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Signage is pictured at the Delilah Road entrance to the Next Generation Aviation Research and Technology Park in Egg Harbor Township. File photo Jan. 25, 2012.

Michael Ein

In the first of two past-due audits for the South Jersey Economic Development District, auditors said they could not determine the value of the NextGen Aviation Research and Technology Park in Egg Harbor Township because the project is stalled.

“It’s like building a house. They started building a house and didn’t have money to finish building that house. Is that house still worth the money you put into it if you can’t finish it?” said John Sabella, an accountant with auditing firm Ford Scott and Associates. “Right now, I can’t determine whether or not (the district) will get the full value out of it.”

The audit, which covers March 2009 through March 2010, paints a picture of where the project stood financially as of nearly two years ago. Auditors are working on a draft of the 2010-11 audit, and by next month the 2011-12 audit should commence.

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The project, once touted as a $300 million investment, remains largely unfinished. The district, which holds the lease with the Federal Aviation Administration for the park’s land, has completed a $7 million infrastructure installation at the site. The district is in negotiations with the NextGen park’s board to turn over the lease for the park’s land.

District officials have vowed not to do so unless reimbursed for $858,000 spent throughout the course of the project that cannot be recouped through grants or other means. Those costs, discovered through Atlantic County’s review of the project’s expenses, include architectural plans, interest accumulating on a bank loan and legal expenses.

SJEDD Executive Director Gordon Dahl has said the district always intended to recoup its expenses through subleases with tenants. However, those arrangements will not happen in the immediate future, as construction has yet to begin on the first of seven buildings slated for the 58-acre site.

“Since the project was in the early stages of development and no executed leases existed at the date of our report, we were unable to satisfy ourselves that there is reasonable assurance that these costs are recoverable, and that the amount reflected in the accompanying balance sheet is free of material misstatement,” the audit reads. “The valuation of this asset and potential impairment cannot be determined.”

The audit, obtained by The Press of Atlantic City, includes seven “findings,” or questioned costs.

Atlantic County, one of the district’s four member counties, withdrew from the organization earlier this year in part because the SJEDD was two years behind in completing audits while in the midst of the largest project in its history. The audits are also required under U.S. Economic Development Administration guidelines.

The audit found that appropriate Internal Revenue Service reporting requirements were not followed, which could result in “significant financial penalties” for the district. Progress reports required in conjunction with a state Department of Transportation grant for the NextGen park were not filed, and the district was not filing for reimbursement of administrative costs under grant agreements.

In the 2009-10 audit, the district was held to different standards than in previous years due to the fact that it expended more than $500,000 in state or federal grants, Sabella said.

Findings in the audit also show that invoices were being credited in the cash account instead of the accounts payable account and bank reconciliations were being performed incorrectly. The district should be more aware of the knowledge and skill needed to apply generally accepted accounting principles, the audit states.

Dahl referred to a corrective action plan adopted by the district’s board earlier this month when asked about the audit’s findings. According to that plan, the district attributed the accounting issues to former staff members who left between November 2009 and March 2010 and did not have the requisite skills to operate accounting software.

The employees were filling in for former SJEDD project manager Judith Arnold, who left the district in late 2009.

The district also owes an estimated $495,000 to contractors who completed the infrastructure installation. Yet last month, district officials turned down a loan from the state Economic Development Authority that would have allowed them to pay the companies. In exchange for accepting the loan, the district would have been required to simultaneously turn over the land lease, thus not recouping the $858,000.

One of those contractors, Birdsall Services Group, filed a lawsuit this month against the district seeking past-due payments totaling $169,700, according to a complaint filed at the Atlantic County Civil Courthouse.

The Sea Girt, Monmouth County-based engineering firm has provided services including land surveying, design, field review of work progress and reviewing of contractor requests for information since entering into contracts with the district beginning in December 2009.

According to the lawsuit, filed Feb. 3, agreements state that the district must make payment within 30 days of receiving an invoice. If payment is not made, the district is subject to a finance charge of as much as 2 percent. The lawsuit does not state when the unpaid invoices were submitted.

Birdsall representatives did not return calls Thursday.

Dahl, who received the lawsuit at about 4 p.m. Thursday, said the district will be filing a counterclaim due to problems with work at the intersection of Delilah Road and the park’s access road as well as problems with a pump station in the park.

Contact Jennifer Bogdan


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