The Rahway Arts District (RAD) did not follow public contract laws when it awarded contracts related to the opening of the Hamilton Stage for Performing Arts, according to the Office of the State Comptroller (OSC). The office also cited the RAD for lack of adequate internal controls “and basic standards for entities handling public funds.”

In an April 13 letter to RAD Executive Director Rachael Faillace and the Board of Trustees, the OSC said the organization “did not follow procedural requirements of the Local Public Contracts Law in its procurement practices, as required by law.” Specifically, it did not follow that law in contracting with former Mayor James Kennedy’s firm, Skye Consulting, LLC, or Front of House Services, citing N.J.S.A. 40:56-86 and N.J.S.A. 40A:65-3.

Faillace recently stepped down as executive director. She said the move was unrelated to the OSC inquiry, which reviewed contracts prior to her being hired in 2012. “I just felt like it was time for me to move on to other things,” she said in an email.

A year ago, the OSC requested documents as far back as 2009 from the Redevelopment Agency, Rahway Arts District (RAD) and City Council.

The OSC conducted a “review of certain issues raised concerning the operation of the RAD in general and funds expended in association with the opening of the Hamilton Stage in particular.”

As a contracting entity , RAD should have advertised and publicly bid contracts, according to an OSC spokesman. Some $125,000 was spent by the Redevelopment Agency to prepare the performing arts facility for its 2012 opening.

The Department of Community Affairs (DCA) was notified “of these concerns for whatever action it deems appropriate,” the OSC letter said, and the OSC will continue to monitor RAD’s “progress in complying with these fundamental principles of governance for public agencies in New Jersey.”

Kennedy, who did not seek re-election in 2010 after 20 years in office, served as executive director of the Arts District from January 2011 to January 2012, with compensation of $25,000. His firm, Skye Consulting, also earned $36,000 for consulting related to the Hamilton Stage project. He said in an email that he was aware of the OSC letter but hasn’t been contacted or spoken to anyone from that office.

The initial contract for Madison-based Front of House Services was for an annual fee of about $50,000, paid in monthly installments from February to September 2011, related to construction of Hamilton Stage, which opened in fall 2012.

The Redevelopment Agency in 2011 entered a shared services agreement to provide $300,000 — in annual increments of $100,000 — to the RAD based on funding availability.

Also, in light of the recent decision by City Council “to significantly increase the amount budgeted to fund the RAD,” the OSC also raised concerns “about the lack of adequate systems of internal control…and basic standards for entities handling public funds.” OSC cited examples found during its review, such as, checks payable to the same person who authorized and signed them and the issuance of payments for goods and services without required certifications by the vendor that the bill is correct and by an agency representative that the goods or services were actually received by, or rendered to, the agency.”

In a brief interview after Monday night’s City Council meeting, City Administrator Cherron Rountree said Mayor Samson Steinman has been “proactively” looking at potential actions and steps to take to remedy the situation since the state began asking questions a year ago.

The city has until May 31 to approve a SID budget for 2015, Rountree said Monday night. A special meeting of City Council has been scheduled for Thursday at 7 p.m. to adopt the 2015 SID budget. The annual SID budget typically is adopted at the same meeting as the municipal budget, which was passed Monday night, and historically had raised approximately $130,000 annually since its inception in the early 1990s. The expansion of the SID is expected to raise about $750,000 this year.  It’s unclear what affect, if any, a lawsuit filed to against the expansion will have on it.