New report details where the money went at NEON

NORWALK, Conn. – A damning report by the federal Department of Health and Human Services Office of Inspector General, featured on the home page of the agency’s website, spells out in detail the misuse of more than $314,000 in federal funds by NEON (Norwalk Economic Opportunity Now) in a period through September 2010.

The report covers ground that has been covered before, but offers greater details about where the money went and why the expenditures were disallowed. The report, which was posted June 4, carries the cover signature of Kay L. Daly, assistant inspector general, and is dated April 2013. And while no local names are mentioned, many of the expenditures are laid directly at the feet of former NEON President and CEO Joe Mann.

In its summary of findings, the report states: “Of the $513,779 in CSBG (Community Services Block Grant) and CSBG Recovery Act costs that the state agency claimed on behalf of NEON and that we reviewed, $199,174 was allowable under the terms of the grant and applicable federal regulations. However, the state agency claimed $314,605 (or 61 percent of reviewed expenditures) in unallowable costs on behalf of NEON.”

The government wants that money back.

Among the unallowable charges were $10,763 for credit card purchases “made by its former CEO that were either not supported or did not meet the program’s objectives.” Those included:

• $4,983 for items including $733 for personal travel following a business conference, $624 for three briefcases, $364 in purchases from Apple iTunes, and $142 for two Cross pens.

• $1,973 for costs such as fuel, car washes and Sirius XM radio that were related to his company vehicle.

• 27 credit card transactions totaling $2,478 that did not have adequate documentation to assess their allowability. Many of these purchases were made at stores that sell both business and personal items, such as restaurants (10 transactions), large retail stores (5 transactions), and supermarkets (2 transactions).

• 47 credit card transactions totaling $1,329 that had no supporting documentation. Many of these purchases were made at stores that sell both business and personal items, such as Apple iTunes (18 transactions) and Amazon.com (12 transactions).

The report continued:

“NEON charged its CSBG Recovery Act grant $3,175 for 127 unallowable gift cards from Walmart, Barnes & Noble and Borders. NEON intended to distribute the gift cards to fathers who attended events that encouraged them to take a more active role in their children’s lives. As supporting documentation, NEON’s former director of community services provided us with attendance sheets of gift card recipients. However, when we reviewed and compared the attendance sheets, we noted that some attendance sheets were duplicates, included staff members as recipients, and included additional signatures that had been added after these events had taken place. The former director said that he had ‘recreated’ some attendance sheets by photocopying attendance sheets for Head Start events, changing some of the dates and adding information indicating that the event recipients had received gift cards. Our analysis further showed that information on the attendance sheets did not match the information on the finance department’s gift card logs.”

Then there were the thrift shop expenses. According to the report, NEON said it would use Recovery Act grant funds to establish a nonprofit thrift store at property that it owns at 24 Havilland St., which would create at least five retail jobs in the store and provide a job training site for NEON clients with little-to-no work history. Unallowed expenditures included $28,924 for thrift store operating costs that were “not reasonable,” and $28,116 for thrift store renovations that were not preapproved.

“NEON did not meet its program objectives of operating a thrift store, creating retail jobs, and training clients as it described in its project plan,” according to the report. Specifically:

• NEON could not obtain the appropriate permits from the city to operate a thrift store because 24 Havilland St. is located in an area where retail businesses are prohibited by city regulations;

• NEON did not use the second floor of 24 Havilland St. as a job training site; instead, it converted the space into a two-bedroom apartment that was rented at below fair-market value to the former CEO’s ex-wife for $600 per month (including utilities, parking, telephone, cable and Internet access);

• None of NEON’s clients received retail job experience at the thrift store, according to NEON staff;

• NEON hired only one employee to operate the thrift store, the former CEO’s ex-wife, who lived outside of NEON’s service area at the time that she was hired;

• The thrift store was closed during six out of seven unannounced visits that we made during business hours;

• Total retail sales from the thrift store were $848 from June 2011 through April 2012 (an average of $84.80 per month for the 10-month period);

• NEON charged, to its CSBG Recovery Act grant, rent for use of the thrift store that was not based on depreciation or use allowance but was based on an estimate by NEON’s former director of finance and planning services; and

• NEON charged, to its CSBG Recovery Act grant, utilities at 24 Havilland St, which included utilities for the second-floor apartment.

In all, the report said, the unallowable operating expenses included $16,000 that NEON charged to the grants as “rent” for the use of NEON’s Havilland Street facility; $9,095 paid to the former CEO’s ex-wife for contract and payroll expenses to set up and manage the thrift store; $2,439 for display racks, equipment, and supplies to operate the store; and $1,390 for utilities.

NEON also charged $28,116 to the CSBG Recovery Act grant for 33 invoices related to unallowable renovations at 24 Havilland St. Renovation costs included:

• $4,647 to purchase and install hardwood flooring;

• $4,000 to remove carpeting, cabinets, bathroom fixtures and provide a clean shell prior to renovations;

• $3,522 to remove old wiring and install new wiring and a fire alarm system; and

• $1,373 to purchase and install an outdoor fence.

The report also detailed unallowable fundraising and lobbying costs tied to Mann’s credit card, as well as missing equipment.

Former NEON board member and community activist John Mosby said the situation could have been avoided if the state overseers “had done their job.”

“DSS (Department of Social Services) should have monitored (it),” he said. “If they had did their job in 2007, they wouldn’t have this problem. They didn’t do their job.”

To hear the podcast, click here.

To read the podcast transcript, click here.

To read the complete report, click here.