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COST OF ABBOTT AUDITS SOAR

LEGISLATURE TRANSFERS FUNDS TO PLUG DEFICIT IN DOE BUDGET

The NJ Department of Education will pay KPMG $10.7 million for audits of the Abbott districts, which is $7.45 million more than the amount the DOE reported it would pay the New York-based accounting firm last October.

The price increase for the audits has caused the DOE to exceed its overall budget for managing Abbott districts by 28%, prompting the DOE to ask the Legislature for $5.6 million to plug the deficit. On April 30th, the Joint Budget Committee approved a transfer of $5.6 million from other State governmental accounts to make up the DOE budget shortfall.

The DOE budget deficit comes at the same time the DOE is seeking to impose a 3% limit on increases in the budgets of Abbott districts, and is vigorously contesting 8 districts that have requested increases above 3% in order to maintain staff and programs.

Each year in the annual State Budget, the Legislature re-directs $14.7 million in Abbott "parity" aid to the DOE for purposes of managing and supervising the Abbott districts and reforms. "Parity aid" is state aid appropriated to enable Abbott districts to provide their students with education programs comparable to those offered in New Jersey’s successful suburban districts. The Legislature does not re-direct funds to support DOE management activities from the budgets of the suburban districts, only Abbott districts.

In October 2006, the DOE issued an "Abbott Budget" listing expenditures for DOE staff and other activities in the Division of Abbott Implementation, the Office of Early Childhood Education and the Office of School Funding. The budget indicated the DOE would spend $3.25 million on audits of all Abbott districts. Also included was $500,000 for "Evaluation of Abbott effectiveness," $500,000 for professional development "reviews," and $600,000 for evaluations under the NJ QSAC, the State’s new monitoring system. The total DOE Abbott budget was $19.7 million.

In asking the Legislature’s Joint Budget Committee for the additional $5.6 million on April 30th, the DOE presented a revised Abbott budget, totaling $25.3 million. The price of the audits is listed as $10.7 million. The budget contains $400,000 for "program reviews" and $600,000 for NJ QSAC reviews. The revised budget no longer contains any allocation for the Abbott evaluation.

As the price of the KPMG audits have soared, the NJ Urban School Superintendents Association has raised questions concerning the manner in which the first four district audits – Newark, Camden, Paterson and Jersey City -- were conducted and publicly released. The NJUSSA noted, among other issues, that KPMG did not give districts customary opportunity to clear up "questionable expenses" before finalizing the audits.

In addition, the DOE has offered no information on any plans to provide follow-up technical assistance to help districts make any needed improvements or upgrades in fiscal accounting or operations systems identified in the audits.

The revised Abbott budget submitted to the Joint Budget Committee also raises another troubling concern: the removal of funds allocated for an evaluation of the Abbott programs and reforms. The NJ Supreme Court first ordered a comprehensive, independent "Abbott program evaluation" in 1998, and reaffirmed the requirement in 2003. Since then, the DOE has convened researchers to design the evaluation, but has yet to award a contract for the evaluation, despite a directive by the Legislature in the FY2007 State Budget to prepare a plan to move the evaluation forward.

Prepared: May 10, 2007