It would appear that some fishermen in New Jersey may have gotten caught with their hands in the federal cookie jar. A new report from the New Jersey Office of the State Comptroller (OSC) finds that nearly $2.4 million in COVID-19 recovery funding paid to fisheries in New Jersey may have been improper, having received more funds than what they lost in 2020 due to COVID.
The CARES Act-funded program, administered by the New Jersey Department of Environmental Protection (DEP), was intended to provide funds to fisheries related businesses that lost revenue during the height of the pandemic. To qualify, applicants must have experienced a greater than 35% loss between March and June of 2020. However, program guidelines required that fisheries could not be made “more than whole”—that is, they could not receive more funds than their actual losses in 2020.
As an independent State agency tasked with examining all aspects of government expenditures to help detect and prevent fraud, the OSC review found that $2,373,550, or 22% paid out to fisheries related businesses, may have been improper. As of the March 24, 2022 announcement by the state government watchdog office, the improper funding had not been returned as required.
“These funds were for fisheries that lost money because of the pandemic,” said Acting State Comptroller Kevin D. Walsh. “If they didn’t lose money during the pandemic or didn’t lose as much as they claimed, they should pay the money back. If the excess funds aren’t returned, taxpayers could potentially be on the hook.”
OSC selected 24 out of 90 program recipients for its review. Ten recipients received awards that put their total revenue for the year above what their average revenue for 2015 to 2019, a violation of program guidelines. The OSC announcement did not name any of the businesses under review, nor did the agency reveal if the improper funds were issued to commercial fisheries, recreational fisheries, or a combination of both.
Federal guidance did not require that applicants submit documentation of their lost revenue. Instead, applicants signed an affidavit stating that the information they gave was truthful. This “self-certification” process was intended to speed up the distribution of funds. However, OSC found that DEP overlooked basic red flags that would have alerted DEP to errors or misrepresentations in applications.
According to the OSC press release the agency identified several red flags that NJDEP should have caught. For example, one applicant reported revenue of $19,200 from March to June every year from 2015 to 2019 — a circumstance that warranted further investigation. OSC’s review found that this applicant didn’t suffer a 2020 revenue loss, yet still received funds. Another applicant submitted two applications for assistance, and received two awards totaling nearly $377,000, but only suffered a loss of $188,000.
According to the report, at least nine of the applicants didn’t report other COVID relief they received, as required, including federal Payroll Protection Program loans ranging from $1,000 to more than $200,000.
In these instances, DEP did not follow up or request more information from applicants prior to distributing funds, missing a key opportunity to prevent fraud, waste, and abuse.
“Our report finds that DEP did not take adequate steps to address red flags and protect federal recovery funds from being misspent,” said Acting State Comptroller Kevin D. Walsh. “Getting COVID funding out quickly was important, but more should have been done to protect the funds from fraud, waste, and abuse.”
OSC is recommending that DEP, along with all agencies tasked with distributing federal COVID recovery funds, take reasonable steps to identify problems that can be addressed without causing any delay. OSC also recommends that DEP direct recipients who were made “more than whole” to return excess funds, in accordance with the rules they agreed to when they received the funds.
Learn more about the New Jersey Office of the State Comptroller at www.nj.gov/comptroller.
