An audit detailing the misuse of state grant funds by Blue Hills Civic Association is prompting calls for more oversight of state aid for nonprofits.  

Department of Economic and Community Development (DECD) Commissioner Daniel O’Keefe said the agency has already put more controls in place.  

“I think what the audit details is–it seems that people were taking advantage of a process,” O’Keefe said Thursday.  

Those changes include requiring more information from nonprofits before grants are dispersed.  

Still, lawmakers expect to talk about further changes.  

“Obviously, the audit report raises many issues of concern in many areas, including state oversight of grants being given out,” Sen. Martin Looney (D-President Pro Tem) said.  

Republicans want further changes to create transparency about which nonprofits receive grants and whether the funding is achieving the intended results.  

DECD retained CliftonLarsonAllen LLP to conduct a forensic audit after BHCA notified the department last year that it never received a $300,000 wire transfer.  

In their findings, CLA said there were “pervasive governance failures, systemic internal control weaknesses, and patterns of conduct that strongly suggest potential fraud and misappropriation of public funds.” 

It also alleged that Sen. Doug McCrory (D-Hartford) wielded significant influence over how BHCA dispersed roughly $15 million in grants to other community organizations in recent years.  

“Available documentation and email correspondence indicate that funding allocations were largely determined by Senator McCrory, with BHCA executing disbursements without consistent adherence to required procedures such as obtaining signed MOUs or projected budgets prior to payment,” the audit said. “The prevalence of backdated MOUs, missing agreements, and passthrough arrangements lacking transparency further underscores significant governance and compliance deficiencies within BHCA. These practices raise concerns about BHCA’s accountability, proper oversight, and adherence to legislative grant requirements.” 

O’Keefe said the DECD now requires nonprofits to provide documentation of how they disburse funds, including proof of checks and balances to ensure funds are spent properly.  

The policy changes were put in place by the Office of Policy and Management for all statewide agencies.  

The rules were already in place for competitive grants under DECD’s discretion, but BHCA’s grants were secured in the budget through a process that gives broad discretion to lawmakers.  

The FBI has been investigating how Hartford-area nonprofits have used grant funding, including issuing subpoenas naming McCrory multiple times.   

The subpoenas asked the state for records that, among other information, reference a possible personal relationship between McCrory and Sonsera Cicero, owner of the nonprofit consulting firm Society of Human Engagement and Business Alignment.   

O’Keefe said he was particularly concerned that auditors identified “$208,000 in unsupported disbursements that either violated conflict of interest best practice standards or were used to pay for services that were not performed.”  

The audited states $168,000 of that money went to Cicero or SHEBA. The state is also now working on a policy to pause payments when there are concerns about misuse.  

McCrory issued a statement denying any wrongdoing but also acknowledged the need for greater control and transparency.   

“First, the DECD audit makes clear that stronger oversight is needed to ensure that public funds are managed responsibly and effectively,” he said. “I agree with this goal and will be supportive of reasonable measures to achieve it.” 

McCrory has not spoken to the media since an exclusive interview with NBC Connecticut last week, in which he announced his intention to seek re-election.  

Harding said lawmakers need to look at changes around how grant decisions are made. He said the process lacks transparency and allows lawmakers to award grants in the budget in exchange for support on the budget or other legislation.  

“Democratic leadership goes to their legislators, asks them what organizations they want to receive taxpayer money, and then we vote on it,” he said. “That’s unacceptable.”  

Gov. Ned Lamont (D-Connecticut) said the problem is not exclusive to his party.  

“First of all, they have their own earmarks,” he said. “We can talk about earmarks if you want to.”