Monitoring and Oversight of Federal Funds Awarded to Bridgeport, Connecticut
Gao ID: GAO-04-230R November 26, 2003In 2001 and 2002, federal prosecutors indicted the Mayor of Bridgeport, Connecticut, and a dozen conspirators on charges of racketeering, extortion, mail fraud, and tax evasion. In March 2003, the mayor was found guilty on 16 counts, and most of the others indicted have pleaded guilty. While the indictment did not refer to any misuse of federal funds, some of the corrupt activities were associated with projects that had received some federal funding in the past. This corruption has raised concerns about the adequacy of monitoring and oversight of the more than $82 million in federal funds Bridgeport has received in recent years. Congress asked us to examine federally funded programs operated by the city of Bridgeport and determine whether and to what extent the respective federal agencies, including program officials and Offices of Inspector General, have heightened program monitoring and oversight in light of the corruption.
The six federal agencies that provided funds to Bridgeport generally have not heightened monitoring and oversight activities in response to the Bridgeport corruption, but rather have continued to oversee program funding through routine, generally risk-based monitoring and oversight activities. These activities include the review of Single Audit Act audit reports and other reports required of fund recipients, comprehensive program reviews, field visits to grantees, and assessments of state oversight in cases where federal funds are provided to localities through states. In recent years, these types of monitoring and oversight activities in Bridgeport have not revealed misuse of federal funds. Further, according to a senior FBI agent who participated in the Bridgeport corruption investigation, the FBI did not identify any internal control weaknesses on the part of federal agencies as the basis for the corruption and concluded that the corruption was caused by corrupt individuals in the local area.
GAO-04-230R, Monitoring and Oversight of Federal Funds Awarded to Bridgeport, Connecticut
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Washington, DC 20548:
United States General Accounting Office:
November 26, 2003:
The Honorable Tom Davis:
Chairman:
The Honorable Christopher Shays:
Vice-Chairman:
Committee on Government Reform:
House of Representatives:
Subject: Monitoring and Oversight of Federal Funds Awarded to
Bridgeport, Connecticut:
In 2001 and 2002, federal prosecutors indicted the Mayor of Bridgeport,
Connecticut, and a dozen conspirators on charges of racketeering,
extortion, mail fraud, and tax evasion. In March 2003, the mayor was
found guilty on 16 counts, and most of the others indicted have pleaded
guilty. While the indictment did not refer to any misuse of federal
funds, some of the corrupt activities were associated with projects
that had received some federal funding in the past. This corruption has
raised concerns about the adequacy of monitoring and oversight of the
more than $82 million in federal funds Bridgeport has received in
recent years.
You asked us to examine federally funded programs operated by the city
of Bridgeport and determine whether and to what extent the respective
federal agencies, including program officials and Offices of Inspector
General, have heightened program monitoring and oversight in light of
the corruption. To respond to your request, we interviewed program and
Inspector General officials from six federal agencies that provided
about 95 percent of federal funds to Bridgeport in fiscal year 2002 to
identify their general monitoring and oversight mechanisms as well as
any monitoring activities specific to Bridgeport.[Footnote 1] We also
obtained and reviewed annual Single Audit Act audit reports for
Bridgeport for fiscal years 1998 through 2002, as well as agency and
Inspector General audit and monitoring reports on federally funded
programs in Bridgeport.[Footnote 2] In addition, we reviewed the
indictment and verdict and met with officials from the Federal Bureau
of Investigation (FBI) regarding the corruption investigation. We
performed our work between June and October 2003 in accordance with
generally accepted government auditing standards.
Results in Brief:
The six federal agencies that provided funds to Bridgeport generally
have not heightened monitoring and oversight activities in response to
the Bridgeport corruption, but rather have continued to oversee program
funding through routine, generally risk-based monitoring and oversight
activities. These activities include the review of Single Audit Act
audit reports and other reports required of fund recipients,
comprehensive program reviews, field visits to grantees, and
assessments of state oversight in cases where federal funds are
provided to localities through states. In recent years, these types of
monitoring and oversight activities in Bridgeport have not revealed
misuse of federal funds. Further, according to a senior FBI agent who
participated in the Bridgeport corruption investigation, the FBI did
not identify any internal control weaknesses on the part of federal
agencies as the basis for the corruption and concluded that the
corruption was caused by corrupt individuals in the local area.
Background:
During 2002, the federal government provided Bridgeport with more than
$82 million in funding. Six federal agencies provided about 95 percent
of federal funds to the city. The Departments of Agriculture (USDA),
Education, Housing and Urban Development (HUD), Justice (DOJ), and
Transportation (DOT), as well as the Environmental Protection Agency
(EPA) awarded these funds for over 20 different programs. For example,
HUD provided funds to Bridgeport for its Community Development Block
Grant (CDBG) and affordable housing programs; DOJ awarded funds for its
Community Oriented Policing Services (COPS) program; and DOT provided
funds through the Federal Transit Administration (FTA) for the
development of the Bridgeport Intermodal Transportation Center. See
enclosure I for information about each of the federal programs that
provided funds to Bridgeport.
Funding for these programs does not always go directly to the city, and
much of it flows through the states, which have responsibility for
passing it to the local level. For example, USDA reimburses the states
for its child nutrition programs, and the states, in turn, reimburse
schools at the local level. Also, not all programs identify the city as
the recipient of the grants. For example, the Bridgeport Housing
Authority is an entity separate from the city of Bridgeport, and HUD's
Public Housing program funds do not flow through the city but go
directly to the Housing Authority.
Federal agencies use a variety of mechanisms to support their
monitoring and oversight activities. The Single Audit Act is intended
to, among other things, promote sound financial management, including
effective internal controls, with respect to federal awards
administered by state and local governments and nonprofit
organizations. Under OMB Circular A-133, Audits of States, Local
Governments, and Non-Profit Organizations, those entities that spend
$300,000 or more in federal awards during the fiscal year are required
to have a single or program-specific audit conducted for that
year.[Footnote 3] The circular also notes that the entities are
required to (1) maintain internal controls for federal programs, (2)
comply with laws, regulations, and the provisions of contracts or grant
agreements, (3) prepare appropriate financial statements, (4) ensure
that the required single audits are properly performed and submitted
when due, and (5) follow up and take corrective actions on audit
findings. In addition to reviewing Single Audit Act audit reports,
agencies may visit grantee sites, conduct risk-based grant reviews of
local program operations, review national program operations, assess
monitoring efforts at the state level, and/or conduct investigations
and reviews initiated through fraud hotlines and other complaints or
leads. High funding levels, inexperienced grantees, grantees with a
history of performance problems, and a variety of other factors,
including known instances of corruption, are elements of risk that
might lead to increased scrutiny through risk-based approaches.
Federal Agencies Have Not Heightened Monitoring and Oversight
Activities in Response to Corruption:
In general, federal agencies have not heightened monitoring and
oversight activities in light of the Bridgeport corruption. Rather,
agencies continue to monitor program funding as they have in the past,
as part of routine, risk-based monitoring and oversight. This type of
monitoring and oversight in Bridgeport in recent years has not revealed
misuse of federal funds. Further, the corruption investigation did not
identify weaknesses in federal controls.
Agencies Have Continued to Conduct Routine, Risk-Based Monitoring and
Oversight:
While federal agencies have not heightened monitoring and oversight
activities in light of the Bridgeport corruption, several risk-based
grant reviews of Bridgeport's program operations have been conducted in
recent years, particularly by HUD. However, according to HUD officials,
without a lead or information from a concerned citizen or whistle-
blower, routine risk-based reviews would not necessarily identify the
kinds of fraud that occurred as part of the Bridgeport corruption, even
if it had involved federal funds.
In August 2000, HUD's Connecticut State Office reviewed Bridgeport's
CDBG and Emergency Shelter Grant programs. The city of Bridgeport was
found to be in compliance with the financial administrative and record-
keeping requirements applicable to HUD-funded grants. HUD raised only
one concern, observing that eight storm doors called for in
rehabilitation specifications had not been installed.
In May 2002, HUD's Connecticut State Office reviewed Bridgeport's
Housing Opportunities for Persons with AIDS (HOPWA) program. The
program was found to be in compliance in all the regulatory and
performance areas that were monitored. For example, all individuals met
HUD's definition of homeless prior to acceptance into the program, case
files were well organized, and units appeared to be clean and
adequately maintained.
In May 2002, HUD's Connecticut State Office reviewed Bridgeport's CDBG
program. The review found that assisted entities had provided public
service benefits, that performance reports and financial documentation
appeared to be accurate and timely, and that selected activities were
found to be eligible. This review also found that Bridgeport had not
collected and submitted interest earned on two revolving loan accounts
for rehabilitation and other activities and that there was a lack of
progress with regard to the implementation of some CDBG rehabilitation
activities.
In addition, the following reviews were initiated as a result of leads
external to HUD's Inspector General. HUD's Inspector General might not
have conducted this work without the leads. For example:
In 2000, in response to a citizen's complaint, HUD's Inspector General
examined the Bridgeport Housing Authority and concluded that it was not
operated in an efficient, effective, and economical manner and did not
always comply with HUD regulations--including a failure to meet the
time schedule on a court-ordered directive to replace 1,063 low-income
housing units. According to HUD officials, most of the concerns
identified in the Inspector General's Bridgeport Housing Authority
report have been or are being addressed.
In May 2003, partly based on information from HUD's Connecticut State
Office that Bridgeport's HOME Investment Partnership program was
suffering from poor management, HUD's Inspector General reported on
Bridgeport's HOME program, finding that the city could not provide
adequate support for $989,929 in HOME program funds.
In addition to HUD, other federal agencies have reviewed Bridgeport's
program operations:
DOT hires engineering firms to perform project management oversight,
including oversight of the development of the Bridgeport Intermodal
Transportation Center. This oversight includes periodic site visits and
the review of monthly reports. DOT has been monitoring this project
since its inception in 1999.
As part of the Bridgeport corruption investigation, DOT's Inspector
General, working with the FBI, Internal Revenue Service, Defense
Criminal Investigative Service, and FTA, investigated $104,000 in DOT
grant funds used for the removal and disposal of contaminated soil,
allegedly from the construction site of a municipal hockey arena,
parking garage, and the Intermodal Transportation Center. The soil was
actually from sites in Norwalk, Connecticut, and New York City. The
parties charged in this investigation have pleaded guilty and agreed to
pay $104,000 in restitution.
In commenting on our draft report, DOT noted that when the Greater
Bridgeport Transit District was chosen to be the grantee for
Bridgeport's Intermodal Transportation Center, FTA initiated a review
of an architecture and engineering procurement under this grant. FTA
found that the appropriate procurement procedures had not been
followed, and the review resulted in the cancellation of the
procurement. In addition, after collaboration between the Connecticut
Department of Transportation and FTA, the city of Bridgeport was chosen
to be the new grantee. The Greater Bridgeport Transit District was
subsequently dissolved and the Greater Bridgeport Transit Authority was
established.
DOJ's Inspector General reviewed Bridgeport's COPS program in 2000
based on routine risk-based audit plans and found that the city
generally performed at an acceptable level but had failed to submit
some monitoring reports and had submitted many other reports late.
In light of the corruption, DOJ's Weed and Seed Program changed the
grant manager fiscal agent from the city of Bridgeport to the Office of
Law Enforcement (the police department).
The Bridgeport Investigation Did Not Identify Weaknesses in Federal
Controls:
As part of its Bridgeport investigation, the FBI contacted officials
from HUD, DOT, and EPA but did not identify any internal control
weaknesses on the part of federal agencies, concluding that the
Bridgeport corruption was not a result of poor internal controls.
Instead, the FBI reported that the corruption was a result of some
corrupt individuals in the local area. According to the FBI, fraud was
committed, but there was no indication that the fraud was a result of a
lack of proper internal controls at the federal level.
In addition, the indictment resulting from the investigation did not
refer to any misuse of federal funds. Rather, it stated that the mayor
and others committed illegal acts, a few of which were associated with
projects that had received some federal funding in the past. For
example, the indictment charged the following:
The mayor and his associates wrongfully collected a payment from a
private company in exchange for awarding the company a contract to
operate and manage Bridgeport's waste water treatment facilities. (This
charge resulted in a "guilty" verdict.) According to EPA officials,
this facility was constructed in the 1970s or 1980s with financial
assistance from EPA.
The mayor agreed to select a specific private company to develop vacant
tracts of land in Bridgeport, including the site of the former Father
Panik Village public housing complex, in return for payments to be made
from the company when the land was developed. (This charge resulted in
a "guilty" verdict.) In 1990, the Bridgeport Housing Authority was
directed by the United States District Court of Connecticut to replace
all units demolished in the Father Panik Village public housing
complex; HUD provided $89 million for this replacement.[Footnote 4]
The mayor and his associates solicited and agreed to accept money and
other items for awarding contracts to private companies for the design
and construction of a minor league baseball stadium and hockey arena.
(This charge was dismissed.) Prior to construction, in 1998, EPA
provided $200,000 in Brownfields program funds to assess the extent of
soil and water contamination on this site. Also, DOT provided over $5
million to help construct the site's parking garage, which is also used
for Bridgeport's Intermodal Transportation Center.[Footnote 5]
Agency Comments:
We provided a draft of this report to USDA, Education, EPA, HUD, DOJ,
and DOT for their review and comment. These agencies generally agreed
with our findings. They provided some additional information on their
monitoring activities in Bridgeport as well as some technical comments
that are reflected in the letter as appropriate.
EPA noted that it has recently completed a 2-day desk review of
Bridgeport's Brownfields grant. This review was conducted after our
draft was sent to agencies for comment.
In addition, DOT noted that, in light of the corruption, FTA has
scheduled a financial management oversight review of Bridgeport to
provide assurance that new accounting procedures implemented by the
city will provide the necessary control over federal transportation
funds.
We are sending copies of this report to the Secretaries of USDA,
Education, HUD, DOJ, and DOT, and to the Administrator of EPA. The
report is also available at no cost on GAO's Web site at http://
www.gao.gov.
If you or your staff have any questions, please contact me at (202)
512-6878 or at woodd@gao.gov. Major contributors to this report were
Andy Finkel and Eric Diamant.
:
David G. Wood:
Director, Financial Markets and Community Investment:
Enclosure:
Use of Funds Provided by Six Federal Agencies in Bridgeport,
Connecticut (by fiscal year):
[See PDF for image]
[End of table]
(250147):
FOOTNOTES
[1] The six federal agencies are the Environmental Protection Agency
and the Departments of Agriculture, Education, Housing and Urban
Development, Justice, and Transportation.
[2] The Single Audit Act (31 U.S.C. 7501 et seq) requires state and
local governments that expend more than a threshold amount in a fiscal
year to have either a single audit or a program-specific audit
conducted and to forward the audit report to the Federal Audit
Clearinghouse for distribution to each federal agency responsible for
programs for which the audit report identifies a finding.
[3] In the June 27, 2003, Federal Register, OMB issued final revisions
to Circular A-133 that raise the threshold for coverage from $300,000
to $500,000 in annual federal spending. These revisions generally apply
to fiscal years ending after December 31, 2003.
[4] When first built, Father Panik Village had a total of 1,239 units
within 46 buildings on a 40-acre tract on the east side of Bridgeport.
Two buildings were later torn down, reducing the overall facility to
1,063 units. In the 1970s, the complex began to fall into disrepair,
and in the 1980s became known as one of the nation's most poorly
managed public housing facilities. Residents complained about the
conditions at the complex and filed suit against HUD and the Bridgeport
Housing Authority. A settlement was negotiated in 1990, and Father
Panik Village was to be totally demolished and replaced by 818 units of
new housing around the city, plus an additional 245 project-based
Section 8 units. (Section 8 allows very low-income families to choose
and lease or purchase safe, decent, and affordable privately owned
housing.)
[5] As noted previously, the DOT Inspector General concluded that
$104,000 of this amount was used fraudulently, and the agency has taken
steps to retrieve the funds.
