Audit: Nonprofit misspent funds

A draft audit has found that a nonprofit company run by Bruce C. Bolling, a former City Council president recently tapped to recruit minority-owned firms to work at the Democratic National Convention, has misspent more than $430,000 in taxpayer funds, including nearly $600 a month on Bolling's personal luxury car, state and federal officials said yesterday.

Bolling, who has served as executive director of the Massachusetts Alliance for Small Contractors since his failed bid to become Boston mayor in 1993, was briefed on the audit findings last week and has a month to refute the charges or pay back the money, said Daniel A. Grabauskas, the state's transportation secretary.

The audit by the state Highway Department accuses MassAlliance of overcharging about $50,000 for executive perquisites disallowed by federal regulations -- primarily for Bolling's leased Audi all-wheel-drive station wagon. In addition, it says MassAlliance overcharged about $380,000 for overhead expenses related to minority-business consulting services provided on behalf of the state's highway agencies.

Grabauskas said the audit determined that Bolling should return approximately $433,000 in all: $165,000 to MassHighway, and the rest to the Turnpike Authority, which oversees the Big Dig. He said he would refer the audit to other state agencies that work with MassAlliance to determine if they, too, are owed for overbillings.

"We now give them 30 days to respond to the inappropriate billings, and assuming they cannot adequately respond, we will seek to recover that money," Grabauskas said. "As a result of the improper billings, our intention is to turn this information over to the other organizations working with this group, including Massport and the MBTA."

In January, Bolling's company was one of three selected by organizers of the Democratic National Convention to recruit minority-owned firms seeking to participate in this summer's nominating convention at the FleetCenter.

Bolling, whose corporation's $1.2 million annual budget is derived almost entirely from state and federal funds, defended the firm's expenditures in an interview, saying MassAlliance has been an "open book" for a decade.

"MassAlliance has not misrepresented, deliberately or otherwise, anything we have done," said Bolling, 59, who was Boston's first black City Council president in 1985 and 1986. "We have been transparent, we renew our contracts each year with each agency. We have provided quality services to each entity that we have had a contract with, and that has to be a testament for us to be able to do that."

In specific, Bolling defended the costs his company has charged for his automobile and for overhead expenses. He said his total pay package adds up to about $150,000, a figure that includes the lease payments and insurance fees for the car, which are counted as income. Although Bolling could not provide records to the auditors proving that he used the vehicle for work, he said he should not have to remunerate MassHighway and the Turnpike Authority for the car because "when I was recruited, I was told I would get a leased vehicle."

"That is not out of line with the kind of package any CEO of a not-for-profit company would receive," said Bolling, whose pay equals about 13 percent of his firm's annual budget. "I don't work for MassHighway, and if I'm being charged for the item as income, the lease and the insurance, what's the issue here?"

Officials with the Federal Highway Administration ordered the audit as part of a newly invigorated campaign to root out fraud, waste, and abuse in the US Department of Transportation's Disadvantaged Business Enterprise program, which earmarks about 10 percent of federal transportation dollars for small minority businesses. Last month, the federal agency began an in-depth review of the state Office of Minority and Women Business Assistance, which certifies minority-owned companies to qualify for special consideration for state contracts, and has begun poring over paperwork of four major MassHighway construction projects.

And earlier in April, federal authorities searched a North Shore demolition firm accused of misrepresenting itself as a minority-owned business to gain access to the lucrative state highway contracts, including a $45 million subcontract to dismantle the elevated Central Artery in downtown Boston.

The draft audit of Bolling's operation was the first in-depth financial scrutiny of MassAlliance since the not-for-profit was established, even though it has spent more than $10 million in state and federal funds since it opened for business in 1994, Grabauskas said.

He said that it would not take another decade for the next audit.

"We're letting hundreds of millions of dollars out a year in contracts, and we want to know what they're doing," Grabauskas said.

Last week, officials at the federal highway agency briefed investigators at the US Department of Transportation Office of Inspector General on the Bolling audit, according to federal officials who asked to remain anonymous. They have not decided if they will formally refer the case for potential criminal investigation, the officials said.

The audit determined that Bolling did not reduce the amount his firm charged state agencies for the cost of administering contracts, known as overhead, even though the firm had taken on additional work that should have reduced that overhead cost. As a result, the audit determined, MassAlliance, a not-for-profit, has generated a surplus in revenue for virtually every year of its existence, sometimes as high as a quarter-million dollars.

Bolling said he intends to dispute the assertion that he overbilled, especially because state officials had persistently encouraged MassAlliance to seek more outside work to broaden its reach in the community.

Federal and state officials have not always taken such a dim view of Bolling's operation, however. According to an April 1999 joint federal and state review of the Big Dig's minority-business recruitment practices, Bolling's firm was "viewed by the team as being an outstanding arrangement for providing supportive services."

"We believe the practices being utilized by [MassAlliance] . . . should be shared with other agencies in Massachusetts as well as with other states," the review report says.

In addition, the US Commerce Department in 1999 honored Bolling as the New England Advocate of the Year.

Bolling pointed out that the audit is inconsistent with the favorable reviews he has received in the past.

"The important thing here is there has been no reference to misappropriated funds, a lack of quality of the services, no reference to a lack of productivity," Bolling said. "If the purpose of the [Disadvantaged Business] program is to build capacity for minority and disadvantaged companies, MassAlliance is succeeding. We have helped about 800 disadvantaged businesses since our inception."

Raphael Lewis's e-mail address is RLewis@globe.com.