Audit flags excess aid, improper spending and missing background checks in Newark schools

State auditors referred unspecified matters to criminal investigators. District officials nonetheless declared that the review found “nothing.”

State auditors found that Newark Public Schools received $6.7 million in excess state aid, failed to complete required employee background checks, and spent hundreds of thousands of dollars on an administrative gym without required construction approvals.

They also identified an estimated $18.7 million in missed health insurance savings, a stalled museum project that cost $2.5 million so far, and violations involving catering and employee entertainment. Auditors referred unspecified matters to the state Division of Criminal Justice.

The findings were detailed in a performance audit covering July 1, 2022, through May 31, 2026. Led by State Auditor David Kaschak, the review examined nonpayroll spending in the district’s general fund and transactions involving its preschool program.

Despite those findings, district officials issued a press release Thursday titled “Newark Public Schools Comes Through State Audit with Flying Colors.” The assertion in the press release: After 22 months of scrutiny, auditors “found…nothing.”

That characterization omits some of the audit’s findings. Auditors concluded that the transactions they tested were properly recorded and were generally related to district programs and “generally reasonable.” They immediately followed that conclusion with a list of problems requiring management’s attention and disclosed the criminal referrals.

Excess state aid and background-check failures

Auditors found that Newark overstated enrollment by 128 students in each of its 2023 and 2024 applications for state school aid. The state Department of Education calculated that the inaccurate counts resulted in $6,654,240 in excess aid for fiscal years 2024 and 2025.

Student records were not updated promptly, and the district lacked policies and procedures governing those updates, auditors found.

In a written response submitted through General Counsel Brenda Liss, district officials disputed the finding and argued that the state’s enrollment-counting rules also exclude students who arrive after the annual cutoff.

Auditors responded that the application must accurately reflect enrollment on the legally prescribed date. They also clarified that the New Jersey Department of Education, rather than the audit team, calculated the overpayments.

The background-check review uncovered separate failures involving 209 employees.

Ten active employees, hired between two and 27 years earlier, had never completed required criminal history background checks. Another 199 had been approved to work in other New Jersey districts but had not properly updated their clearances for employment in Newark.

That omission could prevent Newark from receiving a notice if an employee later commits an offense that disqualifies the person from school employment, auditors wrote.

After auditors raised the issue, nine of the 10 employees without background checks completed them. The remaining employee left the district before completing the process.

Among the other 199 employees, 178 had received clear background checks and updated their employment records by March 31. Thirteen had left before completing the required checks, six were restricted from working until they completed fingerprinting, and two were awaiting a response from the state.

District officials maintained in their written response that their procedures were stricter than state requirements and that none of the employees identified had been disqualified.

Auditors countered that the failure to update employment records left a gap in the district’s ability to learn of disqualifying offenses.

A stalled museum and a little-used gym

The district paid $2.5 million upfront toward a planned museum and administrative offices at 15 State St., under a $4.5 million agreement with the property’s owner.

By May 2026, the project remained unfinished a year beyond its contractual deadline. Auditors observed little to no progress and received no documentation substantiating construction expenses, progress, or an updated completion schedule.

They also found that the district had not obtained required Department of Education approval before taking action to reacquire the property and had effectively circumvented competitive bidding requirements through the agreement.

The arrangement exposed the district to additional costs for certain finishes, utility connections, and permit fees. Under one termination provision, the developer would not have to return payments already received.

The Newark Public Schools district also lost the opportunity to obtain a potential $750,000 preservation grant because it did not own the property or hold a long-term lease.

District officials defended the project as an investment in preserving State Street School, a landmark associated with Newark’s history of educating Black children. They disputed that bidding or acquisition requirements had been circumvented, arguing that the district had not yet acquired the property.

Auditors separately found that Newark spent approximately $566,000 to construct, equip, and operate a gym in its leased administrative headquarters.

Construction alone exceeded $300,000, but the district lacked adequate supporting documentation, did not obtain required formal board approval, and circumvented competitive bidding requirements, auditors found.

The gym opened in November 2024. Sign-in records reviewed for a period in the fall of 2025 showed average use by seven employees a day, all assigned to the administrative building.

The board also approved a $280,440 contract for gym management covering September 2024 through August 2026, including a full-time trainer.

District officials argued that gym services were purchased with wellness funds derived from employee health benefit programs rather than general fund resources. Auditors responded that the district’s own documents showed that construction, operation, and staffing expenses came from its general fund.

Health insurance and preschool spending

Auditors estimated that Newark could have saved $18.7 million in fiscal years 2024 and 2025 by participating in the New Jersey School Employees’ Health Benefits Program.

The district adopted a self-insured arrangement in January 2022 but did not document the required review of available insurance options in 2025. District officials claimed they had requested an extension, but auditors received no documentation supporting that request.

In their response, district officials defended their plan as providing more comprehensive benefits and challenged the comparison with state coverage.

Auditors clarified that they were not recommending a particular insurance program. Their recommendation was that Newark examine available options and select the most cost-effective coverage, as required.

The review also identified $150,619 in employee health benefit contributions that Newark failed to collect during unpaid leave and $41,602 in claims auditors classified as ineligible. The district had not attempted to recover the outstanding contributions identified in the review.

For preschool, auditors estimated that Newark could have saved about $1.3 million during the 2023-24 school year by continuing to adjust payments to private providers when enrollment fell below contractual thresholds.

Newark made those adjustments from October 2023 through January 2024, then stopped.

District officials defended the decision as necessary to preserve community preschool providers and maintained that the Department of Education had not objected. Auditors found the documentation insufficient and noted that the state’s earlier blanket flexibility applied only through the 2022-23 school year.

Catering, student trips and staff entertainment

Auditors identified inadequate documentation and excessive meal costs in a sample of catering transactions.

Of 242 transactions tested, 136 totaling about $184,000 lacked adequate supporting information, such as event justifications or participant details. Another 79 totaling about $49,000 exceeded contractual or regulatory pricing limits. Those categories should not be assumed to represent separate, nonoverlapping costs.

Sixteen of 19 catered board meetings reviewed exceeded the $10-per-person limit. One $700 order included shrimp scampi, grilled salmon, baked ziti and meatballs — a dinner auditors found inconsistent with the requirement for light meals and refreshments.

The district also spent $711,943 on three senior day trips during fiscal years 2023 through 2025. Activities included carnival booths, rock climbing walls, DJs, and karaoke.

District officials described the trips as experiences supporting students’ transition to life after graduation. Auditors found that Newark did not provide adequate documentation demonstrating educational components and recommended that entertainment-focused activities be paid for through student activity accounts or donations.

A June 2024 “Central Office Staff Fun Day” cost another $57,065 and included activities for employees and their children.

The district did not seek bids despite exceeding the $44,000 bidding threshold, and used two purchase orders that circumvented procurement requirements, auditors found. Spending also exceeded the board’s $44,000 authorization.

The Department of Education had already directed Newark to reimburse $33,649.07 in disallowed state aid associated with the first payment. Auditors recommended reimbursement of another $13,251 associated with the second.

District officials disputed the procurement finding, arguing that the second payment covered unanticipated expenses. Auditors responded that the documentation indicated the costs should have been anticipated and that splitting purchases violates procurement law.

The audit also found that Newark’s per-student legal spending was 84% above the statewide average, representing approximately $4.7 million in additional spending over three fiscal years. Auditors found no documentation of required procedures to minimize those costs, a conclusion district officials disputed.

District officials declare success

In Thursday’s announcement, Superintendent Roger León called the audit “an exercise in due diligence and transparency” and maintained that the district takes recommendations seriously.

Valerie Wilson, who served as school business administrator for 30 years, said the review proved that Newark spends “wisely and strategically.” Board President Hasani Council praised the district’s performance under local control.

The announcement also cited favorable annual financial audits, state fiscal-management ratings, a bond-rating upgrade and academic achievements.

But the state review was a performance audit, not an audit expressing an opinion on financial statements. Its objectives concerned spending, accounting and compliance, rather than graduation rates or academic performance.

The written response to the audit by district officials was more combative than Thursday’s announcement. District officials characterized recommendations about educational alignment and student priorities as beyond the auditors’ authority and “extremely presumptuous.”

District officials also called the disclosure of criminal referrals “gratuitous and irresponsible,” arguing that the report did not identify intentional wrongdoing.

Auditors explained that their practice is to withhold details of criminal referrals unless the investigative agency authorizes disclosure in order to avoid interfering with a potential investigation.

Kaschak’s office plans to review Newark’s compliance with the recommendations in 2028 and publish the results.