A scathing report just issued by the New Jersey Office of the State Comptroller (OSC) found that top administrators at New Jersey City University (NJCU) knowingly “cooked the books” by willfully misusing COVID-19 relief funds in bolstering their budget, showing a surplus even though they knew it contained the unlawful use of federal funds.
The report found that nearly a year had passed before senior university administrators at the Jersey City school finally admitted to misappropriating COVID funds, which resulted in nearly a $14 million dollar deficit along with forcing the university to declare a financial emergency.
Gov. Phil Murphy had initiated the investigation, asking the OSC, to look into allegations of unlawful use of federal COVID funds by the university. The investigation uncovered in the Spring 2021 that NJCU was in a precarious financial situation because of declining student enrollments along with increased spending.
Misuse of COVID Funds
Faced with mounting debt, senior administrators in June 2021, decided to knowingly deceive the Board of Trustees by submitting a false and illegal COVID infused budget.
The budget called for using nearly $14 million in federal COVID-19 funds from the Higher Education Emergency Relief Fund (HEERF) to pay for existing institutional student scholarships. NJCU’s 2022 fiscal year began on July 1, 2021.
Additionally, a review of more than 50,000 pages of documents and emails found that senior administrators including the then-President, Chief Financial Officer, and Vice President, Enrollment, were well aware that using COVID funds for existing scholarship programs would likely be in violation of existing federal law.
The report found, that although COVID funds were improperly used to bolster the university’s budget, the actual funds were not used. Instead NJCU began siphoning off its own cash reserve funds, set aside within their budget. The monies were used to fund the school’s scholarship program in the fall 2021.
Additionally, there’s no evidence that senior administrators ever disclosed to the Board of Trustees, the initial shortfall within the budget, amounting to about 8% of the budget according to the report. That information was only revealed in April 2022 after a new interim CFO was hired.
Nearly two months after being hired, the interim CFO officially notified the Board of Trustees that another audit was conducted disputing the original budget submitted, and that the projected year-end amount of a $480,000 surplus originally touted, was in actuality a nearly $14 million deficit along with about 25 days of operating cash on hand, forcing NJCU’s Board to officially declare a financial crisis.
“NJCU’s senior administrators’ conduct was remarkably irresponsible. They prepared a budget based on a risky and incorrect assumption, then failed to change course for 10 months, which thrust the University into crisis,” said Acting State Comptroller Kevin Walsh. “Senior administrators fundamentally failed in their duties to protect NJCU.”
However, long before the 2021 budget manipulation, OSC’s investigation found a troubling pattern of fiscal improprieties with NJCU, beginning as far back as 2015. That year the university claimed its net assets and liabilities of $104 million, however, by 2021 that figure had plummeted to just $69 million.
OSC found that as student enrollment began declining in 2016; NJCU started spending heavily in an unsuccessful effort to attract more students even offering tuition discounts, while also raising tuition fees on average 3% every year since 2011.
Those efforts accounted for just $1 million in additional tuition revenue, which comprises about 60% of NJCU’s operating revenues. In all, student enrollment declined to 6,918 in 2021 from 8,328 in 2011 .
“When a public institution fails, we owe it to residents to find out what went wrong, hold people accountable, and identify ways to prevent problems in the future,” said Walsh. “We share this report with the belief that transparency and accountability, coupled with improvements in how the administration and board function, will better serve NJCU students.”