OIG Ca 25 007 Desk Review Of The State Of West Virginia S Use Of Coronavirus Relief Fund Proceeds
Summary
A Department of the Treasury Office of Inspector General memorandum dated November 13, 2024, Desk Review of the State of West Virginia's Use of Coronavirus Relief Fund Proceeds (OIG-CA-25-007), transmitting a desk review performed under contract by Castro & Company, LLC. The review examined a non-statistical selection of 34 transactions and identified unsupported questioned costs of $657,742 and ineligible questioned costs of $20,917,332, for total questioned costs of $21,575,074. It finds that the Direct Payments and Aggregate Payments to Individuals payment types did not comply with the CARES Act and Treasury's Guidance, and rates West Virginia's risk of unallowable use of funds as moderate. It recommends follow-up, recoupment if support is not provided, and a determination on the feasibility of an audit. The review notes a $1,250,000,000 CRF payment to West Virginia.
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DEPARTMENT OF THE TREASURY
W ASHINGTON, D.C. 20220
OFFICE OF
INSPECTOR GENERAL
November 13, 2024
MEMORANDUM FOR JESSICA MILANO, CHIEF PROGRAM OFFICER, OFFICE OF
CAPITAL ACCESS, DEPARTMENT OF THE TREASURY
FROM: Deborah L. Harker /s/
Assistant Inspector General for Audit
SUBJECT: Desk Review of the State of West Virginia’s Use of
Coronavirus Relief Fund Proceeds
(OIG-CA-25-007)
Please find the attached desk review memorandum 1 on the State of West Virginia’s
(West 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 34 transactions reported in the quarterly Financial Progress Reports
(FPR) and identified a combination of unsupported and ineligible questioned costs
of $657,742 and $20,917,332, respectively, with total questioned costs across all
payment types of $21,575,074 (see attached schedule of monetary benefits).2
Castro also identified grants portal misclassification reporting issues related to
Contracts greater than or equal to $50,000 that did not comply with Department of
the Treasury’s (Treasury) 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
Questioned costs consist of ineligible costs related to the West Virginia Medical Access Road
Program (MARP) and unsupported costs related to public safety payroll.
Page 2
Castro determined that expenditures related to Grants greater than or equal to
$50,000, Transfers greater than or equal to $50,000, 3 and Aggregate Reporting less
than $50,000 4 payment types complied with the CARES Act and Treasury’s
Guidance. Castro also determined that expenditures for the Contracts greater than
or equal to $50,000 payment type complied with the CARES Act but not Treasury’s
Guidance. Castro determined that the expenditures related to the Direct Payments
greater than or equal to $50,000 and Aggregate Payments to Individuals5 payment
types did not comply with the CARES Act and Treasury’s Guidance. Additionally,
Castro determined that West Virginia’s risk of unallowable use of funds is
moderate.
Castro recommends that Treasury Office of Inspector General (OIG) follow-up with
West Virginia’s management to confirm if the transactions noted as unsupported
expenditures of $657,742 within Aggregate Payments to Individuals can be
supported. If support is not provided, Treasury OIG should recoup the funds or
request West Virginia management to provide support for replacement expenses,
not previously charged, that were eligible during the CRF period of performance.
In addition, Castro recommends that Treasury OIG request West Virginia
management to provide support for replacement expenses, not previously
charged, that were eligible during the CRF period of performance for the
$20,917,332 of ineligible costs charged to the Direct Payments greater than or
equal to $50,000 payment type. If support is not provided, Treasury OIG should
recoup the funds.
Based on West Virginia’s responsiveness to Treasury OIG’s requests and West
Virginia’s ability to provide sufficient documentation and/or replace unsupported
and ineligible transactions charged to CRF with valid expenditures, Castro
recommends Treasury OIG determine the feasibility of conducting an audit for the
Direct Payments greater than or equal to $50,000 and Aggregate Payments to
Individuals payment types.
3
A transfer to another government entity is a disbursement or payment to a government entity
that is legally distinct from the prime recipient.
4
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).
5 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.
Page 3
Treasury OIG and Castro met with West Virginia management to discuss the
questioned costs. West Virginia management stated that they would provide
additional documentation to Treasury OIG to support the questioned costs or
replace them with other eligible expenditures.
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 West 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 the 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,
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
Danielle Christensen, Deputy Chief Program Officer, Office of Capital
Access, Department of the Treasury
Wayne Ference, Partner, Castro & Company, LLC
Ann Urling, Senior Advisor, Officer of the State of West Virginia Governor
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 405.
Recommendation Questioned Costs
Recommendation No. 1 $21,575,074
The questioned cost represents amounts provided by Treasury under the
Coronavirus Relief Fund. As discussed in the attached desk review, $21,575,074 is
West Virginia’s expenditures reported in the grant-reporting portal that were
ineligible or lacked supporting documentation.
6
2 CFR § 200.84 – Questioned Cost
7
JAMES is Treasury’s audit recommendation tracking system.
1635 King Street
Alexandria, VA 22314
Phone: 703.229.4440
Fax: 703.859.7603
www.castroco.com
Desk Review of the State of West Virginia
November 13, 2024
OIG-CA-25-007
MEMORANDUM FOR DEBORAH L. HARKER,
ASSISTANT INSPECTOR GENERAL FOR AUDIT
FROM: Wayne Ference
Partner, Castro & Company, LLC
SUBJECT: Desk Review of the State of West Virginia
On September 18, 2023, we initiated a desk review of the State of West Virginia’s
(West 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 West Virginia’s documentation supporting its uses of CRF
proceeds as reported in the GrantSolutions 2 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 December 31, 2022,3
as reported in the GrantSolutions portal.
As part of our desk review, we performed the following:
1) reviewed West Virginia’s quarterly Financial Progress Reports (FPRs)
submitted in the GrantSolutions portal through December 31, 2022;
2) reviewed the Department of the Treasury’s (Treasury) Coronavirus Relief
Fund Guidance as published in the Federal Register on January 15, 2021;4
1
P.L. 116-136 (March 27, 2020).
2
GrantSolutions, a grant and program management Federal shared service provider under the
United States (U.S.) Department of Health and Human Services, developed a customized and user-
friendly reporting solution to capture the use of CRF payments from prime recipients.
3
West Virginia fully expended their total CRF proceeds as of December 31, 2022. Castro set the
scope end date to December 31, 2022, which was the date of West Virginia’s last reporting
submission within the GrantSolutions portal.
4
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
1
Desk Review of the State of West Virginia
3) reviewed Treasury Office of Inspector General’s (OIG) Coronavirus Relief
Fund Frequently Asked Questions Related to Reporting and
Recordkeeping; 5
4) reviewed Treasury OIG’s monitoring checklists 6 of West Virginia’s quarterly
FPR submissions for reporting deficiencies;
5) reviewed other audit reports issued, such as Single Audit Act reports, 7 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 West Virginia’s uses of CRF proceeds;
6) reviewed Treasury OIG Office of Investigations, the Council of the
Inspectors General on Integrity and Efficiency Pandemic Response
Accountability Committee, 8 and Treasury OIG Office of Counsel input on
issues that may pose risk or impact West Virginia’s use of CRF proceeds;
7) interviewed key personnel responsible for preparing and certifying West
Virginia’s GrantSolutions portal quarterly FPR submissions, as well as
officials responsible for obligating and expending CRF proceeds;
5
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.
6
The checklists were used by Treasury OIG personnel to monitor the progress of prime recipient
reporting in the GrantSolutions portal. GrantSolutions quarterly submission reviews were
designed to identify material omissions and significant errors, and where necessary, included
procedures for notifying prime recipients of misreported data for timely correction. Treasury OIG
followed the CRF Prime Recipient Quarterly GrantSolutions Submissions Monitoring and Review
Procedures Guide, OIG-CA-20-029R to monitor the prime recipients on a quarterly basis.
7
P. L. 104-156 (July 5, 1996) The Single Audit Act of 1984, as amended in 1996, requires entities
who receive federal funds in excess of $750,000 to undergo an annual audit of those Federal funds.
The act was enacted for the purpose of promoting sound financial management, including
effective internal controls, with respect to Federal awards administered by non-Federal entities and
to establish uniform requirements for audits. This prime recipient was subject to those audit
requirements, and Castro reviewed applicable prior year single audit reports as part of our desk
review risk assessment procedures.
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 15 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.
2
Desk Review of the State of West Virginia
8) made a non-statistical selection of Contracts, Grants, Transfers,9 Direct
Payments, Aggregate Reporting, 10 and Aggregate Payments to Individuals11
F
data identified through GrantSolutions portal reporting; and
9) evaluated documentation and records used to support West Virginia’s
quarterly FPRs.
Based on our review of West Virginia’s documentation supporting the uses of its
CRF proceeds as reported in the GrantSolutions portal, we determined that the
expenditures related to the Grants greater than or equal to $50,000, Transfers
greater than or equal to $50,000, and Aggregate Reporting less than $50,000
payment types complied with the CARES Act and Treasury’s Guidance. Also, we
determined that the expenditures related to the Contracts greater than or equal to
$50,000 payment type complied with the CARES Act but not Treasury’s Guidance.
In addition, we determined that expenditures related to the Direct Payments
greater than or equal to $50,000 and Aggregate Payments to Individuals payment
types did not comply with the CARES Act and Treasury’s Guidance.
We identified unsupported and ineligible questioned costs of $657,742 and
$20,917,332, respectively, with total questioned costs of $21,575,074. We also
determined West Virginia’s risk of unallowable use of funds is moderate.
Castro recommends that Treasury OIG follow-up with West Virginia’s
management to confirm if the $657,742 noted as unsupported expenditures within
Aggregate Payments to Individuals can be supported. If support is not provided,
Treasury OIG should recoup the funds or request West Virginia management to
provide support for replacement expenses, not previously charged, that were
eligible during the CRF period of performance.
In addition, Castro recommends that Treasury OIG request West Virginia
management to provide support for replacement expenses, not previously
charged, that were eligible during the CRF period of performance for the
$20,917,332 of ineligible costs charged to the Direct Payments greater than or
equal to $50,000 payment type. If support is not provided, Treasury OIG should
recoup the funds.
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
Prime recipients were required to report CRF transactions greater than or equal to $50,000 in
detail in the GrantSolutions portal. Transactions less than $50,000 could be reported as an
aggregate lump-sum amount by type (contracts, grants, loans, direct payments, and transfers to
other government entities).
11
Obligations and expenditures for payments made to individuals, regardless of amount, were
required to be reported in the aggregate in the GrantSolutions portal to prevent inappropriate
disclosure of personally identifiable information.
3
Desk Review of the State of West Virginia
Further, based on West Virginia’s responsiveness to Treasury OIG’s requests and
its ability to provide sufficient documentation and/or replace unsupported and
ineligible transactions charged to CRF with valid expenditures, Castro
recommends Treasury OIG determine the feasibility of conducting an audit for the
Direct Payments greater than or equal to $50,000 and Aggregate Payments to
Individuals payment types.
Non-Statistical Transaction Selection Methodology
Treasury issued a $1,250,000,000 CRF payment to West Virginia. As of
December 31, 2022, West Virginia expended all its CRF funds. West Virginia’s
cumulative obligations and expenditures by payment type are summarized below.
Cumulative Cumulative
Payment Type Obligations Expenditures
Contracts >= $50,000 $ 34,542,780 $ 34,542,780
Grants >= $50,000 $ 20,573,908 $ 20,573,908
Loans >= $50,000 $ - $ -
Transfers >= $50,000 $ 255,687,153 $ 255,687,153
Direct Payments >= $50,000 $ 45,102,179 $ 45,102,179
Aggregate Reporting < $50,000 $ 173,405,258 $ 173,405,258
Aggregate Payments to
Individuals (in any amount) $ 720,688,722 $ 720,688,722
Totals $ 1,250,000,000 $ 1,250,000,000
Castro made a non-statistical selection of payments 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, Direct Payments greater than or equal to $50,000,
Aggregate Reporting less than $50,000, and Aggregate Payments to Individuals
payment types. 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 West Virginia’s FPR submissions. West Virginia did not obligate or
expend CRF proceeds to the Loans greater than or equal to $50,000 payment type;
therefore, we did not select transactions from this payment type.
The number of transactions (34) we selected to test were based on West Virginia’s
total CRF award amount and Castro’s overall risk assessment of West Virginia. To
allocate the number of transactions (34) by payment 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, Direct Payments greater than or equal to $50,000,
12
Treasury OIG had a pre-defined list of risk indicators that were triggered based on data
submitted by prime recipients in the FPR submissions that met certain criteria. Castro reviewed
these results provided by Treasury OIG for the prime recipient.
4
Desk Review of the State of West Virginia
Aggregate Reporting less than $50,000, and Aggregate Payments to Individuals),
we compared the total payment type dollar amounts as a percentage of
cumulative expenditures as of December 31, 2022. The transactions tested were
not selected statistically, and therefore results could not 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 U.S. Virgin Islands, Guam, American Samoa,
and the Commonwealth of the Northern Mariana Islands; and Tribal governments
(collectively referred to as “prime recipients”). Treasury issued a $1,250,000,000
CRF payment to West Virginia. The CARES Act stipulates that a prime recipient
may only use the funds to cover costs that —
(1) were 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 during the covered period between March 1, 2020 and
December 31, 2021. 13
Section 15011 of the CARES Act required each covered recipient 14 to submit to
Treasury and the Pandemic Response Accountability Committee, no later than 10
days after the end of each calendar quarter, a report that contained (1) the total
amount of large covered funds 15,16 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
13
P.L. 116-260 (December 27, 2020). The covered period end date of the CRF was extended through
December 31, 2021 by the Consolidated Appropriations Act, 2021. The covered period 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.
14
Section 15011 of P.L. 116-136 defined a covered recipient as any entity that received large
covered funds and included any State, the District of Columbia, and any territory or possession of
the United States.
15
Section 15010 of P.L. 116-136 defined covered funds as any funds, including loans, that were
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 made appropriations for
Coronavirus response and related activities.
16
Section 15011 of P.L. 116-136 defined large covered funds as covered funds that amounted to
more than $150,000.
5
Desk Review of the State of West Virginia
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 the authority to recoup funds in the event it is determined a
prime 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
Financial Progress Reports
We reviewed West Virginia’s quarterly FPRs through December 31, 2022, and
found that West Virginia timely filed quarterly FPRs in the GrantSolutions portal in
compliance with Treasury OIG’s reporting requirements for the period of
June 30, 2020 through December 31, 2022.
Summary of Testing Results
We found that the expenditures related to the Grants greater than or equal to
$50,000, Transfers greater than or equal to $50,000, and Aggregate Reporting less
than $50,000 payment types complied with the CARES Act and Treasury’s
Guidance. We also found that the expenditures related to the Contracts greater
than or equal to $50,000 payment typed complied with the CARES Act but not
Treasury’s Guidance. Additionally, we found that the Direct Payments greater than
or equal to $50,000 and Aggregate Payments to Individuals payment types did not
comply with the CARES Act and Treasury’s Guidance because we were unable to
determine if all tested expenditures were necessary 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 could not be extrapolated to the total universe of transactions.
Within the table below, we have included a summary of unsupported and
ineligible expenditures identified as questioned costs, which did not comply with
the CARES Act and Treasury’s Guidance. 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.
6
Desk Review of the State of West Virginia
Summary of Expenditures Testing and Recommended Results
As of December 31, 2022
Cumulative
Unsupported Ineligible
Expenditure Cumulative Total Tested
Tested Tested
Population Expenditure Questioned
Questioned Questioned
Payment Type Amount Tested Amount Costs
Costs Costs
Contracts >= $50,000 $ 34,542,780 $ 8,187,124 $ - $ - $ -
Grants >= $50,000 $ 20,573,908 $ 7,721,650 $ - $ - $ -
Loans >= $50,000 $ - $ - $ - $ - $ -
Transfers >= $50,000 $ 255,687,153 $ 8,017,864 $ - $ - $ -
Direct Payments >=
$50,000 $ 45,102,179 $ 21,724,982 $ - $ 20,917,332 $ 20,917,332
Aggregate Reporting <
$50,000 $ 173,405,258 $ 7,284,271 $ - $ - $ -
Aggregate Payments to
Individuals (in any
amount) $ 720,688,722 $ 9,387,501 $ 657,742 $ - $ 657,742
Totals $ 1,250,000,000 $ 62,323,392 $ 657,742 $ 20,917,332 $ 21,575,074
Contracts Greater Than or Equal to $50,000
We determined West Virginia’s Contracts greater than or equal to $50,000
complied with the CARES Act but did not comply with Treasury’s Guidance. We
tested two contracts totaling $8,187,124 and identified no testing exceptions. The
contracts tested included expenditures for the purchase of medical supplies and
rental space for a 24-hour a day emergency room access, and upgrades to
enhance a statewide interoperable radio network for emergency responders
during the pandemic.
However, we identified a reporting misclassification that did not comply with
Treasury’s Guidance related to Contracts greater than or equal to $50,000 that we
determined should have been reported as Direct Payments greater than or equal
to $50,000 in the GrantSolutions portal.
7
Desk Review of the State of West Virginia
Grants Greater Than or Equal to $50,000
We determined West Virginia’s Grants greater than or equal to $50,000 complied
with the CARES Act and Treasury’s Guidance. We tested three grants totaling
$7,721,650 and identified no testing exceptions. The grants tested included
expenditures for mobile emergency medical technician pandemic-related training,
renovation of a facility to provide housing for the homeless during the pandemic,
food distribution, personal protective equipment, and payroll costs for training
services related to manufacturing medical supplies.
Transfers to Other Government Entities Greater Than or Equal to $50,000
We determined West Virginia’s Transfers greater than or equal to $50,000
complied with the CARES Act and Treasury’s Guidance. We tested five transfers
totaling $8,017,864 and identified no testing exceptions. The transfers tested
included expenditures for reimbursement of payroll costs for public health and
safety personnel; personal protective equipment; medical supplies; remote video
subscriptions to support telework capabilities; contracted call center services; and
upgrades to a microwave network and a 911 operation center.
Direct Payments Greater Than or Equal to $50,000
We determined West Virginia’s Direct Payments greater than or equal to $50,000
did not comply with the CARES Act and Treasury’s Guidance. We tested five direct
payments totaling $21,724,982 and identified testing exceptions related to the
West Virginia Medical Access Road Program (MARP) resulting in ineligible
questioned costs totaling $20,917,332, as detailed below. The direct payments
tested included expenditures for reimbursement for medical access road
programs and implementation of a grant management solution software. 17
We tested four transactions totaling $20,917,332 related to the West Virginia
MARP and determined the documentation provided failed to sufficiently support
that the expenditures were necessary as it pertained to the COVID-19 pandemic.
West Virginia leveraged existing blanket purchase order arrangements with
paving companies that were established prior to the start of the COVID-19
pandemic to accomplish the goals of the MARP which the State believed were a
necessary response to the public health emergency. Based on our review, we
determined the support did not explicitly state the costs incurred were for COVID-
17
West Virginia used CRF proceeds for a vendor to create, implement, and train West Virgina
personnel on using a computerized grants application portal through which the public and state
agencies accessed information on COVID-19-related funding opportunities and applied for grants
and funding related to the COVID-19 pandemic.
8
Desk Review of the State of West Virginia
19 related expenditures, resulting in non-compliance with the CARES Act and
Treasury’s Guidance.
We obtained and inspected the master agreements and other obligating
documents specific to the West Virginia Division of Highways and the selected
vendors; however, the support did not clarify how the MARP expenditures were
related to the contracted services established in the master agreements. In
addition, we noted the master agreements were signed with dates before the
enactment of the CARES Act program of March 1, 2020. Further, West Virginia did
not provide a modification or separate contract under the master agreements to
redefine a scope of work specific to the MARP resulting from the pandemic.
We asked West Virginia to justify how it determined these selected expenditures
incurred were necessary due to the public health emergency with respect to
COVID-19 and to include any additional documentation needed to support this
determination. In response, West Virginia stated the purpose of the MARP
expenditures were to provide improvements and deferred maintenance to roads
critical to West Virginia communities’ ability to travel and access medical facilities.
In summary, West Virginia was unable to provide support to corroborate that the
expenditures were necessary as it related to the COVID-19 pandemic. As a result,
the MARP expenditures reimbursed with CRF proceeds were not justified or an
eligible use, resulting in ineligible questioned costs of $20,917,332.
Aggregate Reporting Less Than $50,000
We determined West Virginia’s Aggregate Reporting less than $50,000 complied
with the CARES Act and Treasury’s Guidance. We tested four transactions totaling
$7,284,271 and identified no testing exceptions. The transactions tested included
expenditures for the purchase of grant management software related to pandemic
support, hardship utility bills, payroll for public health and safety employees, and
COVID-19 test kits.
Aggregate Payments to Individuals
CRF payments made to individuals, regardless of amount, were required to be
reported in the aggregate in the GrantSolutions portal to prevent inappropriate
disclosure of personally identifiable information. Castro notes that the Aggregate
Payments to Individuals payment type consisted of the below broad types of
potential costs, which we have defined from Treasury’s guidance as published in
the Federal Register. 18 Prime recipients may or may not have claimed all these
types of expenditures.
18
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
9
Desk Review of the State of West Virginia
Public Health and Safety Payroll 19 – consisted of payroll costs for public
health and safety department personnel.
Substantially Dedicated Payroll 20 – consisted of payroll costs for non-
public health and safety personnel who were substantially dedicated to
mitigating or responding to the COVID-19 public health emergency.
Non-Substantially Dedicated Payroll 21 – consisted of payroll costs for
personnel who performed COVID-19 related tasks on a part-time basis.
Non-Payroll Expenditures – consisted of financial assistance payments to
citizens due to hardship or loss of income, unemployment claims, and
other non-payroll related expenditures made to individuals.
19
Treasury’s Federal Register guidance provided the following examples of public health and
safety employees: “police officers (including state police officers), sheriffs and deputy sheriffs,
firefighters, emergency medical responders, correctional and detention officers, and those who
directly support such employees such as dispatchers and supervisory personnel…employees
involved in providing medical and other health services to patients and supervisory personnel,
including medical staff assigned to schools, prisons, and other such institutions, and other support
services essential for patient care (e.g., laboratory technicians) as well as employees of public
health departments directly engaged in matters related to public health and related supervisory
personnel.”
20
Substantially dedicated payroll costs meant that personnel must have dedicated over 50 percent
of their time to responding or mitigating COVID-19. Treasury’s Federal Register guidance
indicated: “The full amount of payroll and benefits expenses of substantially dedicated employees
may be covered using payments from the Fund. Treasury has not developed a precise definition of
what "substantially dedicated" means given that there is not a precise way to define this term
across different employment types. The relevant unit of government should maintain
documentation of the "substantially dedicated" conclusion with respect to its employees.”
21
Payroll costs that were not substantially dedicated were payroll costs that were not public health
and safety, and which were not substantially dedicated to performing COVID-19 related tasks.
Treasury’s Federal Register guidance defined more stringent tracking requirements for these types
of payroll costs. Specifically, Treasury’s Federal Register stated: “track time spent by employees
related to COVID-19 and apply Fund payments on that basis but would need to do so consistently
within the relevant agency or department. This means, for example, that a government could
cover payroll expenses allocated on an hourly basis to employees' time dedicated to mitigating or
responding to the COVID-19 public health emergency.”
10
Desk Review of the State of West Virginia
The West Virginia Aggregate Payments to Individuals balance consisted of payroll
and other transactions from the following types of claimed costs.
Aggregate Payments to Individuals Total Expenses
Category Types 22 Claimed
Public Health and Safety Payroll $ 202,024,088
Substantially Dedicated Payroll $ 755,348
Non-Payroll Expenditures 23 $ 517,909,286
Totals $ 720,688,722
Castro noted that public health and safety payroll transactions were subject to
Treasury’s administrative accommodation, 24 and therefore, were subject to less
detailed documentation requirements. Castro tested public health and safety
payroll transactions by reviewing itemized payroll distribution reports to support
these balances. Substantially dedicated payroll balances were not subject to this
administrative accommodation, and therefore, Castro tested these transactions by
reviewing payroll distribution files and by performing tests over specific employee
timesheet submissions or other documentation provided by the prime recipient to
confirm the “substantially dedicated” conclusion with respect to its employees.
Non-Payroll expenditure balances were also not subject to this administrative
accommodation, and therefore, Castro tested these transactions by reviewing the
program requirements and requested specific supporting documentation to
determine eligibility and allowable use.
22
West Virginia did not report any non-substantially dedicated payroll within its Aggregate
Payments to Individuals payment type, and so these were not included within the Aggregate
Payments to Individuals Category Types.
23
The Non-Payroll Expenditures of $517,909,286 consisted of unemployment related expenditures
of $445,391,209 (see Non-Payroll Expenditures: CRF Unemployment Expenditures section below
for an overall review of these charges), payments to support workforce re-entry into the job market
of $53,971,267, vaccine incentive programs of $16,772,840, other hardship related payments of
$1,073,970, and reimbursement of survivor benefit payments of $700,000. The expenditures in the
Non-Payroll Expenditures category, other than CRF Unemployment Expenditures, were tested as a
part of the sample of transactions selected (see Summary of Aggregate Payments to Individuals
Testing Results section below). The CRF Unemployment Expenditures section below discusses the
analysis of unemployment expenditures charged to CRF, which was performed as a wholistic
analysis rather than testing on a sample of expenditures.
24
Treasury’s Federal Register guidance states the following regarding an administrative
accommodation: “In recognition of the particular importance of public health and public safety
workers to State, local, and tribal government responses to the public health emergency, Treasury
has provided, as an administrative accommodation, that a State, local, or tribal government may
presume that public health and public safety employees meet the substantially dedicated
test…This means that, if this presumption applies, work performed by such employees is
considered to be a substantially different use than accounted for in the most recently approved
budget as of March 27, 2020. All costs of such employees may be covered using payments from
the Fund for services provided during the period that begins on March 1, 2020, and ends on
December 31, 2021.”
11
Desk Review of the State of West Virginia
Non-Payroll Expenditures: CRF Unemployment Expenditures
The Unemployment Trust Fund (UI) is a reserve funded by state taxes, primarily
on employers, and used only to pay state unemployment benefits. The balance in
the reserve fund can decline during a prolonged period of high unemployment
such as the COVID-19 pandemic. The fund’s activity is demonstrated by inflows
and outflows of the account based on contributions from state taxes or employers
and reduced by issuance of unemployment benefit claims. Due to the COVID-19
pandemic, West Virginia experienced significant increases in unemployment
claims which decreased the reserve fund balance increasing the risk of insolvency.
West Virginia maintained a UI fund balance of $160,448,610 as of February 2020,
prior to the COVID-19 pandemic. We noted West Virginia’s UI reserve fund
balance for the month ending at the start of the pandemic, March 31, 2020, was
$110,535,131. For April 2020, West Virginia originally projected 4,538 total
unemployment claims; however, the actual claims filed totaled 108,330. By May
2020, West Virginia’s UI fund balance decreased to $20,054,032, causing concern
that the fund would become insolvent. This exponential change in fund balance
warranted the unemployment claims analysis described below.
West Virginia performed an unemployment claim analysis supporting how it
determined that the change in the UI balance occurred due to the COVID-19
pandemic and not due to unemployment claims that would have been paid
regardless of the pandemic. Castro reviewed this analysis and obtained and
inspected the bank statements/fund balance with Treasury Direct statements 25 to
support key unemployment trust fund balances included within West Virginia’s
unemployment claim analysis to justify the eligibility of unemployment
expenditures claimed using CRF proceeds. We noted West Virginia used
$445,391,209 in CRF proceeds related to unemployment expenditures, consisting
of the following three items:
1. $184,910,036 - Repayment of U.S. Department of Labor Title XII Advances
(Loan)
Due to the significant increase in actual unemployment claims, West Virginia
depleted their UI balance and took advantage of an available interest-free loan,
the Department of Labor’s Title XII Advance (Loan), to support its ability to pay
unemployment claims. When the interest-free period ended, CRF proceeds were
used to repay the principal loan balance of $184,910,036 which represented the
unemployment payments that had been made from the Loan.ௗ
25
Treasury Direct is an official website of the United States Government that provides insight on
funds management programs, including unemployment trust fund statements. Castro conducted
external research to obtain unemployment related datasets to corroborate the support provided by
West Virginia.
12
Desk Review of the State of West Virginia
Prime recipients may use CRF proceeds to repay the principal amount of a Title
XII Loan, 26 but not the interest.27 Specifically, States faced a massive
unemployment claim load due to the pandemic, which resulted in the obligation
to repay Title XII advances requested during the CRF covered period. These
advances were due immediately and payable as long as a balance remained
open. However, any interest expense on the Title XII advances would be accrued
outside of the covered period, making it ineligible for CRF reimbursement. West
Virginia only used CRF proceeds for the total amount of Title XII advances
received, not interest. As a result, we determined the use of CRF for the Title XII
Loan principal repayment was an eligible expenditure.
2. $220,559,606 – Replenishment of the Unemployment Trust Fund
Supplemental funding was made to West Virginia’s UI to prevent insolvency and
enable West Virginia to continue to pay necessary unemployment benefits.ௗ We
noted $220,559,606 in CRF proceeds were used to replenish the UI balance in
September 2021. Castro noted in their supporting documentation that West
Virginia accumulated $536,195,604 in unemployment benefits during the
covered period where the claimant indicated on the completed application their
claim resulted from the pandemic. Based on the support provided, we
determined West Virginia’s use of $220,559,606 in CRF proceeds to replenish the
UI was reasonable and eligible.
26
Federal Register Frequently Asked Question A.9 states, “Are States permitted to use Fund
payments to support state unemployment insurance funds generally? To the extent that the costs
incurred by a state unemployment insurance fund are incurred due to the COVID-19 public health
emergency, a State may use Fund payments to make payments to its respective state
unemployment insurance fund, separate and apart from such State’s obligation to the
unemployment insurance fund as an employer. This will permit States to use Fund payments to
prevent expenses related to the public health emergency from causing their state unemployment
insurance funds to become insolvent.”
27
Because interest expenses on Title XII advances did not accrue during the covered period, the
interest costs were not allowable.
13
Desk Review of the State of West Virginia
3. $39,921,567 - Payment of Lost Wage Assistance State Share
The Federal Emergency Management Agency (FEMA) Administrator approved
West Virginia for a FEMA grant under the Lost Wages Assistance program.
FEMA’s grant funding allowed West Virginia to provide $300 per week -- on top
of their regular unemployment benefit -- to those unemployed due to COVID-19.
West Virginia strategized to implement an additional $100 state cost share
approved by the Governor using CRF proceeds in addition to the $300 per week
provided by FEMA for a total benefit to the claimant of $400. To be eligible to
receive the Lost Wage Assistance payment, claimants were required to self-
certify that they were unemployed due to disruptions caused by COVID-19.
Workforce West Virginia’s (a West Virginia department that processes
unemployment claims) initial and weekly unemployment claim applications
included questions indicating whether a claimant’s unemployment was caused
by the pandemic, and only those claimants indicating the pandemic as the
reason for unemployment were paid Lost Wage Assistance benefits. Based on
this information, we determined West Virginia’s use of $39,921,567 in CRF
proceeds for the state share of the Lost Wage Assistance funding was
reasonable and eligible.
Conclusion Related to West Virginia’s CRF Unemployment Expenditures
Based on the information and support provided by West Virginia, we determined
the use of $445,391,209 in total CRF proceeds related to CRF unemployment
expenditures was reasonable and eligible.
Summary of Aggregate Payments to Individuals Testing Results
Other than the CRF Unemployment Expenditures category, we determined that
West Virginia’s Aggregate Payments to Individuals did not comply with the
CARES Act and Treasury’s Guidance. We tested 15 Aggregate Payments to
Individuals transactions totaling $9,387,501. The expenditures tested included
vaccine incentive programs, teachers’ payroll for dedicated time on online
programs, payroll costs of program coordinators, payroll costs for public health
and safety personnel, payment of taxes on vaccine incentive programs,
payments to public safety front line workers in the West Virginia National Guard,
reimbursement of survivor benefit payments for public health and safety
personnel, and unemployment-related expenditures which resulted from
charges for a service provider contracted to perform unemployment call center
services. We identified testing exceptions resulting in unsupported questioned
costs related to public safety payroll totaling $657,742, as detailed below.
14
Desk Review of the State of West Virginia
For one transaction related to public safety payroll reimbursements for payments
to front line workers in the West Virginia National Guard totaling $657,742, we
requested West Virginia provide supporting documentation to evidence the
claimed expenditures were eligible under CRF requirements. However, West
Virginia confirmed the transaction was a duplicate transaction in their accounting
system, resulting in unsupported questioned costs of $657,742. These costs were
paid in support of the West Virginia National Guard team, who received an initial
advance of funds, which was not caught during West Virginia’s final CRF
reconciliation. West Virgina management told us that the State would use these
funds for other eligible purposes.
Conclusion
We determined that the expenditures related to the Grants greater than or equal
to $50,000, Transfers greater than or equal to $50,000, and Aggregate Reporting
less than $50,000 payment types complied with the CARES Act and Treasury’s
Guidance. Also, we determined that the expenditures related to the Contracts
greater than or equal to $50,000 payment type complied with the CARES Act but
not Treasury’s Guidance. Additionally, we determined that the expenditures
related to the Direct Payments greater than or equal to $50,000 and Aggregate
Payments to Individuals payment types did not comply with the CARES Act and
Treasury’s Guidance.
We identified a combination of unsupported and ineligible questioned costs of
$657,742 and $20,917,332, respectively, with total questioned costs across all
payment types of $21,575,074. Also, we identified GrantSolutions portal
misclassification reporting issues related to Contracts greater than or equal to
$50,000 that did not comply with Treasury’s Guidance.
Additionally, West Virginia’s risk of unallowable use of funds is moderate.
Castro recommends that Treasury OIG follow-up with West Virginia’s
management to confirm if the $657,742 noted as unsupported expenditures within
Aggregate Payments to Individuals can be supported. If support is not provided,
Treasury OIG should recoup the funds or request West Virginia management to
provide support for replacement expenses, not previously charged, that were
eligible during the CRF period of performance.
In addition, Castro recommends that Treasury OIG request West Virginia
management to provide support for replacement expenses, not previously
charged, that were eligible during the CRF period of performance for the
$20,917,332 of ineligible costs charged to the Direct Payments greater than or
equal to $50,000 payment type. If support is not provided, Treasury OIG should
recoup the funds.
15
Desk Review of the State of West Virginia
Further, based on West Virginia’s responsiveness to Treasury OIG’s requests and
its ability to provide sufficient documentation and/or replace unsupported and
ineligible transactions charged to CRF with valid expenditures, Castro
recommends Treasury OIG determine the feasibility of conducting an audit for the
Direct Payments greater than or equal to $50,000 and Aggregate Payments to
Individuals payment types.
*****
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.28 We appreciate the courtesies
and cooperation provided to our staff during the desk review.
Sincerely,
Wayne Ference
Partner, Castro & Company, LLC
28
https://www.ignet.gov/sites/default/files/files/Silver%20Book%20Revision%20-%208-20-12r.pdf
16
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