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State Launches Criminal Probe into Weatherization Program

Audit reveals agency can't account for $600,000, used state and federal funds for country club dues.

The state Division of Criminal Justice has opened an investigation into the actions of a nonprofit agency given a lucrative contract to help New Jersey weatherize homes.

State Auditor Stephen Eels told the Assembly State Government Committee yesterday his office referred issues that arose during its audit of the New Jersey Community Action Association’s handling of $2.1 million in federal stimulus funds it was allocated under the weatherization program.

The audit, the third one performed by his office to find rampant problems with the weatherization program, discovered that the New Jersey Community Action Association (NJCAA) could only document $1.5 million in expenses. It also revealed that the agency had commingled federal funds with money it raised through annual fees. As a result, the audit said state and federal funds had been used to pay $7,000 for political receptions, $5,500 in country club bills and $25,000 for a down payment on a new facility.

The investigation by the state came to light as the Assembly committee held a hearing on the audit, which also was critical of the state Department of Community Affairs (DCA), which awarded the contract to the NJCAA. The audit found the state agency had inadequate budgetary and spending controls in place over the grant and had circumvented state policies regarding procurement by using the association to contract with vendors.

The association did not return a call left on its office answering machine for comment.

The state has had a weatherization program for a number of years, but its approximately $4 million budget is much more modest than the $119 million allocated to New Jersey under the federal stimulus program, which aimed to create green jobs and help lower energy bills for homeowners by insulating their houses.

As it turned out, many of the people who were trained under the program were not necessarily hired to do the weatherization work, according to DCA Commissioner Lori Grifa. "It was a great frustration on many levels," she said.

The DCA put spending controls in place when notified last fall by the state auditor of problems with the NJCAA, according to Grifa and Eels. Grifa also said the department has hired a forensic auditor to comb through its records, which should produce a financial snapshot within 45 days.

"They’ll be accountability for the people at NJCAA," Grifa said, who also noted there is still money unaccounted for which had been allocated to the association.

The commissioner said she does not know if New Jersey might be forced to repay the federal government any money that was inappropriately spent.

The Division of Criminal Justice has accessed some of the paperwork done by the auditor’s office, Eels said, and has talked to members of his staff. The division also is working with the forensic auditor hired by the DCA, he said.

Before the state hired the NJCAA, there was an audit of the DCA, which cleared the way for it to hire the association. In that audit, Eels noted there were some issues raised about the organization’s financial system, which were addressed by the state agency, he said, but never followed up.

"It sounds like they put their hand on the barn door, but they didn’t close it," said Assemblywoman Linda Stender (D-Union), chairwoman of the committee.

Others were stunned to have the association handle so big a project. It boggles the mind that this agency [the NJCAA] was able to receive any public money," added Assemblyman Herb Conaway (D-Burlington).

In its application to the federal government, New Jersey said it would weatherize 13,000 homes, according to Grifa. So far, 5,200 homes have been weatherized. Because the state is limited in what kind of work it can do, however, the average cost of weatherization (about $3,500 per house) is nearly half as much as it initially expected ($6,500). The state will now do thousands more homes than it had originally promised, she said.

"We’ve had our moments, not all of them good," Grifa told the committee. "In the end, we’re going to end up with a program we can be proud of."

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