State auditor Joseph DeNucci delivered a hard blow to the Massachusetts Estuaries project this week, releasing a highly critical audit report on the multi-million dollar project managed by the University of Massachusetts at Dartmouth to study the health of ponds and estuaries on the Cape and Islands.

The Massachusetts auditor’s report found undocumented contract costs, no-bid contracts and a potential conflict of interest in the project, a sophisticated scientific study begun in 2001 of more than 60 ponds and estuaries from Duxbury to the Cape and Islands.

Twelve ponds on the Vineyard are involved in the study, which is broadly intended to precisely pinpoint the source of pollution with an eye toward saving coastal communities millions of dollars in restoration and cleanup costs.

The state auditor’s report identified some $629,000 in “questionable” contract costs incurred by the university due to inadequate procurement controls, and about $833,000 in two subcontracts, awarded without competitive bids to a company run by a scientific associate of Brian Howes, the principal investigator for the Massachusetts Estuaries Program (MEP).

The report also identified a potential conflict of interest inherent in the relationship between Mr. Howes and John Ramsey, principal of Applied Coastal Research and Engineering Inc.

The audit covered the period from 2002 to 2004. The university has since taken steps to tighten its procedures covering contract cost accounting and potential conflicts of interest.

But it also maintains firmly that the relationship between Mr. Howes and Mr. Ramsey was a “scientific collaboration common to large research projects rather than a standard contractor/subcontractor relationship,” according to a statement put out this week.

The two men, who are both marine scientists, jointly developed the complex scientific model used to analyze the ecological health of the ponds and estuaries,

“Brian Howes and John Ramsey are the ones that created this unique model. They’re the only two who can execute it. They need to work together for the model to work,” said university spokesman John Hoey.

The audit report claimed Mr. Howes was involved in the process of awarding the contracts to Mr. Ramsey’s company but did not disclose his prior business relationship with Mr. Ramsey.

It noted that Mr. Howes’s for-profit company, Coastal Environment Associates, shared a mailing address with Mr. Ramsey’s company in Mashpee.

There is no suggestion Mr. Howes derived any money from the relationship. He explained that the mailing address was for convenience, because parties involved in the estuaries project used Mr. Ramsey’s place of business for meetings related to the project.

As for the claimed nondisclosure of his prior association, Mr. Howes said — and the university confirmed — it was well-known to all parties before the estuaries project even began.

“This model was created long before the MEP began and is in the process of being patented to protect the intellectual property rights of the University and the scientists,” the statement from the university said.

Yesterday Mr. Howes underscored the point.

“The critical point is, no one disputes the fact that John Ramsey and I developed the model. We wrote the proposals, the pre implementation proposals together. That took two full years before the project even started. It was transparent then who was on the team,” he said.

He described the alleged potential conflict of interest as mostly procedural.

“The university was doing a massive enhancement of its research around 2002. Some of the procedures just weren’t there,” he said, adding:

“The university made a determination in 2002. Then, later, the auditor has come in and said ‘we disagree with that.’ All the other things devolve from that original determination by the university.”

In its statement the university enumerated changes it has since made, including hiring a new research director and a grants director with accounting experience, hiring additional grants office staff and adopting new grants management software, and instituting stronger conflict of interest procedures.

Mr. Hoey said the university had accounted for every dollar invested in the MEP.

The release of the auditors’ report this week came on top of another difficulty for the estuaries project: a protracted period of negotiation for a new contract with the state Department of Environmental Protection.

The contractual delays have in turn held up the process of delivering the findings of MEP studies — specifically in the case of the Vineyard, the report on the state of the Edgartown Great Pond, a copy of which was obtained by the Gazette last month. The draft report is posted on the Gazette Web site (

The report found the pond was moderately affected by excessive nitrogen, and that the biggest contributor to the nitrogen load was individual septic systems.

The Edgartown Great Pond draft report was submitted to the DEP for review on July 1 and stayed there for four months until Nov. 2. But in the absence of a new contract it cannot be officially released and MEP members cannot begin the consultation process about means to rectify the problem.

Yesterday all parties — the MEP, the university and the department said contractual negotiations were now proceeding well and would likely be concluded within a couple of weeks.

Mr. Howes said he was glad the audit process now was behind him and the contractual issue apparently close to resolution, so he and his team could focus on their main concern: “Making a difference, moving environmental restoration forward.”