New Haven Register (New Haven, CT)
‘It’s just become bigger’
With billions in fed pandemic relief coming in, municipalities have even heftier task detecting potential fraud
Let’s take a look at the situation that led to allegations state Rep. Michael DiMassa committed fraud as he collected hundreds of thousands of dollars in pandemic relief money for the town of West Haven, where he worked as a municipal official until Thursday.
The question is, with this case in mind, what can we do about potential fraud in the coronavirus relief payments to Connecticut cities and towns? The numbers make the task staggering.
The West Haven money, just under $1.2 million, was part of a small set-aside of $75 million for cities and towns by the state, from the very first allotment of $1.4 billion the state received back in the horrific spring of 2020. The goal was simple: Reimburse towns for some of their direct COVID-19 expenses.Just to hand out that $75 million to the towns, including the money at issue in West Haven, the state had to set up a whole new apparatus. Numerous letters, memos and guidelines went out to towns.
As it happens, the deadline for cities and towns to submit claims for 2020 expenses in that
simple pot of money: Friday, Oct. 22, 2021. It took 10 months into the new year because nothing about the pandemic stimulus is simple.
Now the federal government is about to hand out 40 times that amount to Connecticut cities, towns and school systems — a total of $3.04 billion in four giant programs. That’s 340 separate recipients including school boards and town halls, if you’re keeping score at home.
The Feds will accomplish this without a lot of help from the state, with few feet on the ground here in Connecticut, as part of $674 billion that’s headed to cities, towns, states and tribal governments nationwide. And that gargantuan total is just a small part of the $5 trillion in U.S. pandemic relief, including $1 trillion for unemployment and $1 trillion in direct payments to households.
What could possibly go wrong? Yes, there will be fraud. Stop already with the shock and amazement.
‘Checks and balances…are there’
The good news is, cities and towns have significant internal and external controls in place for the tens of billions of dollars they collectively spend without the pandemic relief money.
“I don’t think it’s outside of what they have to do anyway. It’s just become bigger,” said Joe DeLong, executive director and CEO of the Connecticut Conference of Municipalities, which is helping local sort out how to manage the flow of all this money.
DeLong believes, and I agree, that the majority of fraud in the pandemic relief is in private enterprise, business and relief to individuals, where checks and balances don’t generally exist as mush as they do in state and municipal governments.
Those controls in each municipality include department-level and town-level checks on checks that any town writes, plus mandatory outside audits of the whole shebang, plus separate audits of each grant program, such as community development block grants. “Every check in most municipalities has to be signed by more than one person,” said state Sen. Cathy Osten, co-chair of the General Assembly’s powerful appropriations committee, and first selectman of Sprague for 12 years until two years ago.
Osten walked me through the checks and balances, including the number of people who must sign each check. “In Sprague it was three.”
“I’m more than willing to look at other checks and balances that we should do,” Osten said, but she added, “We should also recognize the checks and balances that are there.”
GOP wants answers
That’s not enough to stop fraud schemes, in part because people are smart and in part because people are dumb. Obviously, what is alleged to have happened in west Haven — ironically, one of three Connecticut municipalities already under the control of a state Municipal Accountability Review Board — required some serious incompetence, or worse, if indeed it did happen.
“Human behavior will always find a way to get around the system,” said DeLong, at CCM, whose help for cities and towns includes an arrangement the conference made for a fraud hotline for municipal employees.
Federal criminal authorities allege that DiMassa set up a consulting firm that collected as much as $630,000 without doing much or any work for the payments, and received payments of as much as $83,000 at a clip.
Yes, that’s brazen. Some Republicans are suggesting that DiMassa, a rising Democrat in a Democrat-controlled town, was able to scarf up the money (if the scheme happened as charged) because of party insiderism — not collusion, but an abundance of trust in a rising young elected official.
Now Republicans in the loyal opposition want a lot more controls. In a release Thursday, the GOP leaders of the state House called for a public hearing next week on the distribution of public COVID-19 relief money, and they issued a list of 20 questions — general, and specific to West Haven — that they want answered. “It is unacceptable for government to suggest that current protocols are sufficient because this problem has now come to light,” the group of five Republican leaders said in a written statement. “We must have a system that prevents against the misuse of the funds in the first place, not one that acts only after an FBI investigation of alleged wrongdoing and the loss of over $600,000.”
The hearing is a good idea, and more controls would be fine.
“We can certainly beef it up across the board,” said Osten, the Sprague Democrat who, along with Rep. Toni Walker, D-New Haven, the other co-chair of appropriations, received a letter outlining the Republicans’ demands.
Audits aren’t magic
It’s all great theater and maybe we can stop some fraud before it happens. Maybe.
For now, Gov. Ned Lamont’s budget office is looking closely at the allegations around the Coronavirus Relief Funds in West Haven. Even before Wednesday’s arrest of DiMassa, it brought in CohnReznick, an auditing and accounting firm, to “conduct a full and complete audit of West Haven’s use of CRF funding.”
And, Melissa McCaw, Lamont’s budget chief, added, “Once the audit and investigation is complete, we will take all appropriate steps to address any findings of waste, fraud, or abuse and address any internal control weaknesses. In addition, OPM will cooperate fully with the ongoing federal investigation.”
The state auditors, too, are working overtime, meeting with federal officials as part of a sweep- ing program to make sure the $674 billion is well spent and well targeted, John Geragosian, the Democratic state auditor, told me Thursday.
All of this is terrific, as we add a hinge or two to the barn door, lest the next horse gets out in a high wind. But let’s be realistic here about the task. “There’s waste, fraud and abuse in every federal program, every state program,” Geragosian said. “The audit process is not necessarily going to detect fraud ... We can’t tell you that that company was fake that the invoice was paid on.”