More than $390,000 is unaccounted for in revolving loan funds maintained by the South Jersey Economic Development District — the latest in a string of financial discrepancies left behind by the agency’s former executive director.
Missing money appears to have funded the agency’s operating expenses or the costs associated with the NextGen Aviation Research and Technology Park, said Steve O’Connor, the district’s interim executive director. O’Connor was charged with sorting out the agency’s finances after the board voted to oust its longtime Executive Director Gordon Dahl earlier this year.
The district is attempting to dig its way out of hundreds of thousands of dollars in debt that appears to have accumulated while Dahl was leading a $7 million infrastructure installation at the NextGen park. Board members have said they were unaware of the district’s financial position and the decisions Dahl was making.
SJEDD’s revolving loan funds are intended to provide low-interest financing to local businesses, thereby improving the regional economy. Money is lent out, and after it is repaid then can be lent out to other businesses. The district collects 5 percent interest on the loans, which is used for administrative costs.
“There should always be roughly the same total amount of money. It can’t be used for anything else. When I looked at how much is outstanding and how much was in the account, it didn’t add up,” O’Connor said. “It’s really anticipated that the district would have self-policed itself.”
At a SJEDD board meeting Monday night, O’Connor will recommend suspending the district’s loan program until further notice. The agency does not have plans to immediately recollect the money from the seven outstanding loans, but O’Connor will recommend that no additional money be issued. The money used to fund the loan program came from a $1 million loan from the U.S. Department of Agriculture in 1991 and $517,939 in grants obtained from the U.S. Economic Development Agency between 1987 and 1988.
“It’s disheartening to hear this. It really is. It’s disheartening that an organization in a 14-month period just deteriorated to this point. Until we get a full picture and a full accounting of the district’s finances we won’t agree to rejoin the district,” said Howard Kyle, chief of staff to Atlantic County Executive Dennis Levinson.
Atlantic County withdrew from the district earlier this year questioning why SJEDD failed to complete audits for two years while overseeing the $7 million infrastructure installation at the NextGen park. Their action triggered questions from the district’s other member counties — Cape May, Cumberland and Salem — which then called for the board to take a vote of confidence in Dahl.
Dahl had been the district’s executive director since 1987. He has since filed a $7.5 million tort claim against the district, Atlantic County and the NextGen park’s board claiming that coercion and illegal methods were used in his termination.
The shortfall of the federal Economic Development Agency fund, obtained as a grant to the district, totals $152,848. Meanwhile, $237,691 is unaccounted for from the USDA fund. That money was obtained as a loan to the district. SJEDD has already repaid more than $760,000 of the loan but the remaining amount still must be returned to the USDA.
O’Connor met with representatives of both agencies last week to notify them of the discrepancies and requested that they audit the loan programs. Why the missing funding wasn’t discovered sooner either by the district’s auditors or by the federal agencies that provided the funding is unclear.The federal EDA required the agency to self-report on the fund every six months, but its system for doing so hasn’t been operational since January. The USDA’s reporting requirements weren’t clear as of Thursday.
“I can’t answer that. I really don’t know what the auditors’ criteria is for testing each component, so it would be unfair for me to comment,” O’Connor said. “I’ve gone to the auditors now and specifically said that there’s a problem with the the loans.”
Last month, O’Connor discovered that the agency owes $147,770 to Adacel Systems, the company that manufactured a simulator being used at Atlantic Cape Community College. Two grants totaling nearly $350,000 were secured by SJEDD to help purchase the simulator, yet less than half of that amount was used to pay for the equipment.
O’Connor believes that remaining portion of the funds was used to finance the NextGen park. The district total debt in the park totals $611,789.
The district’s three remaining member counties have all passed resolutions calling for the district prove that it can be financially viable between mid-to-late June. O’Connor said he will recommend that the counties vote to extend that deadline while more work is completed regarding the agency’s finances. Preliminary findings of a 2011 audit — which is past due — may be reviewed at Monday’s meeting where O’Connor will also present his plan to revise the district’s bylaw and operating guidelines.
“I believe that once this audit is released ... that at least every problem the district has will have been identified, and they’re all correctable,” O’Connor said.
Contact Jennifer Bogdan:
609-272-7239
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