Watchdogs want reserve to audit ARPA spending

Boston Statehouse

BOSTON (SHNS) – As the Legislature wrapped up its hearings to inform the major American Rescue Plan Act spending decisions they are poised to make, advocates made their closing arguments for pursuing a range of investments they said could represent a significant opportunity to improve the lives of Massachusetts residents.

But the windfall of billions of dollars of federal pandemic aid sent to Massachusetts also creates a situation ripe for waste, fraud and abuse, Auditor Suzanne Bump and Inspector General Glenn Cunha said Tuesday as they made the case that lawmakers should set aside a reserve account to fund audits, investigations and other oversight activities to make sure that the state’s $5.3 billion ARPA money is not wasted.

“The urgency of getting relief dollars into the hands of state and local governments, businesses and individuals necessitated the lowering of some of the normal barriers that regulate eligibility for government contracting and relief programs. Through these openings flooded identity thieves and fraudsters,” Bump told Ways and Means Committee members holding their final planned hearing on how to spend the ARPA aid.

The massive surge in unemployment during the pandemic brought with it a wave of fraudulent claims as the unemployment insurance system here and elsewhere faced what Massachusetts officials referred to as a “continued surge of fraudulent claim attempts.” Not only did the fraudulent claims mean some money went where it should not have, but the schemes created headaches and delays for people who were legitimately seeking benefits.

As of July 31, Massachusetts had allocated a little more than $194 million of the $5.3 billion in federal money the state received in May — including $109 million in local aid for Chelsea, Everett, Methuen and Randolph, and $75 million to subsidize the state’s COVID-19 emergency sick leave law — with another $186 million planned to be implemented by January, according to a state report submitted to the U.S. Treasury.

Senate President Karen Spilka said Monday that the Legislature is “still planning” to decide how to spend at least part of the roughly $4.8 billion remaining in the ARPA account before wrapping up formal business for the year in about six weeks.

“This unprecedented level of aid will go far to help Massachusetts recover from the incredible challenges of the coronavirus pandemic. And for this reason, it’s essential that these funds go directly where they are needed and no place else,” Cunha said.

The auditor said her office is unable to devote staff exclusively to auditing pandemic relief programs “despite the high level of risk associated with these programs” because no funding is available specifically for that purpose. The reserve fund she and Cunha proposed Tuesday would also allow the attorney general and state comptroller to access funds for pandemic relief oversight.

“The reserve fund that we’re proposing is modeled on what the Legislature created for addressing the Hinton Lab drug testing scandal. That fund enabled multiple parties to access the funding that they needed in order to conduct their respective investigations,” Bump said. “We believe it to be a workable model that would support our efforts in the current situation.”

The Executive Office of Administration and Finance administered the Hinton Lab reserve account and Cunha explained that any of the offices or agencies that were eligible to obtain some of the money had to submit written budgets demonstrating the costs they incurred.

“These are detailed, articulated reasons, not just a request for $5 million,” the inspector general said.

During Tuesday’s hearing, lawmakers, advocacy organizations and activists pitched lawmakers on their own ideas for spending some of the state’s ARPA sum. National Federation of Independent Businesses State Director Christopher Carlozzi and Retailers Association of Massachusetts President Jon Hurst continued the business community’s lobbying for the Legislature to use federal ARPA dollars to offset the cost of unemployment benefits paid out during the pandemic as some other states have done.

“The state has received federal funds for education, transportation, child care, health care but nothing to help shore up the UI Trust Fund. States were told explicitly using ARPA funds was allowed for UI purposes. In fact, more than 30 states have already committed either CARES Act or ARPA funds to provide tax relief for employers, but Massachusetts has yet to pledge any federal dollars,” Carlozzi said. “Instead, businesses that are attempting to recover from the pandemic-related revenue losses, businesses that were forced to seek loans to stay afloat, businesses that are struggling to bring back their workforce are now facing substantial increases in their UI taxes over a 20 year period.”

Other groups, like Catholic Charities, asked the lawmakers to focus on child care, behavioral health needs and food security programs. A group of people from Chelsea called on the Legislature to prioritize the needs of Gateway Cities like Chelsea with investments in housing stability. And Rep. Bruce Ayers asked that his colleagues consider using some of the ARPA money to establish a full-time ferry service from Marina Bay in Quincy.

Rep. Liz Miranda, who represents parts of Roxbury and Dorchester, made what she acknowledged was “a hard ask” of the committee, that they “slow down a bit to ensure that grassroots organizations and advocates and all of our communities have the ability to participate in the process and access ARPA funding.”

“I know you guys have done many hearings, but still it may not be reaching some of the communities that desperately need this funding,” Miranda said. She added, “One example I have is to engage with the Black and Latino Caucus to maybe do one bigger hearing to make sure that we’re getting to hear from some of the organizations that we do not traditionally hear from.”

Rep. Dan Hunt, who chairs the House Committee on Federal Stimulus and Census Oversight and presided over Tuesday’s hearing, pointed out to Miranda that lawmakers held an ARPA hearing dedicated to issues of racial equity last week.

“You guys have done a pretty exceptional job,” Miranda responded, “but what I’m finding as being a representative of communities like this, you still find that some important sectors are not representing themselves well.”

House Speaker Ronald Mariano said Monday that the House and Senate have not yet agreed to the size of the forthcoming ARPA spending package, though legislative leaders have indicated they plan to allocate only a portion of the pot’s $4.8 billion remainder this fall.

“The chairmen of Ways and Means in the House and the Senate are both negotiating now on how to roll out this planned spending for a large portion of the money,” Mariano said. “We will continue to listen and begin to negotiate on the best way to roll this out to make sure the money is spent efficiently and in a transformative way.”

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