The Boston Finance Commission found that the city’s Three Squares Main Street program may have misused federal grant funds issued to the city and recommended that City Hall continue to withhold funds from that particular initiative until an audit is conducted.
The Finance Commission, an independent watchdog agency created to monitor city business, issued a two-page report Wednesday detailing the outcome of an investigation into the citywide initiative Three Squares Main Street that was triggered by a complaint made by a city employee two weeks ago.
“The City of Boston Finance Commission has been made aware of suspected financial irregularities regarding one of our Main Streets programs,” Matthew Cahill, executive director of the watchdog agency, wrote in the report.
“After reviewing documents related to several grants provided by the City of Boston to Three Squares Main Streets, city employees relayed concerns to the Finance Commission in compliance with the city charter.”
After researching the grants, the Finance Commission found that two of the contracts utilized federal American Rescue Plan Act, or ARPA, funds in the amounts of $45,000 and $42,500. Another contract used federal Community Development Block Grant funds in the amount of $57,500, the report states.
The report states that all of the funds were deposited into a commingled bank account, and several bank statements were altered in a way that “appeared to change not only the payee but greatly increase the payments.”
The Finance Commission notes that the vendor, Three Squares Main Street in this instance, is required to provide bank statements detailing expenditures to ensure that funds are being spent in accordance with the grants.
The city received $560 million in ARPA, or pandemic relief funds, from the federal government through an act that was signed into law in March 2021. It also received roughly $17 million in CBDG funds, aimed at expanding opportunities for low- and moderate-income people, from the feds last year.
“The Boston Finance Commission recommends that the city continue to withhold funds from Three Squares Main Streets and cease all communications until this matter is resolved,” Cahill wrote. “An audit should be conducted into Three Squares Main Streets and all contracts issued by the organization for at least the last three years.”
While Cahill praised Mayor Michelle Wu, City Auditor Scott Finn, and the “several” city employees who referred the matter to the Finance Commission, he said that the misuse of funds necessitates the sharing of his report with the feds.
“Since the bank statements provided appear to show evidence of tampering and federal funds were used, the City of Boston Finance Commission will be presenting this report and corresponding evidence to authorities,” Cahill wrote.
Mayor Wu’s office said a city audit into the “financial irregularities” is already underway.
“We’re grateful for city staff who have been working to ensure oversight of every dollar of federal funds spent on pandemic recovery, including grants to nonprofit organizations,” Wu spokesperson Emma Pettit said in a statement. “Through their diligence, these financial irregularities were identified and reported to the appropriate agencies to take action.
“The city will continue to support any further investigation, and is undertaking a further audit to ensure full accountability.”
Three Squares Main Streets Director Warren Williams declined to comment.
“I would like to take some time to thoroughly review the report and gather all relevant information before providing a detailed response,” Williams said in an email. “I anticipate that it may take a week to ensure that I can address all concerns adequately.”
City Councilor Erin Murphy said in a statement, however, that the purported misuse of federal funds amounted to a “betrayal of public trust.”
“It is profoundly disheartening to learn that someone entrusted with stewarding public resources, especially resources intended to uplift our communities, would instead exploit that trust for personal gain,” Murphy said. “The funds in question were meant to support small businesses, promote equity, and revitalize our Main Streets. They were never meant to line the pockets of individuals who were granted the responsibility to serve.
“Misusing them not only erodes public trust but directly harms the people and communities these grants were designed to help,” the at-large councilor added. “This betrayal of public trust underscores the urgent need for transparency, accountability, and stronger safeguards.”
City Councilor Ed Flynn said the report indicates a lack of fiscal oversight from the city.
“The City of Boston has not provided the proper oversight and management of these federal funds,” Flynn said in a statement. “Once again, I’m calling for a full and complete federal investigation into all federal funds Boston received through the American Rescue Plan Act. We must demonstrate the highest ethical standards and fiscal discipline.”
Formerly known as Hyde Jackson Square Main Street, the Three Squares Main Street is a nonprofit organization that’s part of the Boston Main Streets program — a citywide initiative aimed at revitalizing and sustaining vibrant neighborhood commercial districts throughout Boston.
Three Squares serves commercial businesses along Center Street in Jackson Square, Hyde Square and Canary Square.