IG: Virginia is failing to track Recovery Act program funds

A preliminary audit of a Virginia state agency's administration of $94 million in Recovery Act funds for helping low-income residents make their homes more energy efficient revealed a string of management failures.

The report by George Collard, Energy's assistant inspector general for national security and energy audits, found that Virginia's Department of Housing and Community Development failed to conduct any on-site financial monitoring of the work, verify the accuracy of documentation local agencies submitted, reconcile amounts paid to actual costs, maintain vehicle and equipment inventories as required by federal regulation and directives, or accurately report program results to the Energy Department.

"These control and reporting weaknesses increase the risk that Recovery Act objectives may not be achieved and that fraud, waste or abuse can occur and not be detected in this critically important program," Collard wrote.

The Energy Department received $5 billion under the 2009 American Recovery and Reinvestment Act for its weatherization assistance program. The money is disbursed through grants to the states, where the programs are administered.

Because of the unprecedented level of funding for the program and the risk for waste and abuse, the IG has been conducting audits in a number of states. Last December, Inspector General Gregory Friedman issued a management alert over the program's implementation in Illinois after finding egregious problems there.

In Virginia, DHCD administers the program through 22 local community action agencies. These agencies, or subgrantees, are responsible for determining applicant eligibility, weatherizing homes, and conducting home assessments and inspections.

The $94 million in Recovery Act funds for the program in Virginia in 2009 represented more than a tenfold increase in the program's funding level. State officials expect to weatherize about 9,200 units during the life of the grant, a huge increase over the 1,475 units previously planned in 2009.

Despite the funding increase, state officials did not make a single on-site financial monitoring visit to any of the 22 subgrantees as required under the Recovery Act, the report said.

"Because of the lack of supporting documentation and inadequate financial monitoring, the accuracy of DHCD's payments to subgrantees could not be verified," the report said.

There were other problems as well: Vehicles and equipment purchased with federal funds must be recorded and reported as program assets, yet no such inventory information was maintained. When auditors asked DHCD to use its procurement systems to identify vehicles and equipment that met the reporting threshold, the information was incomplete.

In addition, the number of weatherized homes that DHCD reported to the Energy Department was significantly different from the number of homes that subgrantees reported.

Auditors attributed problems in large part to inadequate reporting systems and insufficient staffing at DHCD, which had only one full-time person assigned to the program.

Auditors recommended the state conduct on-site monitoring, as required; review prior subgrantee billing and seek reimbursement for amounts erroneously charged; periodically reconcile the amount of funds invoiced and reimbursed to actual costs; maintain inventories of vehicles and equipment; and correct reporting weaknesses.

The IG also recommended Energy Department project officials conduct financial reviews during on-site monitoring visits.

Kathleen Hogan, deputy assistant secretary for energy efficiency, concurred with Collard's report and outlined steps Energy was taking to assist Virginia in meeting its reporting and oversight responsibilities.