Alleges Years of Missing Audits, Revoked IRS Tax-Exempt Status, and Failure of State Officials to Protect Taxpayer Funds
A major new legal challenge has been launched against the Lakewood School Transportation Authority (LSTA), with a newly filed petition asking New Jersey's Commissioner of Education to disqualify the organization from doing business with any school district in the State for five years, FAA News has learned.
But the petition does not stop there.
It also seeks the removal of Lakewood School District State Monitor Louise Davis and the replacement of the entire Consortium Oversight Committee, accusing those responsible for overseeing LSTA of knowingly allowing serious financial and regulatory violations to continue unchecked.
The five-page Petition of Appeal - obtained and reviewed by FAA News - was filed by prominent Lakewood attorney and taxpayer Larry S. Loigman, Esq., who names LSTA, the Consortium Oversight Committee, and Davis as respondents.
At the center of the petition are allegations that LSTA has operated for years without obtaining or submitting required independent financial audits.
Loigman cites New Jersey education regulations requiring the transportation consortium to maintain internal financial controls, preserve documentation, and undergo annual independent audits.
Under N.J.A.C. 6A:27-14.4, the consortium is required to contract annually with an independent entity to audit implementation of the transportation program and submit the final audit to the Department of Education by December 1.
Yet, according to the petition, LSTA has "failed, refused and neglected to obtain an independent audit, and to submit an independent audit, for many years."
More troubling, Loigman alleges that the officials responsible for oversight knew about the purported failures.
"This default was and is well known to the other Respondents," the petition states, alleging that they nevertheless failed to take corrective action or order an independent audit themselves.
Loigman argues that independent auditing is essential to safeguard public funds against potential theft, misuse, or misappropriation.
The petition does not allege that any particular theft has been established. Rather, it contends that the absence of mandatory financial safeguards exposes taxpayer funds to unnecessary risks.
The petition raises a second major issue involving LSTA's federal tax filings.
According to Loigman, LSTA failed for years to file required IRS Form 990-series returns or notices, resulting in the revocation of its federal tax-exempt status.
The petition further alleges that LSTA failed to file required federal income tax returns and pay applicable taxes following the revocation.
Publicly available nonprofit tax-record databases separately identify LSTA's tax-exempt status as revoked. ProPublica's Nonprofit Explorer also reports that the organization is not listed among the IRS's most recently recognized tax-exempt organizations.
The IRS explains that organizations whose tax exemptions are revoked may become subject to federal income tax and additional filing requirements.
The petition does not identify a specific amount of unpaid taxes, and no independent determination of tax liability is established by the petition.
Loigman alleges that the oversight officials were aware of LSTA's tax-related problems but continued conducting business with the organization without taking corrective action.
Perhaps the most striking aspect of the petition is that it directly targets the officials charged with overseeing the transportation arrangement.
Louise Davis serves as the State-appointed Monitor overseeing the Lakewood School District's fiscal affairs.
The Consortium Oversight Committee, meanwhile, is responsible for monitoring the implementation of financial controls and cooperating with independent auditors.
Loigman's petition alleges that these officials failed to exercise their oversight responsibilities despite knowledge of LSTA's purported violations.
The petition characterizes the respondents' conduct as a pattern of "neglect, misfeasance, nonfeasance, and malfeasance," allegedly harming Lakewood and New Jersey taxpayers.
These accusations have not been adjudicated, and the respondents have not been found liable for any wrongdoing.
Loigman is asking the Commissioner of Education to enter an order:
- Disqualifying LSTA from conducting business with the Lakewood Board of Education or any other New Jersey school district for five years.
- Requiring an independent, comprehensive audit of LSTA's books and financial affairs, at LSTA's expense.
- Making the resulting audit available to Lakewood taxpayers.
- Removing Louise Davis from her position as State Monitor.
- Removing the members of the Consortium Oversight Committee and appointing replacements.
If granted, the requested five-year disqualification would represent a dramatic intervention in Lakewood's school transportation system.
FAA News will continue following this developing case and the responses of LSTA, the State Monitor, the Consortium Oversight Committee, and the Department of Education.
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2 comments:
Would this affect our taxes?
Good. I hope the truth finally comes out in court, but I wouldn't be surprised if someone convinces him to drop it.
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