CHARLESTON, W.Va. — An annual assessment of West Virginia’s state finances singles out 18 ways the Division of Homeland Security and Emergency Management has been out of compliance on handling federal disaster relief dollars.

Emergency Management receives by far the most focus in the annual Single Audit, which is produced independently by accountants from Ernst & Young.

The 155-page audit finds that the state hasn’t succeeded in reimbursing local governments in timely fashion, did not close out grants by expiration dates, did not adequately monitor subrecipients like local governments, did not provide its own required documentation and, in some cases, did not contribute enough state share to federal grants that required a match.

The findings include corrective actions, and state Emergency Management indicates it has made recent improvements.

Still, “DHSEM does not have adequate internal controls and policies and procedures in place over the reporting process,” the auditors wrote, over and over.

The Single Audit says those findings “could have a direct and material effect” on Disaster Grants-Public Assistance, Hazard Mitigation Grants and Emergency Management Performance Grants.

All these findings go into the growing mix of questions about how West Virginia has been handling federal flood relief dollars.

Mitch DeBoard

Mitch DeBoard is president of the Clay County Business Development Authority, which was awarded FEMA money to rebuild local rails trails. When the money was first approved, Deboard recalled telling state officials, “Folks, I don’t know enough about FEMA right now to even attempt this.”

But he said he never got a response and wound up hiring an outside consultant to help guide him through using the money properly.

DeBoard is now worried that West Virginia could be on the hook for millions of dollars if federal officials believe the many grants that were approved for the state have not received proper oversight.

“West Virginia right now is at risk of having to pay back hundreds of millions of dollars if they don’t do something to straighten this all out,” he said in a telephone interview last week.

A lot of money is involved.

Total federal expenditures for presidentially declared disasters during the period amounted to $32,459,031.

The total federal expenditures for the Hazard Mitigation Grant program were $5,328,656 for fiscal 2018.

Emergency Management Performance Grants for West Virginia totaled $5,072,094 for the period.

Of all that, the audit specifically questioned $6,275,138 in total costs, although in some broader areas of concern the auditors concluded the cost that could be questioned was actually unknown.

The report’s findings resonate in light of other ongoing questions about whether West Virginia has handled flood relief dollars carefully.

A separate report released this month by the state Auditor revealed the City of Richwood failed to properly use up to $3.1 million in federal disaster money. Richwood was among the hardest-hit communities during the catastrophic flood of 2016.

Another report by the separate Legislative Auditor late last year concluded that the Division of Homeland Security and Emergency Management has provided inadequate oversight of federal grants for years.

Intended improvements

Michael Todorovich

Adjutant General James Hoyer and Homeland Security Director Michael Todorovich have acknowledged the need for improvement.

On MetroNews’ “Talkline” this week, they described establishing an internal audit team within Homeland Security and Emergency Management to examine relief issues while also establishing site assistance teams to go out to communities.

“We’re leaning forward and seeing how we can teach people to better be prepared with the paperwork and those types of things,” Todorovich said.

The Single Audit suggests changes by Emergency Services either that took place or are still taking effect. In several cases, Emergency Management said it had lacked adequate personnel to fulfill its obligations.

The corrective action plan filed with the Single Audit indicated some problems could be alleviated because of a recently-hired chief financial officer and the creation of the internal review department.

The internal review team is staffed by a certified public accountant, a quality assurance manager, a chief monitor and three monitoring coordinators who report to the director.

The internal review department is supposed to start producing detailed monthly reports for the agency director.

Another task has been designing a matrix detailing all eligibility requirements for subrecipients like local governments. A similar dashboard would detail all required training for agency employees. And yet another project is a tracking system for the exact status of grant awards compared to grant commitments.

In response to additional questions by MetroNews, the Division of Homeland Security and Emergency Management provided some more details.

The response noted that last October, Governor Justice named Todorovich as director of the agency and asked the National Guard to take a greater role in oversight of Homeland Security and Emergency Management.

The state agency then worked with FEMA to create a critical improvement plan, which addressed the Single Audit findings with a set of milestones for improvement. Among those improvements was the creation of the internal review team.

As for auditors’ concerns, they extended over several areas of how the state handles federal grants.

Inadequate internal checks

For several reports required by the federal government, the state “prepared and submitted the reports without going through an appropriate review and approval process.”

This finding states that in some instances the same person has been allowed to create, approve, and submit reports to FEMA without any review or approval from any other employee.

“DHSEM does not have adequate internal controls and policies and procedures in place over the reporting process,” the auditors wrote.

On several Emergency Management Performance Grants, the state did not close out reporting within 90 days of the expiration of the grant award.

“The grant may not be properly closed out resulting in FEMA having to administratively close out the award; if this action is taken, consideration for subsequent awards to DHSEM may be impacted or restricted,” auditors wrote.

With Emergency Management Performance Grants, the state was allowed to use up to 5 percent of the award for management and administration, but the auditors found that the state “did not track these expenditures to ensure compliance.”

Not enough monitoring of communities receiving grants

On several grant awards for presidentially-declared disasters, the state did not provide adequate evidence that it was monitoring subrecipients such as local governments.

Similar findings were made for Hazard Mitigation Grants and Emergency Management Performance Grants, a conclusion that noted the state is not completing subrecipient risk assessments and is not documenting monitoring.

It means there was not enough internal control over whether local communities were spending money on allowable costs.

This hits home with the recent Richwood findings. In that case, Richwood was spending money for things not approved in their grants.

“Management did not have effective internal control and policies and procedures in place during the fiscal year,” auditors wrote.

In some instances, the audit found, DHSEM was making awards to subrecipients who were not meeting the conditions to be eligible to receive the federal funding. Even for recipients who were complying with the conditions, DHSEM was not maintaining adequate documentation to demonstrate compliance.

Not responsive enough to communities receiving grants

Some problems noted by the audit pointed to cash flow issues that could hinder progress at the local level.

For a significant number of subrecipients that would include local governments, the state wasn’t providing reimbursement within 30 days after receiving a billing on expenses  that were supposed to be covered.

In some instances, DHSEM was taking much longer to make payment.

That was a conclusion for each of the types of grants examined.

“By not reimbursing subrecipients for expenses incurred timely, the completion of projects may be delayed and vendors may not be paid timely,” auditors wrote.

Failure to match federal dollars

In other cases, the state often failed to match 25 percent of an expenditure covered under Hazard Mitigation Grants. The Federal Emergency Management Agency covered the first 75 percent.

Similarly, the state failed to properly match 50 percent of the total budget for expenditures under Emergency Management Performance Grants.

A few problems easily corrected

Some concerns were less significant and were relatively quickly corrected.

For instance, the Single Audit concludes the West Virginia School Building Authority was not holding advance payments of federal awards in interest bearing accounts. By the end of the fiscal year, the agency had made the appropriate change.

It’s still important.

Considerable interest, which is due back to FEMA in some instances, has been lost in the last several years.

Legislative concerns

Senators Glenn Jeffries and Stephen Baldwin have asked for resumption of the Joint Legislative Committee on Flooding, which last met in December.

The two senators say the Legislature needs to resume its oversight of flood relief efforts.

Stephen Baldwin

One of their areas of concern is making sure Emergency Management is responsive with federal grants.

“Many of our communities continue to languish with grant programs that aren’t showing any results,” the senators wrote.

Baldwin, D-Greenbrier, said the state agency needs to become more responsive. He said communities that deal with state oversight of flood relief are frustrated.

“It has been my experience in dealing with the system and the municipalities and counties in my district, they can’t even get a call back, much less oversight,” Baldwin said in a telephone interview.

“In my experience, if there’s such little involvement in a pro active way when I’m reaching out, when municipal leaders are reaching out, it does not surprise me at all that there’s no oversight from the system reaching out to municipalities.”

Glenn Jeffries

Jeffries, D-Kanawha, said that unless the state can demonstrate it is being responsible it could wind up on the wrong side of federal collectors.

“The state is liable for that money, for all that money,” Jeffries said.

“If it’s not  documented right, if it’s not spent right, then the state of West Virginia is on the hook for that money.”



West Virginia Single Audit 2018 (1) (Text)

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