April McCullum

Free Press Staff Writer

Vermont has been handing out taxpayer dollars without proper checks and balances.

That’s the message of two reports released last month by Vermont State Auditor Doug Hoffer, who uncovered a contracting system that enables state officials to cut corners.

Jacqui Carlomagno, a former Vermont Agency of Education employee, has been watching closely.

Carlomagno triggered one of the investigations after noticing problems with federally-funded contracts at the Agency of Education — at least, what she thought were problems. Her supervisors disagreed.

“My job was to get things moving and make sure they were done right, and that’s what I was trying to do,” said Carlomagno, 55, of Montpelier, in an interview alongside her attorney, Ted Hobson.

“I always think, ‘This is federal money. You can’t just hand out federal money,’” she said.

Carlomagno says she was shunned at work and ultimately lost her job because she raised concerns with her supervisors. Now she’s suing the state in Washington Superior Court, claiming retaliation for whistleblowing activity.

The state says she was fired because of poor work habits, insubordination and slow performance, and not because of the concerns she flagged.

"Plaintiff's vague concerns about federal grant compliance and insubordinate opposition to her employer's management practices are not protected whistleblower activity," the Vermont Attorney General's Office wrote in court documents.

Frustrated at the internal response to her concerns, Carlomagno approached the State Auditor's Office.

“The reason we went into AOE in the first place was because of Ms. Carlomagno,” Hoffer said.

The results came out Dec. 17: Instead of putting contracts out for a competitive bid, Agency of Education officials routinely gave contracts to people and organizations they knew. One contract raised questions about conflicts of interest.

The improper practices could cost the Agency of Education down the road when its use of federal money is evaluated through a single audit, Hoffer said. If the single audit uncovers significant problems, the agency would have to pay about $40,000 for a new audit. The agency has pledged to tighten its procedures.

“Like many other departments, they’re just a little loose with the process,” Hoffer said.

The grant

Carlomagno was hired in December 2014 to help Vermont spend a $37 million federal grant called Race to the Top.

The money funds 24 projects that are supposed to help Vermont’s young children prepare for and succeed at school, from birth to third grade. The grant is managed through the Governor’s Office and disbursed through the Department for Children and Families, the Department of Health and the Agency of Education.

Carlomagno was a grants administrator at the Agency of Education, which received a $9 million share. About $5 million was expected to be used for contracts, according to the auditor's report.

The money would be used for professional development for early childhood teachers, for example, or to revise Vermont's early education standards.

“By the time I was hired, they were months behind schedule, and they were in panic mode,” Carlomagno said. “So however they could get these things done quickly, they were doing.”

Carlomagno began to wonder whether Vermont was spending the grant in compliance with federal regulations. Her supervisors at the Agency of Education rebuffed her suggestions, according to the state's defense in court.

When Carlomagno persisted, other employees told her to stop raising questions, according to email records filed in the case.

Her supervisor, Karin Edwards, extended Carlomagno’s trial work period twice before firing her.

“You have antagonized key people that you have to work with because of your certainty that you know the correct way to do things,” Edwards wrote in a March 2015 letter to Carlomagno.

In court documents, Edwards says Carlomagno was disciplined due to “low productivity and personality conflicts,” not because Carlomagno raised concerns about contracts.

The Agency of Education referred requests for comment to the Vermont Attorney General, rather than having Edwards and Education Secretary Rebecca Holcombe speak about the case.

Carlomagno and a second anonymous whistleblower approached the State Auditor’s Office with several issues that piqued Hoffer's interest enough for him to start digging around.

As of April 2015, the Vermont Agency of Education had awarded 11 contracts of at least $15,000 each under the Race to the Top grant, according to Hoffer's report. All but one were no-bid contracts.

Taxpayer money is supposed to be doled out after a competitive bid process to ensure that the government is getting a good deal and that contractors have a fair shot at state dollars.

Government can skirt that competitive process by handing out sole source contracts, which are supposed to be reserved for “extraordinary circumstances.” These contracts require special approval from the Agency of Administration.

Bill Talbott, the chief financial officer for the Agency of Education, defended the no-bid contracts.

“Every contract we did was approved by the Agency of Administration,” Talbott said.

In the wake of the auditor's investigation, the Agency of Administration has begun to revise its standards for approving no-bid contracts. And Talbott says the Agency of Education will hold itself to a higher standard, too.

“Secretary Holcombe is adamant that we run a tight ship and that we’re following everything we need to follow,” Talbott said. He declined to comment on Carlomagno’s lawsuit.

Carlomagno believes her concerns were ultimately vindicated by the auditor's report.

But Assistant Attorney General Jon Alexander, who is defending the state in court, says the auditor's report addresses different issues than the ones Carlomagno raised.

"In other words, the Auditor did not find that there was any merit to Ms. Carlomagno's supposed 'whistleblowing' concern," Alexander wrote in an email.

A $22,000 question

One example of problematic contracting at the Agency of Education involves a conflict-of-interest question.

The auditor’s report and public records show that the Agency of Education awarded a $22,000 no-bid contract to the Vermont Higher Education Collaborative even though the state employee who oversaw the contract, Manuela Fonseca, also worked for the contractor.

Fonseca said in an interview that she'd helped to start the Vermont Higher Education Collaborative years ago when it was part of state government, and when the group became a nonprofit organization she continued to serve as an adviser with a "very small contract."

When Vermont considered awarding a Race to the Top professional development contract to the Vermont Higher Education Collaborative, Fonseca said she tried to keep some distance.

"I didn't think it was a conflict of interest because I didn’t negotiate anything," Fonseca said.

State contracts are required to note any appearance of a conflict of interest. Contract paperwork asks whether “a reasonable person may conclude that this party was selected for improper reasons.”

The Agency of Education employee who filled out the $22,000 contract paperwork checked “No.”

Agency of Education CFO Talbott and Secretary Holcombe both signed off on the arrangement in December 2014.

“Time is of the essence in getting this first round of sessions underway,” Holcombe wrote in a memo to justify the agency’s use of a no-bid contract.

The no-bid contract later was approved by the Agency of Administration and the Attorney General’s Office.

State Auditor Hoffer flagged this contract as obviously raising conflict-of-interest questions.

“Given the AOE employee’s relationship with the contractor, it’s reasonable to question her ability to be impartial because her decision to select the vendor could have been significantly influenced by her employment relationship with the vendor,” the audit report states.

Talbott and Fonseca said they agree with the auditor's concern.

“There was no personal gain, but there was an appearance,” Talbott said.

"I probably should have just not had anything to do with it and not even overseen the contract, in hindsight," said Fonseca, who left her state job last summer to work for a national organization.

Lawsuit continues

Carlomagno worked for the state a total of eight years before being fired in June 2015, about six months into her new job at the Agency of Education.

She remains unemployed, and looking for other state jobs, while she sues the state.

Carlomagno says she’s glad she spoke up, but losing her job has caused an emotional and financial toll.

“I’m still unpacking the effect of what has happened to me,” Carlomagno said. “It’s been all-encompassing. I have three children, and they have seen a very different mom because I’ve been preoccupied.

"At least I got to show them that you stand up for yourself," she added.

Carlomagno’s lawsuit was filed in April and amended in November at Washington Superior Court. No hearing date has been set.

This article was first published online Friday, Jan. 15, 2016. Contact April Burbank at 802-660-1863 or aburbank@freepressmedia.com. Follow her on Twitter atwww.twitter.com/AprilBurbank