Rockland development office can't document payments: Report

NEW CITY - A national accounting firm hired by County Executive Ed Day's administration found wide-ranging problems with the Rockland Community Development Office's handling of millions of dollars in federal money from 2009 to 2016.

The report outlining the forensic audit — completed in August 2017 and released by Day on Tuesday — doesn't cite criminality but contends the office's lack of paperwork and oversight concerning business loans and money dispersed for low-income municipal projects and to non-profit agencies.

AUDIT: Rockland Community Development Office under scrutiny

If criminality existed — such as theft of funds — the statute of limitations have expired and prosecution couldn't occur, officials said. The concerns had been referred to the Rockland District Attorney's Office and investigators for the U.S. Department of Housing and Urban Development.

The firm — Baker Tilly, based in Chicago — recommended the office improve internal controls, devise written policies and revise procedures overseeing contracts, grants, Section 8 rent subsidies and business loans.

The firm also recommended further investigation into some payments and training personnel and adding legal and accounting expertise to the office.

The firm stated the audit "focused on determining whether any inappropriate or fraudulent activities were occurring within the community development programs managed" by the Rockland County Office of Community Development.

Although the auditors didn't report finding criminality, they cited questionable decisions and a lack of justification or documentation for many of the program's initiatives.

"We reviewed program administration and record keeping, and documentation controls and identified that proper documentation was not obtained for all funding transactions," the report stated. "We also could not determine, based on a review of RCOCD files, whether all funding transactions were made for eligible activities and/or in accordance with (federal Housing and Urban Development) rules and regulations.”

'This was a nightmare'

Community Development block grants are federal funds that are awarded annually to municipalities with low-income areas and to local nonprofits.

The report covering 2009 to 2016 is 300 pages with 30 pages of analysis and recommendations.

The firm was paid $55,271 so the payment didn't require Rockland County Legislature approval since it fell under the $100,000 threshold. Baker Tilly was on the qualified supplier list of forensic accounting firms, the list was queried for proposals and they were chosen.

The Legislature didn't learn about the audit until about August 2018. Lawmakers got wind of the audit when the Day administration withheld $90,000 from United Hospice of Rockland for expenses for a child bereavement program, which the administration called a loan.

The administration wanted United Hospice to sign a lien to cover the loan, which the agency said it never received. Hospice administrators provided documentation proving the administration wrong and the Legislature's Democrats and Republicans overruled Day's veto on providing the money.

The Legislature's Budget and Finance Committee interviewed the auditors on Tuesday night — which coincided with Day releasing the 17-month-old audit.

Asked why he didn't let legislators know about the audit earlier, Day said Wednesday that the Legislature had conducted its own inquiry. Day said his office worked with HUD investigators and the district attorney.

"This was a nightmare," Day said. "I was in the middle of fixing a problem. It was my judgment call to inform the legislators when I want to. The notion I get from down the hall is we're hiding things. The same people complaining didn't do anything about the situation."

Day said that during the past 17 months since the completion of the audit the administration restructured the office. The county hired an attorney and accountant for the office to ensure all legalities were followed and the books were kept in order.

Day said Thursday that the forensic audit confirmed mismanagement at the office. Day, a Republican, previously served on the Legislature representing predominately Clarkstown before being elected in November 2013.

“Coming into office, we knew that County Government was broken,” Day said in a statement. “Besides the deficit we inherited, the Office of Community Development was one of the biggest problems we have had to clean up.

"This Forensic Audit is being released now, because only now does the RCOCD have the proper management and staff in place to be run properly," Day said. "I want to make it clear that the issues in this report of RCOCD predate my administration.”

HUD repercussions

The possibility exists that HUD could force the county to repay federal funds unaccounted or withhold future grants to cover the money. Day said he would hope HUD would take into consideration the county's cooperation and effort to correct the problems.

The audit covers the administration of then-County Executive C. Scott Vanderhoef, the county's top official for 20 years, and office administrator Joseph Abate, who left the county for the New York state Community Development Office.

Abate didn't return an email seeking a comment on the audit report.

The report's recommendations, included:

Develop clear written policies for each loan program.

Designate an individual in charge of training who is knowledgeable in all program rules and industry regulations.

Establish and maintain adequate loan files and records in a matter conducive to an audit.

Hire professionals with strong accounting backgrounds to review contracts and loan documents.

Hire professionals with strong legal backgrounds to ensure compliance with applicable laws and regulations.

Day credited former acting Commissioner Penny Jennings and former County Auditor Robert Bergman with beginning to uncover issues.

Jennings failed to win Legislature approval in 2016 after five months on the job. Some legislators, including then Chairman Alden Wolfe, D-Montebello, wanted information on the HUD investigation involving community development issues and felt Jennings was not forthcoming.

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Jennings had been approved by Legislature committees and previously served on the Rockland Community College Board of Trustees.

County Attorney Thomas Humbach, who pressed for the audit, said the Legislature's Democrats who control the governing body refused to create inspector general's office.

Humbach said Rockland "was in need of a strong hand to do the hard work of detecting and identifying improper financial and management practices. Some of the findings are disturbing and, as of May 2018, have all been reported to the district attorney.”

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Twitter: @lohudlegal