Full text
OFFICE OF
INSPECTOR GENERAL
DEPARTM ENT OF THE TREASURY
WASHINGTON, D.C. 20220
July 21, 2023
MEMORANDUM FOR JESSICA MILANO, ACTING CHIEF RECOVERY OFFICER,
DEPARTMENT OF THE TREASURY
FROM:
Deborah L. Harker /s/
Assistant Inspector General for Audit
SUBJECT:
Desk Review of State of Texas’ Use of Coronavirus Relief
Fund Proceeds (OIG-CA-23-034)
Please find the attached desk review memorandum1 on the State of Texas’ use of
Coronavirus Relief Fund (CRF) proceeds. The CRF is authorized under Title VI of
the Social Security Act, as amended by Title V, Division A of the Coronavirus Aid,
Relief, and Economic Security Act (CARES Act). Under a contract monitored by
our office, Castro & Company, LLC (Castro), a certified independent public
accounting firm, performed the desk review. Castro performed the desk review in
accordance with the Council of the Inspectors General on Integrity and Efficiency
Quality Standards for Federal Offices of Inspector General standards of
independence, due professional care, and quality assurance.
In its desk review, Castro personnel reviewed documentation for a non-statistical
selection of 63 transactions reported in the quarterly Financial Progress Reports
(FPR) and questioned costs of $17,288,574.87 (see attached schedule of monetary
benefits).
Castro determined that the expenditures related to Direct Payments greater than
or equal to $50,000 and Aggregate Payments to Individuals2 complied with the
CARES Act and Treasury’s Guidance. However, the expenditures related to
Contracts greater than or equal to $50,000, Grants greater than or equal to
$50,000, and Aggregate Reporting less than $50,0003 did not comply with CARES
Act and Treasury’s Guidance.
1 The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) assigned the Department of
the Treasury Office of Inspector General with responsibility for compliance monitoring and
oversight of the receipt, disbursement, and use of Coronavirus Relief Fund (CRF) payments. The
purpose of the desk review is to perform monitoring procedures of the prime recipient’s receipt,
disbursement, and use of CRF proceeds as reported in the grants portal on a quarterly basis.
2 Obligations and expenditures for payments made to individuals, regardless of amount, are
required to be reported in the aggregate in the grants portal to prevent inappropriate disclosure of
personally identifiable information.
3 Recipients are required to report CRF transactions greater than or equal to $50,000 in detail in the
grants portal. Transactions less than $50,000 can be reported as an aggregate lump-sum amount
by type (contracts, grants, loans, direct payments, and transfers to other government entities).
Page 2
Additionally, Castro determined that Texas’ risk of unallowable use of funds is
high. As such, Castro recommends that the Department of the Treasury (Treasury)
Office of Inspector General (OIG) obtain documentation from Texas management
and follow-up on necessary reporting corrections. Further, based on Texas’
responsiveness to Treasury OIG’s requests and its ability to provide sufficient
documentation, Castro recommends that Treasury OIG determine if a focused
audit is feasible for Contracts greater than or equal to $50,000 and Grants greater
than or equal to $50,000.
Treasury OIG and Castro met with Texas management to discuss questioned
costs. Texas management told us that they made updates to the grants portal in
subsequent cycle submissions which they believe have addressed all the findings
contained in this report.
In connection with the contract, we reviewed Castro’s desk review memorandum
and related documentation and inquired of its representatives. Our review, as
differentiated from an audit performed in accordance with generally accepted
government auditing standards, was not intended to enable us to express an
opinion on Texas’ use of the CRF proceeds. Castro is responsible for the attached
desk review memorandum and the conclusions expressed therein. Our review
found no instances in which Castro did not comply in all material respects, with
Quality Standards for Federal Offices of Inspector General.
We appreciate the courtesies and cooperation provided to Castro and our staff
during the desk review. If you have any questions or require further information,
please contact me at (202) 486-1420, or a member of your staff may contact Lisa
DeAngelis, Deputy Assistant Inspector General for Audit, at (202) 487-8371.
cc:
Jordan Hall, Deputy Chief of Staff, Office of the Texas Governor
Michelle. A. Dickerman, Deputy Assistant General Counsel, Department of
the Treasury
Victoria Collin, Chief Compliance & Finance Officer, Office of Recovery
Programs, Department of the Treasury
Christopher Sun, Director of Data and Reporting, Office of Recovery
Programs, Department of the Treasury
Wayne Ference, Partner, Castro & Company, LLC
Page 3
Attachment
Schedule of Monetary Benefits
According to the Code of Federal Regulations,4 a questioned cost is a cost that is
questioned due to a finding:
(a) which resulted from a violation or possible violation of a statute,
regulation, or the terms and conditions of a Federal award, including for
funds used to match Federal funds;
(b) where the costs, at the time of the review, are not supported by
adequate documentation; or
(c) where the costs incurred appear unreasonable and do not reflect the
actions a prudent person would take in the circumstances.
Questioned costs are to be recorded in the Department of the Treasury’s
(Treasury) Joint Audit Management Enterprise System (JAMES).5 The amount will
also be included in the Office of Inspector General (OIG) Semiannual Report to
Congress. It is Treasury management's responsibility to report to Congress on the
status of the agreed to recommendations with monetary benefits in accordance
with 5 USC Section 405(b) of the Inspector General Act of 1978.
Recommendation
Questioned Costs
Recommendation No. 1
$17,288,574.87
The questioned cost represents amounts provided by Treasury under the
Coronavirus Relief Fund. As discussed in the attached desk review, $17,288,574.87
is Texas’ expenditures reported in the grant-reporting portal that lacked
supporting documentation and included ineligible expenditures.
4 2 CFR § 200.84 – Questioned Cost
5 JAMES is Treasury’s audit recommendation tracking system.
Desk Review of the State of Texas
1
1635 King Street
Alexandria, VA 22314
Phone: 703.229.4440
Fax: 703.859.7603
www.castroco.com
July 21, 2023
OIG-CA-23-034
MEMORANDUM FOR DEBORAH L. HARKER,
ASSISTANT INSPECTOR GENERAL FOR AUDIT
FROM:
Wayne Ference
Partner, Castro & Company, LLC
SUBJECT:
Desk Review of the State of Texas
On September 1, 2021, we initiated a desk review of the State of Texas’ (Texas)
use of the Coronavirus Relief Fund (CRF) authorized under Title VI of the Social
Security Act, as amended by Title V, Division A of the Coronavirus Aid, Relief, and
Economic Security Act (CARES Act).1 The objective of our desk review was to
evaluate Texas’ documentation supporting its uses of CRF proceeds as reported in
the GrantSolutions2 portal and to assess the risk of unallowable use of funds. The
scope of our desk review was limited to obligation and expenditure data for the
period of March 1, 2020 through June 30, 2021 as reported in Cycles 13 through 54
in the GrantSolutions portal.
As part of our desk review, we performed the following:
1) reviewed Texas’ quarterly Financial Progress Reports (FPRs) submitted in
the GrantSolutions portal through June 30, 2021;
2) reviewed the Department of the Treasury’s (Treasury) Coronavirus Relief
Fund Guidance as published in the Federal Register on January 15, 2021;5
1 P.L. 116-136 (March 27, 2020)
2 GrantSolutions, a grant and program management Federal shared service provider under the
U.S. Department of Health and Human Services, developed a customized and user-friendly
reporting solution to capture the use of CRF payments from recipients.
3 Calendar quarter ending June 30, 2020.
4 Calendar quarter ending June 30, 2021.
5 Coronavirus Relief Fund Guidance as published in the Federal Register (January 15, 2021)
https://home.treasury.gov/system/files/136/CRF-Guidance-Federal-Register_2021-00827.pdf
Desk Review of the State of Texas
2
3) reviewed Treasury Office of Inspector General’s (OIG) Coronavirus Relief
Fund Frequently Asked Questions Related to Reporting and
Recordkeeping;6
4) reviewed Treasury OIG’s monitoring checklists7 of Texas’ quarterly FPR
submissions for reporting deficiencies;
5) reviewed other audit reports issued, such as Single Audit reports, and
those issued by the Government Accountability Office and other applicable
Federal agency OIGs for internal control or other deficiencies that may
pose risk or impact the Texas’ uses of CRF proceeds;
6) reviewed Treasury OIG Office of Investigations (OI), the Council of the
Inspectors General on Integrity and Efficiency Pandemic Response
Accountability Committee (PRAC),8 and Treasury OIG Office of Counsel
input on issues that may pose risk or impact Texas’ uses of CRF proceeds;
7) interviewed key personnel responsible for preparing and certifying Texas’
GrantSolutions portal quarterly FPR submissions, as well as officials
responsible for obligating and expending CRF proceeds;
8) made a non-statistical selection of Contracts, Grants, Direct Payments,
Aggregate Reporting,9 and Aggregate Payments to Individuals10 data
identified through GrantSolutions reporting; and
9) evaluated documentation and records used to support Texas’ quarterly
FPRs.
Based on our review of Texas’ documentation supporting the uses of CRF
proceeds as reported in the GrantSolutions portal, we found that uses of CRF
proceeds for Direct Payments greater than or equal to $50,000 and Aggregate
6 Department of the Treasury Office of Inspector General Coronavirus Relief Fund Frequently Asked
Questions Related to Reporting and Recordkeeping OIG-20-028R; March 2, 2021
7 The checklists are used by Treasury OIG personnel to monitor the progress of prime recipient
reporting in the GrantSolutions portal. GrantSolutions quarterly submission reviews are designed
to identify material omissions and significant errors, and where necessary, include procedures for
notifying prime recipients of misreported data for timely correction. Treasury OIG follows the CRF
Prime Recipient Quarterly GrantSolutions Submissions Monitoring and Review Procedures Guide,
OIG-CA-20-029R to monitor the prime recipients quarterly.
8 Section 15010 of P.L. 116-136 established the Pandemic Response Accountability Committee
within the Council of the Inspectors General on Integrity and Efficiency to promote transparency
and conduct and support oversight of covered funds (see Footnote 17 for a definition of covered
funds) and the coronavirus response to (1) prevent and detect fraud, waste, abuse, and
mismanagement; and (2) mitigate major risks that cut across program and agency boundaries.
9 Recipients are required to report CRF transactions greater than or equal to $50,000 in detail in the
GrantSolutions portal. Transactions less than $50,000 can be reported as an aggregate lump-sum
amount by type (contracts, grants, loans, direct payments, and transfers to other government
entities).
10 Obligations and expenditures for payments made to individuals, regardless of amount, are
required to be reported in the aggregate in the GrantSolutions portal to prevent inappropriate
disclosure of personally identifiable information.
Desk Review of the State of Texas
3
Payments to Individuals complied with the CARES Act and Treasury’s Guidance.
However, we determined that Contracts greater than or equal to $50,000, Grants
greater than or equal to $50,000, and Aggregate Reporting less than $50,000 did
not comply with the CARES Act and Treasury’s Guidance.
Castro's desk review resulted in total questioned costs of $17,288,574.87.
Additionally, we determined that Texas’ risk of unallowable use of funds is high.
As such, Castro recommends Treasury OIG obtain documentation from Texas
management and follow-up on necessary reporting corrections. Further, based on
Texas’ responsiveness to Treasury OIG’s requests and its ability to provide
sufficient documentation, we recommend Treasury OIG determine if a focused
audit is feasible for Contracts greater than or equal to $50,000 and Grants greater
than or equal to $50,000.
Non-Statistical Transaction Selection Methodology
Treasury issued a CRF payment to Texas of $8,038,314,290.90. As of Cycle 5,11
Texas’ cumulative obligations and expenditures were $6,843,708,309.22 and
$6,570,641,654.27, respectively. Texas’ cumulative obligations and expenditures
by payment type, as reported in GrantSolutions through Cycle 5, are summarized
below.
Payment Type
Cumulative
Obligations
Cumulative
Expenditures
Contracts >= $50,000
$ 3,135,424,033.56
$ 2,863,344,685.95
Grants >= $50,000
$ 873,775,780.47
$ 873,775,779.78
Loans >= $50,000
$ -
$ -
Transfers >= $50,000
$ -
$ -
Direct Payments >= $50,000
$ 4,351,867.14
$ 4,351,867.14
Aggregate Reporting < $50,000
$ 31,332,187.71
$ 31,297,878.26
Aggregate Payments to
Individuals (in any amount)
$ 2,798,824,440.34 $ 2,797,871,443.14
Totals
$ 6,843,708,309.22
$ 6,570,641,654.27
Castro made a non-statistical selection of Contracts greater than or equal to
$50,000, Grants greater than or equal to $50,000, Direct Payments greater than or
equal to $50,000, Aggregate Reporting less than $50,000, and Aggregate
Payments to Individuals. Selections were made using auditor judgment based on
information and risks identified in reviewing audit reports, the GrantSolutions
portal reporting anomalies12 identified by the Treasury OIG CRF monitoring team,
and review of Texas’ FPR submissions. Castro noted Texas did not obligate or
11 Calendar quarter ending June 30, 2021.
12 Treasury OIG has a pre-defined list of risk indicators that are triggered based on data submitted
by recipients in the FPR submissions that meet certain criteria. Castro reviewed these results
provided by Treasury OIG for Texas.
Desk Review of the State of Texas
4
expend CRF proceeds for Loans greater than or equal to $50,000, or
Transfers13 greater than or equal to $50,000, therefore, we did not make a
selection of transactions from these categories.
The number of transactions (59) we selected to test were based on Texas’ total
CRF award amount and our overall risk assessment of Texas. To allocate the
number of transactions (59) by payment type (Contracts greater than or equal to
$50,000, Grants greater than or equal to $50,000, Direct Payments greater than or
equal to $50,000, Aggregate Reporting less than $50,000, and Aggregate
Payments to Individuals), we compared the payment type dollar amounts as a
percentage of cumulative obligations for Cycle 5.14 Treasury OIG identified four
anomaly transactions, for a total of 63 transactions tested. The four anomalies
were potential duplicate payments from the Contracts greater than or equal
to $50,000 payment type.
Background
The CARES Act appropriated $150 billion to establish the CRF. Under the CRF,
Treasury made payments for specified uses to States and certain local
governments; the District of Columbia and U.S. Territories, including the
Commonwealth of Puerto Rico, the United States Virgin Islands, Guam, American
Samoa, and the Commonwealth of the Northern Mariana Islands; and Tribal
governments. Treasury issued a CRF payment to Texas for $8,038,314,290.90. The
CARES Act stipulates that a recipient may only use the funds to cover costs that—
(1) are necessary expenditures incurred due to the public health emergency
with respect to the coronavirus disease 2019 (COVID-19);
(2) were not accounted for in the budget most recently approved as of
March 27, 2020; and
(3) were incurred between March 1, 2020 and December 31, 2021.15
Section 15011 of the CARES Act, requires each covered recipient16 to submit to
Treasury and the PRAC, no later than 10 days after the end of each calendar
13 A transfer to another government entity is a disbursement or payment to a government entity
that is legally distinct from the prime recipient.
14 Calendar quarter ending June 30, 2021.
15 P.L. 116-260 (December 27, 2020). The period of performance end date of the CRF was extended
through December 31, 2021 by the Consolidated Appropriations Act, 2021. The period of
performance end date for tribal entities was further extended to December 31, 2022 by the State,
Local, Tribal, and Territorial Fiscal Recovery, Infrastructure, and Disaster Relief Flexibility Act,
Division LL of the Consolidated Appropriations Act, 2023, P.L. 117-328, December 29, 2022, 136
Stat. 4459.
16 Section 15011 of P.L. 116-136 defines a covered recipient as any entity that receives large
covered funds and includes any State, the District of Columbia, and any territory or possession of
the United States.
Desk Review of the State of Texas
5
quarter, a report that contains (1) the total amount of large covered funds17,18
received from Treasury; (2) the amount of large covered funds received that were
expended or obligated for each project or activity; (3) a detailed list of all projects
or activities for which large covered funds were expended or obligated; and (4)
detailed information on any level of sub-contracts or sub-grants awarded by the
covered recipient or its sub-recipients.
The CARES Act assigned Treasury OIG the responsibility for compliance
monitoring and oversight of the receipt, disbursement, and use of CRF proceeds.
Treasury OIG also has authority to recoup funds in the event that it is determined
a recipient failed to comply with requirements of subsection 601(d) of the Social
Security Act, as amended, (42 U.S.C. 801(d)).
Desk Review Results
Our review of Texas’ quarterly FPR submissions through June 30, 2021
found that Texas complied with the Reporting Timeline as required under
Treasury OIG Guidance OIG CA-20-021, Coronavirus Relief Fund Reporting and
Record Retention Requirements. However, we identified a reporting variance, as
detailed below.
As a result of our reconciliation procedures, we determined that expenditures
recorded in GrantSolutions for Aggregate Reporting less than $50,000 were
$31,297,878.26 while the expenditures per the general ledger detail were
$26,030,237.78, resulting in a variance of $5,267,640.48 as of June 30, 2021. We
corroborated that Texas made corrections for variances within its Cycle 619
submission except for a required adjustment of $3,924,219.87 to Aggregate
Reporting less than $50,000. Texas personnel plan to make this remaining
adjustment in subsequent cycles; therefore, we question unsupported expenditure
amounts of $3,924,219.87 for Aggregate Reporting less than $50,000.
Summary of Testing Results
Other than Contracts greater than or equal to $50,000 and Grants greater than or
equal to $50,000, transactions selected for detailed review were supported by
documentation and were allowable expenditures in accordance with the CARES
Act and Treasury’s guidance. We noted that the Direct Payments greater than or
equal to $50,000, Aggregate Reporting less than $50,000, and Aggregate
17 Section 15010 of P.L. 116-136 defines covered funds as any funds, including loans, that are made
available in any form to any non-Federal entity, not including an individual, under Public Laws 116-
123, 127, and 136, as well as any other law which primarily makes appropriations for Coronavirus
response and related activities.
18 Section 15011 of P.L. 116-136 defines large covered funds as covered funds that amount to more
than $150,000.
19 Calendar quarter ending September 30, 2021.
Desk Review of the State of Texas
6
Payments to Individuals were necessary expenditures due to the COVID-19 public
health emergency, were not accounted for in the budget most recently approved
as of March 27, 2020, and were incurred during the covered period. The
transactions selected for testing were not selected statistically, and therefore
results cannot be extrapolated to the total universe of transactions.
The following table includes the total cumulative expenditure population amount
and the expenditure amount tested. Within the table below, we have included a
summary of unsupported and ineligible expenditures identified as questioned
costs. Additionally, in the far-right column, we have identified the expenditures
that Castro tested without exceptions noted. See the Desk Review Results section
below this table for a detailed discussion of questioned costs and other issues
identified throughout the course of our desk review.
Summary of Expenditure Testing and Recommended Results – As of Cycle 520
Payment Type
Cumulative
Expenditure
Population
Amount
Cumulative
Expenditure
Tested Amount
Unsupported
Reconciling
Items21
Unsupported
Exception
Ineligible
Exception
Castro Reviewed
Value Without
Exception
(per Support)
Contracts >=
$50,000
$2,863,344,685.95
$2,587,265,699.17
$ -
$ -
$ 487,370.00
$ 2,586,778,329.17
Grants >= $50,000
$ 873,775,779.78
$ 48,859,938.09
$ -
$ 12,876,985.00
$ -
$ 35,982,953.09
Loans >= $50,000
$ -
$ -
$ -
$ -
$ -
$ -
Transfers >=
$50,000
$ -
$ -
$ -
$ -
$ -
$ -
Direct Payments
>= $50,000
$ 4,351,867.14
$ 306,879.00
$ -
$ -
$ -
$ 306,879.00
Aggregate
Reporting <
$50,000
$ 31,297,878.26
$ 95,433.48
$ 3,924,219.87
$ -
$ -
$ 95,433.48
Aggregate
Payments to
Individuals (in any
amount)
$2,797,871,443.14
$ 2,238,609.00
$ -
$ -
$ -
$ 2,238,609.00
Totals
$6,570,641,654.27
$2,638,766,558.74
$ 3,924,219.87
$ 12,876,985.00
$ 487,370.00
$ 2,625,402,203.74
20 Calendar quarter ending June 30, 2021.
21 As a result of our reconciliation procedures, we determined that expenditures recorded in
GrantSolutions were $31,297,878.26 while the expenditures per the general ledger detail were
$26,030,237.78, resulting in a variance of $5,267,640.48 as of June 30, 2021. We corroborated
corrections made by Texas for all variances within its Cycle 6 submission (September 30, 2021)
except for a required adjustment of $3,924,219.87, which we question. However, we do not
consider this amount to be tested and so we have excluded this amount from the “Cumulative
Expenditure Tested Amount” column.
Desk Review of the State of Texas
7
Contracts Greater Than or Equal to $50,000
We determined that Texas’ Contracts greater than or equal to $50,000 did not
comply with the CARES Act and Treasury’s Guidance. During our review of
Contracts greater than or equal to $50,000, we determined that Texas included
ineligible expenditures of $487,370.00 within its GrantSolutions submissions. We
selected 23 transactions to test. For one out of the 23 original selections, we
selected 11 expenditure transactions as sub-selections.22 During our review, we
identified the following exceptions.
For one out of 23 selections, we reviewed invoice supporting documentation and
noted that the expenditure amount differed from what was recorded in
GrantSolutions. After adjustments made by Texas, we identified inclusion of
ineligible costs of $487,370.00. Specifically, Texas reported $55,244,961.42 of
ineligible contract expenditures in GrantSolutions. As of Cycle 5,23 Contracts
greater than or equal to $50,000 was overstated by $55,244,961.42. Castro verified
that Texas personnel removed $54,757,591.42 of these expenditures as of
Cycle 8;24 however, Texas personnel had not yet removed the remaining ineligible
costs of $487,370.00 from its CRF reporting. Castro questions this expenditure
balance.
Texas personnel stated that this contract included audit services such as building
dashboard reporting tools and dashboard management tools for emergencies
covering agency programs originating from various funding sources, not just CRF.
Castro was able to agree vendor invoices to expenditures claimed within
GrantSolutions without exception. However, Texas personnel were not able to
support the proportion of these charges that was related to CRF. Texas personnel
were in the process of reviewing the eligibility of expenditures claimed as CRF
and told us that a portion of these transactions was pending approval to be
claimed using Federal Emergency Management Agency (FEMA) funding. Once
this approval was obtained, Texas personnel told us that they would make
adjustments in subsequent GrantSolutions cycles to remove the ineligible
portions of this balance.
Texas personnel told us that they did not believe this to be an exception and had
intentionally charged the full invoice amount, including expenditures directly
attributed to FEMA funded projects, to CRF with the intention of moving the
expenditures later to the appropriate funding source. Texas personnel stated that
most of the expenditures attributed to FEMA have since been removed from CRF
22 Due to the high volume of transactions at the original transaction selection level, we obtained
and utilized a general ledger detail listing to make a sub-selection of transactions needed to test
obligations and expenditures at the detailed transaction level.
23 Calendar quarter ending June 30, 2021.
24 Calendar quarter ending March 31, 2022.
Desk Review of the State of Texas
8
claims. Texas personnel told us that they were still determining additional
adjustments to be made, and that upon completion, they would update this within
a future cycle submission.
Grants Greater Than or Equal to $50,000
We determined Texas’ Grants greater than or equal to $50,000 did not comply
with the CARES Act and Treasury’s Guidance. We noted a lack of supporting
documentation that resulted in questioned expenditures of $12,876,985.00. As part
of our procedures, we selected six transactions to test. For two out of the six
selections, we selected 10 expenditure transactions as sub-selections. During our
review, we identified the following exceptions.
For two out of six selections tested, we identified a portion of the tested balance
where expenditures per external vendor invoices were $4,151,000 less than what
was recorded in GrantSolutions. The Texas Region IV Education Service Center
(ESC – Region IV), the entity responsible for administering the distance learning
grant program, utilized the school district’s original distance learning equipment
orders to generate intergovernmental invoices between ESC – Region IV and the
school districts. Upon inspection of third-party vendor invoices that support actual
equipment received by the school districts, Castro determined that the school
districts made changes to their original orders that resulted in lower than
originally anticipated expenditures. However, ESC – Region IV did not adjust its
intergovernmental invoices to reflect the changed order quantity and prices. As
Texas personnel utilized the balance of intergovernmental invoices instead of
actual expenditures incurred to report its expenditures in GrantSolutions, this
resulted in an overstatement of $4,151,000 to Texas’ reported expenditures. We
question these costs as unsupported.
For one out of six selections, we identified unsupported expenditure amounts of
$8,725,985, as Texas did not provide sufficient documentation to support the
expenditure balances reported for ESC – Region IV as of Cycle 5.25 Additionally,
we determined that the ESC – Region IV grant balance did not represent a valid
grant balance within GrantSolutions, as the majority of these costs were not
reported to the correct sub-recipient. Instead of reporting this balance under ESC –
Region IV as the sub-recipient within GrantSolutions, Texas should have reported
the school districts as the GrantSolutions sub-recipients.
Texas personnel told us that ultimately, this transitory ESC – Region IV distance
learning equipment balance would be fully drawn down for equipment
administered to school districts and the only GrantSolutions balances with ESC –
Region IV as the sub-recipient would be the administrative costs charged by ESC –
25 Calendar quarter ending June 30, 2021.
Desk Review of the State of Texas
9
Region IV for running the bulk purchase program. However, Texas was unable to
provide support to evidence administrative costs incurred by ESC – Region IV as
this amount was still being determined. As ESC – Region IV continued to allocate
equipment to the ultimate grant sub-recipients (school districts), Texas personnel
told us that they planned to remove additional expenditures from ESC – Region IV
and to post additional expenditures to the respective school districts that received
that equipment. Texas personnel told us that they were in the process of
reconciling these balances and determining the final administrative costs to be
charged as CRF claims for ESC – Region IV. As such, we question $8,725,985 in
expenditures as unsupported.
Based on the issues noted above, we determined Texas did not comply with
Treasury OIG Guidance OIG-CA-20-021 CRF Reporting and Record Retention
Requirements because the official authorized to certify that the data was true,
accurate, and complete did not ensure that its submission met all the Treasury
OIG Guidance requirements.
Direct Payments Greater Than or Equal to $50,000
We determined Texas’ Direct Payments greater than or equal to $50,000did not
comply with Treasury’s Guidance. We identified misclassification exceptions of
$1,385,602.40 reported as Direct Payments greater than or equal to $50,000 that
should have been reported in the Aggregate Reporting less than $50,000 payment
type. We are not questioning these costs as the support for these transactions was
adequate to determine eligibility of expenditures. However, we determined these
exceptions to be a reporting misclassification. As part of our procedures, we
selected one transaction to test. We then selected five expenditure transactions as
sub-selections.
For the one selection tested, we obtained and reviewed the underlying obligation
support and noted that the obligation consisted of expense report claims for 576
individual transactions, each with their own purchase order dates, purchase order
numbers, and invoice numbers. We determined that Texas should have reported
each of these transactions as separate Direct Payment entries within
GrantSolutions, each with its own cumulative obligation and expenditure
balances and payment dates. This does not comply with Treasury OIG’s reporting
requirements to individually report direct payment transactions (for both
cumulative expenditure and obligation reported balances).
Additionally, for one of the five sub-selections tested, we determined that the
expenditure value reported was misclassified. We performed data analytics over
the remaining balance of selections not tested. Including the one sub-selection,
Desk Review of the State of Texas
10
we identified 572 transactions that were similarly misclassified. As of Cycle 5,26
Texas personnel reported expenditure values in the Direct Payments greater than
or equal to $50,000 payment type that were overstated by $1,385,603 and
Aggregate Reporting less than $50,000 payment type was understated by the
same amount.
Texas personnel told us that the state agency should have treated each purchase
order separately and reported it accordingly. Texas personnel told us that they
would make adjustments to GrantSolutions in a future reporting cycle. We are not
questioning these costs as the support for these transactions was adequate;
however, we determined the amount tested was a reporting misclassification.
Conclusion
Based on the results of our desk review, we found that Texas personnel timely
filed quarterly FPR reports in the GrantSolutions portal. We also found that uses
of CRF proceeds for Direct Payments greater than or equal to $50,000 and
Aggregate Payments to Individuals complied with the CARES Act and Treasury’s
Guidance. However, we determined that Contracts greater than or equal to
$50,000, Grants greater than or equal to $50,000, and Aggregate Reporting less
than $50,000 did not comply with the CARES Act and Treasury’s Guidance.
Castro's desk review resulted in total questioned costs of $17,288,574.87.
Additionally, we determined that Texas’ risk of unallowable use of funds is high.
As such, Castro recommends Treasury OIG obtain documentation from Texas
management and follow-up on necessary reporting corrections. Further, based on
Texas’ responsiveness to Treasury OIG’s requests and its ability to provide
sufficient documentation, we recommend Treasury OIG determine if a focused
audit is feasible for Contracts greater than or equal to $50,000 and Grants greater
than or equal to $50,000.
26 Calendar quarter ending June 30, 2021.
Desk Review of the State of Texas
11
*****
All work completed with this letter complies with the Council of the Inspectors
General on Integrity and Efficiency’s Quality Standards for Federal Offices of
Inspectors General, which require that the work adheres to the professional
standards of independence, due professional care, and quality assurance to
ensure the accuracy of the information presented.27 We appreciate the courtesies
and cooperation provided to our staff during the desk review.
Sincerely,
Wayne Ference
Partner, Castro & Company, LLC
27 https://www.ignet.gov/sites/default/files/files/Silver%20Book%20Revision%20-%208-20-12r.pdf