Another report out this week from the N.C. Office of the State Auditor shows inadequate monitoring of funds and deficiencies from departments including the N.C. Department of Public Safety and N.C. Pandemic Recovery Office. The newly released Statewide Single Audit examined funds that come primarily through federal grants like Medicaid, highway, and bridge funding, and, more recently, financial assistance for programs to aid in the response to the COVID-19 pandemic.
Auditor Beth Wood’s office found that the Department of Public Safety incorrectly used Emergency Rental Assistance program funds. During the audit period, the Department provided $75.1 million in funds to assist households with rent and utility payments.
To maximize the benefits of the assistance program, the Department transferred a portion of the funds to reimburse rent and utility payments that were previously paid by other funding sources. Auditors reviewed the $21.5 million in transfer activity between the rental assistance program and other funding sources and initially found that some expenditures were reimbursed twice, resulting in overpayments of $1,201,030. The Auditor’s office found that many payments didn’t have documentation to back them up or didn’t agree with supporting documentation.
As a result of errors in program spending, the Department may be required to pay $1,341,695 back to the U.S. Department of the Treasury. In addition, there is an increased risk that federal funds may not be used in accordance with the federal requirements, which reduces funding available to assist other households affected by the COVID-19 pandemic. The N.C. Office of Recovery and Resiliency is the division of the Department of Public Safety that handled the distribution of funds.
“NCCORR is saying we weren’t required to monitor the money, check if they spent it efficiently,” Wood told Carolina Journal. “We are saying you are stewards of that money. That is a weak, weak response,” She followed up by saying that even though they may say they didn’t have the resources, whoever is passing out federal grant money must make sure it is being used for the intended purposes and we are getting every dollar we possibly can of benefit.
Auditors reviewed the two emergency rental assistance program reports required to be submitted during the audit period and found errors in both. Specifically, in the April 2021 report, the Department underreported funds distributed to households by $633,656. Additionally, the Department underreported the number of households receiving assistance by 805 households. For the May 2021 report, the Department underreported funds distributed to households by $156,910. Additionally, the Department underreported the number of households receiving assistance by 218 households.
“With the requirements of the federal grant money comes the requirements that you will use it for its intended purpose, you will protect it and make sure it is used for its intended purpose, and that you will make sure that everybody that we can help with that money is being helped,” Wood said. “The federal dollars are our tax dollars. Every citizen you would ask would say, yes, I expect you to follow up on those monies, make sure they were spent on the right things and spent effectively and efficiently as they possibly could have been.”
The Office also said in the report they used the same criteria that were used in the HOPE Program to determine eligibility. The HOPE Program nationwide has come under fire for having significant amounts of fraud. “The HOPE Program has been in the news for months,” Wood stated. “Again, their response has been inadequate and weak.”
The Office of Recovery and Resiliency accepted the auditor’s finding that the Department did not accurately report ERA program data to the Department of the Treasury by underreporting the funds distributed to households and the number of households receiving assistance for April and May of 2021.
With additional Treasury guidance, the office produced updated reports in November of 2021, however, the Department acknowledges that further reconciliation efforts are necessary.
Upon the auditor’s recommendations, the office has further developed the application system of record to align more closely with the accounting system. Data provided for subsequent reports are a more accurate representation of assistance provided. Department staff has become more proficient with the Treasury reporting requirements since the initial reports were produced.
The auditor’s office also found that the N.C. Pandemic Recovery Office didn’t adequately monitor $2.92 billion in federal funds used for expenditures incurred due to the COVID-19 pandemic. Specifically, they didn’t review sub-recipient expenditures and audit reports didn’t review direct expenditures of state entities, or complete separate monitoring activities for high-risk sub-recipients.
Recovery office management responded to the report saying monitoring procedures did not require that the results of reviews and other monitoring activities be documented and did not review or revise monitoring procedures following changes in federal programs and operations. These changes required management to prioritize other responsibilities, resulting in personnel not being available for monitoring.
Recommendations from the auditor’s office include that the Recovery Office should ensure that monitoring procedures are designed and implemented, including a requirement that personnel document the completion of the procedures. In addition, management should review and revise monitoring procedures as necessary in response to changes in federal programs or operations, including contingency plans to address personnel shortages.
The Recovery Office accepted the findings and said they established internal monitoring and review standards that were higher than those required at the federal level and without regard to budget and staff limitations. The General Assembly ultimately funded the office at half of the recommended amount, which left the office understaffed and contributed to the inadequate documentation of monitoring procedures of funds.
They did acknowledge that a lack of staffing and funding and the temporary nature of the office contributed to the State Auditor’s finding that the monitoring efforts were not as robust as they should be. As a result, the Recovery Office began to make corrections including hiring more monitoring staff, and engaged an external firm to assist with program, staffing, and internal controls design closely following federal and state standards. The office is statutorily required to dissolve on June 30, 2023.
There were also findings on the Dept. of Public Instruction and the Dept. of Health and Human Services.