Auditor’s Office questioned $6.7 million check to flood consultant

CHARLESTON, W.Va. — The consultant that was at the center of contract controversy over West Virginia’s response to long-term flood relief just got a big paycheck.

Horne LLP was issued a $6,739,575 check from the state on Nov. 2.

State officials say that represents the company’s final payout on its work to guide West Virginia’s response to long-term flood relief.

Horne LLP came up over and over last spring during controversy about the state’s slow progress on helping flood victims.

The Governor’s Office, accompanied by the state Purchasing Division, halted processing on a new contract with Horne that would have led a $900,000 initial scope of work to become a contract valued at $18 million.

The Legislative Auditor later reported that the contracts governing the additional scope of work were not properly bid and should be considered void.

Now Horne has been paid, although not the full amount of its originally-conceived payout.

West Virginia leaders say they coordinated with the U.S. Department of Housing and Urban Development, the Governor’s Office, the Department of Commerce and the Purchasing Division to OK the final Horne payment.

Jeff Wood

“There had to be an emergency contract put in place with Horne,” said Jeff Wood, director of Development and Intergovernmental Relations for the state Adjutant General’s Office.

“We made sure there was a way we could make this payment work and meet all the legalities.”

The state Auditor questioned the payment, although that office eventually signed off.

West Virginia MetroNews received the correspondence between the Auditor’s Office and the Governor’s Office through a Freedom of Information Act request.

The Auditor’s Office became aware of the request for payment on Oct. 26.

J.B. McCuskey

“Our office initially held this payment to obtain additional information including, specifically, additional supporting documentation and general questions as to the nature of the payment,” Auditor J.B. McCuskey wrote.

The Auditor went on to ask several questions:

  1. Has Horne LLP provided service/work to Commerce and the State of West Virginia necessitating payment of the submitted $6.7 million request?
  2. Has the Purchasing Division specifically authorized and approved this new contract as 1) compliant with West Virginia law and 2) compliant with the recommendations of the Legislative Auditor?
  3. Does this new contract, procurement and payment request comply with HUD guidance and federal law?

In a signed letter, Gov. Jim Justice replied.

Jim Justice

Responding to the specific questions, Justice wrote: “1. Yes, Horne provided the services to the WVDO necessitating payment of the invoice. 2. Yes, the WV Purchasing Division authorized and approved the contract and procurement utilized and 3) Yes, the new contract, procurement and payment request comply with HUD guidance and federal law.”

Horne, which has a presence mostly in southern states, was hired to guide West Virginia on managing a $150 million federal disaster relief grant after the devastating 2016 floods.

The initial contract was for $900,000 but there were additional steps valued at another $17 million.

The state Department of Commerce wanted to treat the additional scope as an extension but the Division of Purchasing balked.

One of the points made last spring by Purchasing Division Director Michael Sheets was that work already completed could not be added after the fact through a change order.

“Any work associated with Task Orders 3 through 8 that has already been completed cannot be approved now by the Purchasing Division,” he wrote.

Sheets, in his April 4 memo, also advised the state to go through a competitive bidding process for the work.

Governor Justice and his staff publicly halted the contract at the time, and the ensuing controversy led to the pressured departures of several top Department of Commerce employees.

The controversy was tied to the slow pace of housing relief West Virginians were experiencing two years after the flood.

At a June 15 press conference, Justice described ‘the pause’ as financially responsible and said the state would actually save millions in the long run.

“What did we gain by the pause?” Justice asked. “We gained millions of dollars we’re going to save for our state.”

Just a few days later, June 19, the state Purchasing Division signed off on an emergency funding approval to keep paying Horne.

The two-sentence approval was signed by Purchasing Director Sheets, who had written four pages of warnings about the Horne contract earlier this year. “Your emergency is approved,” Sheets wrote.

The state Development Office, which made the request, said Horne’s continued services were necessary to ensure no further delays on helping residents.

“WVDO has carefully reviewed allowable procurement methods under West Virginia law,” wrote acting Commerce Secretary Clayton Burch, “and each would require additional additional time that the state unfortunately does not have.”

The Legislative Auditor’s findings released five days after the emergency contract was approved, specifically warned that any new contract should be bid out.

The audit, as Sheets had said earlier, reiterated that no payments should reflect the disputed work orders.

The audit made reference to the publicly-discussed new contract with Horne but acknowledged that no one yet knew its conditions.

“Therefore, the Legislative Auditor would expect the new contract to have been procured through the Purchasing Division’s competitive bidding process, but as of today, has not seen this new contract.

“In addition, the new contract should not contain payments for any of the services that have already been rendered under the invalid Task Order Agreements Three through Eight.”

McCuskey wrote that his office ran payment for the emergency contract past the Legislative Auditor in light of the earlier warnings, but that office declined to weigh in this time.

The work Horne conducted for the $6.7 million paycheck corresponds roughly to the original Task Order 4. That scope was originally valued at $6,740,500.

The purchase order that flowed through state government indicates Horne was paid for work completed from June 19 through Sept. 21, although the accompanying documentation has dates for work completed months earlier..

The work has been valuable, said Wood, who currently oversees the RISE West Virginia efforts.

Horne had completed work such as personal consultations and eligibility review for flood victims that will continue to be used, Wood said in a telephone interview.

“That was actually the work they had performed and the data they had gathered over probably a year,” Wood said.

Horne’s work was completed in September. The company needed some time to turn the information over to the state. Officials are still processing the information that was provided, Wood said.

“As far as the work we saw them do and complete while they were here it was quality work and services rendered,” Wood said.

He noted, as the governor has, that West Virginia will not be paying out the full $18 million that had been possible.

Some of the original task orders are now meant to be handled internally by state government. Wood said some of the money that would have gone to Horne may now be reinvested internally.

“We internalized to save money or to invest in the future, one of the two,” he said.

The governor, in his letter to McCuskey, cast the entire process as an effort toward good government oversight and savings to the taxpayers.

“When I realized the original contract between the West Virginia Development Office and Horne LLP was not procured correctly, I wanted to make sure the best course of action was taken moving forward in the most effective and efficient manner while adhering to state purchasing laws and federal guidelines set for by HUD,” Justice wrote.

“My staff met with representatives from Horne to negotiate the terms and services of those services. Horne ultimately agreed to not exceed $9.4 million, therefore saving the state $7.6 million.”

According to the most recent update, 878 days after the flood, the long-term disaster response effort has now completed 38 homes.

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