West Haven Mayor Nancy Rossi talks about the state's oversight of the city during a council meeting on March 28, 2022. City of West Haven

The city of West Haven misspent nearly $893,000 in federal pandemic relief funding last year, according to a newly released audit, and the findings are forcing state officials to consider whether to take over the municipality’s troubled finances.

The highly anticipated audit, which was commissioned by the state Office of Policy and Management, found that West Haven officials didn’t collect proper documentation to back up many of its expenditures and that the city used a significant amount of the funding on items that were not allowed under the federal CARES Act rules.

Those missteps will likely require West Haven and its taxpayers to refund the federal government for more than three quarters of the $1.1 million the municipality received at the end of 2020.

None of the spending reviewed by the auditors is connected to the fraud charges that federal prosecutors filed against former state Democratic lawmaker Michael DiMassa earlier this year.

That means the additional $1.2 million that DiMassa, his wife and two other defendants allegedly stole from West Haven actually came from state and local taxpayer money — not the federal relief funds, as city’s records previously suggested.

Even so, the audit blamed West Haven’s lack of basic financial controls for most of the misappropriated money.

Some of the transactions the auditors flagged were already highlighted in media reports last year, including $8,404 the city used to purchase commemorative coins, $7,675 the city spent on a 20-piece marching band, $19,600 that went to a city councilman’s towing business and at least $58,712 in overtime-related pay that went to a handful of high-ranking employees in the city.

But the audit report also noted other serious problems with West Haven’s spending that were not previously recognized.

The auditors took issue with a $10,000 “bonus” that was given to a West Haven employee for installing COVID-related signs and another $7,850 in renovation work on a shower at West Haven city hall, which auditors say a city contractor never completed.

Some of the spending is so troubling that state officials suggested it could be referred to federal prosecutors.

But all of the questioned expenditures are a concern for the state government, which has given West Haven roughly $16 million in recent years to help the municipality staff its finance department and straighten out its budget.

Officials with OPM and the state Municipal Accountability Review Board, who have overseen West Haven’s finances since 2018, repeatedly warned the city about the serious gaps that exist in its financial oversight.

Yet over the past four years, West Haven’s elected leaders have largely failed to get those problems under control, even as they benefited from the financial assistance from the state, they said.

OPM’s new secretary Jeffrey Beckham and the other members of the MARB announced Friday that they are likely to ramp up their oversight of West Haven even further in the near term.

If that doesn’t work, MARB could recommend the state appoint a receiver to take over direct control of the city’s $78 million general fund and the extra $29 million the city received from the federal government under the American Rescue Plan Act.

“Since the questionable and potentially fraudulent use of COVID relief funds and other irregularities surfaced, the city has taken little action to address the seriousness of vulnerabilities to further losses,” OPM officials wrote in a memo that was delivered to West Haven’s leaders.

Mismatched payroll

The audit is likely to increase the political and financial pressure on West Haven Mayor Nancy Rossi, who was reelected in a close runoff last November.

On Friday afternoon, Rossi said she and her staff were still reviewing the audit, but she said the city would seek to rebut any findings they don’t not agree with.

“The city will not comment until we have had sufficient time to thoroughly go through the report,” she said.

Rossi is already on the record defending some of the spending that the auditors are now faulting.

She told the Connecticut Mirror last year that the overtime-related payments issued to her appointees were a legitimate use for the CARES Act funding and that the payments could be justified by payroll records.

But in their report, the independent auditors with CohnReznick noted that the city’s appointed officials independently track their own hours, outside the city’s payroll department.

The audit also found that many of those people either didn’t keep accurate records, couldn’t explain how the overtime was related to the pandemic, or the hours they recorded didn’t match up with how much money they received out of the CARES Act funding.

Lee Tiernan, West Haven’s corporation counsel, reportedly tried to pass off hours that he worked before March 2020 as pandemic-related overtime.

In all, the city will likely have to reimburse the federal government for the extra pay that went to DiMassa and Tiernan, as well as the city’s public works director, its former human resource director and the mayor’s executive assistant.

But that’s only a small piece of the spending that West Haven taxpayers may now be on the hook for.

A lack of records

Some of the expenses the auditors dismissed may have qualified under the CARES Act, but the city’s finance department is in such disarray that they could not produce the necessary evidence for auditors.

The audit report, for instance, shows the city expensed roughly $433,000 that reportedly went to payroll for West Haven’s health department, but the city could only provide auditors with payroll reports from a different time period.

Similar problems occurred with the overtime that Rossi and her administration tried to claim for the city’s fire departments.

West Haven claimed that personnel at the West Shore and West Haven fire departments earned a combined $174,381 worth of overtime during the pandemic. But when the auditors asked for that payroll information, the city failed to provide any type of supporting documentation.

The same is true for a number of transactions that were charged to West Haven’s credit card. The expenditures may have been related to the city’s response to the pandemic, but Lou Esposito, Rossi’s executive assistant, couldn’t produce the necessary documentation to prove what was purchased.

“Mr. Esposito was not able to provide CohnReznick with additional support for the expenditures, nor was he able to identify the individual that used the card for the specific transactions,” the auditors wrote.

Many other items that were noted in the audit were simply outside the bounds of the federal CARES Act rules, which West Haven officials promised to follow when they took possession of the federal funding in December 2020.

The auditors relied on those rules to reject a large number of invoices.

That included the $1,000 the city paid for a “COVID logo,” the $1,500 the city spent to film its Juneteenth and Martin Luther King Jr. celebrations, the $46,800 that reportedly went to a summer camp program run by Ready Inc., and the $5,000 it paid to Kara Rochelle, a state Democratic lawmaker from Ansonia, who reportedly performed consulting about West Haven’s fire stations.

Contractors and a councilman

The audit also questioned payments that went to several city building contractors.

The audit, for instance, took issue with a $10,000 “bonus” payment that was given to Ernie Chiarelli, who reportedly installed COVID-related signage in city hall. According to the city’s webiste, Chiarelli is the city’s sidewalk inspector, but auditors said he received the “bonus” as a city contractor.

A similar $20,000 “COVID response bonus” was also issued to Louis Faugno, who previously worked for the West Haven Fire Department.

The auditors also flagged another $7,850 the city paid to Baybrook Remodelers for reportedly installing a new shower in city hall.

West Haven officials initially claimed that all of the work on that bathroom project had been completed as promised, but when the auditors asked to inspect the new shower for themselves, city officials admitted the construction was not completed “at the location listed on the invoice.”

State records show Baybrook Remodeling is owned by Ken Carney. He is also the chairman of the West Haven’s High School Building Committee and was also recently appointed by Rossi to head up a special committee that is meant to oversee West Haven’s $29 million in ARPA funding.

In the report, the auditors noted that the shower installation wasn’t the only work Carney’s companies reportedly performed for the city. West Haven’s records indicated four of his businesses were paid a combined $59,000 for work in the past, and not all of that came from CARES Act funding.

As a result, CohnReznick’s staff suggested the MARB further review Carney’s relationship with the city.

The auditors also took a similar interest in West Haven city councilman Robert Bruneau.

The CT Mirror published a story last year that showed Bruneau’s towing business received thousands of dollars out of the CARES Act funding for reportedly setting up and tearing down sites after COVID-related events.

The auditors rejected all of that spending, arguing the invoices didn’t provide enough detail or description of the work that was performed.

The auditors also reported that several of Bruneau’s companies received at least $170,000 in payments from West Haven in the past, outside of CARES Act funds, and they recommended that those expenditures be scrutinized further.

“CohnReznick suggests that additional inquiries and procedures are performed in connection with these vendors to determine if all payments are valid,” the auditors wrote.

The MARB is set to convene another meeting next week to decide its next steps.

Andrew joined CT Mirror as an investigative reporter in July 2021. Prior to moving to Connecticut, Andrew was a reporter at newspapers in North Dakota, West Virginia and most recently South Carolina. He’s covered business, utilities, environmental issues, the opioid crisis, local government and two state legislatures. Do you have a story tip? Reach Andrew at 843-592-9958