A Norwalk nonprofit agency may have misused more than $400,000 in federal funds intended to support the Head Start program in the city, a federal government audit indicates.

The audit by the Office of the Inspector General reviewed $4,757,151 awarded to Norwalk Economic Opportunity Now from Jan. 1, 2009, to March 31, 2011. Of that, “NEON claimed costs of $406,434 that were not allowable, allocable, reasonable and adequately documented under the terms of the Head Start and Recovery Act grants and applicable federal regulations,” the reports says.

Joseph Mann, NEON’s president and CEO, said in a statement, “None of the findings by OIG indicate that funds were expended for any purpose other than their child-care operations.”

NEON is a not-for-profit community action agency providing social programs and services to the poor in and around Norwalk. NEON’s programs include employment services and job training, early childhood development and day care, housing and supplementary assistance for food and energy assistance.

The audit, which was made public Wednesday, says, “The deficiencies occurred because NEON did not have adequate policies and procedures” to ensure the Head Start grants would be used properly. Mann said Head Start will remain in Norwalk and that “NEON will do everything that it can to see that it continues to be a vibrant program for the children of our city.”

The report says that the money misused by NEON included claimed costs of:

  • $383,312 in indirect expenses to Federal Head Start grants without obtaining an approved indirect cost rate
  • $23,122 in unallowable expenses to the Recovery Act Head Start quality improvement grant.

NEON allocated administrative expenses to its federal Head Start grant, indirect expenses that were not included in the grant application, the report says. It did not charge expenses directly to the grant, as it had proposed. This resulted in the $383,312 in unallowable indirect costs.

The money awarded to NEON includes $4,626,834 in Head Start funds to provide services to 275 children and $130,317 in Recovery Act Head Start funds for cost-of-living adjustments and Head Start quality improvements.

The report says that of the $130,317, NEON claimed:

  • $10,598 for tuition for non-Head Start employees;
  • $7,830 for routine nursing consultations; and
  • $4,694 for equipment that was unused, missing or used by non-Head Start classes.

As a result, NEON claimed $23,122 in unallowable quality improvement costs.

Although the report was made public Wednesday The Hour newspaper obtained a preliminary version through a Freedom of Information Act request. Mann says he was prohibited from responding to their reports by federal regulations.

“First, it was never our intention to hide or cover up anything that is not what we do,” he said in a statement. “We want our actions to be transparent and have always endeavored to assure that is the case. The OIG report, prior to now, was a preliminary draft document that we were directed, by OIG, not to disclose is contents. Secondly, NEON did not choose to exclude people from the Jan. 11 presentation of the draft report. OIG directed that the meeting be limited to the NEON Board of Directors and we complied.”

The government recommends that NEON refund the money and obtain training and technical assistance Federal Uniform Administrative Requirements, Cost Principles, and Head Start regulations and adopt policies and procedures to ensure that the correct expenses are charged to the Federal Head Start grant.

Mann said NEON has brought on a finance director and a consulting team, which will oversee finances. The agency immediately changed its allocation formula when it was told there was a problem and is assigning the administrative costs to the grant as they occur.

“As NEON has done in the past, we will continue to comply fully with any official reviews of our community programs and administration,” Mann said. “We have our noses to the grindstone day in and day out, so it is helpful to have others take a fresh look at our operations in the spirit of continuous improvement.”

For more on grants and grant writing, visit Grant Pros.


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