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New Bedford city officials gave $2.25 million to a local robotics nonprofit after the city’s own auditors repeatedly warned that the grant came with significant risks.
Internal memos show auditors had deep concerns about New Bedford Research & Robotics, which received a pandemic relief grant last spring to renovate a vacant garage into an innovation center.
The auditors initially recommended against providing the money. They determined that the young nonprofit was “very high-risk.” They said the grant would violate the city’s own criteria, creating an appearance of “favoritism.”
But top officials in Mayor Jon Mitchell’s administration disagreed with the auditors’ findings. They have strongly defended the project as a good investment of public funds.
A Bristol County Superior Court judge ordered the city to release the internal memos to The Light after the news organization sued the city for the documents. The Light first requested the records in February, but city lawyers claimed for months that they could be kept hidden from the public under attorney-client privilege. The Light appealed to the Secretary of the Commonwealth, who ordered the city to produce an index of the records, which it did. When the city still didn’t produce the records themselves by June, The Light filed suit.
The Light previously reported on the project based on an early assessment from February 2023, which also ruled the project was high-risk. The grant wasn’t finalized until more than a year later in April 2024.
The newly released memos shed light on concerns raised during that yearlong risk assessment process — and how city officials responded.
Auditors gave serious, repeated warnings that NBRR had a high risk of failing to reach the project’s goals or failing to meet the compliance requirements that come with federal grants. NBRR was required to correct some problems, but top administration officials rejected some of their own auditors’ advice.
“Based upon the results of this review and factors as of this date, it is our opinion that NBRR is a very high-risk organization and that an award should not be issued,” the auditors wrote in a July 2023 memo.
A second memo in August 2023 asked for extensive documentation from NBRR. By the time auditors issued their third and final opinion in February 2024, NBRR had fixed the most glaring compliance problems, but auditors still had deep unresolved concerns.
Read the memos ⇢
The authors of the memos were Rick Taylor, an accountant contracted by the city as a consultant, and Jennifer Maxwell, a city auditor who resigned earlier this year. Both declined to comment for this story.
The administration official who oversaw pandemic relief spending, Chief Operating Officer Christina Connelly, was not available for an interview. Public Information Officer Jonathan Darling issued a written statement on Wednesday justifying the city’s funding decision.
Darling said NBRR would benefit the city’s economy and praised the nonprofit’s leader for his commitment to the project. Darling added that the city is paying vendors directly for design and construction work, as well as taking other measures to mitigate risk.
“While no investment is without some level of risk, we believe this one will pay dividends for years to come,” he wrote.
Read the city’s full statement
“The establishment of New Bedford Research and Robotics, which was funded by the City’s ARPA funds and sources of private capital, is a significant win for the city. It will offer a long-term opportunity to broaden Greater New Bedford’s economy by cultivating the formation and growth of technology businesses. The applicant, Mark Parsons, has an established track record in the field, having successfully developed a robotics program affiliated with the Pratt Institute in New York. He has moved back to New Bedford and seeks to replicate his success here. He has demonstrated personal commitment by securing private financing, attracting outside investment, and contributing a significant amount of his own resources. Recognizing the promise of this initiative, the City has provided support in a manner that carefully manages public risk. Under the advice of legal counsel, the City has structured its assistance to ensure that federal funds are safeguarded, including by paying contractors directly, requiring a notice of federal interest, and exercising oversight of the project. While no investment is without some level of risk, we believe this one will pay dividends for years to come.”
— Public Information Officer Jonathan Darling
The grant to NBRR is one of the largest slices of New Bedford’s $82 million allocation from the American Rescue Plan Act, the federal pandemic relief package passed in 2021.
NBRR plans to transform the formerly vacant Glaser Glass building on Purchase Street into a futuristic robotics hub. The organization has provided STEM lessons for local students, and it works with companies and universities to conduct robotics research.
The project has fallen far behind its original schedule. When The Light toured the site in April, construction was still in very early stages. The building needed unexpected work, contributing to delays and rising costs, the nonprofit’s leader said at the time.
Less than $273,000 of the project’s $2,250,000 in pandemic relief funds had been spent by this past June, according to the latest project report. It said the latest construction activity included stabilizing the aging structure and replacing the roof.
NBRR says it’s still on track to meet all its goals before a federal spending deadline at the end of 2026.
In the fiscal year ending last summer, NBRR’s expenses exceeded its revenue by nearly $170,000, nonprofit tax filings show. The organization’s actual revenue has never come close to the projections in grant documents it submitted to the city, according to the filings. The nonprofit projected nearly $1.3 million in revenue for fiscal year 2024, but it ultimately raised less than half that amount.
Mark Parsons, the executive director of NBRR, was out of the office and unavailable for an interview this past week. His spokesperson, Nick Puleo, released a written statement from NBRR Board Chair Ben Anderson.
“New Bedford Research & Robotics is a growing and successful nonprofit with a proven track record of regulatory compliance, transparency, and sound financial stewardship as it pursues its mission to expand access to frontier technologies for entrepreneurial and social impact in New Bedford,” the statement said.
Anderson said NBRR wasn’t involved in internal city discussions, but it acted on city recommendations and is in full compliance with grant requirements.
Read the NBRR’s full statement
“New Bedford Research & Robotics is a growing and successful nonprofit with a proven track record of regulatory compliance, transparency, and sound financial stewardship as it pursues its mission to expand access to frontier technologies for entrepreneurial and social impact in New Bedford.
New Bedford Research & Robotics was not a part of or aware of any internal discussions related to its ARPA funding award; however, when the City made recommendations to strengthen its internal processes, the organization acted on them, is in full compliance with all funding requirements, and is on track to meet all project goals.
Mark Parsons, our founder, saw a vacant building in the heart of the city and knew this legacy site was the ideal future home of New Bedford Research & Robotics. Since NBRR wasn’t in a position to make that dream a reality, Mark put up capital to make it happen for the benefit of the organization and the community. This real estate purchase and arrangement has been thoroughly vetted and approved by our board and through a rigorous third-party review process to ensure transparency and compliance.”
— Ben Anderson, Chair, Board of Directors
First memo identifies major compliance challenges
The auditors advised against issuing the grant in their first memo in July 2023.
They said that there was “grave concern” about NBRR’s ability to bring in revenue to support its programs. They pointed out that it was a new nonprofit formed in 2021 with a minimal track record. Some aspects of the project “will not stand up under scrutiny” if the project were to be audited, they wrote.
Auditors took issue with the ownership arrangement for NBRR’s future innovation center. The nonprofit would be the grant recipient, but it did not own the Purchase Street property.
Instead, Parsons had set up a separate for-profit holding company, called South Coast Research & Robotics, to purchase the property and lease it to the nonprofit. NBRR would pay rent to SCRR, and it would also be responsible for most other expenses, such as utilities, insurance, and property taxes. Parsons previously told The Light that this arrangement was the only way to secure a bank loan to finance the project.
The original bank loan posed a problem for auditors because the for-profit company had put the nonprofit’s assets up as collateral. That didn’t make sense to them because the NBRR’s assets didn’t belong to SCRR, they wrote in their first memo.
The loan wouldn’t fly under federal grant regulations, and the IRS would have a problem with it too, auditors said.
“This may be considered an act of ‘self-dealing’ and/or ‘unacceptable private benefit’ by the IRS, and may result in loss of an entity’s non-profit status and potential penalties,” they wrote.
According to the memos, Parsons’ answers about the loan didn’t match bank records.
They wrote that Parsons said he was the guarantor and his home was the collateral. But they said bank records showed NBRR was the guarantor and NBRR’s assets were the first collateral on top of Parsons’ home.
“These issues lead the reviewers to question the financial viability and risk involved in ownership of the building located at 1265 Purchase Street,” the memo said.
At the time, the auditors were also concerned that the for-profit and nonprofit’s finances could be “comingled” inappropriately.
Near the end of the memo, auditors began to express concerns that the city was violating its own grant criteria by funding more than half of the project costs, setting the stage for the auditors’ biggest disagreement with top administration officials.
The second memo came a few weeks later. This one reiterated problems found in the first memo and flagged areas where the auditors needed more information.
This time, auditors went further in their description of Parsons’ answers about the bank loan, saying his divergence from the bank records was “stark” and calling it a “red flag.” They asked to see detailed banking records.
The auditors noted discrepancies in budget documents and expressed doubt about NBRR’s budget projections. They wrote that NBRR’s “aggressive growth modeling” was unusual for a nonprofit, saying it looked more like a for-profit business plan designed to accumulate cash.
“Where is the program services portion of the budget that is intended to benefit the community?” they asked.
The memo called for NBRR to produce a wide range of detailed banking records, financial reports, and summaries of past programs to resolve the auditors’ many outstanding questions. It’s not clear how much of the requested information NBRR ultimately provided, though documents show the nonprofit met with auditors a few days after the memo was filed.
Auditors question lease agreement
When the reviewers filed their last memo in February 2024, Parsons had fixed the “most significant issues” from the first memos, auditors wrote. He took NBRR off the bank loan and amended SCRR’s business registration to make it clear the company only existed to own real estate.
A real estate broker was brought in to look at the lease agreement and make sure the rent payments were reasonable. The broker’s appraisal estimated the annual rent payments should total around $162,000. For the auditors, that was close enough to the $175,000 per year NBRR was paying at that time.
But they weren’t fully satisfied. The auditors said NBRR’s rent payments appeared to “far exceed” SCRR’s loan payments, noting that NBRR was also covering most other property-related costs, such as utilities and taxes.
The auditors cited records showing that SCRR paid about $4,882 per month on its loan in early 2023, while the lease was charging NBRR $7,292 in rent around that time period. They pointed out that the lease increases the rent payments each year, reaching $19,215 per month within a decade.
“Charging more for the lease than the cost of the mortgage will result in windfall profit for SCRR,” they wrote, adding: “it is highly likely that the for-profit entity will reap significant profit on investment.”
NBRR disputes this.
“There is not a windfall. NBRR is in a standard lease with SCRR for a commercial property,” Puleo said in a phone interview.
In an email, Puleo said the auditors were wrong to fixate on the lease structure, saying it’s normal for a “commercial lessee” to make improvements to a rented space at its own cost.
Anderson, the board chair, said in his statement that the arrangement was “thoroughly vetted and approved by our board and through a rigorous third-party review process to ensure transparency and compliance.”
The for-profit/nonprofit ownership arrangement created other risks, auditors said — risks that extended beyond this single project.
NBRR’s pandemic relief grant came through the city’s Vacant or Abandoned Property Rehabilitation Program. When the city put out a request for proposals inviting organizations to apply, it set a requirement that the city would only fund up to 50% of the total cost of projects.
Auditors calculated the city would be funding 71% of the NBRR project, violating its own criteria. The only other funding source going to the nonprofit aside from the $2.25 million city grant would be a $900,000 state grant from MassDevelopment.
Top administration officials came up with a different ratio. They factored in a $960,000 bank loan taken out by Parsons’ private holding company and $500,755 of “owner equity.” That brought the city’s contribution down to 49%.
But auditors said that funds provided to the holding company, a separate legal entity that was not receiving the grant, shouldn’t be used in the calculation.
Connelly, the top official overseeing pandemic relief spending, decided that the 50% limit could be omitted because it was a rule imposed by the city and not the federal government, according to the memos. Auditors called this a “selective after-the-fact change” that could lead other organizations to protest the grant because they would not have been able to meet the requirement.
“In addition, a revision to the award selection criteria in order to benefit a subrecipient could cause reputational damage to the City as it may present an appearance of favoritism for the subrecipient,” they said.
Last October, months after the city provided NBRR with the grant, Connelly filed a one-page memo justifying the city’s reasoning.
She wrote that it was “understandable” that the risk assessments only included funds controlled by the NBRR, “which clearly did not meet the requirement.” But she said the city decided to consider funding for both the nonprofit and the for-profit because of the “unique nature of this project.” Her memo said the committee in charge of reviewing grant proposals had no objection to this.
Auditors said the city “must” take four specific steps to secure the federal money.
City leaders accepted the auditors’ recommendation that they pay project vendors directly, instead of giving cash to NBRR. And the grant agreement includes a recommended clause that aims to protect the project in the event that NBRR dissolves.
The city did not act on auditors’ recommendations for retainage, the amount of grant money the city can hold back until the work is complete to make sure the project gets done. Auditors recommended 10% retainage, but the grant agreement only provides for 5% retainage.
Auditors recommended that the agreement include a “[r]eal property clause requiring a lien to be filed and recorded,” though they didn’t go into detail on what that would look like. The grant agreement doesn’t include a provision that explicitly requires NBRR or the city to file a lien.
The city has not addressed questions about what would happen to the federal money if Parsons’ private holding company were to sell the property after the renovation is complete, potentially profiting from the grant-funded improvements. NBRR has agreed to certain restrictions on what it can do with the property, but it’s not clear how those limits would apply to the private holding company.
Parsons previously said he intends to eventually transfer ownership of the property to the nonprofit.
The project now faces a deadline of Dec. 31, 2026, to spend the rest of its grant. Any money not spent by that date must be returned to the federal government.
Email Grace Ferguson at gferguson@newbedfordlight.org
Editor’s note: Mark Parsons and Ben Anderson are members of The New Bedford Light’s Advisory Council. The New Bedford Light’s newsroom is scrupulously independent. Only the editors decide what to cover and what to publish. Founders, funders and board members have no influence over editorial content.
No one should be surprised, this administration has established it runs the city by it’s own rules, it is not the first time something like this has happened, and it won’t be the last. In my opinion Mayor Mitchell did not handle or distribute the APRA Funding in the best interest of city (example using more funds in the Water and Sewer Division to help prevent the rise in Sewer and Water rates, with taxes rising again this year this would have provided home owners with some much needed relief). After over ten years Mayor Mitchell’s vision is not working and the city of New Bedford needs new leadership in City Hall.
Has NBRR been able to offer any of its proposed program during the renovation process, or are they having to wait until all the work is done on their building? I believe they have been open to the public for several AHA Nights, and I know of an artist who has worked with them to create a ceramics project. But that doesn’t sound like all they had planned to do as a non-profit.
Stories like this and the lengths to which The Light has gone to expose potential corruption at the city level are why local journalism MATTERS. I hope this story is continuously updated because, as they say, where there’s smoke there’s usually a fire.
I’m increasing my monthly donation after reading this. Well done!
I’d donate too, if the LIGHT was fair and posted all comments, but they have proven they are not fair and only post what they allow, not what is actually posted. Not worth a damn penny!
Giving million s away for a company that is not a non-profit but a real estate agency to secure the property is SHAMEFUL and unfare to the real non-profits that could have used the capital for improvements.
Great work! Now how many more? Quality of life/work issues need to take precedent! A significant drought was declared for the Southcoast and Cape again, yet the City’s administration is pushing the pedal on commercial development. The quality of life for current residents should not be affected by overdeveloping the future. I didn’t even mention the sewage pollution.
I’m happy to see the city circling the drain on the project, the entire $82 Million dollars in “Pandemic Relief Funds” should have been returned to the U. S. Treasury as the nation is in debt for over $32 Trillion dollars that the federal tax players will be forced to repay in the near future. If you think times are tough for some people now, just wait until the middle class is taxed heavier to repay that debt.
The city funding a high risk project with these funds may work out as hoped and be a big benefit to the City in the future…only time will tell.
Michell is forward looking and that means taking risks others may not …some will work some will not but to only find safe bets is not the way to pull NB into the future.