Did the Delaware Center for Homeless Veterans misuse pandemic money meant for Hope Center?

Wilmington is suing a nonprofit previously contracted to run the New Castle County Hope Center, claiming the organization diverted over $300,000 in federal emergency pandemic relief meant to pay for employees of the homeless shelter.

A lawsuit filed in Delaware Superior Court by the city in July claims the Delaware Center for Homeless Veterans and its Executive Director David E. Mosley diverted at least $338,762 meant for monitor and mentor salaries at the Hope Center, instead using the money to pay for Mosley's salary as well as other executive staff at the veterans center.

Wilmington attorneys said in the suit that the veterans center and Mosley's “illegal diversion…left the Hope Center without sufficient monitor/mentors for months, depriving homeless individuals at the Hope Center of critical supportive services.”

Delaware’s largest city was first alerted to the funding discrepancies in December 2022 after New Castle County conducted a review of the Hope Center’s operations and finances. Wilmington later hired outside auditors to perform a review, which confirmed the improper spending.

The money was part of $689,997 Wilmington contributed to the Hope Center for meals and supportive services for the homeless, thanks to Emergency Solutions Grant funding from the U.S. Department of Housing and Urban Development.

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The Delaware Center for Homeless Veterans did not respond to requests for comment for this story.

How the Hope Center came to be

Near the end of 2020, New Castle County spent $20 million to convert the former Sheraton hotel ,on Airport Road near New Castle, into an emergency homeless shelter and resource for area residents. The project was made possible primarily through coronavirus relief funds from the federal government.

The Hope Center offers short-term housing for houseless individuals, as well as provides some medical care, workforce development, school programming for children and transportation.

For the first two years, Wilmington, the county and the city of Newark forged a multijurisdictional partnership to fund the center, said Carrie Casey, manager of the Division of Community Development and Housing for New Castle County.

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Casey said the county initially partnered with Friendship House to run the Hope Center as the “service anchor” for 2021.

The following year, the Delaware Center for Homeless Veterans secured the bid to serve as the Hope Center’s service anchor for 2022.

When Wilmington received the federal funding, it contracted with the Delaware Center for Homeless Veterans to provide meals for 60 days and pay mentors’ and monitors’ salaries for a year at the Hope Center.

The $689,997 grant agreement was signed in February 2022. The agreement was updated the following month, but the city’s obligation remained the same, according to court papers.

How the pandemic relief funds were misused

After New Castle County alerted the city to the funding discrepancies, Wilmington launched its own investigation.

UHY LLP, a certified public accounting firm with locations across the country including Maryland and Virginia, conducted an audit of the grant funds, a review that the Delaware Center for Homeless Veterans agreed to in February this year.

The veterans center initially agreed to repay the city for the overcharges, and on Feb. 6 provided $5,000 to begin the repayments. Wilmington attorneys say no other payments were received.

The accounting firm found that over six months in 2022, the veterans center charged Wilmington for its executive staff rather than the Hope Center employees the grant money was meant to pay for.

For example, the firm found that in April the veterans center charged Wilmington for 15 employees that were not Hope Center monitors or mentors. This practice continued through September 2022, according to court papers, with the center submitting invoices to the city for nearly a half dozen veterans center employees each month.

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“The April and May invoices were false and contained misrepresentations, because the city was in fact charged for salaries other than those for monitor/mentors, including Mosley's own salary and the salaries of the clinical director, operations manager, and two individuals who did not work at the Hope Center,” the lawsuit reads.

The accounting firm also found the Delaware Center for Homeless Veterans:

• Lacked internal controls, including switching to a manual payroll system that removed the HR director from payroll monitoring.

• Failed to turn over key documents on costs incurred during the audit; documents that are required within the agreement with Wilmington and when receiving federal grant money.

• Charged Wilmington $229,160 for services budgeted and reimbursed by New Castle County.

The contract with the veterans center expired in February and the nonprofit no longer serves the Hope Center. Now three years into operating the resource and shelter, New Castle County “knows what it wants,” Casey said.

“We took over case management in March, and use Goodwill staffing for the 24-hour staffing that we need,” she said.

Got a tip? Contact Amanda Fries at afries@delawareonline.com, or by calling or texting 302-598-5507. Follow her on Twitter/X at @mandy_fries.

This article originally appeared on Delaware News Journal: Wilmington sues Delaware nonprofit, claiming misuse of COVID funds