The state auditor says the way Vermont went about distributing federal COVID-19 relief funds through one program was flawed and needs to be addressed.

According to a report released last week by State Auditor Doug Hoffer, between June 2020 and December 2020, the Agency of Commerce and Community Development awarded $117 million to 2,278 businesses via the federal Emergency Economic Recovery Grant program.

“There were two separate and distinct rounds, and the problems were different in each round,” Hoffer said Monday. “One of them, arguably, puts us — ‘us’ meaning the state — at possible risk of recapture by the feds. The other does not; though, the other, involving a lot more money, is just an unfortunate example of the design of the program not being optimal.”

He said that in the first round of the ERG program, awards of up to $50,000 were calculated based on what businesses reported for losses in 2019. Hoffer said the program required applicants to show their losses for a given month.

“That was already a mistake; they just said ‘a month’ not a particular month,” said Hoffer. “So what would a business do? You want money, you’re going to find the biggest decline you can, which means finding in 2019 the month with the biggest revenue.”

This led many to receive more funds than the pandemic cost them, he said.

Hoffer’s report says that some businesses that received funds didn’t meet the necessary criteria to do so, while others received inappropriate awards.

“This is because ACCD did not develop adequate procedures to verify businesses met all eligibility criteria, and some procedures were not followed,” the report’s conclusion states. “Additionally, ACCD potentially violated federal rules by issuing awards that exceeded businesses’ reported losses.”

Hoffer said the businesses aren’t to blame here.

“They (the applicants) applied for a benefit in a program set by the Legislature and the Agency of Commerce, they didn’t do anything wrong,” he said. “It’s not as if there was anything nefarious going on, but it certainly wasn’t an optimal design, because by giving a bunch of money to businesses that were still profitable, then that money wasn’t available to the businesses that really were circling the bowl.”

According to Hoffer, this report is the first of two looking at Vermont’s use of Coronavirus Relief Funds. All told, the state spent $461 million in funds from the ERG program along with the Healthcare Provider Stabilization Grant program. This accounts for 37 percent of the $1.25 billion the state got in federal Coronavirus Relief Funds.

The report contains a response to its information from ACCD Secretary Lindsay Kurrle, who wrote that, “We stand by the work that was done to keep Vermont’s economy afloat during a once in a century crisis,” and that her office appreciates Hoffer’s work. “The Auditor’s draft report has been reviewed and the issues raised are being looked into on a case-by-case basis to determine if an appropriate cure is needed.”

The rest of the ACCD response touts the success of, and defends, the program.

Hoffer said his report doesn’t reflect on the merits of the program, merely its implementation. He said he hopes it will be used when the state government distributes other federal coronavirus funds.

Visit bit.ly/927Audit to view the audit.

keith.whitcomb @rutlandherald.com

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