State Auditors: Teachers Union Affiliate ‘Likely’ Misused 12/14 Donations
UPDATE (December 5, 2019): This story has been updated with added details as well as comments and responses from the Newtown Federation of Teachers, AFT Connecticut, the president of the nonprofit named in the auditors report, and others.
The update also corrected a reference to ULA being a nonprofit affiliate of the Connecticut AFL-CIO.
UPDATE: December 6, 2019: This story has been updated to include comments from Senator Tony Hwang and State Representative JP Sredzinski.
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A number of reactions have been issued in the hours following a December 5 report released from the Connecticut Auditors Of Public Accounts suggesting a nonprofit affiliate of the Connecticut AFL-CIO “likely” misused or spent donations in a special fund initially established to assist qualified “educational employees” and police responders affected by the shootings at Sandy Hook Elementary School on December 14, 2012 (12/14).
The Newtown Bee has received reactions from State Attorney General William Tong, as well as the Newtown Federation of Teachers & AFT, and the president of the nonprofit named in the audit report.
A December 4 memo from state auditors addressed to Newtown’s State Representative Mitch Bolinsky and State House Republican Leader Themis Klarides outlines the narrative of a forensic investigation into the matter.
The request for that audit was initiated by Rep Bolinsky after he learned donated funds originally designated for qualified school personnel and local and State Police responders to Sandy Hook Elementary School on and after 12/14 might be missing.
Rep Bolinsky said he was made aware that something was amiss in February 2019 when former Newtown-Sandy Hook Community Foundation Director Jennifer Barahona attempted to make an inquiry on behalf of a local qualified law enforcement officer to the John J. Driscoll United Labor Agency (ULA).
The ULA had previously become the fund’s administrator after striking an arrangement with the State Office of Victims Services (OVS).
At the time of her inquiry, Ms Barahona was told the fund was no longer available to law enforcement claimants, which she knew was in violation of language in the original legislative action that established the so-called Sandy Hook Workers Assistance Program or SHWAP.
According to the state auditors’ report, the fund was created through Special Act 13-1 to provide immediate help for “affected persons” who suffered a mental or emotional impairment because of the mass shooting.
The act stipulated the fund — which Ms Barahona said originated after designated donations for teachers and police were made to the regional United Way — would be administered by the OVS until August 31, 2015.
On that date, $115,827 remained in the fund that originally totaled $388,396. All but $340 in accrued interest was amassed from individuals designating donations to help qualified affected school personnel and police responders, the auditors’ report states.
The act required any remaining funds to go to “other charitable trusts or entities,” but did not provide specific guidance or a process to distribute the balance of the donations and fractional interest revenue. In May 2015, the OVS announced it intended to transfer 75 percent of the balance to the ULA and 25 percent to the Newtown Police Union to serve any unmet needs of law enforcement personnel.
Prior to the disbursement, however, the local police union notified OVS it did not want the designated portion of that fund, so without notifying the legislature, the OVS decided to transfer the entire remaining balance to the ULA.
Memorandums Of Understanding
That decision to transfer all the funds to the ULA prompted two memorandums of understanding (MOU) that were drafted in July and August 2016 between the OVS and the nonprofit union subsidiary.
The first reflected that 75 percent of the fund would go to the ULA “exclusively to ensure that unionized and non-unionized school personnel who were affected... continue to have access to programs and services.”
The second memorandum drafted about six weeks later reflected the remaining 25 percent distribution to the ULA, again stipulating the funds were exclusively for school personnel.
On September 1, 2016, the OVS transferred $115,827 to ULA. Since then, that agency reported it provided a total of $6,323 to five eligible recipients. The auditors also report that the ULA absorbed $5,791 — about five percent of the fund balance — to cover “administrative costs,” leaving $103,713 for future distribution.
The audit report states the ULA did not have these remaining funds available, however.
The report states that ULA should have maintained a specific cash or short-term investment balance of at least $103,713 earmarked exclusively for SHWAP, but auditors state that “it appears that as a result of financial difficulties, ULA may have used SHWAP funds for other purposes,” and that the union subsidiary “commingled the $115,827 in SHWAP with cash from other sources — even though the ULA was not obligated to separate it as part of either memorandum.
The auditors state they “could not determine exactly how ULA spent these funds.”
“Because ULA does not have sufficient assets to satisfy its obligations, it does not appear to have fulfilled its fiduciary responsibility with respect to these funds,” the auditors report states.
ULA, AFT Reactions
Sal Luciano, president of ULA, said the auditors report "came as a shock and a disappointment" to him and the ULA board of directors. He said after learning of the audit, the board met and took immediate corrective action.
“First and foremost, the Connecticut AFL-CIO has put together the funds to make the Worker Assistance Program whole again," Mr Luciano said. "Every dollar that should be in the fund — all $103,712 — is currently available to any worker who has been impacted by the tragic school shooting at Sandy Hook."
Mr Luciano said the ULA board also established a number of new financial protocols.
"Even though the ULA was not required to separate the funds, we will follow the recommendations of the State Auditors to keep the money segregated from the rest of the budget," he said, adding the board also created financial trustee positions to provide greater oversight, and took other steps to ensure ULA fulfills its fiduciary responsibilities.
“Finally, the board will be hiring an independent outside attorney to conduct a full investigation into how money from the fund was used," Mr Luciano said.
He also affirmed the audit report, which said no worker, whether they were union or non-union, was denied benefits through this program.
"The ULA is committed to continuing to serve all workers in the state with job training, workers compensation, emergency food pantry services, and counseling." Mr Luciano added.
The report goes on to detail the ULA’s net assets, which dropped from $188,420 as of June 30, 2014, to a deficit balance of $20,962 on June 30, 2018.
The report states that “ULA’s financial condition continued to deteriorate in the fiscal year 2019,” adding the “ULA’s unaudited preliminary trial balance as of June 30, 2019, shows a deficit net assets balance of $76,029.”
As of September 30, 2019, the report states ULA’s cash balance totaled $41,977.
Following the interaction with Ms Barahona at the local community foundation and the inquiry to Rep Bolinsky, it was discovered that ULA was excluding first responders — in violation of the original intent of the public act creating the SHWAP.
And while MS Barahona said the ULA conceded it would cover the responder’s claim, it would take a June 2019 amendment to the original memorandum to restore 25 percent of the fund to meet the ongoing needs of qualified local and state police responders.
Tom Kuroski, president of the Newtown Federation of Teachers, called the ULA "a partner in assisting the teachers and other education personnel who suffered greatly as a result of the Sandy Hook School tragedy."
"They have processed claims for assistance and ensured that each and every applicant who was eligible for assistance received the help they needed. The Newtown teachers are thankful for the ULA’s assistance in administering this fund and ensuring that teachers who needed assistance got the help they needed and deserved,” Mr Kuroski said.
According to the audit, ULA released a $534 claim for a para educator; $1,080 to a reading specialist; $2,388 to a teacher; $1,381 to a custodian; and $940 to a speech/language pathologist.
Jan Hochadel, president of AFT Connecticut, said her organization supports ULA as well.
“In 2013, the ULA was there to assist those who experienced one of CT’s greatest tragedies — Sandy Hook," Ms Hochadel said. "The Sandy Hook Workers Assistance Program and the Sandy Hook Workers Assistance Fund were designed to provide financial help for workers dealing with emotional or mental health issues resulting from [12/14]. The United Labor Agency accepted the responsibility and has administered the distribution of the funds to those in need."
She said her organization has "every confidence that the ULA has a plan in place to ensure that all funds that should be available will continue to be available for all affected persons who are eligible for the assistance — and support a review of the audit and ensure that more diligent policies and procedures are in place for the future.”
Newtown Police Chief James Viadero said the original rejection of that 25 percent disbursement was made under former Chief Michael Kehoe; he became involved earlier this year when Ms Barahona attempted to inquire about funds for a local officer. Chief Viadero told The Newtown Bee he promptly contacted the OVS and was assured that agency would make good on any claim, even if the ULA’s fund was depleted or gone.
“I was probably most shocked about the fact that some entity could take control of the fund and exclude our officers,” he said.
Ms Barahona said over the course of her handling of the matter, she experienced the “OVS and ULA finger pointing back and forth for some time,” before the ULA agreed it would make a one-time exception to pay a claim for a local police officer.
Similar cross-concerns between the OVS and the ULA are reflected in the auditors’ report. It is also important to note that the ULA has no evidence any Newtown officer ended up making a claim to SHWAP before or after the memorandum amendment was drafted last June.
The report concludes that given the deficit net assets balance in the ULA account as of June 30, 2018, “it is likely that ULA used additional funds for administrative or other purposes.”
The report also concludes that claims from SHWAP were expected to outpace the amount in the fund, but that did not occur, “therefore, neither the legislation or the [memorandums] addressed what should have happened to the funds if there was little or no demand for them.”
It goes on to offer guidance if a similar fund is created in the future. The report also takes officials to task, stating “the legislation and contracts should ensure better state oversight of the successor nonprofit agency so that it properly maintains the funds and distributes them consistent with the legislature’s intent.”
Bolinsky, Tong Responses
State Rep Mitch Bolinsky said he would support an investigation into how OVS has created various memorandums with any other nonprofits to ensure funds are handled, distributed, and accounted for properly.
“I wish it was somebody else’s play money we found being mishandled,” Rep Bolinsky said, acknowledging this issue was coming to light at “the worst possible time,” less than ten days prior to December 14.
“I had concerns about how these funds might be handled,” he added. “They were intended for the people who were deeply affected by the horrific tragedy seven years ago next week. I still think we need a fuller accounting of where this money went, and who it was spent on.’’
Rep Klarides said she understood “the AFL-CIO has indicated it will replace the funds that were spent on services not intended by the legislation we passed in a bipartisan fashion to help those first responders and educators who were so horribly affected. That is not enough; we need to better understand what happened here.’’
Attorney General William Tong said he met personally with Rep Bolinsky on February 27, 2019 to discuss the matter. Following that meeting, Attorney General Tong directed Assistant Attorneys General in the Charities division to review the MOU and to clarify donor and legislative intent.
After months of negotiations, the Office of the Attorney General restructured and redrafted the MOU to accurately reflect donor intent. A new MOU was signed on June 26, 2019 that restored police access to the fund. The Office of the Attorney General also addressed [a] reimbursement concern with respect to [a] state trooper.
The AGs stated it is is currently carefully reviewing the auditors report and evaluating further action. At a minimum, further action may be necessary to determine the following:
1. How funds were commingled and disbursed;
2. Procedures going forward to ensure adequate protection of the funds; and
3. How and where funds should be maintained going forward.
"The Auditor's report has revealed very serious problems that require thorough review and investigation," AG Tong said. "At a minimum, we need to understand how any commingled funds were spent, what procedures are in place now to ensure protection of the funds going forward, and whether it makes sense to designate a new entity to safely maintain these funds and provide much needed transparency.
The AG also made a strong point that the timing of the report's release should not become a political issue.
"I will not allow this and the Sandy Hook community to be used mere days from the anniversary of the most horrific tragedy our state has endured in my lifetime," the AG added. "I look forward to working collaboratively towards a solution that protects both donor intent, and supports the ongoing needs of our courageous Sandy Hook educators and police officers."
On Thursday evening, December 5, State Senator Tony Hwang released the following statement: "What happened to these funds is disturbing and upsetting on so many levels. What took place in Sandy Hook in 2012 was an unspeakable tragedy that continues to affect the lives of so many people to this day. The Sandy Hook community put their faith into a system to ensure that our first responders and teachers received needed help and support. It is hard to fathom the level of carelessness that led to these funds going missing. It's infuriating. Many people worked to get to the bottom of what happened here, and I know many will continue working hard to make sure this can never happen again. We are all glad the money has been restored, but it will take much more to restore people's trust and bring back peace of mind that these funds are being properly managed."
State Representative JP Sredzinski weighed in, stating "People from around the country and around the world gave their money in support of those victims of Sandy Hook who were affected by the tragedy, and specifically in this case, first responders and teachers who witnessed unspeakable tragedy. It's a sad day when charity money dedicated to assisting victims of a horrific tragedy is abused. We as a government owe our constituents, and the families of Sandy Hook shooting victims, more."
Rep Sredzinski, who represents a portion of Newtown including Sandy Hook, added, "I hope that the audit of the ULA sheds some light on a very dark part of our government right now. Moving forward, we will continue to investigate this situation and work to eradicate any and all mismanagement of public funds within our government.