An audit prompted by alleged misuse of federal COVID relief fund has city officials reeling, but that same time angry at the findings. Ordered by state officials after the arrest of former State Rep. Michael DiMazza last year, the audit, done by CohnReznick, found many systemic problems in the way West Haven handles funds.
The audit of the $1.15 million in federal CARES Act funding, found that more than $892,000 did not fit federal guidelines under the terms of the legislation.
Those payments, including payments to city department heads for overtime during the pandemic, and payment to a marching band to appear in the annual Memorial Day parade, were specifically mentioned by the auditing form.
In a statement sent out over the weekend, Mayor Nancy N. Rossi said the city will take the recommendations in the audit “very seriously.”
“The report highlights shortcomings in internal controls and processes; some of which we have already addressed, and some which require additional focus. The Coronavirus funds were administered by West Haven employees who did not have the city’s best interest at heart,” Rossi said. “We have initiated a comprehensive corrective action plan beginning with the recent hiring of a new finance director. Finance Director Scott D. Jackson and his team will be coordinating West Haven’s response to each of the issues raised in the audit report.”
While Rossi admits changes in City Hall procedures are needed, there are some who are saying the audit itself is flawed, leaving out paper trails that were readily accessible, and should have been included.
“People here are upset that paperwork that was done was left out of the report,” one source inside City Hall said this week.
Meanwhile, one vendor is threatening legal action against the auditing firm if allegations made in the report are not retracted.
Ken Carney, owner of Baybrook Remodeling was personally cited in the report as were his affiliations with one current and one former city committee.
Carney, who is a partner in the West Haven Voice, took issue with some of the statement made in the report by Vincenzo Pozzi, its author.
“If he called me, he would have had all the paperwork at his disposal if he couldn’t find it,” Carney said, showing copies of one City Hall project particularly cited in the report.
According to Carney a bathroom rehab project, costing $7,850, was cited as an unfinished, but paid. Carney was asked to do the work, but COVID restrictions and asbestos concerns have kept the project uncompleted. Carney showed a letter requesting when work could be completed. He further said the project in question was altered by city officials during the work, and that further slowed down completing.
“I was given the scope of the original job, and gave a price of $7,850,” he said. “I never invoiced the city or asked for money. A few weeks later a check, unsolicited, for the project came to the office. I never asked for a deposit, or the money. It was then I sent the letter about delays, and asking for a time schedule for completion.”
One other problem was an alleged $59,000 in other work, which Carney says goes back to projects from 2014. He complained that no context was given in the report, but a scenario of bad faith was the narrative.
One other problem cited was Carney’s relationship with the city as the head of the Building Committee and now the ARPA Committee, overseeing American Rescue Plan Act funds, and his former relationship with the defunct Building Oversight Committee.
“I was taken off the Oversight Committee (which no longer exists), under Mayor O’Brien in 2016. The work I do with the other committees comes out in a monthly overview that I print and send out to officials to show what has been done so far,” he said.
“If they don’t retract these statements, I will be filing legal action against the auditors, and filing an Ethics Complaint with the Department of Consumer Protection,” he said.
A letter to CohnReznick was expected to be sent Tuesday afternoon asking for corrections and retractions in the report.
So far, four people have been indicted in an alleged fraud scheme that directed thousands of dollars into alleged fake corporations. Besides DiMazza, John Bernardo, a former city official, John Trasacco, a city businessman, and DiMazza’s wife, Lauren Knox, have been indicted.
Last month, former city Finance Director Frank Cieplinski was fired and escorted out of his office in City Hall. Cieplinski came under criticism by city officials and the Municipal Accountability Review Board (MARB) for not implementing internal safeguards and procedures that show transparency of disbursals.
The lack of supporting documentation for money earmarked under the CARES funding was a particular criticism of the auditors.
One of the more troubling sections of the audit was CohnReznick suggesting a Tier IV status with MARB might be necessary to get the city to revise its procedures. Tier IV gives the panel strict oversight over the city’s finances, though not on a day-to-day basis.
In her statement, Rossi said the documentation will be found and offered to the auditing firm, she said newly installed Finance Director Scott Jackson and his team are moving in that direction.
“Among their first tasks will be to provide the clarification and supporting documentation for the expenditures that were disallowed in the audit due to a lack of proper documentation. I am confident that we can significantly increase our reimbursement for these COVID-related expenses,” she said.
Rossi attempted to put a positive spin during the statement, noting the city has taken strides in securing its financial structure, and is in the best position it has been for years.
MARB, meanwhile, has reviewed the audit and approved its findings, though it was unclear at press time what was its next move. Rossi said she will be in consultation with the panel.
“We do welcome the board’s assistance and look forward to working with its member to continue strengthening the city’s financial position. I will release additional information and updates as we work through the process,” she said.
In a second statement issued Monday afternoon, Rossi said some of the issues in the report are being addressed.
“I carefully reviewed the audit report over the weekend that was submitted by CohnReznick on Friday, April 1. I understand the outrage from the community, and quite honestly, I am equally outraged. This is embarrassing to West Haven.
“Proper financial controls have been a problem and ignored in our city for decades. I have made a real effort and some progress on improving the city’s control structure, but, admittedly, not fast enough. I take full responsibility as mayor, but at the same time, I make the commitment to our residents that I will make any needed changes and will facilitate the implementation of any additional financial controls necessary to ensure that something like this never happens again. Some of the issues in the audit report have already been addressed, and we will be drafting and implementing additional controls to satisfy the other noted deficiencies soon.
A scheduled meeting with the MARB on Tuesday was to address some of the changes implemented.
“I have a meeting with the MARB (Tuesday), where we will discuss a comprehensive correction plan — to not only institute additional controls but submit the necessary documentation to validate the COVID-19 expenditures that were not approved for reimbursement.
“In the end, I believe the city will qualify and receive reimbursement for most of the COVID-19-related expenditures incurred. Finance Director Scott D. Jackson will be addressing the City Council at its next meeting to update members on immediate steps taken and my corrective action plan moving forward.”
Meanwhile, the Republican Town Committee came out with a statement Monday evening, decrying what it called a lack of leadership.
“After reviewing the CohnReznick Forensic Audit dated 4/1/2022, we are outraged and angered with the findings. Those funds were meant to go to our own fellow Westies who were suffering and needed it most during a difficult time. This is a clear result of lack of leadership, oversight, and accountability. Our city government has violated our trust again! All individuals named in this report must take a leave of absence pending the results of the investigation,” the statement read.