The state released a forensic audit of the Blue Hills Civic Association (BHCA) on Tuesday.
The audit was launched after BHCA reported to the Department of Economic & Community Development (DECD) that it lost $300,000 in state funds.
Officials said that following the loss of funds, DECD reported the incident to authorities, demanded the return of the funds, and froze all future funding to BHCA.
The group abruptly laid off employees last spring with no warning.
The audit was conducted by CliftonLarsonAllen LLP (CLA), which was tasked with assessing BHCA’s reporting, policies, and procedures, and analyzing the fact patterns that led to the loss of funds.
In their findings, CLA said there were “pervasive governance failures, systemic internal control weaknesses, and patterns of conduct that strongly suggest potential fraud and misappropriation of public funds.”
CLA also stated how the audit had to continue into 2026 due to “prolonged delays” in getting essential financial paperwork, along with operational and grant documentation. CLA additionally identified concerns that required further analysis.
The audit concluded that over a few years, BHCA received more than $15 million in state funding yet “operated without adequate policies, oversight, or accountability mechanisms.”
CLA stated that BHCA routinely disbursed funds to subrecipients without legal agreements, projected budgets, or documented compliance checks. BHCA was found to lack transparency and to have significant discrepancies in reported expenses that went “unchallenged.”
“These practices violate fundamental principles of grant management and raise serious questions about the integrity of BCHA’s operations,” CLA said in their audit.
Due to BHCA’s deficiencies in record-keeping and reporting, CLA said it wasn’t able to determine the majority of the grant funds BHCA disbursed.
Despite that, CLA found that over $200,000 in unsupported disbursements had either violated conflict-of-interest standards or were used to pay for services that were not performed.
CLA also found that the association’s policies didn’t meet state record-retention requirements and that the BHCA board’s oversight of grant awards was “lacking.”
DECD Commissioner Daniel O’Keefe said the report made it clear that more scrutiny is needed, and the department will expand its staff capacity for financial reviews and compliance for legislatively-directed funds, as it does with its other programs.
CLA’s work is not done. They will be conducting a new phase of the audit, focusing on getting and reviewing documentation directly from the BHCA’s subrecipients that received the state-funded grant dollars. CLA will be looking to verify if BHCA followed grant requirements and to see if any potentially fraudulent transactions occurred.
