In an attempt to move past the debacle that is the Small Business Grant award program known as CARES II, the Ulster County Legislature voted on August 15 to pay out $395,611 in coronavirus state and local fiscal recovery funds (SLFRF) to companies which never should have been considered for receipt of those funds in the first place.
These payments represent almost $400,000 out of the $34 million total received by the county under the federal American Rescue Plan Act (ARPA).
A million dollars was originally made available to the CARES II program via the ARPA special committee co-chaired by Democrat Peter Criswell and Republican Tom Corcoran.
At the August meeting of the legislature, Criswell expressed his dismay at how the whole process had turned out.
“I just want to make sure,” said Criswell, “that it’s very clear that our legislative intent … was that these funds would go to low-and-middle-income business owners. It could not have been more clear. It was in our resolution, it was in the contract itself.”
It would be discovered in due course that 17 out of a list of 42 awardees announced on April 26 had been ineligible. County executive Jen Metzger paused the program in an attempt to get to the bottom of what had happened.
County comptroller March Gallagher opened an audit. “If mistakes were made prior to my taking office,” Metzger said then, “we will do our best to make sure they are corrected, and that the original intent of the 2022 CARES II Small Business Assistance Program is honored.”
Informed of their having been chosen, most of the awardees had already begun to spend. It didn’t seem to matter that as a result of the pause no awards had been handed out. The applications completed by the awardees had noted that the funds were being awarded on a reimbursement basis, and that businesses would have to pay for expenses upfront and submit documentation for reimbursement of their expenses.
Gallagher’s August 6 report found that contractual requirements had been ignored by the program administration. Requirements were either misunderstood or intentionally miscommunicated. She placed the mistakes at the feet of county director of economic development Tim Weidemann. Weidemann, the comptroller alleged, had been responsible for the incongruities between the contracts and their execution.
Nine days later, opting to conduct no further investigation, the Ulster County Legislature voted 18 to 3 to honor the award amounts promised through the tainted process and give out the money anyway.
Two new resolutions separated the money into two separate buckets. One bucket of $580, 921 went to businesses which qualified as intended under the terms laid down in the CARES resolution. The other bucket, which legislator Joe Maloney referred to as “the bucket of badness,” was the remainder of the funds, less about $100,000 of the outflow which the county managed to staunch when it realized the mistakes made and advised the awardees to stop spending.
“We just keep going”
Prior to that vote, Maloney was sarcastic
“Let’s move on,” he said. “Nobody cares. We’re starting to refer to it as [Weidemann’s] friends and family ARPA funds and we just go on. It’s not our money. If it was our money, believe me, we’d want an investigation, we’d want to look into it, we’d want to fix it. And you know what happens when you look into something? It deters these things from happening again …. We just keep going and keep pumping out the money and keep telling everybody there’s nothing here to see.”
Legislator Abe Uchitelle, who voted to pay out the money, saw it as a matter of obligation to meet the contracts offered, regardless of what had gone wrong.
“I can tell you that I think I know what happened,” Uchitelle said. “I don’t believe there was any malicious intent. I think it was an honest mistake. There’s absolutely no evidence that would indicate that this was intentional, and the person who made the mistakes feels really badly about it.”
Back in April, Weidemann resigned his position to take a job with congressmember Pat Ryan as his director of economic development and special projects. Weidemann has not responded to multiple requests for comment.
The process to provide the grants was threefold. First the program was announced, and applications began to be accepted on October 31, 2022. Next, the submitted applications were sorted through by Weidemann and his staff to determine eligibility. Lastly those businesses which qualified were provided to a six-member scoring committee, whose three legislators and three administrative staff judged each applicant based on a scoring matrix provided them.
Member of the scoring committee legislator Kevin Roberts takes great pains to explain that he doesn’t believe there was anything nefarious about the process, but still he remains dissatisfied with how the process played out.
“It was a painstaking ordeal,” explained Roberts. “I don’t think that justice was done by that process. There was over 200 applicants. Some were easier to score than others. Minimum it took ten minutes each. I think it was probably more than 40 hours when it’s all said and done. You know, we are part-time legislators, and the county exec’s office has a full-time staff that gets paid for 40 hours.”
Roberts also felt the process was rushed because the county hadn’t provided the qualifying list of awardees until the last minute. In a legislature meeting, he characterized the county as sitting on the list.
“Maybe that sounded a little bit nefarious,” said Roberts. “I get that the county is busy, but there was a several-month process on their part. When they finally got it to us it was like ‘Hurry up. Let’s get it done’.”
Roberts would have liked to have gone out to visit some of the businesses and see firsthand what their needs were and to get a feel for their operations. There just wasn’t enough time. As the rubric for scoring had no element of financial consideration, the scoring committee was not provided with financial information.
No more invoices, please
Legislator Herb Litts, a UCEDA director, sees the whole thing as a regrettable mistake with consequences. He doesn’t see any way not to pay the money out.
“The small businesses that submitted through the process and were picked went to contract,” said Litts. “They signed the contract, but were found later to be ineligible. They filed in good faith, they were accepted, and contracts [were] written. And it’s only honoring to the point when we told them, look, there’s an issue. Don’t send any more invoices.”
Litts found nothing unusual about the list of awardees being provided just 24 hours before the board vote on accepting it. “I get the list. I know it was vetted, that’s why you have a committee to do that,” he said. “So I’m not going to go back and regurgitate all the applications. I didn’t even see the applications. So Weidemann and the county group there, the economic development [people], they enter into contracts, and they supply them to UCEDA at a board meeting. ‘Here’s the list. Here’s the contracts. And we needed to vote on them, which we did.’ Then, some time down the road, we hear, ‘Ohhh, we got a problem.’ So any time you have a problem, you say, ‘Alright, stop the presses. Stop. Let’s figure this out.’ So I gotta give the county government kudos in that one.”
Our financial guy left|
While comptroller Gallagher does not believe that the UCEDA board was responsible for the improperly awarded funds, she opposes additional money for UCEDA until issues of governance and finance are worked out.
UCEDA hasn’t posted an annual financial report since December 2021.
At the August 15 Laws and Rules Committee meeting, the comptroller elaborated. “We are looking at UCEDA’s financial disbursements generally,” said Gallagher. “Unfortunately, this did necessitate issuing a subpoena which we did earlier this week. We received a subpoena response, and we’re reviewing that information. We are going to require additional books and records, so that’ll be ongoing, and we’ll report to you as soon as we know more.”
Litts denies the comptroller’s subpoena was necessary.
Gallagher said she had asked UCEDA staff for the specific documents eight weeks ago, at the beginning of her audit. “We first asked for these documents when we issued the audit letter,” said Gallagher. “We asked for bank statements, canceled checks …. They provided most of it. We still have a few documents outstanding.”
Litts has an explanation for UCEDA’s financials not being posted.
“Ever since I’ve been on UCEDA, there has been someone from the financial office that is assigned to be our financial officer,” said Litts. “We are behind because the gentleman who was our financial guy left. We just got a new guy in here this past month, and he came in under fire because of the third-party audit, and he’s been working with the auditors and stuff. And I think, I think we’re okay. And if you look at our minutes, and they’re public, we do have financial reports that are submitted every month.”
The third-party audit Litts refers to involves the resignation of longtime finance commissioner Burt Gulnick.
The reports Litts refer to haven’t been submitted since April, when CFO Adam Korol said he needed to update the way journal entries were handled. In the interim, Korol ended his employment with the county and Christopher Jaros has taken over the CFO position for UCEDA.
These reports aren’t the same as the unpublished yearly report which is to be performed by an outside accounting firm to provide a general overview of UCEDA finances. The monthly reports Litts refer to, which are prepared in-house, lack the imprimatur of neutrality an outside firm provides. The 2021 report was performed by UHY C.P.A. LLC, a group based in Kingston.
Legislator Chris Hewitt, who also served on the scoring committee, voted for the bad bucket.
“We should have been given better grants to look at,” said Hewitt. “I think we made two mistakes. One was giving grants to people that shouldn’t have gotten them in the first place. But also the other mistake is that we’re not funding the struggling businesses that actually needed the funding.”
While Hewitt regretted how the process turned out, he also described his vote to provide funding to the ineligible businesses as making the legislature’s commitment whole.
Time to do the right thing
What about the commitment to the businesses which applied who fit the criteria and could have used the money more than, say, the Accord Market LLC which received $32,500 and is owned by the Oberon Group, which owns restaurants, catering operations, wine bars, après-ski food and beverage experiences, and naturalist retreat centers in New York City and upstate New York. Or Belleayre Lodge, “a community of fresh and modern vintage Catskill cabins” which , received $34,294 for its glamping operations. .
Other major winners from the flawed process were Northeast Offroad Adventures Inc. which received $34,000, SJ Galaxy Construction LLC, $35,000, Starlite Motel LLC $35,000, and Hurds Family Farm LLC $35,000, None of these should have qualified, according to Criswell.
Chelsea Becker, third generation owner of Sav-on Party Central in Kingston Plaza, is one of those business owners who would have qualified. She now feels cheated. She spoke of her disappointment at the August legislature meeting after the vote to reward the ineligible awardees with funds from the bad bucket.
“When we read about the Ulster County Cares Act, we were happy and immediately applied,” said Becker. “We were hopeful that we would be one of the businesses that would benefit, but also recognized that there are many in the county that needed the money as much as we did.”
According to Becker, besides the special consideration given to companies that were woman-owned, her company also meets every other criteria of the grant as well. It has 25 or fewer employees. The business had experienced at least a one percent decrease in net profit from 2019. It reduced its operating hours for four consecutive weeks.
At the height of the pandemic from March through July 2020, Ulster County reached out to Sav-on for a donation of tenting to be used to provide Covid-19 testing sites.
“Sav-on donated over $120,000 of equipment to Ulster County and the City of Kingston,” said Becker. “Even though we weren’t allowed to work ourselves, we did not hesitate to assemble a team of our loyal staff members to install tents on multiple locations.”
Becker said she was informed that Sav-on had been beaten out by 42 other applications. She described feeling crushed at receiving the news. When the information came out about the ineligible awardees months later, her emotion changed to anger.
“When we read about the gross misuse of funds, we were extremely upset,” said Becker. “This is not what we expect from Ulster County. When you called on us and many other local businesses to step forward and help while facing our own financial ruin, we did so without question. Now it’s your turn to do the right thing and award this grant money to the businesses and community members that honestly met the standards that you all set.”