Delaware's Office of Auditor of Accounts (AOA) releases the second wave of opioid grantee audits, finding financial inconsistencies within Congo Legacy Center's plans to fund the Congo Tarir Project.
The audits are being conducted on a rolling basis after State Auditor Lydia York flagged Kent County nonprofit Code Purple in June 2024 for potential fraudulent use of opioid abatement grant funding.
It was announced that the Delaware Department of Justice's (DOJ) white collar crime unit would investigate Code Purple and attempt to claw back $290,000 in grant funding distributed to the nonprofit — DOJ says there are still no updates on the investigation at this time.
Opioid grant funding refers to funding awarded to the State of Delaware through legal challenges against opioid manufacturers and distributors.
The Prescription Opioid Settlement Distribution Commission (POSDC) is in charge of distributing those funds — which is anticipated to accumulate to $250 million by 2038 — in a way that supports a wide variety of strategies to fight the opioid crisis.
Following Auditor York's report that Code Purple's audit could not be completed, she announced 12 additional grant recipients, selected at random, would be audited to reveal if there is cause for further concern within the grant program.
Auditor York released the first round of performance audits in February of this year and found that three of the four organizations analyzed were in compliance with their grant agreements.
The fourth organization, Higher Ground Outreach, was unable to provide supporting financial documentation to monitor grant expenditures, but Auditor York explained the lack of reporting did not correlate to fraudulent use of funds.
“We believe that they are doing the work, but they just didn't have the infrastructure or the controls in place to best document that work. But there's just no evidence of fraud," Auditor York told Delaware Public Media in February.
On Thursday, AOA released the second round of grantee audits and found two of the three recipients to be in compliance.
The report says Congo Legacy Center failed to prove sufficient grant management and oversight of grant deliverables and requirements and that the organization's record keeping is inadequate.
Congo Legacy Center was awarded $475,000 during Phase 1B of grant funding in June 2023.
The grant was awarded for plans to fund the Congo Tarir Project, which detailed the renovation of a facility located at 501 West 28th Street in Wilmington.
Congo Legacy Center described the proposed resource hub as a place for youth and their families to be educated on opioid misuse and prevention. The organization said it would offer anti-opioid and other drug interventions in an "environment that provides alternative activities known to prevent and decrease opioid use disorder in high-risk communities."
Congo Legacy Center projected the program to launch in March 2024, but that target date was not met.
As reported by Spotlight Delaware, Congo Legacy Center faced additional turmoil late last year when the City of Wilmington filed two foreclosure warnings against the organization in an attempt to recover years of delinquencies on its properties.
Subsequent reporting from Spotlight Delaware revealed Congo Legacy Center ultimately avoided a sheriff's sale when its tax-exempt status — which was lost in 2022 after it failed to file its taxes for three years — was reinstated and Ernest “Sammy” Congo paid a portion of the taxes owed and set up a payment plan for the remaining $236,000 over two years.
Following the tax concerns, the POSDC opted to pause a second $80,000 grant the organization was awarded in July, known as bridge funding.
In a statement, POSDC Executive Director Brad Owens says that balance has been held in abeyance pending the outcome of the newly released performance audit.
"In light of the audit's findings, the POSDC will now review all options to address this matter," Director Owens said.
Congo Legacy Center opioid grant performance audit findings
From the three findings within Congo Legacy Center's performance audit, — analyzing the period from Sept. 1, 2023, to July 31, 2024 — AOA concludes the organization did not maintain or provide documentation to support the requirements identified in its grant agreement and was not in compliance with the expenditure of grant funds in various categories.
AOA analyzed 35 transactions totaling $183,089, and the results revealed 21 of 35 transactions (60%) were not consistent and/or not in compliance with the signed grant agreement. Of the total amount tested related to other expenses, $145,480 (79%) of the items were not in compliance.
The total amount of payroll transactions and other expense transactions tested were $256,422. The testing results showed that $218,813 (85%) were not consistent and/or in compliance.
Additionally, the grant budget allocated $80,000 for a Program Coordinator position. AOA tested 11 months worth of funding for that position ($73,333) and auditors found no entries in the general ledger for payroll for this position, meaning it does not appear that grant funds were used to pay for a Program Coordinator.
"What it boils down to is there was not sufficient documentation for some of the expenditures that this organization had related to the grant to prove that those expenditures were in line with the budget that they created with the POSDC, and that they produced the deliverables they said they would in the terms of their grant," AOA Policy Advisor Sam Berry said. "It's mostly about insufficient documentation. Every time that you spend money towards a grant, what we're expecting to see is documentation that's proving, 'Hey, this particular expenditure is something related to the budget, and here's how, and also, once we've spent that money, here's what it's producing.'"
AOA also found documentation was not available to show the business relationship between related party organizations, concluding that funds were disbursed to related party entities without supporting documentation or signed contracts to support the expenditures.
"This grant is for them to renovate a facility, and they used a related party firm to do some of those renovations, but they did so without documentation, like an MOU [memorandum of understanding] that would prove what we're looking for, like an arms-length transaction, basically. And while that's not explicitly disallowed, there is an expectation of some extra documentation in that case to prove that the money is not being misused in any way," Berry explained.
An MOU is a non-binding agreement that outlines the involved parties' mutual intentions and goals for a project, while an arms-length transaction means each party acts independently and in their own best interests.
Congo Legacy Center management formally disagreed with all of the findings in the report and offered to provide further documentation to prove correlation between spending and the renovation project.
Management also agreed to implement enhanced tracking to better link spending to deliverables and says they are open to clarifying contractor requirements in future agreements and improving disclosure protocols.
Ernest "Trippi" Congo, II did not respond to a request for comment.
Berry says while he was not involved directly in the audit, he does not believe there was any issue with cooperation between Congo Legacy Center management and the audit process.
He also says there is no intention of referring the audit to DOJ for further investigation, nor will there be an attempt to claw back any funding.
"Just to be clear, there's no evidence of fraud or misuse of funds here, but there is certainly evidence of a lack of proper policies and procedures and internal controls," Berry explained. "At this point, the Opioid Commission is going to be the body that's going to be checking in, but that doesn't foreclose the possibility of us auditing any of these grant recipients again in the future."
POSDC Executive Director Brad Owens also shed some light on the potential reasoning behind the audit findings in a statement released Thursday:
"According to CLC representatives, due to unexpected renovation costs, the organization utilized all of the grant funds for renovations and was unable to launch the intended programming. CLC representatives believe this may help explain why the audit concluded that grant expenditures did not have a demonstrable direct correlation with the scope of work and grant budget. However, the CLC grant agreement was never officially updated to reflect these changes, so the POSDC is unable to verify if this was an approved shift in funding use," he said.
This second round of grantee performance audits comes just one month after the commission announced it would be handing out its third round (Phase 1C) of abatement funds in September.
$13 million was approved for this round of grants, but close to an additional $1 million is leftover from previous cycles. Of the 122 organizations that applied for funds, over $50 million was requested in total — the commission is recommending 63 grant applications move forward.
The approval follows a year of funding freezes while the commission hired an outside contractor to evaluate the commission’s grant process and then implement new guardrails to ensure better grant distribution policy and procedures.
"The latest round of grant funding (Round 3) included the implementation of new standards and procedures to strengthen compliance and safeguard opioid settlement dollars, ensuring greater accountability and transparency. We are working diligently to ensure that grant funds are used effectively to combat the opioid crisis in Delaware. The AOA's report highlights the importance of proper record keeping and oversight, which are areas we are actively strengthening to improve future grant management," Director Owens statement reads.
Berry says more reports on audited grantees can be expected in September to early October of this year.
