The city of West Haven misspent nearly $893,000 in federal pandemic relief funding last year, according to a newly released audit, and the findings are forcing state officials to consider whether to take over the municipality’s troubled finances.
The highly anticipated audit, which was commissioned by the state Office of Policy and Management, found that West Haven officials didn’t collect proper documentation to back up many of its expenditures and that the city used a significant amount of the funding on items that were not allowed under the federal CARES Act rules.
Those missteps will likely require West Haven and its taxpayers to refund the federal government for more than three quarters of the $1.1 million the municipality received at the end of 2020.
None of the spending reviewed by the auditors is connected to the fraud charges that federal prosecutors filed against former state Democratic lawmaker Michael Dimassa earlier this year.
That means the$1.2 million that Dimassa, his wife and two other defendants allegedly stole from West Haven actually came from state and local taxpayer money — not the federal relief funds, as city’s records previously suggested.
Even so, the audit blamed most of the misappropriated money on West Haven’s lack of basic financial controls.
Some of the transactions the auditors flagged were already highlighted in media reports last year, including $8,404 the city used to purchase of commemorative coins and other marketing material, $19,600 that went to a city councilman’s towing business and at least $58,712 in overtime-related pay that went to a handful of high-ranking employees in the city.
But the audit report also noted other serious problems with West Haven’s spending, which were not previously recognized.
The auditors took issue with a $10,000 “bonus” that was given to an outside company and $7,850 in renovation work on a shower at West Haven city hall, which auditors say was never completed by the hired contractor.
Some of that spending is so troubling that state officials suggested it could be referred to federal prosecutors.
All of the questioned expenditures are a concern for the state government, which has given roughly $16 million to West Haven in recent years to help the municipality staff its finance department and straighten out its budget.
Officials with OPM and the state Municipal Accountability Review Board, who have overseen West Haven’s finances since 2018, repeatedly warned the city in past years about the serious gaps that exist in its financial oversight.
Yet over the past four years, West Haven’s elected leaders have largely failed to get those problems under control, even as they benefited from the financial assistance from the state, they said.
OPM’s new secretary Jeffrey Beckham and the other members of the MARB announced Friday that they are likely to ramp up their oversight of West Haven even further in the near term.
If that doesn’t work, MARB could recommend the state appoint a receiver to take over direct control of the city’s $78 million general fund and the extra $29 million the city received from the federal government under the American Rescue Plan Act.
“Since the questionable and potentially fraudulent use of COVID relief funds and other irregularities surfaced, the city has taken little action to address the seriousness of vulnerabilities to further losses,” OPM officials wrote in a memo that was delivered to West Haven’s leaders.