What a new state audit found about Newark Public Schools
Auditors identified millions of dollars in state aid overpayments and potential savings, gaps in employee background checks and concerns about district spending.
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A new state audit of Newark Public Schools found the district received millions of dollars in state aid overpayments, identified potential health care savings, found gaps in required employee background checks and raised concerns about district expenses.
The Office of the State Auditor examined the district's operations from July 2022 through May 2026. State funding accounted for an average of 88% of its General Fund revenue during fiscal years 2023 through 2025.
Auditors concluded that the transactions they tested were properly recorded and generally related to district programs and were reasonable, but identified several areas requiring attention.
The auditor also said "certain matters" were referred to the state Division of Criminal Justice. The report does not identify them, saying more information was withheld to avoid interfering with a potential investigation.
Newark Public Schools disputed several findings and has characterized the report as evidence of its sound financial practices.
Enrollment and state aid
Auditors found Newark overstated its resident enrollment by 128 students in both its 2023 and 2024 state aid submissions.
The state Department of Education reviewed the discrepancies and calculated that they resulted in $6.65 million in state aid overpayments for fiscal years 2024 and 2025.
Auditors attributed the inaccurate counts in part to student records that were not updated promptly. Newark disputed the auditor's interpretation of how students who withdrew should be counted. Auditors responded that the district had about two months to review and correct the numbers before certifying them to the state.
Employee background checks
Auditors found 10 of 8,043 applicable active employees had never had a required criminal history background check completed. Another 199 had been cleared while working for other New Jersey school districts but had not updated their records to identify Newark as their current employer.
The district took corrective action. Nine of the 10 employees subsequently received clearance, while the other left before completing the process. By March 31, 178 of the other 199 had received clear results and updated their records.
Newark argued that the state provides districts with information about employees who become disqualified. Auditors responded that identifying an employee's current district is necessary to ensure the employer is notified.
Health benefits
Auditors estimated Newark could have saved $18.7 million during fiscal years 2024 and 2025 if it had participated in the state's School Employees' Health Benefits Program instead of using its self-insured plan.
The auditor did not recommend Newark switch plans. Instead, it recommended regularly comparing available plans and choosing the most cost-effective option, and said Newark could not document that it conducted a required review in 2025.
The district defended its self-insured plan and challenged the comparison. The auditor said its recommendation was to evaluate available alternatives, not join a particular plan.
State Street museum and office project
Under a 2023 agreement, a property owner was to construct a district museum and administrative offices at the former State Street School for $4.5 million. Newark paid $2.5 million upfront in May 2023.
As of May 2026, the project remained unfinished and was a year past its deadline. Auditors said it showed little to no progress and that the district did not provide records detailing construction progress, expenses or an updated schedule.
Auditors also said Newark did not obtain required state Department of Education approval before pursuing the land acquisition and that the agreement effectively circumvented competitive bidding requirements.
Employee fitness center
Newark spent approximately $566,000 to construct, equip and operate an employee fitness center in its administrative building.
More than $300,000 went toward construction. Auditors said the costs were not formally approved by the school board and competitive bidding requirements were circumvented.
Sign-in records covering nearly three months in 2025 showed an average of seven employees used the center each day, all of whom worked in the administrative building.
Newark described the center as an employee wellness initiative. Auditors said General Fund money paid for its construction, operations and staffing and maintained that the expenses cited did not comply with applicable requirements.
Other spending findings
Auditors estimated Newark could have saved about $1.3 million during the 2023-24 school year by reducing payments to private preschool providers when enrollment fell below contract thresholds.
Newark said the state Department of Education had allowed it to continue making payments based on capacity. Auditors said records from the time did not support that assertion. A later communication from the department described the decision as Newark's to make but did not explicitly approve or direct its approach.
The audit also found Newark's per-student legal expenses were 84% higher than the statewide average over three years; examined $1.14 million in catering spending and identified documentation and meal-price issues in transactions tested; and questioned $711,943 spent on three Senior Day trips. Newark said Senior Day recognized student achievement and supported students' social and emotional development.
Auditors also reviewed a $57,065 "Central Office Staff Fun Day." The state Department of Education had already directed Newark to repay $33,649.07 in state aid associated with the event, while the State Auditor recommended repaying another $13,251.
District responds to audit
Newark Public Schools has emphasized the audit's broader conclusion that the transactions tested were properly recorded and generally related to district programs and were reasonable.
In an Oct. 1 statement titled "Newark Public Schools Comes Through State Audit with Flying Colors," the district said the review demonstrated its financial practices were sound and argued that several findings lacked context or did not accurately reflect district practices.
The State Auditor maintained its recommendations and distinguished its performance audit from the district's annual financial audits, saying its review examined selected operations, transactions and compliance rather than expressing an opinion on Newark's financial statements.
The State Auditor plans a compliance review in 2028 to determine what action the district has taken on the recommendations. The results will be made public.
