TRENTON – A follow-up report released today by the Office of the State Comptroller finds that the Buena Regional School District improved its administration of health insurance benefits and lunch program. But the District still falls short when it comes to ensuring a fair, transparent, and legal process for procuring insurance brokers.  

OSC’s original 2020 audit found that Buena Regional School District failed to comply with federal regulations for income verification for the school lunch program and state requirements for transparency governing procurement of insurance brokers. The school district also gave health insurance opt-out payments to employees at the same time they were receiving health insurance coverage. 

OSC’s follow-up report finds that Buena Regional School District fully complied with four of our five recommendations, including developing policies and procedures for income verification for the lunch program. However, OSC finds that the District still awarded contracts to insurance brokers without meeting the standard for transparency.

While the contract awards were published in the District’s official newspaper, the amount of the contracts were not disclosed. Buena also failed to require the brokers to disclose their fees or commissions in their proposals, making it difficult to determine which proposal was most beneficial to the District and taxpayers.  (OSC determined that one broker’s commission for fiscal 2022 year was $140,000; another broker was paid a commission of $50,000.)

“The District created an opportunity for wasteful spending by not requiring brokers to disclose the amount of their fees or commissions in their proposals,” said Acting State Comptroller Kevin Walsh. “Local governments need to be transparent so taxpayers can see how their taxes are being spent.”

Additionally, the District imposed a mileage restriction in the Request for Proposals (RFP). The employee benefits broker RFP said that the broker’s “central office” must be within 30 miles of the Board’s office; the health insurance broker RFP had a 20-mile requirement. When questioned, the District stated the reason for the requirement was to ensure brokers are “accessible and responsive.” Because the mileage restriction wasn’t necessary, OSC found this requirement created an unlawful restraint on competition.

Even worse, the District, after discouraging competition, then waived the requirement when it awarded the contract to a broker that was outside of the 30-mile limit.

 “Mileage restrictions can be used to favor certain brokers,” said Walsh. “Local governments should avoid these sorts of constraints on competition whenever possible.”

Read the report.

To report government fraud, waste, mismanagement or corruption, file a complaint with OSC or call 1-855-OSC-TIPS.