per hour. However, we found
          that Camden paid a rate of $18.85 per hour, and for one day, Camden paid $28.28 per
          hour for overtime. This resulted in an overpayment of $7,285 to the vendor.
       	 For the period July 1, 2005, through June 30, 2006, Camden contracted with a university
          to provide two certification classes for its bilingual teachers. Camden paid the vendor
          $35,259 for 11 teachers to attend the first class and 12 teachers to attend the second class.
          According to the documentation we reviewed, only 10 teachers attended the first class
          and 11 teachers attended the second class. Therefore, Camden overpaid the vendor
          $3,066 for two teachers that were not enrolled in nor attended class.
       	 For the period July 1, 2005, through June 30, 2006, Camden contracted with a vendor to
          provide writing workshops to Camden’s 4th grade students at an amount not to exceed
          $34,650. The vendor submitted its invoice for services rendered in the amount of
          $34,200. Camden paid the vendor $34,650, which was $450 over the amount the vendor
          invoiced.
       	 Camden’s Board approved a contract with a vendor to provide professional development,

5
    We applied the applicable regulatory citation for each fiscal year of our audit period.

6
    $11,369 of this amount was included in the $4.58 million of unsupported expenditures noted in Finding No. 2. 

Final Report
ED-OIG/A02J0002                                                                     Page 7 of 33

        training, and technical support at a cost not to exceed $297,300 during the period
        July 1, 2005, through June 30, 2006. The vendor submitted invoices and Camden paid
        the vendor $297,500, an overpayment of $200.
       Camden’s Board approved a contract with a vendor to provide training and teacher
        mentoring at a cost not to exceed $69,000 during the period July 1, 2005, through
        June 30, 2006. The vendor submitted invoices and Camden paid the vendor $69,070, an
        overpayment of $70.

According to the Office of Management and Budget (OMB) Circular A-133 §___. 300(b), the
auditee shall “[m]aintain internal control over Federal programs that provides reasonable
assurance that the auditee is managing Federal awards in compliance with laws, regulations, and
the provisions of contracts or grant agreements that could have a material effect on each of its
Federal programs.”

Camden did not have adequate controls in its accounting system to ensure that payments were
properly made to contracted vendors. In addition, Camden’s accounts payable officials were not
aware of the contract details. Therefore, payments were processed based on invoices received
from the vendors. Camden officials who had requested the contracts had certified the invoices
for payment without verifying that the invoiced amount was correct. As a result, Camden
overpaid contracted vendors $11,453 in ESEA funds.

RECOMMENDATIONS
We recommend that the Assistant Secretary for Elementary and Secondary Education require
NJDOE to—

1.1 	   Direct Camden to develop and implement a contract administration system that maintains
        sufficient details regarding the contracts awarded by funding source to properly maintain
        and track the administration of contracts, and mitigate overpayments to contracted
        vendors.

1.2 	   Direct Camden to return the $11,453 in unallowed ESEA funds, with applicable interest,
        to the Department.

1.3 	   Review the remaining 38 contracts funded with ESEA funds awarded in the amount
        below New Jersey’s bid threshold of $29,000 to determine whether the contracts were
        properly executed, that the goods and services were provided, and the funds were
        expended in accordance with applicable laws and regulations.

NJDOE Comments
In its response to the draft report, NJDOE neither agreed nor disagreed with Finding No. 1 and
agreed to take corrective actions in accordance with Recommendations 1.1, 1.2, and 1.3.
NJDOE stated that Camden developed and planned to implement SOPs on contract
administration and payments for goods and services for Recommendations 1.1 and 1.3. The
planned SOPs stated that a database would be used to track detail on awarded contracts and that
the financial system would be used to track payments for contracts. NJDOE also stated that
Camden started to review the remaining 38 contracts mentioned in Recommendation 1.3 to
determine whether the contracts were properly executed, that the goods and services were
provided, and the funds were expended in accordance with applicable laws and regulations.
Final Report
ED-OIG/A02J0002                                                                     Page 8 of 33

OIG Response
We reviewed the SOPs attached to NJDOE’s comments. The planned SOPs were provided in
response to our recommendations to establish controls over the contract administration system
and the payments of goods and services. The SOPs expanded controls and procedures included
in the Camden City Board’s Governance Manual. If the planned SOPs are implemented
correctly, they would establish a database to track contracts, maintain proper documentation to
support contract expenditures and prevent overpayment of contracts by requiring prior approval
from Camden’s business administrator. However, the SOPs did not specifically describe how
the database would interface with Camden’s existing financial system to ensure overpayments
were prevented. Therefore, the SOPs would not be sufficient to fully address
Recommendations 1.1 and 1.3.

FINDING NO. 2 – Camden Had Inadequate Documentation to Support Expenditures of
               ESEA Funds

Camden did not have adequate controls to ensure that contracts and supporting documentation
were maintained. We reviewed 50 contracts with ESEA expenditures totaling $11.7 million and
found that Camden expended $4,526,936 for 23 missing or improperly executed contracts. For
8 of the 23 missing or improperly executed contracts, Camden lacked adequate documentation to
support expenditures of $1,039,661. For the remaining 15 contracts, Camden had adequate
documentation to support the expenditure; however, because the contracts were missing or
improperly executed, we could not determine whether the expenditures were in accordance with
the intended terms of the contract. We also found that for 15 of the 27 properly executed
contracts, Camden lacked adequate documentation to support expenditures of $3,007,489.

Camden Could Not Provide Support for Approximately $4.53 Million in ESEA Funds
Because of Missing or Improperly Executed Contracts and Inadequate Documentation

Camden did not ensure that 23 of the 50 contracts we reviewed were properly executed and
maintained in Camden’s contract files. Fourteen of the 23 contracts were missing from
Camden’s files. Although the contracts were approved by Board resolutions, the resolutions did
not provide sufficient details regarding the scope of work the vendor was contracted to provide.
Camden expended $3,374,362 in ESEA funds for the 14 missing contracts. Of the remaining
nine, for which Camden expended $1,152,575 in ESEA funds, six contracts were signed only by
the vendor, and three contracts were signed only by a Camden official. Without a contract
signed by both parties, Camden did not have a fully executable agreement on the cost and scope
of work to be performed.

According to the Camden Board’s policy, the school business administrator was responsible for
maintaining district records including contract files. Camden’s purchasing agent stated that
starting in FY 2009, he had been assigned responsibility for maintaining the contract files.
During our audit period, Camden had five different school business administrators. Prior to
FY 2009, Camden’s school business administrators assigned various staff to maintain the
contract files.

Per 34 C.F.R. § 80.36 (b)(1), “. . . subgrantees will use their own procurement procedures which
reflect applicable State and local laws and regulations, provided that the procurements conform
to applicable Federal law. . . .”
Final Report
ED-OIG/A02J0002                                                                                    Page 9 of 33

According to the New Jersey Statutes Annotated (N.J.S.A) 18A: 18A-36b,

        The contract shall be signed by all parties within the time limit set forth in the
        specifications, which shall not exceed 21 days, Sundays and holidays excepted, after the
        making of the award; provided, however, that all parties to the contract may agree to
        extend the limit set forth in the specifications beyond the 21-day limit required in this
        subsection.

Additionally, N.J.S.A. 18A: 18A-40 states, “[a]ll contracts for the provision or performance of
goods or services shall be in writing.”

In addition, Camden did not have sufficient documentation to support $1,039,661 expended for
8 of the 23 contracts that were missing or improperly executed. We reviewed Camden’s files
related to the missing or improperly executed contracts to determine whether sufficient
documentation was maintained to support the expenditures for these contracts. Camden lacked
documentation that would support attendance at workshops or seminars such as sign-in sheets for
workshops or seminars and transcripts for teachers attending professional development courses.
Three of the contracts were for services related to various software or Web sites; however,
Camden did not have the corresponding license agreements as documentation to support that
Camden officials had the right to access the sites for which it had contracted. Camden officials
stated that its records were reviewed by various Federal and State agencies, and it was possible
that the documents were misfiled or were not returned to Camden. Even if this happened,
Camden needed to have proper controls to ensure that documents reviewed by others were
returned and properly filed.7

According to 34 C.F.R. § 76.730,

        A State and a subgrantee shall keep records that fully show: (a) [t]he amount of funds
        under the grant or subgrant; (b) [h]ow the state or subgrantee uses the funds; (c) [t]he
        total cost of the project; (d) [t]he share of that cost provided from other sources; and
        (e) [o]ther records to facilitate an effective audit.

OMB Circular A-87 § (C)(1)(j), states that to be allowable under Federal awards, costs must be
adequately documented.

Because Camden did not consistently designate an official responsible for maintaining and
tracking contracts awarded, Camden expended $4,526,936 on missing or improperly executed
contracts. (See Enclosure 1 for details). Without properly executed contracts, there is no
assurance that Camden and the vendor agreed to the scope of work, that the scope of work was
met, and that the services were provided during the agreed-upon period and at the agreed-upon
cost. Additionally, Camden did not follow policies and procedures for maintaining
documentation and did not have controls to ensure that documents reviewed by others were
returned and properly filed. As a result, Camden could not support $1,039,661 expended for 8 of
the 23 contracts that were missing or improperly executed. 8 (See Enclosure 2 for details).

7
  On June 28, 2010, Camden’s assistant business administrator informed us that Camden had recently implemented
new procedures that required documents reviewed by others to be signed out and filed back only by Camden’s staff.
8
  The $1,039,661 was included in the $4,526,936 of unsupported expenditures due to missing or improperly
executed contracts.
Final Report
ED-OIG/A02J0002                                                                     Page 10 of 33


Camden Had Inadequate Documentation to Support More Than $3 Million for Properly
Executed Contracts Expended with ESEA Funds

For the 27 contracts that were properly executed and awarded during the period July 1, 2005,
through June 30, 2009, we found that Camden lacked adequate documentation to support
expenditures for 15 contracts funded with ESEA funds. Camden’s records lacked supporting
documentation such as the original copies of POs, vendor invoices, receiving reports for services
provided and materials delivered, attendance or agenda records for vendors contracted to provide
workshops and seminars to Camden teachers and students, and support for teacher attendance
such as transcripts for teachers attending professional development courses.

Because Camden did not follow policies and procedures for maintaining documentation and did
not have controls to ensure that documents reviewed by others were returned and properly filed,
$3,007,489 in ESEA expenditures were unsupported. (See Enclosure 2 for details). By not
keeping documents to support expenditures as required by OMB Circular A-87 § (C)(1)(j),
Camden could not show its compliance with 34 C.F.R § 76.730.

RECOMMENDATIONS
We recommend that the Assistant Secretary for Elementary and Secondary Education require
NJDOE to—

2.1 	   Direct Camden to provide support that the 23 missing or improperly executed contracts
        were properly executed and that the goods and services related to those contracts were
        provided in accordance with contract terms, or return the $4,526,936, less
        $11,369 returned based on Recommendation 1.2, with applicable interest, to the
        Department.

2.2 	   Direct Camden to provide support for expenditures related to 8 of the 23 contracts that
        were missing or improperly executed even if Camden provides documentation that the
        contracts were properly executed in response to Recommendation 2.1, or return the
        unsupported amounts, with applicable interest, to the Department.

2.3 	   Direct Camden to provide support for $3,007,489 expended for properly executed
        contracts or return the unsupported amount of ESEA funds, with applicable interest, to
        the Department.

2.4 	   Direct Camden to implement policies and procedures to ensure that contract files include
        properly signed agreements; ensure that adequate documentation is maintained to support
        expenditures of procured goods and services; and develop specific policies regarding
        maintaining documentation, custody of records, and governance of files.
Final Report
ED-OIG/A02J0002                                                                    Page 11 of 33

NJDOE Comments
In its response to the draft report, NJDOE neither agreed nor disagreed with Finding No. 2,
disagreed with Recommendations 2.1, 2.2, and 2.3, and agreed with Recommendation 2.4.
NJDOE stated that the State Monitor worked with Camden officials to locate the missing or
improperly executed contracts. NJDOE stated that Camden will continue to search for all
contracts that are missing and will properly execute all contracts. In addition, NJDOE cited
N.J.S.A. 18A:18A-2, which recognizes a PO as a contract. NJDOE believed that a properly
executed PO should have served as a contract between the district and the vendors. Further,
NJDOE stated that Camden will provide support for the missing, improperly executed and
properly executed contracts that lacked supporting documentation. NJDOE concluded that no
funds should be returned to the Department. NJDOE added that if the OIG believes that services
or goods were not supplied, Camden will attempt to recover the costs and return the funds to
NJDOE. Regarding Recommendation 2.4, NJDOE stated that Camden developed and planned to
implement an SOP on contract administration in April 2011.

OIG Response
We reviewed the additional contract documentation that Camden provided as an attachment to
NJDOE’s comments. Contrary to NJDOE’s comments, Camden’s documentation did not
support that all missing contracts were properly executed. However, we determined that one
contract that was initially categorized as improperly executed actually was properly executed,
two contracts that were initially deemed as missing were improperly executed, one contract that
had unsupported expenditures was fully supported, and another contract that had unsupported
expenditures was partially supported. As a result, Finding No. 2 was revised accordingly.

Although N.J.S.A 18A:18A-2 established that a PO may serve as a contract, the POs did not
include sufficient detail to ensure that proper procedures for procuring goods and services were
followed. The POs we reviewed did not include detailed information for the scope of work to be
performed or a schedule of costs which would otherwise be included in a formal contract.
Initially, 24 contracts were missing or improperly executed, but as a result of our review of the
additional contract documentation provided with NJDOE’s comments, 23 contracts were still
missing or improperly executed. Because the 23 contracts were missing or improperly executed,
there was no assurance that the goods and services received were procured according to
applicable laws and regulations.

Although Camden will attempt to recover unsupported ESEA funds and return the funds to
NJDOE, those funds lapsed during our audit period. Accordingly, any funds that are recovered
or that remain unsupported should be returned to the Department in accordance with our
recommendations.

We also reviewed the SOP for contract administration that was attached to NJDOE’s comments.
The SOP expanded controls and procedures included in the Camden City Board’s Governance
Manual. If the planned SOP is implemented correctly, it would establish a database to track
contracts and maintain documentation to track contract expenditures. However, the SOP did not
specifically describe how the database would interface with Camden’s financial system, or which
documents would be retained, to support contract expenditures. Therefore, the SOP would not
be sufficient to fully address Recommendation 2.4.
Final Report
ED-OIG/A02J0002                                                                                   Page 12 of 33

FINDING NO. 3 – Camden's Procurement Process Did Not Comply with Federal
               Procurement Requirements

Camden did not execute its procurement process in accordance with Federal procurement
requirements. Camden did not perform cost or price analysis for competitive and
noncompetitive contracts, did not maintain documentation to support the awarding of
competitive contracts, and did not provide sufficient rationale for awarding noncompetitive
contracts. In addition, contracted vendors provided services before Board approval and before
Camden signed the contracts. Also, we identified signed contracts that were not dated by
Camden.

Camden Did Not Perform Cost or Price Analysis

Camden did not determine the reasonableness of the proposed contract price of the 50 contracts
we reviewed, totaling $11,754,080 in ESEA funds, as required by Federal regulations.
According to 34 C.F.R. § 80.36 (f)(1), subgrantees must perform a cost or price analysis in
connection with every procurement action, including contract modifications, to determine the
reasonableness of the proposed contract price. An independent cost estimate must be made
before receiving bids or proposals.

Of the 50 contracts, Camden awarded 43 contracts noncompetitively. For noncompetitive
procurements, 34 C.F.R. § 80.36 (d)(4)(ii) and (f)(1) requires a cost analysis, such as verifying
the proposed cost data, the projections of the data, and the evaluation of the specific elements of
costs and profits, unless an exception applies. A cost analysis is not necessary if price
reasonableness can be established through adequate price competition, on the basis of a catalog,
or market price of a commercial product sold in substantial quantities to the public, or based on
prices set by law or regulation. If a cost analysis is not necessary under the circumstances of the
procurement, then a price analysis must be used to determine price reasonableness.

Camden did not document that it conducted a cost or price analysis on any of the 50 contracts.
In fact, Camden did not maintain any documentation establishing that it made independent cost
estimates. Accordingly, Camden could not ensure that the contracted goods and services were
reasonably priced and that noncompetitive contracts met Camden’s needs at the highest quality
and at a fair price.

Camden officials did not perform any cost or price analysis because they were not aware of this
Federal requirement. This may be due to the fact that NJDOE did not provide guidance on
Federal procurement requirements to school districts. As a result of our preliminary review at
Camden, NJDOE worked with New Jersey’s Division of Local Government Services and the
Department to issue contracting guidance, dated and effective January 15, 2010. This guidance
requires all school districts that received Federal funds to certify compliance with the Education
Department General Administrative Regulations.9 It also instructs school districts to conduct an
independent price analysis and include documentation in contract files that demonstrates the
school district ensured the contract costs were reasonable.

9
  Education Department General Administrative Regulations include 34 C.F.R. Parts 74, 75, 76, 77, 79, 80, 81, 82,
84, 85, 86, 97, 98 and 99. They contain regulations for administering discretionary and formula grants awarded by
the Department.
Final Report
ED-OIG/A02J0002                                                                               Page 13 of 33

Camden Did Not Maintain Sufficient Documentation to Support Its Competitive
Procurement Process

Camden used a competitive process for 7 of the 50 contracts. One of the seven contracts had
documentation to support the competitive process used. For the remaining six contracts, for
which Camden expended $499,697 of ESEA funds, Camden lacked documentation to support
that the competitive proposals and sealed bids complied with Federal requirements. For the six
contracts that lacked supporting documentation, one contract was awarded through a competitive
proposal; however, Camden did not document that it publicly advertised a request for proposal
identifying all evaluation factors; received proposals from two or more qualified
sources/vendors; conducted an evaluation of the proposals using its established method; and
awarded the contract to the vendor whose proposal was more advantageous to the program. The
remaining five contracts were awarded using a sealed bid process; however, Camden's files
lacked documentation to support that the bids were publicly advertised and solicited from an
adequate number of known vendors, defined the items or services for bidders to properly
respond, were opened at a prescribed time and place, and were awarded as fixed-price contracts
to the lowest responsible bidders.

According to 34 C.F.R. § 80.36 (d)(3)(i) through (iv), for procurement by competitive proposals:

       (i) [r]equests for proposals will be publicized and identify all evaluation factors and their
       relative importance . . . (ii) [p]roposals will be solicited from an adequate number of
       qualified sources; (iii) [g]rantees and subgrantees will have a method for conducting
       technical evaluations of the proposals received and for selecting awardees; (iv) [a]wards
       will be made to the responsible firm whose proposal is most advantageous to the
       program, with price and other factors considered . . . .

When sealed bids are used, 34 C.F.R. § 80.36 (d)(2)(ii) states that:

       (A) [t]he invitation for bids will be publicly advertised and bids shall be solicited from an
       adequate number of known suppliers, providing them sufficient time prior to the date set
       for opening the bids; (B) [t]he invitation for bids, which will include any specifications
       and pertinent attachments, shall define the items or services in order for the bidder to
       properly respond; (C) [a]ll bids will be publicly opened at the time and place prescribed
       in the invitation for bids; [and] (D) [a] firm fixed-price contract award will be made in
       writing to the lowest responsive and responsible bidder . . . .

Camden had a record retention policy for contracts awarded competitively. However, Camden
did not always follow its policy and procedures for record retention. As a result, Camden had
insufficient documentation to support that it followed the procurement process for competitive
proposals and sealed bids in accordance with Federal requirements.

Camden’s Rationale for Awarding Noncompetitive Contracts Did Not Comply with State
Statutes

Camden awarded noncompetitive contracts that did not qualify as library and educational goods
and services, which were exempt from public bids, and to a vendor whose contract cost exceeded
the bid threshold. N.J.S.A. 18A:18A-5 authorizes procurement through noncompetitive
contracts if the contracted services are library and educational goods and services. In addition,
Final Report
ED-OIG/A02J0002                                                                             Page 14 of 33

N.J.S.A. 18A:18A-3 allows a contract to be awarded noncompetitively when the cost of the
contract does not exceed the bid threshold.

Camden documented that 35 noncompetitive contracts were for library and educational goods
and services and, therefore, were not subject to a competitive bid. However, we found that 21 of
the 35 contracts did not qualify as procurements of library and educational goods and services.
According to New Jersey laws and regulations, library and educational goods and services were
textbooks, copyrighted materials, services incidental to books, newspapers, photographs, and
sound recordings, and specialized computer software used instead of reference materials.
Fourteen of the 21 contracts provided services related to professional development and training
that included college level courses, coaching, seminars, or workshops provided for Camden staff.
Six of the 21 noncompetitive contracts included after-school programs, school-based family
support, and college preparatory programs for Camden students. Lastly, for 1 of the
21 noncompetitive contracts, a vendor was contracted with to hire qualified teachers to work at
Camden schools.

In addition, we found that one noncompetitive contract did not meet the bid threshold to be
exempted from the publicly advertised bid requirement. According to N.J.S.A. 18A:18A-3,
certified purchasing agents may award contracts without public advertising for bids when the
contract cost does not exceed a bid threshold of $29,000. Camden awarded a contract to a
vendor for an amount not to exceed $34,650. The Board resolution stated that the contract was
awarded without public bidding or publication because the contract amount was below the
“statutory threshold.” However, the contract was above the statutory bid threshold of
$29,000 and, therefore, should have been publicly advertised and bid. The vendor was
contracted to provide writing workshops to 4th grade students to address writing deficiencies by
using music, movement, and mnemonics. Camden did not document any other justification for
awarding the contract noncompetitively.

Per 34 C.F.R. § 80.36 (b)(1), “. . . subgrantees will use their own procurement procedures which
reflect applicable State and local laws and regulations, provided that the procurements conform
to applicable Federal law. . . .”

Per N.J.S.A. 18A:18A-5, “[a]ny contract, the amount of which exceeds the bid threshold, shall
be negotiated and awarded by the [board] by resolution at a public meeting without public
advertising for bids and bidding . . . if (a) [t]he subject matter thereof consists of: . . . (5) [l]ibrary
and educational goods and services.”

NJDOE did not provide adequate guidance regarding the type of services that qualified for an
exemption under N.J.S.A. 18A:18A-5. As a result, Camden erroneously classified services in
21 noncompetitive contracts as library and educational goods and services. In addition, Camden
erroneously justified the award of one contract as an exception to public advertising and bidding
by stating it was below the statutory threshold. However, the amount awarded for the contract
was clearly above the bid threshold of $29,000. We concluded that these contracts should have
been awarded through a competitive bid process. Without a competitive bid process, there was
no assurance that the services received from the noncompetitive contracts were “the highest
quality at a fair price” as required by New Jersey statutes.

Subsequent to awarding the 21 noncompetitive contracts that we found were erroneously
Final Report
ED-OIG/A02J0002                                                                     Page 15 of 33

misclassified, New Jersey issued guidance on January 15, 2010, requiring the use of a
competitive procurement process for school and district improvement services intended to
improve student performance. The 21 contracts fell within the category of student performance
improvement services, and the January 2010 New Jersey guidance confirmed that a competitive
procurement process was required for these services. As clarified in the New Jersey guidance,
the services obtained under the 21 contracts did not qualify for exemption under
N.J.S.A. 18A:18A-5. The guidance also instructed school districts to use open and competitive
procedures where possible when awarding contracts for goods and services using Federal funds.

Contracted Vendors Provided Services Before Board Approval or Before the Contract Was
Signed by Camden

We found that seven contracted vendors provided services before the Board approved or before
Camden signed the contract. For two vendors, services were provided 5 months before the
Board’s approval. For two other vendors, the contracts were missing from Camden’s files.
However, according to supporting documentation, the two vendors rendered services
approximately 2 and 6 months prior to the Board’s approval. For the fifth contract, services were
provided from August to December 2008; however, Board approval was not given until
November 25, 2008. For the sixth contract, services started 3 weeks before the Board approved
the contract and before Camden signed the contract. For the seventh contract, the Board
approved the contract; however, services started 2 weeks before the date that Camden signed the
contract.

According to N.J.S.A. 18A: 18A-4a, “[e]very contract for the provision or performance of any
goods or services, the cost of which in the aggregate exceeds the bid threshold, shall be awarded
only by resolution of the board of education . . . .”

Camden did not have adequate written procedures regarding the procurement of goods and
services. During an interview, Camden’s purchasing agent, who was responsible for the
procurement of goods and services, described the procedures for procuring goods and services.
However, even these procedures were not always followed. In addition, Camden had inadequate
internal controls to ensure that contracted services were provided after proper approval as
required by State statutes.

Camden Signed But Did Not Date Contracts

During our audit period, we found that Camden signed contracts with five vendors that did not
include the dates the contracts were signed. According to the Board resolutions, Camden
received approval to enter into contracts with the five vendors. After receiving the Board’s
approval, the school business administrator signed but did not date the contracts. The signed
contracts were filed in Camden’s contract files. However, Camden’s staff did not verify that the
contracts were dated prior to filing the contracts.

According to N.J.S.A. 18A: 18A-36b, “[t]he contract shall be signed by all parties within the
time limit set forth in the specifications, which shall not exceed 21 days, Sundays and holidays
excepted, after the making of the award; provided, however, that all parties to the contract may
agree to extend the limit set forth in the specifications beyond the 21-day limit required in this
subsection.” Because the contracts were not dated, there was no assurance that the contracts had
Final Report
ED-OIG/A02J0002                                                                     Page 16 of 33

been signed before services began and after the Board had approved them and that they met the
requirement to be signed within 21 days after being awarded.

RECOMMENDATIONS
We recommend that the Assistant Secretary for Elementary and Secondary Education require
NJDOE to—

3.1 	   Instruct Camden to implement policies and procedures to ensure compliance with laws
        and regulations regarding the performance of cost or price analysis for all procurement
        actions under 34 C.F.R. § 80.36 (f)(1).

3.2 	   Direct Camden to develop and implement controls to ensure that supporting
        documentation is maintained to support its compliance regarding cost or price analysis
        under 34 C.F.R. § 80.36 (f)(1); the procurement process for sealed bids under
        34 C.F.R § 80.36 (d)(2)(ii); and the procurement process for competitive proposals under
        34 C.F.R. § 80.36 (d)(3).

3.3 	   Direct Camden to update its policies and procedures to include the new State guidance
        and requirements issued on January 15, 2010, which required the use of a competitive
        procurement process for school and district improvement services intended to improve
        student performance, and monitor Camden’s compliance with the requirements.

3.4 	   Monitor Camden to ensure compliance with State statutes regarding the exceptions to
        publicly bid and advertised contracts and obtaining Board approval prior to acquiring
        goods and services.

3.5 	   Monitor Camden’s compliance with the State statute requiring contracts to be signed
        within 21 days after being awarded by ensuring that contracts are signed and dated.

NJDOE Comments
In its response to the draft report, NJDOE neither agreed nor disagreed with Finding No. 3, and
agreed with all of the recommendations. NJDOE stated that Camden developed and planned to
implement SOPs on the performance of cost or price analysis for all procurement actions under
34 C.F.R 80.36(f)(1), the procurement by competitive proposals under 34 C.F.R 80.36(d)(3), the
use of a competitive procurement process for schools and district improvement services intended
to improve student performance as specified in State guidance, and the requirement to sign
contracts within 21 days after making the award. NJDOE also stated that Camden would
develop and implement SOPs on a procurement process for sealed bids and a procurement
process regarding the exceptions to publicly bid and advertised contracts.

OIG Response
We reviewed the SOPs that were attached to NJDOE’s comments. The planned SOPs were
provided in response to our recommendations to establish controls over the procurement process
including cost analysis, competitive proposals and State procurement requirements. If properly
implemented, the planned SOPs would address our recommendations as it relates to the
competitive procurement process, except for the sealed bids process and the exceptions to
publicly bid and advertised contracts included in Recommendations 3.2 and 3.4.
Final Report
ED-OIG/A02J0002                                                                                     Page 17 of 33

FINDING NO. 4 – Camden Had Internal Control Weaknesses in Its Accounting for
               Procured Goods and Services

Camden’s fiscal control and fund accounting procedures did not ensure proper accounting for
ESEA funds. Camden lacked proper internal controls in its accounting system to ensure that
contract expenditures were properly allocated, accounting budget codes were not duplicated, and
encumbrances were not duplicated.10

Camden Inappropriately Allocated Expenditures of $79,260 to Title I and $58,519 to IDEA

Camden inappropriately allocated expenditures to its Title I and IDEA Federal accounting codes.
During the July 1, 2008, through June 30, 2009, audit period, Camden entered into three
contracts with Camden County Educational Services Commission (CCESC) to provide teacher
services to eligible Title I and IDEA students at nonpublic schools. Two of the contracts
(Resolutions 13 and 94) were for services chargeable to Title I, and one contract (Resolution 83)
was chargeable to IDEA. CCESC submitted invoices detailing its monthly services for all three
contracts; however, when Camden paid the invoices, the expenditures were not always charged
to the appropriate accounting code. As a result, Camden misallocated $79,260 for IDEA
services to Title I and $58,519 for Title I services to IDEA. (See Enclosure 3 for details).

OMB Circular A-87 § (C)(1)(b) provides that to be allowable under Federal awards, costs must
be allocable to Federal awards.

Although Camden’s payments to CCESC did not exceed the contracted amounts, Camden’s
allocation of the expenditures resulted in improper charges to Title I and IDEA. This occurred
because the vendors submitted one invoice that included charges for the three contracts. In
addition, Camden’s accounts payable officials were not aware that three contracts were awarded
to CCESC, and Camden’s accounting system did not include sufficient controls that would alert
the accounts payable officials that multiple contracts were awarded to the vendor. The accounts
payable officials relied on Camden’s program office officials to verify and approve items billed
by the vendor. However, for the CCESC contracts, the program office officials did not identify
on the invoice which charges were for Title I and IDEA services. In addition, Camden did not
follow proper accounting procedures because it did not make adjustments to its accounting
system to accurately allocate the expenditures after Camden realized it had improperly charged
the expenses to the wrong account. As a result, Camden’s accounting system reflected
inaccurate expenses, and its audited financial statements were misstated.11

Camden Duplicated Budgets of Title I Funds

Camden made duplicate budgets in its accounting system of more than $4 million in Title I funds
for the July 1, 2006, through June 30, 2007, audit period. Prior to expending its funds, Camden’s
business office created accounting codes to budget funds awarded during the fiscal year. Each of
Camden’s funding sources was assigned separate accounting codes. During our review of one

10
   An encumbrance is a contingent liability, contract, purchase order, payroll commitment, tax payable, or legal 

penalty that is chargeable to an account. It ceases to be an encumbrance when paid or when the actual liability 

amount is determined and recorded as an expense.

11
   This misstatement may not have materially affected the outcome of the financial statements. 

Final Report
ED-OIG/A02J0002                                                                                     Page 18 of 33

contract awarded during the 2006-2007 period, we found, according to PO documents, that
Camden charged the contracted expenditures to an accounting code that did not exist in its
accounting system. Upon further inquiry, we were informed that Camden opened two
accounting codes to budget its Title I funds.12 During the school year, Camden charged
expenditures to both of the accounting codes. Camden's Independent Public Accountant (IPA)
informed Camden that the same source of Title I funds was budgeted twice when it created the
two accounting codes. Camden then transferred the expenditures charged to one accounting
code to the other accounting code. More than $1 million in expenditures was charged to the
duplicate accounting code before it was deleted. Because Camden officials were unaware that
two accounting codes were created to budget the same Title I funds and it charged expenditures
to both accounting codes, Camden was at risk of having over-expended its Title I funds.

Camden Duplicated Encumbrances for the Same Service

Camden created a duplicate encumbrance of $87,540 for one contract awarded during the
2005-2006 period. Camden encumbered the services to its blended accounting codes.13 Camden
officials later decided to charge the services to Title I. Instead of cancelling the funds
encumbered to the blended accounting codes, Camden again encumbered the services to Title I.
This resulted in a duplicate encumbrance for the same Title I services. When the funds were
expended, Camden charged the services to the blended accounting codes. However, the funds
remained encumbered to Title I. As a result of not properly and timely accounting for an
encumbrance, Camden’s available funds would have been understated in its system and may
have put funds at risk of lapsing.

According to 34 C.F.R. § 76.702, “[a] State and a subgrantee shall use fiscal control and fund
accounting procedures that insure proper disbursement of and accounting for Federal funds.”

RECOMMENDATIONS
We recommend that the Assistant Secretary for Elementary and Secondary Education, in
conjunction with the Assistant Secretary for Special Education and Rehabilitative Services,
require NJDOE to—

4.1 	    Direct Camden to develop and implement policies and procedures that require the
         purchasing agent and program officials to monitor contracts to ensure proper allocation of
         payments made for contracted services.

4.2 	    Direct Camden to implement proper accounting controls to ensure proper classification of
         Federal funds in its accounting system.

4.3 	    Direct Camden to implement proper accounting controls to ensure that ESEA funds are
         properly disbursed and accounted for in its accounting system.




12
   Accounting codes were structured to identify the source of funds used and included additional coding to specify

the purchasing activity. 

13
   Blended accounting codes were used to record school-based expenditures. Schools approved with school-wide 

plans consolidate their Federal, State, and local funds in blended accounting codes.

Final Report
ED-OIG/A02J0002                                                                    Page 19 of 33

NJDOE Comments
In its response to the draft report, NJDOE neither agreed nor disagreed with Finding No. 4, and
agreed with all of the recommendations. NJDOE stated that Camden had implemented practices
to monitor contracts to ensure proper allocation of payments among funding sources, proper
classification of Federal funds in its accounting system, and proper disbursement and accounting
of ESEA funds in its accounting system. NJDOE noted that Camden established a Federal
account manager position about 3 years ago, which reported directly to the controller. According
to NJDOE, the Federal account manager’s duties included reviewing all spending requisitions for
adherence to the approved grant application and posting to the proper account code. Also, the
Federal account manager reviewed the account classification at the requisition level for
compliance with the State’s minimum chart of accounts. Because the practice was not
memorialized in writing, the school business administrator will develop the SOP to include this
practice.

OIG Response
NJDOE’s comments did not address our recommendations for Finding No. 4. The improper
allocation of expenditures to Camden’s Title I and IDEA Federal accounting codes occurred
because the correct account codes were not charged when making invoice payments at the
accounts payable level. In addition, the assigned duties of the Federal account manager did not
include reviewing account codes charged when making PO and invoice payments to vendors.
Therefore, the Federal account manager position would not have detected the improper
allocation of expenditures to Camden’s Title I and IDEA Federal accounting codes.

The improper classification of Federal funds we noted was also beyond the assigned duties of the
Federal account manager because it resulted from budgeting Title I funds appropriated to two
different account codes. The budgeting function would pertain to Camden’s business
administrator or a designee within the business office.

The Federal account manager position would not detect and prevent duplicated encumbrances for
the same service or ensure that ESEA funds are properly disbursed and accounted for in
Camden’s accounting system. The duplicate encumbrance did not occur as a result of a
duplicated requisition; therefore, the Federal account manager would not have detected it in
Camden’s financial system.

We reviewed the SOP on payments that was attached to NJDOE’s comments. The SOP
expanded controls and procedures included in the Camden City Board’s Governance Manual. If
the planned SOP is implemented correctly, it would establish a system that properly identifies
POs for payment and maintains proper documentation to support expenditures. However, the
SOP did not specify accounting controls to prevent duplicated encumbrances. Therefore, the
SOP would not be sufficient to fully address Recommendation 4.3.
Final Report
ED-OIG/A02J0002                                                                              Page 20 of 33


                    OBJECTIVE, SCOPE, AND METHODOLOGY 



The objective of our audit was to determine whether Camden’s contract related expenditures
funded through ESEA were allowable and spent in accordance with applicable laws and
regulations. Our audit period was July 1, 2005, through June 30, 2009.

Originally, the objective of our audit was to determine whether Camden had adequate controls to
properly account for its Federal education funds in compliance with Federal laws and regulations
for the July 1, 2005, through June 30, 2006, period. We revised our scope to segregate our audit
of contract related expenditures for the period July 1, 2005, through June 30, 2009, and
non-salary expenditures for the period July 1, 2006, through June 30, 2009. This draft report
presents the findings related to the audit of contract related expenditures. Audit results related to
other non-salary expenditures will be presented in a separate report upon completion of our
work.

To accomplish our objective, we:

     	 Obtained an understanding of Camden’s internal controls over procured goods and
        services by reviewing Camden’s policies and procedures and conducting interviews with
        Camden officials; and conducted a limited review of judgmentally selected contracts
        awarded using ESEA funds during our preliminary review.
     	 Reviewed selected provisions of the ESEA, Federal procurement regulations, and OMB
        Circulars.
      Reviewed New Jersey State procurement statutes.
      Reviewed selected sections of Camden City Board’s Governance Manual related to
        purchases paid with ESEA funds.
      Reviewed Camden’s documents related to contracted vendors that were paid with ESEA
        funds, including (but not limited to):
            o	 Board minutes for meetings held during calendar years 2005, 2006, 2007, and
                2008;
            o	 Board resolutions and contract files;
            o	 PO files; and
            o Chart of ESEA accounts.
      Obtained and examined Camden’s expenditure reports for ESEA funds for FYs 2006,
        2007, 2008, and 2009.
      Obtained and reviewed Camden’s State Monitor’s reports for FY 2009.14
      Obtained and reviewed the New Jersey State Auditor report of Camden for the period
        July 1, 2006, through February 28, 2009.
     	 Obtained and reviewed July 2009 and September 2009 Government Accountability
        Office Reports to Congressional Committees on American Recovery and Reinvestment
        Act of 2009 spending in New Jersey.
     	 Obtained and reviewed Camden’s CAFRs Single Audit sections for FYs 2004, 2005,
14
  In October 2006, NJDOE appointed a State Monitor for Camden. State Monitors were appointed for school
districts with serious fiscal deficiencies identified during a district’s annual audit.
Final Report
ED-OIG/A02J0002                                                                      Page 21 of 33

       2006, 2007, 2008, and 2009, and the related audit documentation.
      Conducted interviews with the IPAs that performed Camden’s financial statements and
       compliance audits for FYs 2004, 2005, 2006, 2007, 2008, and 2009.
      Reviewed IPA working papers for FYs 2006 and 2009 relating to ESEA expenditures.

Because Camden could not provide a universe of contracts awarded and funded with ESEA 

funds, we developed alternative procedures to determine the contracts awarded and funded with 

ESEA funds during the period July 1, 2005, through June 30, 2009. 


We reviewed Camden Board meeting minutes to identify all resolutions for contracts awarded 

during the July 1, 2005, through June 30, 2008, period, and determined which resolutions were 

for contracted services. We reviewed Camden Board meeting minutes for calendar years (CYs) 

2005, 2006, and 2007, and from January 1, 2008, through June 30, 2008. Based on our review, 

we found 261 resolutions for contracted services (102 were for contracts awarded in CY 2005, 

84 in CY 2006, 59 in CY 2007, and 16 awarded between January 1, 2008, and June 30, 2008). 

Further, we reviewed Camden's contract and PO files to determine the number of the 

261 resolutions that were contracted services funded with ESEA funds during the audit period. 

We determined that Camden awarded 63 contracts funded with ESEA funds for the period 

July 1, 2005, through June 30, 2008. 


For the July 1, 2008, through June 30, 2009, audit period, Camden provided a list of 301 Board 

resolutions. We reviewed the contract and PO files and determined the universe of contracts 

awarded. For the July 1, 2008, through June 30, 2009, audit period, Camden awarded 

79 contracts, of which we determined 25 were funded with ESEA funds. 


Based on these alternative procedures, we determined that Camden awarded 88 contracts, with a 

total value of $14,899,894, funded with ESEA funds during our audit period. We judgmentally 

decided to review all contracts awarded in the amount above New Jersey’s bid threshold of 

$29,000 because they would have been required, unless exempt, to be competitively bid. Based 

on this rationale, we reviewed a judgmental sample of 50 contracts with a total value of

$14,384,678 of which $11,749,080 was expended during our audit period. We reviewed signed 

contracts, Board resolutions, POs, payment records and supporting documentation, such as 

invoices, sign-in sheets, teacher transcripts, and meeting agendas relating to the 50 contracts. 


Because Camden had an inadequate contract administration system (see Finding No. 1), we were 

not assured that the 88 contracts constituted a complete universe. In addition, because Camden 

had missing and unsupported documentation (see Findings Nos. 1 and 2), we were not assured 

that we reviewed all expenditures relating to the 50 contracts. As a result, there is no assurance 

that the judgmental sample and expenditures were representative of the entire universe, and audit 

results should not be projected over the contracts we did not review. 


During our review, we used the computer-generated expenditure reports to assist us with our 

review of contracts. The expenditure reports were used as an additional source of information to 

obtain vendor PO numbers and expenditures. We compared the computer-generated expenditure 

reports to the vendor contracted amounts and identified corresponding PO numbers. We also 

verified the expenditure data to the PO documents. Based on the documents reviewed, we 

concluded that the data contained in these expenditure reports were sufficiently reliable for the 

purposes used. 

Final Report
ED-OIG/A02J0002                                                                   Page 22 of 33

We conducted audit fieldwork at Camden’s office in Camden, New Jersey, from
November 11, 2008, through June 28, 2010. However, on April 3, 2009, the audit was placed on
hold and resumed on December 14, 2009. Prior to the audit, from November 14, 2007, through
March 20, 2008, we performed a preliminary review of Camden’s administration of the
Department funds. We visited Camden’s IPA offices in Voorhees, New Jersey, and Ocean City,
New Jersey, to review the work of the IPAs that performed Camden’s financial statements and
compliance audits. We held our exit conference with NJDOE and Camden officials on
July 21, 2010.

We conducted this performance audit in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions
based on our audit objectives. We believe that the evidence obtained provides a reasonable basis
for our findings and conclusions based on our audit objectives.
Final Report
ED-OIG/A02J0002                                                                                  Page 23 of 33

                     Enclosure 1: Missing or Improperly Executed Contracts

                                                                                                        ESEA
                                          Resolution       Type of Contracted          Contracted
     Vendor Name                                                                                       Amount
                                           Number          Goods and Services           Amount
                                                                                                      Expended15
     Missing Contracts

 1   LLTeach, Inc.                        188-SY06      Professional Development       $ 1,154,901    $ 1,022,632
                                                        Software, Support and
 2   Compass Learning, Inc.               108-SY05                                     $   642,938    $   642,938
                                                        Materials
                                                        Software, Licenses and
 3   Achieve 3000                         109-SY05                                     $   477,360    $   477,360
                                                        Training
                                                        Software, Support and
 4   Scholastic, Inc. — READ 180           10-SY08                                     $   402,000    $   359,540
                                                        Materials
                                                        Textbooks, Materials and
 5   Peoples Publishing Group, Inc.       112-SY05                                     $   303,286    $   302,894
                                                        Supplies
     Princeton Center for Leadership
 6                                        102-SY05      Professional Development       $   264,875    $   264,875
     Training
 7   Apex Learning                         10-SY06      Online Subscriptions           $   114,947    $   114,947
 8   Scholastic, Inc. — FASTT Math         11-SY08      Instruction                    $    87,170    $    82,400
 9   Rowan University                     156-SY05      Professional Development       $    36,792    $    35,259
10   Learning Quest, Inc.                 144-SY08      Professional Development       $    32,500    $    32,500
11   Accu Staffing Services               176-SY07      Temporary Staff                $   180,000    $    29,854
                                                        Delivery and Installation of
12   Desco & Associates                   127-SY08                                     $    67,260    $      3,912
                                                        X-Ray Scanners
13   Uniform City                         47-SY08       Uniforms and Accessories       $    93,050    $      3,143
14   Book-It Distribution                 171-SY07      Textbooks Delivery             $   130,000    $      2,108
     Improperly Executed Contracts
     Rutgers Institute for Improving
15                                        103-SY08      Professional Development       $   517,500    $   517,500
     Student Achievement
16   Foundations, Inc.                    100-SY05      After-School Instruction       $   180,000    $   180,000
     Camden County Educational
17                                         13-SY08      Teacher Services               $   148,150    $   142,604
     Services Commission

     Southern Regional Educational                      Professional Development
18                                         30-SY06                                     $    81,950    $     81,950
     Board                                              and Support

     William Crombie & Angelo                           Professional Development
19                                         53-SY06                                     $   125,000    $     69,300
     DeMattia                                           and Support
                                                        Professional Development
20   GED & Associates, Inc.               103-SY06                                     $    56,300    $     56,300
                                                        and Materials
     Education Institute of Rowan
21                                        145-SY06      Professional Development       $    40,825    $     39,231
     University
22   International Write Now, Inc.         62-SY05      Instruction                    $    34,650    $     34,650
     Institute for the Development of
23                                        203-SY04      Instruction                    $    31,040    $     31,040
     Education in the Arts
                                                                           TOTAL       $ 5,202,494    $ 4,526,937




15
  The difference in totals for this column is due to rounding. The total ESEA amount expended of $4,526,937 is
presented as $4,526,936 throughout the report.
Final Report
ED-OIG/A02J0002                                                                                         Page 24 of 33

                               Enclosure 2: Unsupported ESEA Expenditures

                                                                      Reason Expenditures Were Unsupported
                                                Unsupported        Missing   Missing All/  Missing    License
                                  Resolution
           Vendor Name                             ESEA             Scope     Part of PO Attendance Agreement
                                   Number
                                                Expenditures       Details16  Document    Records17   Missing

Missing or Improperly Executed Contracts
 1    Achieve 3000                109-SY05       $    477,360                        x              x            x
      Princeton Center for
 2                                102-SY05       $    264,875          x                            x
      Leadership Training
 3    Apex Learning                10-SY06       $      94,727                                                   x
      Southern Regional
 4                                 30-SY06       $      81,950                                      x
      Educational Board
 5    GED & Associates, Inc.      103-SY06       $      49,476                                      x

 6    International Write Now      62-SY05       $      34,650         x                            x
      William Crombie &
 7                                 53-SY06       $      32,700                                      x
      Angelo DeMattia
      Education Institute of
 8                                145-SY06       $       3,923                                      x
      Rowan University
                                     TOTAL $ 1,039,661
Properly Executed Contracts
    Kaplan K12 Learning
 1                                 20-SY05       $ 1,641,308           x
    Services
 2    Peoples Publishing Group    233-SY04       $    298,000          x
 3    Pathways to College          9-SY08        $    277,000                        x
      Southern Regional
 4                                 23-SY07       $    219,395          x                            x
      Education Board
 5    Teach for America            12-SY05       $    100,000          x             x

 6    LL Teach, Inc.               29-SY06       $      87,894                                      x
      Camden County
 7    Educational Services         48-SY07       $      82,500                                      x
      Commission
 8    Standards Solutions         141-SY08       $      74,800                                      x

 9    GED & Associates, Inc       176-SY05       $      69,070         x                            x

 10 College Board                  38-SY08       $      54,001                       x              x            x
      American Reading
 11                                31-SY05       $      52,900                                      x
      Company




16
   Missing scope details includes lack of documentation to show what the scope of services were, how the services 

were provided, or when the services were provided. 

17
   Missing attendance records includes registration records, timesheets, sign-in sheets by contractor, proof of site

visits or certificate of completion by attendees. 

Final Report
ED-OIG/A02J0002                                                                      Page 25 of 33

                 Enclosure 2: Unsupported ESEA Expenditures (continued)

                                                           Reason Expenditures Were Unsupported
                                          Unsupported    Missing  Missing All/  Missing    License
                             Resolution
        Vendor Name                          ESEA        Scope     Part of PO Attendance Agreement
                              Number
                                          Expenditures   Details   Document     Records    Missing

12 Rowan University          165-SY05     $     24,981                           x
13 America's Choice           81-SY05     $     20,599                           x
   Camden Center for Youth
14                           166-SY05     $      3,868                           x
   Development
   Southern Regional
15                           128-SY05     $      1,173                           x
   Education Board
                                TOTAL $ 3,007,489
    Final Report
    ED-OIG/A02J0002                                                                              Page 26 of 33

                      Enclosure 3: Misallocation of Federal Funds per Check Payment18

                            Payments         Payments         Payments
                                                                                              IDEA        Title I
                               for              for              for
Check          Check                                                             Properly   Services     Services
                            Resolution       Resolution       Resolution
 No.           Date                                                              Allocated Misallocated Misallocated
                               13                94               83
                                                                                            to Title I   to IDEA
                              Title I          Title I          IDEA
                             $20,868              -                -               $7,408    $13,460          -
142716      11/25/2008a
                             $33,322              -                -             $14,815     $18,507          -
                                 -                -           $89,19519          $52,158        -          $37,037
144173       2/24/2009b
                                 -                -            $41,672           $20,190        -          $21,482
145399       5/26/2009c          -                -            $20,190            $20,190       -             -
                             $29,154              -                -                 -       $29,154          -
                             $59,260              -                -              $59,260       -             -
146283       7/10/2009d
                                 -            $26,667              -              $26,667       -             -
                                 -                -            $42,431            $42,431       -             -
146291       7/15/2009e          -            $18,139              -                 -       $18,139          -
               Total:        $142,604         $44,806          $193,488          $243,119    $79,260       $58,519




    a
     Camden paid CCESC $54,190 for Title I and IDEA services provided during September 2008
    and October 2008, of which $31,967 was for IDEA services that Camden misallocated to Title I.
    b
     Camden paid CCESC $130,867 and charged the entire expenditure to its IDEA accounting
    code. This payment consisted of $89,195 for Title I and IDEA services rendered from
    September 2008 through November 2008 and $41,672 for Title I and IDEA services rendered in
    December 2008. Because the services invoiced included Title I services, Camden misallocated
    $58,519 of Title I services to IDEA. In addition, Camden made a duplicate payment of
    $54,190 for September 2008 and October 2008 services, which had already been paid in
    November 2008.
    c
     After the February 2009 payment was made, Camden’s accounts payable officials realized they
    had made a duplicate payment to the CCESC. To offset the overpayment to CCESC, Camden
    did not make the full payment for January 2009 and February 2009 services. Instead, Camden
    paid for these services and subsequent monthly invoices in its July 10, 2009, payment. However,
    the May 2009 payment was for March 2009 IDEA services that were properly allocated.
    d
     Camden paid $157,512 for Title I and IDEA services. However, $29,154 was for IDEA
    services Camden inappropriately charged to Title I. The remaining payment was properly
    allocated.
    e
        Camden paid CCESC $18,139 for IDEA services which were misallocated to Title I.


    18
         Because of rounding, some numbers in the table are understated by $1.
    19
         The duplicate payment of $54,190 was included in the $89,195 payment.
Final Report
ED-OIG/A02J0002                                                                                                                Page 27 of 33



                                         Enclosure 4: NJDOE Comments




                                                       )It.t. af;N.1u tr"
     CURlS CHRISTIE                                     DEPARTMENT Of EOUCAT1(P.o1
       Go.'emor                                               PO Box 500
     KIM GUADAGNO                                        TRE OON. NJ 08625·0500                                      CHRISTOPHER D. CERF
       U. Gu",!mor                                                                                                    A.c'i g CommiUioner


              April I, 2011



              Mr. Daniel P. Schultz
              Regional Inspector General for Audit
              U.S, Department of Edueation
              Offiee of Inspector Gcneral
              Financial Square
              32 Old Slip, 261h Floor
              New York, NY 10005


              Dcar Mr. Schultz;


              The New Jersey Dcpartment of Education (N1DOE) has received and revicwcd the
              findings and recommcndation contained in the United States Depanment of Education
              (USDOE), Officc of Inspector Oeneral's Audit Repon titled Camden City Public School
              District's   Administration         of   Federal     Education       Funds      (Control     Number       ED-
              010/A02J0002), 13e1ow is thc N1DOE's response to the findings and recommendations
              contained in the report.


              FINI)ING NO. J          Camden llad an Inadequate Contract Administratiun Svstl'lII


              Camden did not have an adequate contract administration system. Camden used a manual
              process for procuring contracted goods and services that did not ensure supporting
              contract information were adequately documented, maintained, and tracked. As a result.
              Camden could not provide a universe of contracts funded with ESEA funds and overpaid
              contracted vendors $11,453.


              RECOMMEN))ATIONS


              We recommend that the Assistant Secretary for Elementary and Secondary Education
              require NJDOE to;


              1.1 Direct Camden to develop and implement a contract administration system that
                  maintains sufficient details regarding the contracts awarded by funding source to
                  properly    maintain      and    track    the   administration      of     contracts,     and     mitigate
                 overpayments to contracted vendors.


              1.2 Direct Camden to return the $11,453 in unallowed ESEA funds, with applicable
                 interest, to the Dcpanment.


                                                           www.nj.go.'/educalion
                           Nr:wJersry Is A.n Equal OpPD"""ily Emp/o)'tr" Primtd on R«yd    d ""d R«"jC/Qbl ftJper
Final Report
ED-OIG/A02J0002                                                                                              Page 28 of 33




           Mr. Daniel P. Schultz
           Page 2
           April 1, 2011



           1.3 Review the remaining 38 contracts funded with ESEA funds awarded in the amount
               below New Jersey's bid threshold of $29,000 to determine whether the contracts were
               properly executed, that the goods and services were provided, and the funds were
               expended in accordance with applicable laws and regulations   .




           NJDOE RESPONSE


            ,I and 1.3 The Camden City School District has developed and plans to implement in
               April 2011    the two allaehed standard operating procedures (SOP) on contract
               administration and payments for goods and services. The district has started the
               process of identifying and reviewing the remaining 38 contracts funded with ESEA
               funds awarded below New Jersey's bid threshold of $29,000 to determine whether the
               contracts were properly executed, that the goods and services were provided, and that
               the funds were expended in accordance with applicable laws and regulations.
               Additionally, a Statc Monitor was appointed to the district in 2009. He has worked
               with Camden officials to develop and implement a new contract administration
               system,    The State Monitor reviews the system on a periodic basis.              The State
               Monitor has reviewed the above referenced procedures with district officials and
              found them to be satisfactory.


           1.2 Camden City School District will return $11,453 in un-allowed payments of ESEA
               funds with applicable interest to the Department. In addition it   will   request a refund
               of the overpayments from the vendor using the OIG audit report as documentation,



           FINDING       NO.   2   -   Camden    Had     Inadequate    Documentation        to    Support
           EX]lenditures of ESEA Funds


           Camden did not have adequate controls to ensure that contracts and supporting
          documentation were maintained. We reviewed 50 contracts with ESEA expenditures
           totaling $11.7 million and found that Camden expended $4,580,937 for 24 missing or
           improperly executed contracts. For 10 of the 24 missing or improperly executed
          contracts,     Camden    lacked   adequate   documentation   to   support      expenditures   of
          $\,13\,526. For the remaining 14 contracts, Camden had adequate documentation to
          support the expenditure; however, because the contracts were missing or i mproperly
          executed, we could not determine whether the expenditures were in accordance with the
          intcnded terms of the contract. We also found that for 14 of the 26 properly executed
           contracts,    Camden    lacked   adequate   documentation   to   support      expenditures   of
          $2,953,488.
Final Report
ED-OIG/A02J0002                                                                                               Page 29 of 33




           Mr. Daniel P. Schultz
           Page 3
           April l , 2011


           RECOMMF.NDATIONS


           We recommend that the Assistant Secretary for Elementary and Secondary Education
           require NJDOE to:


           2.1 Direct Camden to provide support that the 24 missing or improperly executcd
              contracts were properly executed and that the goods and services related to those
               contracts were provided in accordance with contract terms, or return the $4,580,937,
              less $11,369 returned based on Recommendation 1.2, with applicable interest, to the
              Departmcnt.


           2.2 Direct Camden to provide support for expenditures related to 10 of the 24 contracts
              that ",,·ere missing or improperly executed even if Camden provides documentation
              that the contracts were properly executed in response to Recommendation 2.1, or
              return the unsupported amounts, with applicable interest, to the Department.


           2.3 Direct Camden to provide support for $2,953,488 expended for properly executed
              contracts or return the unsupported amount of ESEA funds, with applicable interest,
              to the Department.


           2.4 Direct Camden to implement policies and procedures to ensure that contract liles
              include   properly     signed   agreements,    ensurc   that   adcquate   documentation    is
              maintained to support expenditures of procured goods and services; and develop
              specilic policies regarding maintaining documentation, custody of records. and
              governance of lilcs.


           N.JDOE RESPONSE


           2.1 The State Monitor has worked with Camden officials to locate the 24 missing
              contracts and a number of them are enclosed. The Camden City School District will
              continue its search for all contracts that are missing either within the district or from
              vendors and will properly executc all contracts in order to avoid returning $4,580,937
              less $11,369 with applicable interest to the department. However, NJ.S.A. 18A:18A·
              2 recognizes a purchase order (PO)      as    a contract.   It is our belief that cvcn if all
              formal written contracts cannot be obtained or fully executed, a properly executed
              purchase order and invoice documenting that the services or goods were received
              should serve   as   a contract between the district and the vcndor. Therefore, no funds
              should be returned, as noted in the recommendation.


          2.2 Camden City School District will provide support for expenditures related to 10 of
              the 24 contracts including missing scope details, missing all or part of the PO
              document, missing attendance records and missing license agreements. [f documents
              carulOt be produced, it is our contention as noted in our response to 2.1, that payment�
              are propcrly made if thcre is a purehase order, an invoice, a vendor eenilication, and a
Final Report
ED-OIG/A02J0002                                                                                               Page 30 of 33




           Mr. Daniel P. Schultz
           Pagc 4
           April I, 2011


              receiving copy. If the DIG believes that scrvices or goods on any gi ven contract were
              not supplied, the school district will attempt to recover the costs of those goods or
              services with applicable interest and refund the money with applicable interest to the
              NJDOE.


           2.3 Camden City School District will provide additional support for expenditures related
              to $2,953,488 for properly executed contracts including missing scope details.
              missing all or part of the PO document, missing attendance records and missing
              license agrcements.       If documents cannot be produced, it is our contention that
              payments are properly made if thcre is a purchase order, an invoice, a vendor
              cenification, and a receiving copy. [f the OlG believes that services or goods on any
              given contract were not supplied, the school district will attempt to recovcr the costs
              of those goods or services with applicable interest and refund the money with
              applicable intcrcst to the NJDOE.


           2.4 The Camdcn City School District has developed and plans to implement the attached
              SOPs on contract administration in April 2011. The State Monitor has reviewed the
              procedures with district officials and found them to be satisfactory.


           FINI>ING NO.3          Camden's Procurement Process Did Not Complv with Ffderal
           Procurement Requirements


           Camden did not execute its procurement process in accordance with Federal procurcmcnt
           requirements. Camdcn did not perfonn cost or price analysis for competilive and
           noncompetitive contracts, did not maintain documentation to support the awarding of
           competitive     contracts,   and   did   not   provide   sufficient   rationale   for   awarding
           noncompetitive contracts. In addition, contracted vendor.; provided services before Goard
           approval and before Camden signcd thc contracts. Also, we identified signed contracts
           that were not dated by Camden.


           RECOMMENDATIONS


           We recommend that the Assistant Secretary for Elementary and Secondary Education
           require NJDOE \0:


           3.1 Instruct Camden to implement policies and procedures to ensure compliance with
              laws and regulations regarding the perfonnancc of cost or price analysis for all
              procurement actions under 34 C.F.R. § 80.36 (1)(1).


           3.2 Direct Camden to develop and implement controls to ensure that supporting
              documentation is maintained to support its compliance regarding cost or price
              analysis under 34 c'F.R. § 80.36 (1)(1); the procurement process for scaled bids under
              34 C.F.R § 80.36 (d)(2)(ii); and the procurement process for competitive proposals
              under 34 C.F.R. § 80.36 (d)(3).
Final Report
ED-OIG/A02J0002                                                                                         Page 31 of 33




           Me. Daniel P. Schultz
           Page 5
           April I,20ll


           3.3 	Direct Camden to update its policies and procedures to include the new State
              guidance and requirements issued on January 15,2010, which required the usc of a
              competitive procurement process for school and district improvement services
              intended to improve student perfonnance, and monitor Camden's compliance with
              the requirements.


           3.4 Monitor Camden to ensure compliance with State statutes regarding the exceptions to
              publicly bid and advenised contracts and obtaining Board approval prior to acquiring
              goods and services.


           3.5 Monitor Camden's compliance with the State statutc requiring contracts to be signed
              within21 days after being awarded by ensuring that contracts arc signed and dated.


           NJDOE RESPONSE


           3.1 Camden City School District has developed a SOP to ensure compliance with law and
              regulations regarding the perfonnancc of a cost or price analysis for all procurement
              actions under 34 C.F.R. § 80.36 (f)(I).


           3.2 The Camden City School District has developed and plans to implemcnt the attached
              SOP regarding the perfonnance of a cost or price analysis for all procurement action
              under 34 C.F.R. 80.36   (t)(I)   in April 2011.


              The Camden City School District will develop and implement a SOP in April 2011           a


              procurement process for scaled bids under 34 C.F.R 80.36 (d)(2)(ii), 
 whenever 34
              C.F.R 80.36 (d)(2)(ii) is more stringent than NJ.S.A. 18A-18A.


              The Camden City School District has developed and plans to implement the attached
              SOP regarding the procuremcn! by competitive proposals under 34 C.F.R. 80.36
              (d)(3) in April2011.


           3.3 The Camden Cit)' School District has developed and plans to implement the attached
              SOPs regarding the usc of a competitive procurement process for school and district
              improvement services intended to improve student pcrfonnance in April 2011.


           3.4 	 The Camden City School District will develop and implement a SOP for a
              procurement process regarding the exceptions to publicly bid and advenised contracts
              in April2011. The procedure wi!! include both requirements of N.J.S.A. 18A-18A
              and 34 c.r. R. 80.36.


              The Camden City School District has developed and plans to implement the attached
              SOPs on contract administration that includes obtaining Board approval for contracts
              equal to or greater than $36,000 prior to acquiring goods and services in April 2011 .
Final Report
ED-OIG/A02J0002                                                                                              Page 32 of 33




           Mr. Daniel p, Schultz
           Page 6
          April I, 2011


           3.5 The Camden City School District has developed and plans to implement in April
             2011 the attached SOPs requiring contracts to be signed within 21 days, Sundays and
                holidays excepted, after making the award; provided, however, that all parties to the
                contract may agree to extend the limit set forth in the specifications beyond the 21
                day limit required by law.


           The State Monitor has reviewed the above relerenced SOPs with district officials and
          finds them acceptable.


           FrNDlNG NO.4           Camden Had Internal Control Wcakne. ses in Its Accountin(!.for
           Procured Goods and Services


           Camden's        fiscal control and fund     accounting   procedures did not ensure proper
          accounting for ESEA funds. Camden lacked proper internal controls in its accounting
          system to ensure that contract expenditures were properly allocated, accounting budget
          codes were not duplicated, and encumbrances were not duplicated.


           RECOMMKN()ATIONS


           We recommend that the Assistant Secretary for Elementary and Secondary Education, in
          conjunction with the Assistant Secretary for Special Education and Rehabilitative
          Services, require NJDOE to:


          4.1 Direct Camden to develop and implement policies and procedures that require the
                purchasing agent and program          officials to monitor contracts to ensure proper
                allocation ofpayments made for contracted services.


          4.2    Direct     Camden   to   implement    proper   accounting   controls   to ensure   proper
                classification of Federal funds in its accounting system.


          43 Direct Camden to implement proper accounting controls to ensure that ESEA funds
                are properly disbursed and accounted for in its accounting system.


          NJOOE RESPONSE


          4.1 Camden has implemented practices to monitor contracts to ensure proper allocation
                of payments among grants/funding sources made for contracted services. A federal
                account manager position was established about three years ago due to the district's
                lack of federal spending oversight that routinely resulted in the return of large unspent
                federal funds balances.      This position reports directly to the Controller and is
                independent of the Office of Federal and State Grant Funds.        The account manager
                reviews all spending requisitions for adherence to the approved grant application and
                proper account coding and, when applicable, the allocation of costs among funding
                sources.     The account manager identifies and works with program staff to monitor
Final Report
ED-OIG/A02J0002                                                                                           Page 33 of 33




           Mr. Daniel p, Schultz
           Page 7
           April 1,2011


               unspent balances and to submit requests for grant modifications to efficiently and
               effectively maximize the benefits of federal funds. The State Monitor has reviewed
               the practice with district officials and has monitored the process.        However, the
               practice is not currently memorialized in writing. The School Business Administrator
               has been charged with updating and supplementing the district's procedures manual
               for business operations. A written SOP will be developed by the district to document
               this practice within 30 days of this response.


          4.2 Camden has implemented proper accounting controls to ensure proper classification
               of federal funds in its accounting system.       The federal account manager, described
               above, reviews account classification at the requisition level for compliance with the
               state's minimum chart of accounts which is based on the classification system
               developed by the National Center for Education Statistics (NCES).         As a secondary
               control the School Business Administrator reviews account classification compliance
               at the purchase order level as part of the approval process for POs.


          4.3 Camden has implemented proper accounting controls to ensure that ESEA funds arc
               properly disbursed and accounted for in its accounting system. The federal account
               manager reviews all spending requisitions for !ldherence to the !lpproved grant
               applie!ltion and proper account coding and, when appiic!lbie, the allocation of costs
               among funding sources. The district has   !I written   SOP on payments.


          We trust th!lt our responses and corrective actions satisfy the concerns raised in the
          report. Should you have any questions or need further information, please contact me at
          984-5593.


          S2! :....,t
                "IY
                      I
                        ,              .




           II(JA.( CuLm)
          Robert 1. Ci
                              .
                           mo, Director
          Office of Fiscal Accountability and Compliance


          RJCJMAlCPlResponse to OIG Audit of Camden - Adm.Fed.Funds
          c:        Christopher Cerf
                    Gregg Edwards
                    Barbara Glmtwerk
                    Michael Azzara