Amistad funding halted pending audit

State payments to Amistad America were halted in late June and will not resume until a state audit of the troubled organization is completed, state officials said Friday.

"We plan to withhold payment to Amistad until OPM completes its audit of Amistad, which is expected to be completed in the next few weeks," said Catherine Smith, commissioner of the state Department of Economic and Community Development, in a letter to Senate Minority Leader Len Fasano, R-North Haven, on Friday.

Fasano had called for DECD to stop payments to Amistad America in recent weeks, including a press release on July 3, a letter to the DECD on Monday and a letter to the governor on Thursday. But it wasn't until Amistad America Executive Director Hanifa Washington announced earlier this week that she was backing out of the schooner Amistad's commitment to attend Sailfest this weekend in New London that information about the suspension of state grant funds to the organization came to light.

Gian-Carl Casa, spokesman for the governor's budget office, the Office of Policy and Management, said Friday that the governor's budget chief Benjamin Barnes made the decision to suspend payments on either June 27 or June 30. Casa said he called Kip Bergstrom, deputy commissioner of the DECD, and told him not to make any more payments in the new fiscal year until the contract was negotiated and settled.

Casa said his office didn't make the announcement to the public because "quite honestly, it didn't occur to us."

"It was an internal decision, it was done because we thought it was appropriate, not necessarily for the PR impact," Casa said.

It remained unclear Friday night whether the schooner Amistad would make it to New London today. Gov. Dannel P. Malloy on Thursday urged Amistad America in strong terms to honor its commitment to Sailfest. "Failure to bring the Amistad to New London would force me to reconsider support of additional state funding when negotiating future budgets with the Connecticut General Assembly," Malloy wrote.

In response, Washington said her organization would exhaust every effort to attend the festival. As of 12:45 p.m. Friday, Amistad's crew was "working around the clock" to prepare the ship for the festival, according to an Amistad America press release.

Fasano said recent actions by the Malloy administration were "disingenuous."

"Nobody said we are not going to fund Amistad anymore - nobody said that," Fasano said. "Now that you guys (The Day) have been a little bit harsher and I have been a little bit harsher, they are saying, 'Of course we are not going to fund the Amistad.' What happened last year? How come they didn't write a letter to Amistad three months ago saying they wouldn't get funding until the audit was finished?"

Fasano said the state "apparently ignored" and continued to make payments to Amistad America when state Rep. Diana Urban, D-North Stonington, began publicly pushing for an accounting of how Amistad America has spent its state funding more than a year ago.

In Smith's letter to Fasano, she said Amistad America will have to, as part of a fiscal year 2015 contract with the state, submit details on how it plans to spend state funds.

"Did they do this in the past?" Fasano asked.

Bergstrom on Friday provided an electronic copy of Amistad America's contract with the state for the funding period that began July 1, 2013, and ended June 30, 2014.

According to the contract, the grantee must return all unexpended grant funds to the DECD if it closes or substantially reduces or suspends its operations. Promotional material must include the DECD's name, and funds must be expended for the project as described in the grantee's application.

The contract addresses Amistad America's audit at the bottom by requiring the organization to retain the services of a professional accounting firm to prepare its financial records and requiring Amistad America to provide the auditor, assigned by OPM, with all requested records and documentation.

Amistad America lost its nonprofit status with the Internal Revenue Service for failing to file tax returns for three years.

The Amistad was originally scheduled to arrive at Sailfest today and be open for dockside tours and sailing excursions. Washington said on Tuesday that the ship wouldn't be coming in part because of The Day's coverage of how the organization has spent $8 million in state funding.

The U.S. Coast Guard said Thursday that the ship's license is valid until October.

j.somers@theday.com

Day staff writer Ann Baldelli contributed to this report.

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