NJSIAA RESPONSE TO THE SCI REPORT Distributed on 10/6/10 at the NJSIAA Executive Committee Meeting

Transcription

1 NJSIAA RESPONSE TO THE SCI REPORT Distributed on 10/6/10 at the NJSIAA Executive Committee Meeting Page SCI Issue NJSIAA Response 4 Money from public sources The report defines money from public sources as dues from public schools, tournament entry fees and money paid by members of the public for tickets to attend tournament games. It is a stretch, to put it mildly, to define ticket revenue as money from public sources or public dollars. Clearly, this new definition was created so that the SCI could inflate the percentage of the NJSIAA budget that it could imply came directly from taxpayer dollars in this report. The report repeatedly suggests that the almost $2 million generated by ticket revenue should be considered public funds along with the $900,000 in public school dues and $1 million in tournament fees. This is specious at best. 7 Special assessment for the NJSIAA building This occurred in 1988, more than 20 years ago. The original assessment was $425/year for 10 years, until the school year. During that period, the Executive Committee decided to extend the assessment for an additional 5 years; however, in 1999, the committee decided to use $900,000 in surplus to resolve the matter, so the full 5 year extension was unnecessary. In all, the assessment was used for 12 years, from 1988 to TPAF retirees The director and four assistant directors are TPAF retirees and collect TPAF pensions in addition to their NJSIAA salaries. The SCI report offers no criticism of this, but does mention it. This is not an uncommon practice in either the private sector or the public sector, including at the New Jersey Department of Education and the SCI itself. 9 Personnel costs are 27% of the NJSIAA s budget 10 Membership fees increased 11 Financial Policies and Procedures Manual 11 Expenditures for food This is not excessive for a private, non profit association. In comparison, the New Jersey School Boards Association budget indicates that salaries account for approximately $4.7 million of the association s approximately $9.4 million budget, or about 50%. In addition, Mr. Timko is the only NJSIAA staff member who currently makes more than $100,000 in salary. These increases, the first in 17 years, were enacted at the urging of Assemblyman Burzichelli. Despite the implications to the contrary in the SCI report, most of the procedures in the Financial Policies and Procedures Manual have been adopted and implemented. The policies not implemented concern vouchers, purchase orders for purchases over $3,000 and the hiring of an accounting manager. The NJSIAA makes very few actual purchases that exceed $3,000 (although many bills for services do exceed that amount.) Most of the costs of the NJSIAA s major awards events are recouped by the admission charged to everyone who attend the events except the honorees. A chart detailing the expenditures, revenues and final costs of the major events for the school year is attached.

2 12 Bagels, donuts and lunches at meetings 12 Hospitality suites at tournaments 13 Expense reports 13 Corporate credit card 13 Timko signs his own expense vouchers 14 Employees expense vouchers 14 The filet mignon lunch 14 Breakfast buffets, shrimp scampi and prime rib 16 Travel and lodging costs (general) The NJSIAA conducts approximately 70 meetings, clinics, workshops and training sessions for ADs, coaches, trainers, officials, referees, volunteers and members of its various committees every year. The breakfast and lunch policy for these meetings is currently being reviewed and will be revised if necessary. Hospitality suites at tournaments are paid for with corporate sponsorship funds. The NJSIAA agrees that better procedures are needed for the monitoring of expense accounts and that a professional accountant should be hired. It should be noted, however, that the SCI found no evidence that fraud or other criminal activity was taking place in this area. It is important to note that the NJSIAA has only one credit card, issued to Mr. Timko. When the staff eats together during tournaments or travel, the restaurant bills are paid using that credit card. Per person amounts are then applied to the individual staff members per diems for that day, although the lack of adequate record keeping makes this difficult to track. Nevertheless, the NJSIAA acknowledges that better documentation is warranted and is establishing procedures to provide that. This practice has been discontinued. Mr. Timko s expense vouchers will hereafter be signed by the NJSIAA president. A procedure is being developed to provide better oversight of the expense voucher review and approval process. It is important to note, however, that the SCI found no evidence of fraud or other criminal activity in this area. On page 15 of the report, the SCI acknowledges that the NJSIAA policies and procedures mirror those of the NJSBA, but the lack of itemized receipts makes tracking them difficult. The NJSIAA acknowledges this and will implement policies to improve this process immediately. This lunch, at the 2010 wrestling championship tournament in Atlantic City, was planned, ordered and paid for by one of our corporate sponsors at the state wrestling tournament. No NJSIAA funds were used. This food was served at the hospitality suites paid for with corporate sponsorship money at the wrestling tournament. The food was planned, ordered and paid for by a corporate sponsor. The $143,000 (over four years, or an average of $35,750 a year) includes both travel by the NJSIAA staff and rules interpreters to professional association conferences outside the state and the on site accommodations necessary for the NJSIAA staff and workers who staff and administer the 32 championship tournaments each year. These are two entirely separate items and in all fairness, should not be lumped together in this report. In addition, any consideration of this matter needs to include the fact that under

3 NFHS convention in Chicago 17 $12,000 in rooms at Trump Plaza Mr. Timko s tenure, travel expenses have been cut in half, from $33,000 to approximately $15,000 last year. Regarding the lodging provided for tournament work, it should be noted that some of these tournaments last several days, and many of them run from early in the morning into the evening, especially when they take place on the weekends. Finally, it should be noted that since 2009, rules interpreters have not been traveling out of state to attend conferences on sport rule changes and updates and provide this information to referees, umpires and coaches. For the past year, for $50/sport, the NJSIAA has been obtaining this information via video conferencing, thereby eliminating the cost of the rules interpreters out of state travel. The National Federation of High School Associations (NFHS) is the national association of organizations like the NJSIAA in all states. Staff members of the NJSIAA participate on NFHS committees. The convention also includes workshops, lectures and meetings where information is provided that is helpful to the operation of the NJSIAA throughout the year. Four NJSIAA senior managers and the NJSIAA president and his wife attended the 5 day conference at a total cost of $11,500. This $2,300/person cost included the registration fee for the conference ($450/person), airfare, hotel room for five nights and a $92.50 per diem for food totaling approximately $450 per person (in accordance with NJSBA guidelines.) The cost of two meals for the NJSIAA president s wife and her activity fee were inadvertently picked up by the NJSIAA because of a mistake by the president in filling out the registration form. He had never been to the NFHS conference before and misunderstood the form. He has since reimbursed the NJSIAA for these expenses. It should be noted that the president s wife s airfare and other meals were not at issue here. The president paid for those items himself at the time of the conference. The annual New Jersey wrestling state championships (in which state champions are crowned in all 14 weight classes) in Atlantic City is one of the NJSIAA s largest, most logistically complex and best attended annual events. It is held in early March, involves more than 300 athletes and hundreds of individual matches, and attracts about 40,000 spectators each year. In 2010, the NJSIAA used corporate sponsorship money to pay for the rooms of five of its own staff and about 20 tournament workers (corporate sponsors paid for their own rooms, although the rooms were booked by the NJSIAA) for a total of about 40 people and an average of $300/person in hotel bills. Trump Plaza was chosen because it is adjacent to Boardwalk Hall, and some of the workers had to be at the event site very early in the morning. It should be noted that some people stayed for two nights and some three or four nights, depending on their tournament duties and requirements. 17 Rules interpreter s car service to This was not an appropriate expense and should not have been allowed. However, it should be noted that the interpreter would have been eligible to be reimbursed for parking at Newark Airport, which is $18 $24 per day in the daily

4 Newark Airport 17 Flowers $17,700 spent on flowers over the past four years, with most of the money $15,541 spent on floral decorations, corsages and boutonnieres for NJSIAA awards events. 17 $900 on Christmas cards over three years 18 $1,088 on Vera Bradley bags 18 $1,000 worth of designerembossed computer mouse pads and economy long term lots. As noted above, rules interpreters are no longer traveling to meetings out of state. $15,541 over four years = approximately $3,900 per year. The three major NJSIAA banquets attract more than 2,500 people each year: Scholar Athlete Awards (1,400), Hall of Fame (600) and the association s Annual Meeting (500). Leaving out the corsages and boutonnieres entirely, let s do the math: 2,500 people means the NJSIA was putting flowers on about 250 tables for 10 each year. That $3,900 translates into about $15 per centerpiece, a very reasonable and frugal sum, given the cost of flowers. The SCI report implies that the flowers could be eliminated at these annual awards banquets, which raises the following question: If your daughter was being honored as her school s 2010 scholar athlete, or your husband was being inducted into the New Jersey Coaching Hall of Fame, wouldn t you think the occasion special enough to warrant a few flowers on the table? Yes, the NJSIAA, a voluntary, non profit, non government association, did spend an average of $300 a year to send holiday greetings to a mailing list of about 250 people. The luncheon was an event for which an admission charge was paid by the attendees or their employers. The cost of the bags was recouped from the ticket revenue. Vera Bradley is a company best known for its mid priced, soft, brightly patterned bags. Lunch bags similar to those given out at the 2008 luncheon are available on the company s website for between $ The NJSIAA staff obtained the bags for the 2008 luncheon for $10 each because they were 2007 model products. These Vera Bradley mouse pads (which sell for between $11.25 and $15 on the company s website) were obtained at a discount for use as gifts at the 2009 administrative assistants luncheon. Their cost would have been recouped by the ticket revenues; however, the 2009 luncheon was cancelled. It is anticipated that the mouse pads will be used at a future event. 18 Golf outing This golf outing was a fundraiser for the New Jersey Chapter of the National Wrestling Hall of Fame, which had recently donated money to the NJSIAA to purchase refractometers (which measure the hydration level of athletes) to help implement our wrestling hydration program, an important new NJSIAA athlete health initiative. The NJSIAA purchased four tickets to the golf outing at $150/each. Two of the tickets were used by long time NJSIAA volunteers. While neither of them work for the NJSIAA, both have devoted many years of service to our organization and serve on the Hall of Fame Committee.

5 18 Sympathy gifts 18 Staff holiday party Yes, the NJSIAA, a voluntary, non profit, non government association, spends about $500 a year on sympathy gestures in the form of flowers or fruit baskets for people who are affiliated with the association who have lost a loved one. Yes, the NJSIAA, a non profit, non government association, does take its 15 employees out to lunch around the holidays, at an annual cost of about $600. Employees themselves pay for any alcoholic drinks or wine that they wish to consume at this lunch, as the restaurant is a BYOB and does not serve alcohol. 18 Mileage The NJSIAA acknowledges that the mileage and car policy of the agency has been in place for many years and should be revisited. Suggestions made in the SCI report will, of course, be considered. It is important to note, however, that the assistant and associate directors are responsible for paying the depreciation taxes on the cars they drive. The practice of providing members of the executive committee with pre paid mileage reimbursement forms has been discontinued. 20 Pension plan The NJSIAA s pension plan has been in effect for more than 20 years. Several years ago, the contribution level was reduced from 19% to 10% of an employee s salary for the executive director and new directors. 20 Timko insurance 21 Boyd Sands retirement package 21 Employee bonuses from NFHS funds Mr. Timko responded to this issue on page 4 5 of the appendix submitted in response to mentions of his personal actions in the report. Mr. Timko wanted to provide protection for his family, not create a long term investment opportunity for them, so he converted the whole life policy provided in his contract to a term life policy, saving the association $9,000 a year in premiums, from $10,657 per year to approximately $1,500. The savings to the association have been about $27,000 to date and will be approximately $63,000 over the life of the policy. It has been NJSIAA policy for many years that insurance policies were the personal property of the insured, so the cash payout value of the whole life policy until the point of the switch was given to Mr. Timko. Information about this policy transfer did appear in the association s budget. However, it is important to note that the SCI found no evidence of wrongdoing or fraud in this matter. The policies that led to compensation received by Mr. Sands on his retirement have been changed significantly in the past five years. T Mobile placed no restrictions on the use of this money, which came from a national sponsorship arrangement. The NJSIAA had been interested in trying to increase compensation for our nine support staff workers, many of whom have been with the organization for many years and who earn between $30,430 and $44,725. For the two year period that the money was available ($10,000 per year), it was divided up among the nine support to provide a small additional compensation without affecting the NJSIAA budget or pension accounts. 22 Lack of internal controls The NJSIAA acknowledges that many of our accounting and record keeping practices are archaic and inadequate, and that the hiring of a professional accountant is necessary. Our Finance and Executive Committees will be

6 recommending revisions to our practices. Some changes have already been made. Mr. Timko no longer signs his own expense vouchers and the practice of having pre approved expense vouchers for staff and volunteers has been ended. We anticipate that the hiring of a professional accountant will improve the association s ability to address these issues. It is important to note, however, that most of the changes recommended in 2005 have been made. As noted above, the few changes not implemented involve purchase orders for items over $3,000, and vouchers. Again, it is also important to note that the SCI found no evidence of wrongdoing or fraud in any of these matters. 26 Petty cash The NJSIAA acknowledges that the record keeping system for petty cash needs improvement and changes will be implemented. Again, it is also important to note that the SCI found no evidence of wrongdoing or fraud in any of these matters. 27 Cash based tournaments 31 Contracts for corporate sponsors 40 Outside Monitor The NJSIAA agrees that the cash based compensation system for workers at tournaments is archaic at best. The SCI acknowledges that the association has taken steps to guard against possible losses and other untoward circumstances, but given the technology currently commonly available, more must be done. The Executive Committee and staff will be working to develop new systems for the handling of money at tournaments in the near future. The NJSIAA is a private, non profit association and not subject to government requirements that contracts be publicly bid. All contracts for services are approved by the NJSIAA Executive Committee. We acknowledge that the proposed contract with Honig s of New Jersey did generate complaints from the officials association, and we agreed to table the contact and revisit the terms within two years. Pursuant to the SCI recommendation, the NJSIAA will adopt formal written policies governing the negotiation and wording of corporate sponsorships. The NJSIAA s records have always been publicly available. However, we acknowledge that many of our accounting procedures are archaic and inadequate. Should the Legislature feel the necessity to appoint an outside fiscal monitor, we would willingly accept that option. 41 Consolidate the NJSIAA with the NJSBA or establish the NJSIAA within DOE The NJSIAA objects strongly to both of these options, which would abolish our voluntary, non profit association of schools and place high school sports under the auspices of state government. Both proposals are constitutionally questionable. In addition, while the legislative resolution calling for the SCI investigation implied that there was fraud, malfeasance and criminality within our operation, the SCI found no evidence of any of that. It does not appear to us that archaic and inadequate accounting practices and a less than desired level of internal controls warrant the death penalty for our organization.

7 42 Strengthen Internal Financial Controls Most of these items are mentioned and addressed in our response to various other findings noted above. The NJSIAA Executive Committee will review the SCI recommendations. 46 Establish an accounting office within the NJSIAA 47 Restructure the NJSIAA s Executive Committee 48 Reduce and control spending and personal expenses 50 Establish a Code of Ethics The NJSIAA expects to hire an accounting manager in the near future. The Executive Committee will look closely at these suggestions and make recommendations in the near future. These items were addressed in responses noted above. The NJSIAA expects to establish a written Code of Ethics in the near future in cooperation with the National Federation of High School Associations.

8 The Hall of Fame Luncheon and Annual Business Meeting Revenue Exp Actual cost to NJSIAA Ticket sales $ 15, The Pines Manor (food) $ 12, flowers (center pieces $ 1, Printing Exp (Programs) $ Photography $ 1, $ 15, $ 15, $ The Scholar Athlete Awards Assembly and Luncheon Revenue Expense Ticket Sales $ 34, The Pines Manor (Food) $ 53, Awards (non monetary) $ 2, Printing $ 3, Flowers (center Pieces) $ 2, $ 34, $ 62, $ 28, *** Scholarships awarded to student athletes during Luncheon were 113, B/G Basketball Tournament of Championship Banquette Shoprite Sponsorship $ 50, the Pines Manor (food) $ 12, $ 50, $ 12, $ (37,576.00) There was actually no cost associated with this event That the Shop Rite Corporate Sponsorship did not cover

9 NJSCA Hall of Fame Luncheon Rev Exp Corporate Sponsorship $ 16, Ticket Sales for event $ 20, Printing $ 4, Awards $ 2, Flowers $ The Pines Manor (Food) $ 25, $ 37, $ 31, $ (5,512.82) There was no cost to the NJSIAA associated with this event. It was covered by ticket sales for the event and corporate sponsorships. Girls Volleyball Tournament of Champions Banquette Rev Exp Corporate Sponsorship $ 3, The Brown Stone (Food) $ 2, $ 3, $ 2, $ (752.44) There was no cost to the NJSIAA associated with this event. It was covered by Corporate Sponsorship Total Cost for these few events without factoring in the revenue $ 125, Actual cost for these events when considering their revenue $ (14,344.17) we did not loose any money on these events.