Full text
OFFICE OF
INSPECTOR GENERAL
DEPARTM ENT OF THE TREASURY
WASHINGTON, D.C. 20220
August 9, 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 the Commonwealth of Virginia’s Use of
Coronavirus Relief Fund Proceeds
(OIG-CA-23-042)
Please find the attached desk review memorandum1 on the Commonwealth of
Virginia’s (Virginia) 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 50 transactions reported in the quarterly Financial Progress Reports
(FPR) and questioned costs of $870,559,763.10 (see attached schedule of monetary
benefits).
Castro determined that the expenditures related to Contracts greater than or equal
to $50,000, Transfers greater than or equal to $50,000,2 and Direct Payments
greater than or equal to $50,000 did not comply with the CARES Act and Treasury
Guidance. Virginia personnel were unable to provide complete populations of
transactions for Aggregate Reporting less than $50,0003 and Aggregate Payments
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 A transfer to another government entity is a disbursement or payment to a government entity
that is legally distinct from the prime recipient.
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
to Individuals, 4 and Castro was therefore unable to test these expenditures.
Additionally, Castro determined that Virginia’s risk of unallowable use of funds is
high.
Castro recommends that the Department of the Treasury (Treasury) Office of
Inspector General (OIG) follow-up with Virginia management on necessary
reporting corrections related to expenditure category descriptions. Specifically,
items not listed above5 expenditure category description corrections are needed in
the Contracts greater than or equal to $50,000, Grants greater than or equal to
$50,000, Transfers greater than or equal to $50,000, and Direct Payments greater
than or equal to $50,000 payment types. In addition, Castro recommends Treasury
OIG pursue obtaining documentation from Virginia management for Contracts
greater than or equal to $50,000, Transfers 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. Based on Virginia’s
responsiveness to Treasury OIG’s requests and its ability to provide
documentation, Castro recommends that Treasury OIG determine if a focused
audit is feasible for Contracts, Transfers, and Direct Payments greater than or
equal to $50,000, as well as Aggregate Reporting less than $50,000 and Aggregate
Payments to Individuals.
Treasury OIG and Castro met with Virginia management to discuss the questioned
costs. Virginia management stated they would provide additional documentation
to Treasury OIG to support the questioned costs.
In connection with our contract with Castro, 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 Virginia’s use of 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 Inspectors 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,
4 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.
5 When recording expenditures in the grants portal, grantees select categories for their
expenditures based on a pre-defined listing of eligible expenditure categories. The portal includes
an expenditure category of Items Not Listed Above (INLAs), which includes a free text field that
allows grantees to enter descriptions for eligible expenses that are not included in the pre-defined
list.
Page 3
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:
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
Amanda Simpson, Director of Compliance Oversight and Federal Reporting,
Commonwealth of Virginia
Wayne Ference, Partner, Castro & Company, LLC
Page 4
Attachment
Schedule of Monetary Benefits
According to the Code of Federal Regulations,6 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).7 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
$ 870,559,763.10
The questioned cost represents amounts provided by Treasury under the
Coronavirus Relief Fund. As discussed in the attached desk review,
$870,559,763.10 is Virginia’s expenditures reported in the grant-reporting portal
that lacked supporting documentation.
6 2 CFR § 200.84 – Questioned Cost
7 JAMES is Treasury’s audit recommendation tracking system.
Desk Review of the Commonwealth of Virginia
1
1635 King Street
Alexandria, VA 22314
Phone: 703.229.4440
Fax: 703.859.7603
www.castroco.com
August 9, 2023
OIG-CA-23-042
MEMORANDUM FOR DEBORAH L. HARKER,
ASSISTANT INSPECTOR GENERAL FOR AUDIT
FROM:
Wayne Ference
Partner, Castro & Company, LLC
SUBJECT:
Desk Review of the Commonwealth of Virginia
On June 2, 2022, we initiated a desk review of the Commonwealth of Virginia’s
(Virginia) 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 Virginia’s 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, 2022 as reported in Cycles
13 through 94 in the GrantSolutions portal.
As part of our desk review, we performed the following:
1) reviewed Virginia’s quarterly Financial Progress Reports (FPRs) submitted
in the GrantSolutions portal through June 30, 2022;
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, 2022.
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 Commonwealth of Virginia
2
3) reviewed Treasury’s Office of Inspector General (OIG) Coronavirus Relief
Fund Frequently Asked Questions Related to Reporting and
Recordkeeping;6
4) reviewed Treasury OIG’s monitoring checklists7 of Virginia’s 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 Virginia’s 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 Virginia’s uses of CRF
proceeds;
7) interviewed key personnel responsible for preparing and certifying
Virginia’s 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, Transfers,9 and Direct
Payments data identified through GrantSolutions reporting; and
9) evaluated documentation and records used to support Virginia’s quarterly
FPRs.
Based on Virginia’s documentation related to the uses of CRF proceeds as
reported in the GrantSolutions portal, we determined Virginia did not comply with
the CARES Act and Treasury’s Guidance. There were issues reported with
Contracts greater than or equal to $50,000, Transfers greater than or equal to
$50,000, Direct Payments greater than or equal to $50,000, and a scope limitation10
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 20 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 A transfer to another government entity is a disbursement or payment to a government entity
that is legally distinct from the prime recipient.
10 Castro was unable to obtain a complete population or make transaction selections for Aggregate
Reporting less than or equal to $50,000 or Aggregate Payments to Individuals. Therefore, we
consider this a scope limitation and do not consider this amount to be tested.
Desk Review of the Commonwealth of Virginia
3
for Aggregate Reporting less than $50,00011 and Aggregate Payments to
Individuals.12 We questioned costs of $870,559,763.10. Additionally, we
determined that Virginia’s risk of unallowable use of funds is high.
Castro recommends Treasury OIG follow-up with Virginia management on
necessary reporting corrections. Specifically, items not listed above (INLA)13
description corrections are needed in the Contracts greater than or equal to
$50,000, Grants greater than or equal to $50,000, Transfers greater than or equal
to $50,000 and Direct Payments greater than or equal to $50,000 payment types. In
addition, Castro recommends Treasury OIG pursue obtaining documentation from
Virginia management for Contracts greater than or equal to $50,000, Transfers
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.
Based on Virginia’s responsiveness to Treasury OIG’s requests and its ability to
provide documentation, we recommend that Treasury OIG personnel determine
whether a focused audit is feasible for Contracts, Transfers, and Direct Payments
greater than or equal to $50,000, as well as Aggregate Reporting less than $50,000
and Aggregate Payments to Individuals.
Non-Statistical Transaction Selection Methodology
Treasury issued a CRF payment to Virginia of $3,109,502,836.10. As of
June 30, 2022, Virginia’s cumulative obligations and expenditures were
$3,109,262,010.51 and $3,109,262,001.51, respectively. Virginia’s cumulative
obligations and expenditures by payment type, as reported in GrantSolutions
through Cycle 9,14 is summarized below.
11 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).
12 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.
13 When recording expenditures in the GrantSolutions portal, prime recipients select categories for
their expenditures based on a pre-defined listing of eligible expenditure categories. The portal
includes an expenditure category of Items Not Listed Above (INLAs), which includes a free text
field that allows grantees to enter descriptions for eligible expenses that are not included in the
pre-defined list.
14 Calendar quarter ending June 30, 2022.
Desk Review of the Commonwealth of Virginia
4
Payment Type
Cumulative
Obligated Amount
Cumulative
Expenditure Amount
Contracts >= $50,000
$ 419,842,899.14
$ 419,842,899.14
Grants >= $50,000
$ 146,265,290.58
$ 146,265,290.58
Loans >= $50,000
$ -
$ -
Transfers >= $50,000
$ 1,589,708,558.81
$ 1,589,708,558.81
Direct Payments >= $50,000
$ 351,460,111.70
$ 351,460,111.70
Aggregate Reporting < $50,000
$ 191,901,562.95
$ 191,901,562.95
Aggregate Payments to Individuals (in any amount)
$ 410,083,587.33
$ 410,083,578.33
Totals
$ 3,109,262,010.51
$ 3,109,262,001.51
Castro made a non-statistical selection of Contracts greater than or equal to
$50,000, Grants greater than or equal to $50,000, Transfers greater than or equal
to $50,000, and Direct Payments greater than or equal to $50,000. Selections were
made using auditor judgment based on information and risks identified in
reviewing audit reports, the GrantSolutions portal reporting anomalies15 identified
by the Treasury OIG CRF monitoring team, and review of Virginia’s FPR
submissions. Castro noted Virginia did not obligate or expend CRF proceeds to
Loans greater than or equal to $50,000; therefore, we did not make a selection of
transactions from this category. Additionally, due to the scope limitation
referenced in the desk review results, we were unable to perform a non-statistical
selection for Aggregate Reporting less than $50,000 and Aggregate Payments to
Individuals.
The number of transactions (25) we selected to test was based on Virginia’s total
CRF award amount and our overall risk assessment of Virginia. To allocate the
number of transactions (25) by obligation type (Contracts greater than or equal to
$50,000, Grants greater than or equal to $50,000, Transfers greater than or equal
to $50,000, and Direct Payments greater than or equal to $50,000), we compared
the obligation type dollar amounts as a percentage of cumulative obligations for
Cycle 9.16 We selected an additional three transactions for Grants greater than or
equal to $50,000, which increased our coverage of grants to four selections and
our overall selections to 28. Additionally, our transaction selections were
increased from 28 to 48 selections based on 20 additional anomalies17 identified
15 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 Virginia.
16 Calendar quarter ending June 30, 2022.
17 These anomalies included potential duplicate payments and other anomalies that were identified
by the Treasury OIG CRF monitoring team as outliers. These outliers were flagged because the
transactions were identified as having high dollar amounts relative to transactions at similar points
in time, with similar award descriptions, and that were disbursed by the same prime recipient.
Desk Review of the Commonwealth of Virginia
5
by Treasury OIG personnel. Further, during our transaction reassessment, we
increased the transaction selections from 48 to 50 based on our analysis of the
INLA expenditure categories. The transactions selected for testing were not
selected statistically, and therefore results cannot be extrapolated to the total
universe of transactions.
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 Virginia for $3,109,502,836.10.
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, 2021.18
Section 15011 of the CARES Act requires each covered recipient19 to submit to
Treasury and the PRAC, no later than 10 days after the end of each calendar
quarter, a report that contains (1) the total amount of large covered funds20,21
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.
18 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.
19 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.
20 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.
21 Section 15011 of P.L. 116-136 defines large covered funds as covered funds that amount to more
than $150,000.
Desk Review of the Commonwealth of Virginia
6
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
We found Grants greater than or equal to $50,000 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. We also found that Contracts greater than or equal to $50,000,
Transfers greater than or equal to $50,000, and Direct Payments greater than or
equal to $50,000 transactions selected for detailed review, as well as the
Aggregate Reporting less than $50,000 and Aggregate Payments to Individuals
categories not tested in detail due to the scope limitation, did not comply with the
CARES Act and Treasury’s guidance. The transactions selected for testing were
not selected statistically, and therefore results cannot be extrapolated to the total
universe of transactions.
Our review of Virginia’s quarterly FPR submissions through June 30, 2022, found
that FPR submissions were timely. We also found that Virginia’s quarterly FPR
submissions through June 30, 2022 identified reporting issues relative to INLA
expenditure category. Specifically, for the 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, and transfers greater than or equal to $50,000 the expenditure
category of INLA selected did not contain a related description sufficient to
explain the use of funds. Virginia utilized vague expenditure descriptions for the
INLA amounts reported, such as “Various” and “Other” instead of reporting the
expenditures under the relevant and associated expenditure categories provided
in GrantSolutions. During our desk review procedures, we followed up with
Virginia management to obtain clarification on these expenditures listed as INLAs
to determine whether these expenditures were reported accurately. In reviewing
the responses from Virginia management, we determined that expenditures with
the description of “Other” and “Various” were not properly reported in
GrantSolutions and corrections are required by management to report those
expenditures accurately.
Within our review of prior year Single Audit reports, Castro noted an auditor-
identified CRF finding within Virginia’s 2021 Annual Comprehensive Financial
Report. The finding detailed inadequate monitoring over outsourced grant
programs and resulted in $114,290 in auditor identified questioned costs.
Virginia’s efforts to resolve these issues were still ongoing upon conclusion of
Desk Review of the Commonwealth of Virginia
7
Castro’s desk review fieldwork, and therefore, we recommend that Treasury OIG
personnel follow-up to determine the status of these questioned costs identified in
the Single Audit.
The following table includes the total cumulative expenditure population and the
expenditure amount tested. Additionally, this table includes a summary of
Castro’s testing results. Within the table below, we have included a summary of
scope limitations, unsupported, and ineligible expenditures identified as
questioned costs. In addition, we have included a summary of the amounts of all
INLA description deficiencies noted. We are not questioning the costs related to
the INLA description deficiencies; however, we conclude that these deficiencies do
not comply with Treasury’s Reporting Guidance. 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.
Summary of Expenditures Testing and Recommended Results – As of Cycle 922
Payment Type
Cumulative
Expenditure
Population
Amount
Cumulative
Expenditure
Tested Amount
Scope
Limitations
Exceptions23
Unsupported
Exceptions
Ineligible
Exceptions24
Amount
Reviewed
Without
Exception
Contracts >=
$50,00025
$ 419,842,899.14
$ 98,568,606.19
$ -
$ 169,130,278.17
$ -
$ 72,789,893.65
Grants >= $50,000
$ 146,265,290.58
$ 28,343,037.00
$ -
$ -
$ -
$ 28,343,037.00
Loans >= $50,000
$ -
$ -
$ -
$ -
$ -
$ -
Transfers >=
$50,000
$ 1,589,708,558.81
$ 504,911,906.30
$ -
$ 52,632,958.55
$ -
$ 452,278,947.75
Direct Payments
>= $50,000
$ 351,460,111.70
$ 88,796,111.34
$ -
$ 46,811,376.10
$ -
$ 41,984,735.34
Aggregate
Reporting <
$50,000
$ 191,901,562.95
$ -
$ 191,901,562.95
$ -
$ -
$ -
Aggregate
Payments to
Individuals (in any
amount)
$ 410,083,587.33
$ -
$ 410,083,587.33
$ -
$ -
$ -
Totals
$ 3,109,262,010.51
$ 720,619,660.83
$ 601,985,150.28
$ 268,574,612.82
$ -
$ 595,396,613.74
22 Calendar quarter ending June 30, 2022.
23 Castro was unable to obtain a complete population or make transaction selections for Aggregate
Reporting less than or equal to $50,000 or Aggregate Payments to Individuals. Therefore, we
consider this a scope limitation and do not consider this amount to be tested. Accordingly, we
have excluded this amount from the “Cumulative Expenditure Tested Amount” column.
24 In addition to the questioned costs identified in the table above, Castro noted INLA expenditures
with descriptions of “Other” or “Various” which should have been updated by Virginia
management to reflect the nature of the expenditure in GrantSolutions. Although we do not
consider INLA reporting exceptions to be questioned costs, we consider these INLA reporting
errors to be noncompliant with Treasury’s Guidance.
25 Due to the pervasive issues identified with two Virginia state agencies, we included the entire
populations of contracts for those state agencies reported in GrantSolutions as questioned costs.
Desk Review of the Commonwealth of Virginia
8
Contracts Greater Than or Equal to $50,000
We determined Virginia’s Contracts greater than or equal to $50,000 did not
comply with the CARES Act and Treasury’s Guidance. We identified exceptions in
five of the six transactions selected for testing; resulting in unsupported
questioned costs totaling $169,130,278.17.
Virginia Department of Emergency Management (VDEM)
Of the six transactions selected for contracts testing, three were contracts
executed through the Virginia Department of Emergency Management (VDEM).
We identified exceptions in all three transactions selected for VDEM. Specifically,
VDEM’s accounting system and procurement system were not integrated to allow
accurate tracking of expenditures incurred against specific contracts. Additionally,
VDEM management was unable to provide sufficient supporting documentation to
substantiate consulting costs incurred.
As these issues were noted for all contract transactions selected for testing for
VDEM, we deemed this to be a pervasive issue for contracts awarded by VDEM. In
addition, while we did not expand transaction selections to determine further
impact, we question the contract expenditures we identified as attributable to
VDEM totaling $85,915,907.65 in unsupported questioned costs.26
Virginia Department of Health (VDH)
Of the six transactions selected for testing, two were contracts executed through
the Virginia Department of Health (VDH). We identified exceptions in both of the
transactions selected for VDH. For both transactions selected for testing, VDH
management was unable to provide adequate supporting documentation to
substantiate the costs of COVID-19 testing and contact tracing. We noted reporting
discrepancies between VDH management’s records and the Virginia Department
of Accounts’ (DOA) records as of Cycle 9.27 We could not determine if the
expenditures were supported in accordance with the CARES Act and Treasury’s
Guidance. We determined that the reporting discrepancies occurred due to VDH
management labeling invoices with incorrect agreement numbers.
Due to the nature of the cause of these exceptions, and that we noted this
exception in both selections tested for VDH Contracts, we deemed this a pervasive
issue for contracts awarded by VDH. In addition, while we did not expand our
26 We identified the questioned cost amount of $85,915,907.65 by filtering the GrantSolutions
expenditure population to all transactions that contained the same contract numbers as the VDEM
transactions selected for testing in our desk review. Virginia’s GrantSolutions expenditure
population may include additional VDEM incurred expenses related to other contracts not selected
for testing within our desk review. We note that this $85,915,907.65 questioned cost amount does
not include any of those expense amounts.
27 Calendar quarter ending June 30, 2022.
Desk Review of the Commonwealth of Virginia
9
transaction selections to determine further impact, we question the contract
expenditures we identified as attributable to VDH resulting in unsupported
questioned costs totaling $83,214,370.52.28
Transfers Greater Than or Equal to $50,000
We determined Virginia’s Transfers greater than or equal to $50,000 did not
comply with the CARES Act and Treasury’s Guidance. For two of the original 16
transfer transaction selections, City of Virginia Beach (VB) management was
unable to provide adequate supporting documentation for the transactions
selected, totaling $52,632,958.55 in unsupported costs.
Direct Payments Greater Than or Equal to $50,000
We determined Virginia’s Direct Payments greater than or equal to $50,000 did not
comply with the CARES Act and Treasury’s Guidance. We identified exceptions in
two of the four transactions selected for testing; resulting in unsupported
questioned costs totaling $46,811,376.10.
For two of the four transactions, Virginia Commonwealth University Health
Systems Authority (VCU) management was unable to provide adequate
supporting documentation, as it was not readily available.
VCU management stated it would be difficult to obtain supporting documentation
since they were experiencing competing priorities such as the federal single audit
at the time of Castro’s request for documentation.
Aggregate Reporting Less Than $50,000
We determined Virginia’s Aggregate Reporting less than $50,000 did not comply
with the CARES Act and Treasury’s Guidance. Based on our assessment of the
supporting documentation provided by Virginia management, we determined that
we could not obtain or review accurate or complete populations to select
transactions to test. This scope limitation resulted from management not
completing a reconciliation of the Aggregate Reporting less than $50,000. We
identified $191,901,562.95 in unsupported questioned costs. Management
confirmed the root cause of the errors was the lack of resources to complete a
true reconciliation of the data submitted to Virginia by departments and agencies.
28 We identified the questioned cost amount of $83,214,370.52 by filtering the GrantSolutions
expenditure population to all transactions that contained the same contract numbers as the VDH
transactions selected for testing in our desk review. Virginia’s GrantSolutions expenditure
population may include additional VDH incurred expenses related to other contracts not selected
for testing within our desk review. We note that this $83,214,370.52 questioned cost amount does
not include any of those expense amounts.
Desk Review of the Commonwealth of Virginia
10
Aggregate Payments to Individuals (API)
We determined API did not comply with the CARES Act and Treasury’s Guidance.
Based on our assessment of the supporting documentation provided by
management, we determined that we could not obtain or review accurate or
complete populations to select transactions. We identified $410,083,587.33 in
unsupported questioned costs.
Conclusion
We determined that the expenditures related to Grants greater than or equal to
$50,000 complied with the CARES Act and Treasury’s Guidance. We also found
that uses of CRF proceeds for Contracts greater than or equal to $50,000,
Transfers 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 did not comply with the CARES Act and Treasury’s Guidance, resulting
in total questioned costs of $870,559,763.10. We determined that Virginia’s risk of
unallowable use of funds is high.
Castro recommends Treasury OIG follow-up with Virginia management on
necessary reporting corrections. Specifically, INLA description corrections are
needed in the Contracts greater than or equal to $50,000, Grants greater than or
equal to $50,000, Transfers greater than or equal to $50,000, and Direct Payments
greater than or equal to $50,000 payment types. In addition, Castro recommends
Treasury OIG pursue obtaining documentation from Virginia management for
Contracts greater than or equal to $50,000, Transfers 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. Based on Virginia’s
responsiveness to Treasury OIG’s requests and its ability to provide
documentation, we recommend Treasury OIG determine if a focused audit is
feasible for Contracts, Transfers, and Direct Payments greater than or equal to
$50,000, as well as Aggregate Reporting less than $50,000 and Aggregate
Payments to Individuals. In addition, Castro recommends that Treasury OIG work
with Virginia management to determine whether there are any additional costs
attributable to VDEM and VDH and to ensure that Virginia management makes
any necessary corrections to those balances. Castro also recommends Treasury
OIG follow-up to obtain the status of the 2021 Single Audit Annual Comprehensive
Financial Report finding.
Desk Review of the Commonwealth of Virginia
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.29 We appreciate the courtesies
and cooperation provided to our staff during the desk review.
Sincerely,
Wayne Ference
Partner, Castro & Company, LLC
29 https://www.ignet.gov/sites/default/files/files/Silver%20Book%20Revision%20-%208-20-12r.pdf