OIG Ca 25 026 Desk Review Of The State Of New Jersey S Use Of Coronavirus Relief Fund Proceeds
Summary
A Department of the Treasury Office of Inspector General memorandum dated February 7, 2025, Desk Review of the State of New Jersey's Use of Coronavirus Relief Fund Proceeds (OIG-CA-25-026), transmitting a desk review performed under contract by Castro & Company, LLC. It reports that Castro reviewed a non-statistical selection of 25 transactions and identified unsupported questioned costs of $976,160,389 and ineligible questioned costs of $134,399,600, totaling $1,110,559,989. It states Castro found New Jersey's risk of unallowable use of funds high and recommends follow-up, recoupment if support is not provided, and consideration of an audit. The attached Castro memorandum, dated December 19, 2024, covers March 1, 2020 through September 30, 2023 and closes with other matters including $1,007,050 in self-identified potential fraudulent transactions.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
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DEPARTMENT OF THE TREASURY
W ASHINGTON, D.C. 20220
OFFICE OF
INSPECTOR GENERAL
February 7, 2025
MEMORANDUM FOR GREGORY TILL, ACTING 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 New Jersey’s Use of
Coronavirus Relief Fund Proceeds (OIG-CA-25-026)
Please find the attached desk review memorandum 1 on the State of New Jersey’s
(New Jersey) 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 25 transactions 2 reported in the quarterly Financial Progress Reports
(FPR) and identified a combination of unsupported and ineligible questioned costs
of $976,160,389 and $134,399,600, respectively, resulting in total questioned
costs of $1,110,559,989 (see attached schedule of monetary benefits).
Castro determined that the expenditures related to the Contracts greater than or
equal to $50,000, Grants greater than or equal to $50,000, Transfers greater than
or equal to $50,000,3 Direct Payments Greater than or equal to $50,000,
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 grant-reporting portal on a quarterly basis.
2 Castro made a non-statistical selection of 25 transactions to test based on New Jersey’s total CRF
award amount and Castro’s overall risk assessment for New Jersey. Castro selected an additional
13 potential duplicate payment transactions for limited testing to determine if the payments were
duplicates.
3 A transfer to another government entity is a disbursement or payment to a government entity that
is legally distinct from the prime recipient.
Page 2
Aggregate Reporting less than $50,000,4 and Aggregate Payments to Individuals 5
payment types did not comply with the CARES Act and Department of the
Treasury’s (Treasury) Guidance. Additionally, Castro determined that New Jersey’s
risk of unallowable use of funds is high.
Castro recommends that Treasury Office of Inspector General (OIG) follow up with
New Jersey’s management to confirm if the $976,160,389 noted as unsupported
expenditures within 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 can be supported.
If support is not provided, Treasury OIG should recoup the funds or request that
New Jersey’s management provide support for other eligible replacement expenses,
not previously charged to CRF, that were incurred during the period of
performance.
In addition, Castro recommends that Treasury OIG request New Jersey’s
management to provide support for other eligible replacement expenses, not
previously charged to CRF, that were incurred during the period of performance for
the $134,399,600 of ineligible costs charged to the Transfers greater than or equal
to $50,000 and Aggregate Payments to Individuals payment types. If support is
not provided, Treasury OIG should recoup the funds.
Further, based on New Jersey’s responsiveness to Treasury OIG’s requests and
management’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 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.
4 Recipients are required to report CRF transactions greater than or equal to $50,000 in detail in the
grant-reporting 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 grant-reporting portal to prevent inappropriate disclosure of
personally identifiable information.
Page 3
Castro also identified other matters throughout the course of its desk review,
which warranted recommendations to Treasury OIG for additional action. Castro
recommends Treasury OIG follow-up on these issues:
1) Castro tested $2,301,279 out of the total amount of $29,142,450 in non-
substantially dedicated payroll 6 claimed by New Jersey related to a higher
education grant. Since Castro identified unsupported questioned costs within
these non-substantially dedicated payroll expenditures tested, Castro
recommends Treasury OIG determine the feasibility of performing additional
follow-up with New Jersey to determine if there were other instances of
unsupported balances within the remaining portion of this grant balance.
2) Castro tested $250,398 out of the total amount of $26,000,000 in grant
expenses claimed by New Jersey related to a long-term care facility staff testing
grant program. Since Castro identified unsupported questioned costs within
these grant expenditures tested, Castro recommends Treasury OIG determine
the feasibility of performing additional follow-up with New Jersey to determine
if there were other instances of unsupported balances within the remaining
portion of this grant balance.
3) Castro noted unsupported Aggregate Reporting less than $50,000 and
Aggregate Payments to Individuals questioned costs of $72,008,351 and
$137,077,969, respectively, resulting from reconciliation procedures performed
over New Jersey’s grant-reporting portal and its general ledger (GL) detail.
Castro recommends Treasury OIG determine the feasibility of performing
additional follow-up with New Jersey to obtain expenditure support with
sufficient expenditure level detail needed to support CRF amounts claimed, such
as vendor names and identifying transaction details.
4) Castro noted unsupported questioned costs of $205,520,362 in the form of
discrepancies between the corrected GL detail expenditures against the sub-
recipient GL details for the Transfers greater than or equal to $50,000
population. Castro recommends Treasury OIG determine the feasibility of
performing additional follow up with New Jersey to determine if there were
other instances of unsupported questioned costs within the Transfers greater
than or equal to $50,000 population.
6
Payroll costs that are “non-substantially dedicated” are costs that are not for public health and
safety employees, and not for employees substantially (more than 50 percent) dedicated to
performing COVID-19 related tasks. Treasury’s Federal Register Guidance defined more stringent
tracking requirements for “non-substantially dedicated” payroll costs.
Page 4
5) New Jersey self-identified a total of $1,007,050 in potential fraudulent
transactions for the New Jersey Economic Development Authority (NJEDA) that
were still being investigated during the desk review. Castro recommends
Treasury OIG determine the feasibility of requesting that New Jersey perform an
assessment to determine if all fraudulent transactions have been removed from
NJEDA’s CRF claimed amounts.
Treasury OIG and Castro met with New Jersey to discuss the desk review report.
New Jersey management stated that they followed a “de-centralized” approach
where CRF was distributed to dozens of State agencies that maintained records
and support for expenditures within each of those agencies. As such, any review of
these expenditures would require interactions with each of these agencies which
presented challenges for New Jersey management. New Jersey contends that the
documents supporting the questioned costs are available if given additional time to
produce these records. Following our meeting, New Jersey management began
providing Treasury OIG with supporting documentation for some of the
unsupported questioned costs, including invoices, purchase orders, and
intergovernmental payment vouchers. New Jersey management committed to
providing additional documentation to Treasury OIG as part of a follow-up review to
be conducted in 2025.
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 New Jersey’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,
please contact me at (202) 486-1420, or a member of your staff may contact Lisa
DeAngelis, Audit Director, 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
Page 5
Bob Bartalone, Compliance Director, Governor’s Disaster Recovery Office,
State of New Jersey
Samuel Diiorio, Auditor 3, Office of Management and Budget, State of New
Jersey
Page 6
Attachment
Schedule of Monetary Benefits
According to the Code of Federal Regulations, 7 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). 8 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.
Recommendation Questioned Costs
Recommendation No. 1 $1,110,559,989
The questioned costs represent amounts provided by Treasury under the
Coronavirus Relief Fund. As discussed in the attached desk review,
$1,110,559,989 is New Jersey’s expenditures reported in the grant-reporting
portal that were ineligible or lacked supporting documentation.
7
2 CFR § 200.84 – Questioned Cost
8
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 New Jersey
December 19, 2024
OIG-CA-25-026
MEMORANDUM FOR DEBORAH L. HARKER,
ASSISTANT INSPECTOR GENERAL FOR AUDIT
FROM: Wayne Ference
Partner, Castro & Company, LLC
SUBJECT: Desk Review of the State of New Jersey
On April 3, 2024, we initiated a desk review of the State of New Jersey’s (New
Jersey) 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 New Jersey’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 September 30, 2023, 3 as reported in
the GrantSolutions portal.
As part of our desk review, we performed the following:
1) reviewed New Jersey’s quarterly Financial Progress Reports (FPRs)
submitted in the GrantSolutions portal through September 30, 2023;
2) reviewed the Department of the Treasury’s (Treasury) Coronavirus Relief
Fund Guidance as published in the Federal Register on January 15, 2021;4
3) reviewed Treasury’s Office of Inspector General (OIG) Coronavirus Relief
Fund Frequently Asked Questions Related to Reporting and Recordkeeping; 5
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
New Jersey fully expended their total CRF proceeds as of September 30, 2023. Castro set the
scope end date to September 30, 2023, which was the date of New Jersey’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
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.
1
Desk Review of the State of New Jersey
4) reviewed Treasury OIG’s monitoring checklists 6 of New Jersey’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 New Jersey’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 New Jersey’s uses of CRF proceeds;
7) interviewed key personnel responsible for preparing and certifying New
Jersey’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 Direct
Payments, Aggregate Reporting, 10 and Aggregate Payments to Individuals 11
data identified through GrantSolutions reporting; and
9) evaluated documentation and records used to support New Jersey’s
quarterly FPRs.
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 19 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
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.
2
Desk Review of the State of New Jersey
Based on our review of New Jersey’s documentation supporting the uses of its
CRF proceeds as reported in the GrantSolutions portal, we determined that the
expenditures related to 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 did not comply
with the CARES Act and Treasury’s Guidance.
We identified unsupported and ineligible questioned costs of $976,160,389 and
$134,399,600, respectively, with total questioned costs of $1,110,559,989. We
also determined New Jersey’s risk of unallowable use of funds is high.
Castro recommends that Treasury OIG follow up with New Jersey’s management
to confirm if the $976,160,389 noted as unsupported expenditures within 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 can be supported. If support is not
provided, Treasury OIG should recoup the funds or request that New Jersey
management provide support for other eligible replacement expenses, not
previously charged to CRF, that were incurred during the period of performance.
In addition, Castro recommends that Treasury OIG request that New Jersey
management provide support for other eligible replacement expenses, not
previously charged to CRF, that were incurred during the period of performance for
the $134,399,600 of ineligible costs charged to the Transfers greater than or equal
to $50,000 and Aggregate Payments to Individuals payment types. If support is
not provided, Treasury OIG should recoup the funds.
Further, based on New Jersey’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 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.
Non-Statistical Transaction Selection Methodology
Treasury issued a $2,393,851,157 CRF payment to New Jersey. As of
3
Desk Review of the State of New Jersey
September 30, 2023, New Jersey’s cumulative obligations and expenditures were
both $2,393,599,667. New Jersey returned a total of $251,490 12 in CRF proceeds
to Treasury prior to its final GrantSolutions portal submission of
September 30, 2023. New Jersey’s cumulative obligations and expenditures by
payment type are summarized below.
Payment Type Cumulative Cumulative
Obligations Expenditures
$ $
Contracts >= $50,000
126,706,526 126,706,526
$ $
Grants >= $50,000
152,906,113 152,906,113
$ $
Loans >= $50,000
- -
$ $
Transfers >= $50,000
7,346,411 7,346,411
$ $
Direct Payments >= $50,000
941,541,250 941,541,250
$ $
Aggregate Reporting < $50,000
550,663,094 550,663,094
Aggregate Payments to Individuals
$ $
(in any amount)
614,436,273 614,436,273
$ $
Totals
2,393,599,667 2,393,599,667
12
As of September 30, 2023, New Jersey processed a return of $251,490 to Treasury. This was a
return for unspent CRF funds.
4
Desk Review of the State of New Jersey
In addition to the returned funds of $251,490 already reflected in the table above,
Treasury OIG also identified a subsequent event related to a combination of unused
CRF proceeds of $411,333 13 returned to Treasury in February 2024. Then after
completion of our desk review fieldwork, New Jersey voluntarily returned $5,471 14
of unused CRF proceeds in October 2024, resulting in a total CRF returned amount
of $668,294 as of October 2024. We noted these returned funds occurred outside
the scope of our desk review; hence, these figures are not captured in the
cumulative expenditures within the final GrantSolutions portal submission of
September 30, 2023. Castro did not extend our desk review scope end date of
September 30, 2023.
Financial Reporting Control Issues
New Jersey provided us a general ledger (GL) detail that agreed to the total CRF
proceeds of $2,393,599,667, but we could not agree the underlying GL detail
populations to the amounts reported in the GrantSolutions portal as of
September 30, 2023 for its Contracts, Grants, Transfers, Direct Payments,
Aggregate Reporting, and Aggregate Payments to Individuals payment types. 15
Castro followed up with New Jersey about the misclassification variances in each
payment type and included a summary of the balances that New Jersey should
have reported in the GrantSolutions portal below. Castro determined that these
misclassifications were reporting errors that did not comply with Treasury’s
Guidance. However, since these misclassifications did not affect the total amount
claimed in the GrantSolutions portal, we did not consider these to be questioned
costs.
13
New Jersey confirmed that as part of its state agency reconciliation requested as part of Castro’s
desk review, they identified $411,333 of unused funds that it returned to Treasury in February
2024. Since this happened during our desk review, this amount has not been excluded from the
amounts subject to testing during the desk review.
14
New Jersey voluntarily returned $5,471 of unused CRF funds in October 2024, which was after
completion of Castro’s desk review fieldwork procedures performed.
15
For Aggregate Reporting and Aggregate Payments to Individuals payment types, Castro identified
both reconciliation errors and other matters that we considered to be questioned costs due to
insufficient GL details at the transaction level. See sections Other Matters Questioned Costs for
Treasury OIG Consideration – No Vendor Name transactions with Missing Underlying Expenditure
GL Details and Other Matters Questioned Costs for Treasury OIG Consideration – Budgetary Non-
Payroll transactions with Missing Transaction Level Expenditure GL Details in the Desk Review
Results section for additional discussion.
5
Desk Review of the State of New Jersey
Cumulative Cumulative
Expenditures per Expenditures Per
Payment Type FPR GL Populations Difference
Contracts >= $50,000 $ $ $
126,706,526 386,032,015 259,325,489
Grants >= $50,000 $ $ $
152,906,113 289,131,505 136,225,392
Loans >= $50,000 $ $ $
- - -
Transfers >= $50,000 $ $ $
7,346,411 689,782,079 682,435,668
Direct Payments >= $ $ $
$50,000 941,541,250 79,996,132 (861,545,118)
Aggregate Reporting < $ $ $
$50,000 550,663,094 85,602,371 (465,060,723)
Aggregate Payments to $ $ $
Individuals (in any amount) 614,436,273 863,055,565 248,619,292
Totals $ $ $
2,393,599,667 2,393,599,667 -
Castro made non-statistical selections 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, Direct Payments greater than or equal to $50,000, and
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
anomalies 16 identified by the Treasury OIG CRF monitoring team, and review of
New Jersey’s FPR submissions. New Jersey did not obligate or expend CRF
proceeds to the Loans greater than or equal to $50,000 payment type; therefore,
we did not make a selection of transactions from this payment type.
The number of transactions (25) we selected to test was based on New Jersey’s
total CRF award amount and our overall risk assessment of New Jersey. To
allocate the number of transactions (25) 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,
Aggregate Reporting less than $50,000, and Aggregate Payments to Individuals),
we compared the payment type dollar amounts as a percentage of cumulative
expenditures from the corrected GL Detail provided after completion of New
Jersey’s FPR submission as of September 30, 2023.
Additionally, Treasury OIG provided information on anomalies identified for New
Jersey. We selected five transactions that were included within our original
16
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.
6
Desk Review of the State of New Jersey
transaction selections. Treasury OIG also identified additional anomalies in the form
of potential duplicates, which had not already been included within our transaction
selections, of which we selected 13 potential duplicates. We performed limited
testing on these 13 potential duplicate payments to determine whether the
payments were duplicates. We identified exceptions within this potential duplicate
testing. See Other Matter for Treasury OIG Consideration – Direct Payments
Duplicate Transactions in the Desk Review Results section below for further
discussion. The transactions selected for testing 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 $2,393,851,157
CRF payment to New Jersey. 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, 2021.17
Section 15011 of the CARES Act required each covered recipient 18 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
17
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.
18
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.
7
Desk Review of the State of New Jersey
amount of large, covered funds 19,20 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 the 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
Financial Progress Reports
We reviewed New Jersey’s quarterly FPRs through September 30, 2023, and
found that New Jersey timely filed quarterly FPRs in the GrantSolutions portal in
compliance with Treasury OIG’s reporting requirements for the periods ending
June 30, 2020 through September 30, 2023.
Summary of Testing Results
We found that 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 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.
19
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.
20
Section 15011 of P.L. 116-136 defined large, covered funds as covered funds that amounted to
more than $150,000.
8
Desk Review of the State of New Jersey
Within Table 1 below, we have included a summary of $692,304,421 in
unsupported and ineligible expenditures identified as questioned costs through our
testing of detailed transactions, which did not comply with the CARES Act and
Treasury’s Guidance. Castro also identified other matters throughout the course of
our desk review procedures which we considered to be questioned costs that were
not part of our testing of detailed transactions. Table 2 below combines the
questioned costs identified in Table 1 with the other questioned costs of
$418,255,568 identified separately from our detailed transaction testing to
account for total questioned costs of $1,110,559,989. See the Desk Review
Results section below Table 2 for a detailed discussion of questioned costs and
other issues identified throughout the course of our desk review.
Table 1 - Summary of Expenditures Testing and Recommended Results
As of September 30, 2023
Cumulative
Expenditure Cumulative Unsupported Ineligible
Payment Type Corrected GL Expenditure Tested Tested Total Tested
Populations Tested Questioned Questioned Questioned
Amount Amount Costs Costs Costs
Contracts >= $ $ $ $ $
$50,000 386,032,015 167,015,659 116,447,621 - 116,447,621
$ $ $ $ $
Grants >= $50,000
289,131,505 2,579,776 286,287 - 286,287
$ $ $ $ $
Loans >= $50,000
- - - - -
Transfers to Other
Government Agencies $ $ $ $ $
>= $50,000 689,782,079 41,428,536 29,342,591 10,068,090 39,410,681
Direct Payments >= $ $ $ $ $
$50,000 79,996,132 12,674,130 12,674,130 - 12,674,130
Aggregate Reporting $ $ $ $ $
< $50,000 85,602,371 49,644 - - -
Aggregate Payments
to Individuals (in any $ $ $ $ $
amount) 863,055,565 594,921,502 399,154,192 124,331,510 523,485,702
$ $ $ $ $
Totals 2,393,599,667 818,669,247 557,904,821 134,399,600 692,304,421
9
Desk Review of the State of New Jersey
Table 2 – Summary of Tested and Other Matters Identified Questioned Costs
As of September 30, 2023
(B)
Unsupported
(A) Reconciliation (C=A+B) (E)
Ineligible (F=D+E) (G=C+F)
Unsupported Errors Total (D)
Questioned Total Ineligible Total Questioned
Questioned Questioned Unsupported Ineligible
Costs (Other Questioned Costs (Tested &
Costs Costs (Other Questioned Questioned
Matter) Costs Other Matters)
Payment Type (Tested) Matter) Costs Costs (Tested)
Contracts >= $ $ $ $ $ $ $
$50,000 116,447,621 - 116,447,621 - - - 116,447,621
Grants >= $ $ $ $ $ $ $
$50,000 286,287 - 286,287 - - - 286,287
$ $ $ $ $ $ $
Loans >= $50,000
- - - - - - -
Transfers to Other
Government
Agencies >= $ $ $ $ $ $ $
$50,000 29,342,591 205,520,362 234,862,953 10,068,090 - 10,068,090 244,931,043
Direct Payments $ $ $ $ $ $ $
>= $50,000 12,674,130 3,648,886 16,323,016 - - - 16,323,016
Aggregate Reporting $ $ $ $ $ $ $
< $50,000 - 72,008,351 72,008,351 - - - 72,008,351
Aggregate Payments
to Individuals (in any $ $ $ $ $ $ $
amount) 399,154,192 137,077,969 536,232,161 124,331,510 - 124,331,510 660,563,671
$ $ $ $ $ $ $
Totals
557,904,821 418,255,568 976,160,389 134,399,600 - 134,399,600 1,110,559,989
10
Desk Review of the State of New Jersey
Contracts Greater Than or Equal to $50,000
We determined New Jersey’s Contracts greater than or equal to $50,000 did not
comply with the CARES Act and Treasury’s Guidance. We tested a total of
$167,015,659 of transaction expenditures for four contracts. The transactions
tested included expenditures related to costs for upgrading to a statewide radio
system needed to respond to the to the public health emergency; grant
expenditures for financial assistance for childcare centers and in-home childcare
during the pandemic; grant expenditures for COVID-19 recovery funds to support
New Jersey's residents, businesses, non-profit organizations, government agencies,
and other entities responding to or recovering from the COVID-19 health
emergency; and grant expenditures for food benefits issued to school-age children
who were receiving free and reduced cost lunch, but couldn’t access those meals
when schools closed during the pandemic.
Castro identified three exceptions, resulting in unsupported questioned costs of
$116,447,621, as detailed below. Additionally, Castro identified reporting
misclassification errors for two tested transactions that did not comply with
Treasury's Guidance. Transactions that were reported as Direct Payments greater
than or equal to $50,000 within the GrantSolutions portal, were erroneously
classified as Contracts greater than or equal to $50,000 during New Jersey’s GL
detail reconciliation and should have been classified as Grants greater than or equal
to $50,000.
Contract Exception #1 – Childcare Stabilization Grant Initiative
New Jersey claimed and Castro tested $98,000,000 of expenditures that were
originally reported as Direct Payments greater than or equal to $50,000 within the
GrantSolutions portal but were erroneously classified as Contracts greater than or
equal to $50,000 during New Jersey’s GL detail reconciliation when they should
have been classified as Grants greater than or equal to $50,000. Castro considered
this to be a reporting error that did not comply with Treasury’s Guidance. The
expenditures related to the New Jersey Department of Human Services CRF
Childcare Stabilization Initiative for childcare centers and in-home daycares to either
reopen facilities or provide financial assistance due to ongoing increased COVID-19
related costs, such as making changes to physical spaces to support social
distancing, purchasing personal protective equipment and cleaning supplies, and
paying increased hazard wages to staff.
Castro requested that New Jersey provide the sub-recipient GL detail to support
the total claimed amount of $98,000,000. Castro considers the sub-recipient GL
detail crucial to verify that the prime recipient had complete and accurate
populations of expenditures that were supported by GL detail level expenditure
transactions and for selecting items at the transaction level for testing to verify
11
Desk Review of the State of New Jersey
eligibility. New Jersey did not provide a sub-recipient GL detail by the end of
fieldwork. As a result, Castro questioned the costs of $98,000,000 as
unsupported.
Contract Exception #2 – COVID-19 Compliance and Oversight Task Force
New Jersey claimed $3,281,704 in contract expenditures to hire a Certified Public
Accounting firm to perform program and performance monitoring, financial
monitoring, grant management, and anti-fraud monitoring for CRF proceeds and
programs. Castro tested five invoices totaling $1,525,913 that were drawn down
against the contract balance of $3,281,704, and identified $187,176 of
unsupported questioned costs, as detailed below.
For one invoice tested totaling $187,176, Castro requested the invoice to support
this amount; however, New Jersey did not provide the requested support by the
end of fieldwork. Castro reviewed email correspondence provided by New Jersey,
which indicated that the CRF claimed amount of $187,176 represented cancelled
labor hours that were not worked by the contractor; however, New Jersey did not
reverse these CRF claimed amounts from the GrantSolutions portal. Without the
invoice documentation to support these amounts, Castro questioned these costs of
$187,176 as unsupported.
Contract Exception #3 – Food Benefits Assistance to School-Age Children Grant
New Jersey claimed and Castro tested $18,260,445 of expenditures that were
originally reported as Direct Payments greater than or equal to $50,000 within the
GrantSolutions portal but were erroneously classified as Contracts greater than or
equal to $50,000 during New Jersey’s GL detail reconciliation when they should
have been classified as Grants greater than or equal to $50,000. Castro considered
this to be a reporting error that did not comply with Treasury’s Guidance. The grant
tested related to the New Jersey Department of Human Services, which built a
new grant program to issue food benefits to school-age children who were
receiving free and reduced cost lunch but could not access those meals when
schools closed during the pandemic.
Castro requested that New Jersey provide the sub-recipient GL detail to support
the total claimed amount of $18,260,445. Castro considers the sub-recipient GL
detail crucial to verify that the prime recipient had complete and accurate
populations of expenditures that were supported by GL detail expenditure
transactions and for selecting items at the transaction-level for testing, including
verifying eligibility. New Jersey did not provide a sub-recipient GL detail by the end
of fieldwork. As a result, Castro questioned the costs of $18,260,445 as
unsupported.
12
Desk Review of the State of New Jersey
Grants Greater Than or Equal to $50,000
We determined New Jersey’s Grants greater than or equal to $50,000 did not
comply with the CARES Act and Treasury’s Guidance. We tested a total of
$2,579,776 in transaction expenditures for three grants. The transactions tested
related to the purchase of tablets for students to facilitate distance learning during
the pandemic; a student housing refund due to quarantining requirements that
affected in-person attendance as a result of the pandemic; and grants related to a
small business assistance program to assist vulnerable small businesses with rent
owed and past-due utilities due to COVID-19.
Castro identified two exceptions, resulting in unsupported questioned costs of
$286,287, as detailed below. Also, Castro identified reporting misclassification
errors that did not comply with Treasury's Guidance. These transactions were
originally reported as Direct Payments greater than or equal to $50,000 within the
GrantSolutions portal but should have been classified as Grants greater than or
equal to $50,000.
Grant Exception #1 – Unsupported Non-Substantially Dedicated Payroll 21 Expenses
Related to a Higher Education Grant
New Jersey claimed $29,142,450 in grant expenses related to a grant for
facilitating distance learning during the pandemic. The Office of the Secretary of
Higher Education, a public agency of the State of New Jersey, entered into an
agreement with a university to assist with expenses such as cleaning and
disinfection supplies and the transition to online learning. Castro selected three
transactions totaling $2,301,279 for testing and identified $35,889 of unsupported
questioned costs as detailed below. Also, Castro identified reporting
misclassification errors that did not comply with Treasury's Guidance, where
transactions were reported as Direct Payments greater than or equal to $50,000
within the GrantSolutions portal but should have been classified as Grants greater
than or equal to $50,000.
For one out of three transaction selections totaling $35,889, the transaction
related to non-substantially dedicated payroll expenses claimed by the university.
The supporting activity log detailed that the payroll costs were for a medical school
professor’s time spent making telehealth demonstrations for faculty and staff.
Based on the duration of the appointments listed in the activity log, Castro
confirmed that the university professor was working on an ad hoc assignment and
was not substantially dedicated to the COVID-19 pandemic. New Jersey provided a
21
Payroll costs that were not substantially dedicated meant payroll costs that were not for public
health and safety, and which were not substantially dedicated to performing COVID-19 related
tasks.
13
Desk Review of the State of New Jersey
payroll distribution report, but it was missing significant payroll distribution report
fields, such as hours worked, pay rates needed to recalculate the amount claimed,
pay types, department, descriptions defining codes that the amounts and hours
were being charged to, etc. Castro did not receive any supporting documentation
to recalculate the CRF amounts claimed by the end of fieldwork. As such, Castro
could not determine whether the payroll amounts claimed were properly supported
by payroll distribution reports and were for eligible expenditures. Castro questions
$35,889 as unsupported.
Other Matter for Treasury OIG Consideration – Additional Potential Unsupported
Non-Substantially Dedicated Payroll Questioned Costs Related to a Higher
Education Grant
Castro tested $2,301,279 out of the total amount of $29,142,450 in non-
substantially dedicated payroll claimed by New Jersey related to the higher
education grant noted above. Since Castro identified unsupported questioned costs
within these non-substantially dedicated payroll expenditures tested, we
recommend Treasury OIG determine the feasibility of performing additional follow-
up with New Jersey to determine if there were other instances of unsupported
balances within the remaining portion of this grant balance.
Grant Exception #2 – Long-Term Care Facility Staff Testing Grant Program
New Jersey claimed $26,000,000 in grant expenses related to transactions
incurred by the New Jersey Department of Health. Castro selected two
transactions totaling $250,398 for testing out of the total amount of $26,000,000
in grant expenditures claimed. These transactions related to a long-term care
facility (LTCF) staff testing program, which required the ongoing weekly COVID-19
testing of all staff and the retesting of staff who had previously tested positive for
COVID-19. We are questioning the entire amount tested of $250,398 as
unsupported, as detailed below.
Castro requested underlying invoices incurred by the LTCFs needed to verify that
the LTCFs expended funds on COVID-19 testing, as required by the grant
agreement. New Jersey provided LTCF signed attestation agreements for the
expended funds which Castro reviewed and noted that the LTCFs were required to
retain and provide, upon request, “proof of costs” incurred/related to COVID-19
staff testing, such as laboratory testing charges, supplies purchased to test staff,
and personal protective equipment (PPE) invoices. Castro requested this underlying
support and New Jersey confirmed that it had requested that these two grant
awardees provide these invoices to support COVID-19 tests from the sub-recipient
as part of our desk review but indicated that it was not able to obtain and provide
this support prior to the end of our fieldwork. Without the underlying sub-recipient
invoices, Castro could not verify that the LTCFs expended funds on COVID-19
14
Desk Review of the State of New Jersey
testing, as required by the grant agreement. Castro questions $250,398 as
unsupported.
Other Matter for Treasury OIG Consideration – Additional Potential Unsupported
Questioned Costs Related to Long-Term Care Facility Staff Testing Grant Program
Castro tested $250,398 out of the total amount of $26,000,000 in grant expenses
claimed by New Jersey related to the long-term care facility staff testing grant
program noted above. Since Castro identified unsupported questioned costs within
these grant expenditures tested, we recommend Treasury OIG determine the
feasibility of performing additional follow-up with New Jersey to determine if there
were other instances of unsupported balances within the remaining portion of this
grant balance.
Transfers Greater Than or Equal to $50,000
We determined New Jersey’s Transfers greater than or equal to $50,000 did not
comply with the CARES Act and Treasury’s Guidance. We tested $41,428,536 of
transaction expenditures for seven transfers. The transactions tested included
expenditures related to COVID-19 consulting services procured to analyze the
economic impact of COVID-19; purchase of laptops used for health monitoring
needed due to the COVID-19 pandemic; grants awarded within small business
assistance programs and payroll for grant administrators; PPE needed due to the
COVID-19 pandemic; public health and safety payroll; and payments to reimburse
Counties for inmates held in County jails. For three transfers, we identified testing
exceptions resulting in total unsupported questioned costs of $29,342,591 and
ineligible questioned costs of $10,068,090, as detailed below. For the four
remaining transfers, we did not identify any exceptions based on testing, but we
did identify other reconciling errors that resulted in $205,520,362 of unsupported
questioned costs.
Transfer Exception #1 – The New Jersey Transit Corporation (Unsupported, and
Ineligible Costs)
New Jersey claimed and Castro tested the full amount of $30,000,000 in the
Treasurer of the New Jersey Transit Corporation payroll expenditures. Expenditures
claimed included payroll and benefits expenses for public health and safety
employees.
15
Desk Review of the State of New Jersey
Castro requested payroll distribution reports that supported the claimed public
health and safety22 expenditure amounts. New Jersey provided total summary
information of $34,341,866, which exceeded the $30,000,000 claimed in the
GrantSolutions portal by $4,341,866. Castro disregarded this $4,341,866
difference for testing purposes since it was not included within the amount claimed
within the GrantSolutions portal. Our review resulted in questioning $30,000,000
in payroll costs, which consisted of $19,931,910 and $10,068,090 of
unsupported and ineligible questioned costs, respectively, as detailed below.
A total of $19,931,910 of the payroll distribution reports we received to support
the $30,000,000 amount claimed did not list employee positions, hours worked,
department codes, and pay rates. Castro requested New Jersey provide an updated
report with the missing categories needed to verify these were public health and
safety employees. New Jersey did not provide any additional payroll distribution
reports by the end of fieldwork. Castro questioned $19,931,910 as unsupported.
Additionally, Castro reviewed the detailed support provided and determined New
Jersey utilized an indirect cost rate to calculate the associated fringe benefits costs
of $10,068,090. Castro noted that New Jersey calculated its fringe benefits costs
utilizing a negotiated rate, and therefore Castro considered these fringe benefit
expenditures charged to the CRF to be calculated using an indirect cost estimate
instead of charging direct administrative costs as required by Treasury’s Guidance.
New Jersey applied the fringe benefit rates of 14.03 percent for Federal Insurance
Contributions Act (FICA) and 82.03 percent for regular pay within fiscal year 2020,
and 12.68 percent for FICA and 79.81 percent for regular pay within fiscal year
2021, and multiplied them by the summary payroll amounts provided.
22
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.”
16
Desk Review of the State of New Jersey
New Jersey claimed indirect cost rates by employing guidance from the Code of
Federal Regulations (CFR), 2 CFR 200.414(f)), Grants and Agreements, Uniform
Administrative Requirements, Cost Principles, and Audit Requirements for Federal
Awards, Direct and Indirect (F&A) Costs. 23 This guidance defined indirect cost
rates and sets forth the 10 percent de minimis 24 indirect cost rate (or other similar
agreed upon rate) that could be used indefinitely instead of charging the actual
administrative costs. However, Treasury’s Guidance in the Federal Register Notice
Volume 86, Number 10, 25 Supplemental Guidance on Use of Funds to Cover
Administrative Costs, indicates that “provisions of the Uniform Guidance, 2 CFR
part 200, that are applicable to indirect costs do not apply. Recipients may not
apply their indirect costs rates to payments received from the Fund.” We
determined the CRF guidance did not permit CRF recipients to charge indirect costs
to their CRF award or for sub-recipients to charge indirect costs to their CRF sub-
awards. Since these costs were charged as direct costs to the CRF sub-award,
New Jersey must provide supporting expenditure documentation for it to be
considered allowable. Therefore, New Jersey, by applying the indirect cost rate, did
not comply with Treasury’s Guidance, resulting in an ineligible use of CRF in the
amount of $10,068,090 of questioned costs.
Transfer Exception #2 – Casino Reinvestment Development Authority (Unsupported
Costs)
New Jersey claimed and Castro tested $9,410,681 in transferred expenses to the
Casino Reinvestment Development Authority for grant expenditures made to
awardees and to construct a temporary hospital facility with the extra space in the
Atlantic City Convention Center.
Castro was unable to obtain the sub-recipient GL detail to ensure the expenditure
balances were supported by complete and accurate expenditure GL details and to
select sub-recipient invoice level transactions for CRF eligibility testing. Therefore,
Castro questioned the full balance of $9,410,681 as unsupported costs.
23
Code of Federal Regulations (CFR), 2 CFR 200.414(f)), Grants and Agreements, Uniform
Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Direct
and Indirect (F&A) Costs states: “…any non-Federal entity that does not have a current negotiated
(including provisional) rate…may elect to charge a de minimis rate of 10% of modified total direct
costs (MTDC) which may be used indefinitely. No documentation is required to justify the 10% de
minimis indirect cost rate. As described in § 200.403, costs must be consistently charged as either
indirect or direct costs, but may not be double charged or inconsistently charged as both. If chosen,
this methodology once elected must be used consistently for all Federal awards until such time as a
non-Federal entity chooses to negotiate for a rate, which the non-Federal entity may apply to do at
any time.”
24
De minimis means lacking significance or importance: so minor as to merit disregard.
25
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
17
Desk Review of the State of New Jersey
Other Matters Questioned Costs for Treasury OIG Consideration - Population
Reconciling Errors for Transfers 3, 4, 5, and 6
As discussed above within the Financial Reporting Control Issues section, Castro
requested that New Jersey perform a reconciliation and it provided Castro
corrected GL detail balances they believed should have reported in the
GrantSolutions portal in their final submission. As part of Castro’s reconciliation
procedures, we determined that New Jersey was only able to provide sub-recipient
GL details totaling $141,648,405 out of the total CRF claimed amount of
$347,168,767, resulting in a variance of $205,520,362. We followed up with
New Jersey for missing sub-recipient GL details to support this variance; however,
New Jersey did not provide additional GL details by the end of our fieldwork.
Castro questioned $205,520,362 as other matter unsupported costs because New
Jersey claimed more than its sub-recipients spent. See summary of variances
identified:
Table 3 - Reconciling Differences for Transfers Selections
Total Claimed in Sub-Recipient Total
Corrected GL GL Detail Reconciling
Detail Population Total Differences
Transaction No. (A) (B) (C=A-B)
Transfer 3 – New Jersey Economic $ $ $
Development Authority 285,794,588 95,507,646 190,286,942
Transfers 4 – New Jersey Economic $ $ $
Development Authority 51,000,000 43,825,887 7,174,113
$ $ $
Transfers 5 – County of Morris 9,879,648 1,828,591 8,051,057
Transfers 6 – Municipality of $ $ $
Princeton 494,531 486,281 8,250
$ $ $
Total 347,168,767 141,648,405 205,520,362
Castro recommends Treasury OIG determine the feasibility of performing additional
follow up with New Jersey to determine if there were other instances of
unsupported questioned costs within the Transfers greater than or equal to
$50,000 population. Castro did not identify any other discussion points related to
transfers 5 and 6 within the table above; however, see below for discussion on
additional exceptions for transfers 3 and 4.
Other Matter Transfer Exception #s 3 & 4 – Self-Identified Fraudulent Transactions
Castro found transfers were made to the New Jersey Economic Development
Authority (NJEDA) that were spent on programs such as the Small Business
Emergency Grant Program, COVID-19 Emergency Assistance Programs, and Small
and Micro Business PPE Access Programs.
18
Desk Review of the State of New Jersey
Additionally, Castro noted that in response to inquiries to New Jersey about the
existence of potential fraud within its CRF claimed expenses during the planning
phase of our desk review, New Jersey acknowledged the NJEDA identified
potential fraudulent transactions through their own fraud detection program that
were still being investigated by NJEDA during the course of our desk review.
Castro obtained and utilized the listing of potential fraudulent transactions totaling
$1,007,050 provided by NJEDA to scan through the NJEDA GL detail provided in
response to our transaction selections in attempt to identify if the potential
fraudulent amounts were still claimed in the GL transactions, but Castro did not
identify any of the potential fraudulent transactions within the provided GL detail.
However, Castro was unable to verify whether these potential fraudulent amounts
were properly reversed from New Jersey’s CRF claim due to the $197,461,055 of
missing sub-recipient GL details questioned as unsupported costs for transfers 3
and 4, as discussed in the finding immediately preceding this. Castro recommends
that Treasury OIG determine the feasibility of requesting that New Jersey perform
an assessment to determine if all of the potential fraudulent transactions were
removed from NJEDA’s CRF claimed amounts. Then, we recommend Treasury OIG
determine the feasibility of following up with New Jersey to obtain the missing
NJEDA populations questioned as other matters and, utilizing the listing provided
by NJEDA, determine if the $1,007,050 in potential fraudulent amounts were
properly reversed.
Direct Payments Greater Than or Equal to $50,000
We determined New Jersey’s Direct Payments greater than or equal to $50,000 did
not comply with the CARES Act and Treasury’s Guidance. We tested one direct
payment totaling $12,674,130 and identified unsupported questioned costs for the
full amount of $12,674,130. We also identified a reporting misclassification that
did not comply with Treasury’s Guidance, as this transaction was a grant that was
misclassified as a direct payment. The transaction tested included expenditures
related to childcare stabilization grants that were provided to childcare centers and
in-home daycares to either reopen or to provide financial assistance with ongoing
increased COVID-19 related costs, such as making changes to physical space to
support social distancing, purchasing PPE and cleaning supplies, hiring additional
staff, and paying increased hazard staff wages.
Direct Payment Exception #1 – Childcare Stabilization Initiative Program
New Jersey claimed and Castro tested $12,674,130 in expenditures related to the
Childcare Stabilization Initiative Grant Program expenditures that New Jersey
misclassified as a direct payment instead of a grant. We considered this to be a
reporting error that did not comply with Treasury's Guidance. The New Jersey
Department of Human Services entered into an agreement with the Treasurer of the
19
Desk Review of the State of New Jersey
State of New Jersey to create the Child Care Assistance and Stabilization Initiative
Grant Program. Castro noted that the GL detail balance used to select this
transaction was a batched transaction and Castro needed the sub-recipient's GL
detail at the transactional level to support the claimed expenditures and to select
transactions at the invoice level to verify eligibility. Castro requested the sub-
recipient's GL detail at the transactional level, but New Jersey did not provide any
documentation by our end of fieldwork. Castro questions $12,674,130 as
unsupported.
Direct Payment Anomalies (Potential Duplicate Payments)
We tested 13 potential duplicate transactions identified by the Treasury OIG
totaling $4,123,891. Castro identified nine transactions totaling $3,648,886 that
we determined to be duplicates. Castro considers these other matters unsupported
questioned costs, as detailed below.
Other Matter for Treasury OIG Consideration – Direct Payments Duplicate
Transactions
For eight out of 13 potential Direct Payments duplicate selections totaling
$3,438,886, New Jersey responded to each potential duplicate payment by stating
they were not duplicates because they had different transaction identification
numbers or the transactions netted to zero in the GL detail. New Jersey did not
provide a copy of the vendor invoices to support that the transactions were not
duplicates. New Jersey responded that there were no obligation documents or
invoices to provide. New Jersey confirmed that these transactions had no invoices
to support the reported expenditure amounts. As such, Castro determined that
these were duplicate reported obligations and the amounts claimed did not
represent valid expenditures. Castro determined that New Jersey should have
removed these obligation entries from the GrantSolutions portal and reported actual
expenditures incurred instead. As such, Castro confirmed these payments to be
duplicate entries in the GrantSolutions portal. Castro questions $3,438,886 as
other matter identified unsupported costs.
For two out of 13 potential Direct Payments duplicate selections totaling $420,000
($210,000 each), Castro followed up with New Jersey about providing invoices or
supporting documentation that showed that these transactions were not
duplicates. New Jersey provided one invoice for $210,000 out of $420,000, but
stated that there was no second invoice for the second potential duplicate
transaction of $210,000. As such, Castro determined that these were duplicate
reported obligations and that amounts claimed did not represent valid expenditures.
Castro determined that New Jersey should have removed this obligation entry from
the GrantSolutions portal and reported actual expenditures incurred instead. As
such, Castro confirmed that the first payment for $210,000 was not a duplicate
20
Desk Review of the State of New Jersey
payment and the second payment of $210,000 was a duplicate entry in the
GrantSolutions portal. Castro questions $210,000 as other matter identified
unsupported costs.
Aggregate Reporting Less Than $50,000
We determined New Jersey’s Aggregate Reporting less than $50,000 did not
comply with the CARES Act and Treasury’s Guidance. We tested one aggregate
reporting transaction totaling $49,644 and identified no testing exceptions. The
aggregate reporting transaction tested included expenditures related to Community
Care Residences (CCR) staff that served adults with developmental disabilities who
resided in their personal residences. CCR staff provided essential tasks such as
supervision, feeding, and other personal care to adults with developmental
disabilities during the COVID-19 pandemic.
Although we did not identify any exceptions based on testing of CCR expenditures,
we identified other matter reconciling errors that resulted in $72,008,351 of
questioned costs which caused us to conclude that New Jersey Aggregate
Reporting less than $50,000 did not comply with the CARES Act and Treasury’s
Guidance, which we discuss directly below.
Other Matters Questioned Costs for Treasury OIG Consideration – No Vendor Name
Transactions with Missing Underlying Expenditure GL Details
During Castro’s reconciliation of the $85,602,371 reported in the corrected GL
detail population for the Aggregate Reporting less than $50,000 payment type, we
identified a balance of $72,008,351 that consisted of budgetary transactions
allocating funding between New Jersey and its state agencies, adjusting entries,
and transactions without vendor names, which we did not consider to be sufficient
GL details at the expenditure level. Castro considers the GL detail crucial to verify
that the prime recipient had complete and accurate populations of expenditures
that were supported by expenditure transactions and for selecting items at the
transaction level for testing to verify eligibility.
Castro followed up with New Jersey requesting that New Jersey provide the state
agency subsidiary ledger detailing the transactions at the invoice level that included
vendor names to substantiate the $72,008,351 amount claimed, but New Jersey
did not provide the expenditure level GL detail by the end of our fieldwork. As
such, Castro questions $72,008,351 as other matter identified unsupported
questioned costs because the level of detail was not sufficient to verify the
expenses related to the COVID-19 pandemic. Castro recommends Treasury OIG
determine the feasibility of performing additional follow up with New Jersey to
obtain expenditure support with sufficient expenditure level detail such as vendor
names needed to support CRF amounts claimed.
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Desk Review of the State of New Jersey
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 Aggregate
Payments to Individuals consists of the following broad types of potential costs,
which we have defined from the Treasury’s guidance as published in the Federal
Register. 26 Prime recipients may or may not have claimed all these types of
expenditures.
• Public Safety/Health Payroll – consisted of payroll costs for public health and
safety department personnel.
• Substantially Dedicated Payroll 27 – 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 28 –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 expenses made to individuals.
26
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
27
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 stated
that: “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.”
28
Payroll costs that were not substantially dedicated meant payroll costs that were not for 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, the Treasury’s Federal Register stated that agencies must:
“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.”
22
Desk Review of the State of New Jersey
New Jersey’s Aggregate Payments to Individuals balance consisted of payroll and
other transactions from the following types of claimed costs. New Jersey did not
report any substantially dedicated payroll.
Adjusted GL API
Analysis
Aggregate Payments to Individuals (API) Category Expenses
Types Claimed*
Public Safety/Health Payroll $
603,357,099
Non-Substantially Dedicated Payroll $
21,042,066
Non-Payroll Expenditures 29 $
238,656,400
$
Totals
863,055,565
* New Jersey changed the amount of its Aggregate Payments to
Individuals payment type reported in the GrantSolutions portal by
providing a different GL detail to Castro during our reconciliation
procedures. We utilized the amounts reported by New Jersey in the GL
details for transaction testing purposes. See Financial Reporting Control
Issues section above for additional discussion.
Castro noted that public health and safety payroll transactions were subject to
Treasury’s administrative accommodation, 30 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. Non-substantially dedicated payroll balances were not subject to this
administrative accommodation, and therefore, Castro attempted to test these
transactions by requesting payroll distribution files and by performing tests over
specific employee timesheet submissions.
29
The majority of the non-payroll expenses were related to hardship programs to assist individuals
who suffered a loss due to the COVID-19 pandemic. Castro selected $92,628,000 in original
transaction amounts from this category type. We then obtained populations needed to make
additional selections at the hardship beneficiary level, and we did not identify any exceptions in
amounts tested. New Jersey also confirmed that it did not make any replenishment payments to its
unemployment insurance trust fund.
30
Treasury’s Federal Register Guidance stated that the administrative accommodation meant “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.”
23
Desk Review of the State of New Jersey
We determined New Jersey's Aggregate Payments to Individuals did not comply
with the CARES Act and Treasury's Guidance. We tested a total of $594,921,502
of transaction expenditures for nine Aggregate Payments to Individuals
transactions. Out of those nine transactions, six were for public health and safety
payroll, one was for non-substantially dedicated payroll, and two were for non-
payroll expenditures. As a result of our testing, we identified exceptions in four
public health and safety transactions and one non-substantially dedicated
transaction. We questioned a total of $523,485,702, which consisted of
$399,154,192 and $124,331,510 as unsupported and ineligible costs,
respectively.
Additionally, we identified other matters related to reconciling errors that resulted
in $137,077,969 of unsupported questioned costs. See Other Matters Questioned
Costs for Treasury OIG Consideration – Budgetary Non-Payroll Transactions with
Missing Transaction Level Expenditure GL Details section below for further
discussion.
Public Health and Safety Payroll & Non-Substantially Dedicated – Unsupported
Transactions
For three out of six public health and safety payroll transactions and the one
non-substantially dedicated transaction selected totaling $399,154,192, Castro
requested that New Jersey provide payroll distribution reports to support the total
claimed amount of $399,154,192. However, New Jersey did not provide any
payroll distribution reports to substantiate the balance or eligibility of the
transaction amounts prior to the end of our fieldwork. We needed the payroll
distribution report to verify employee positions, hours worked, department codes,
and pay rate, which were essential to determining that the employees were in fact
public health and safety employees. Castro questioned these costs of
$399,154,192 as unsupported.
Public Health and Safety Payroll – Ineligible Transactions
For one of the public health and safety payroll transactions totaling $124,331,510,
New Jersey did not provide any payroll distribution reports to substantiate the
transaction amounts prior to the end of our fieldwork. However, we reviewed a
document provided by New Jersey entitled, "Fiscal Year 20 Fringe Rate Circular
Letter”. Based on Castro’s review of this letter, we determined that New Jersey
applied a fringe rate to calculate the fringe benefit expenses charged to the CRF
program. We considered the fringe benefit rate application to be similar to an
indirect cost rate application. Treasury’s Guidance in the Federal Register Notice
Volume 86, Number 10, Supplemental Guidance on Use of Funds to Cover
Administrative Costs, indicates that “provisions of the Uniform Guidance, 2 CFR
part 200, that are applicable to indirect costs do not apply. Recipients may not
24
Desk Review of the State of New Jersey
apply their indirect costs rates to payments received from the Fund.” We
determined that the CRF guidance did not permit CRF recipients to charge indirect
costs to their CRF award. Therefore, Castro questioned these costs of
$124,331,510 as ineligible.
Other Matters Questioned Costs for Treasury OIG Consideration – Budgetary Non-
Payroll transactions with Missing Transaction Level Expenditure GL Details
Additionally, during Castro’s reconciliation of the $863,055,565 reported in the
corrected GL detail population for the Aggregate Payments to Individuals payment
type, we determined $137,077,969 flagged as non-payroll transactions in the GL
detail did not include sufficient identifying details needed to determine what the
expenses were incurred for and how those expenses related to the COVID-19
pandemic. The GL details Castro received from New Jersey appeared to be
interagency budgetary transactions from New Jersey to its state agencies and
Castro considered these transactions to be at the batch budgetary level, instead of
at the invoice/expenditure level detail. Castro considers the GL detail crucial to
verify that the prime recipient had complete and accurate populations of
expenditures that were supported by expenditure transactions and for selecting
items at the transaction level for testing to verify eligibility.
Castro followed up with New Jersey requesting a state agency subsidiary ledger
detailing the transactions at the invoice level, but New Jersey did not provide the
expenditure level GL detail by the end of our fieldwork. Castro questions
$137,077,969 of Aggregate Payments to Individuals balances as other matter
identified unsupported questioned costs because the level of detail was not
sufficient to verify these expenses related to the COVID-19 pandemic. Castro
recommends Treasury OIG determine the feasibility of performing additional follow
up with New Jersey to obtain expenditure support with sufficient expenditure level
detail needed to support CRF amounts claimed.
25
Desk Review of the State of New Jersey
Conclusion
We determined that the expenditures related to 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 did not comply with the CARES Act and Treasury’s Guidance.
We identified unsupported and ineligible questioned costs of $976,160,389 and
$134,399,600, respectively, with total questioned costs of $1,110,559,989. Also,
we identified GrantSolutions portal misclassification reporting issues related to 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 that did not comply with Treasury’s
Guidance. Additionally, New Jersey’s risk of unallowable use of funds is high.
Castro recommends that Treasury OIG follow up with New Jersey’s management
to confirm if the $976,160,389 noted as unsupported expenditures within 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 can be supported. If support is not
provided, Treasury OIG should recoup the funds or request that New Jersey
management provide support for other eligible replacement expenses, not
previously charged to CRF, that were incurred during the period of performance.
In addition, Castro recommends that Treasury OIG request New Jersey
management to provide support for other eligible replacement expenses, not
previously charged to CRF, that were incurred during the period of performance for
the $134,399,600 of ineligible costs charged to the Transfers greater than or equal
to $50,000 and Aggregate Payments to Individuals payment types. If support is
not provided, Treasury OIG should recoup the funds.
Further, based on New Jersey’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 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.
26
Desk Review of the State of New Jersey
Castro also identified other matters throughout the course of our desk review,
which warrant recommendations to Treasury OIG for additional action. Castro
recommends Treasury OIG follow-up on these issues:
Castro tested $2,301,279 out of the total amount of $29,142,450 in non-
substantially dedicated payroll claimed by New Jersey related to a higher
education grant. Since Castro identified unsupported questioned costs
within these non-substantially dedicated payroll expenditures tested, we
recommend Treasury OIG determine the feasibility of performing additional
follow-up with New Jersey to determine if there were other instances of
unsupported balances within the remaining portion of this grant balance.
Castro tested $250,398 out of the total amount of $26,000,000 in grant
expenses claimed by New Jersey related to a long-term care facility staff
testing grant program. Since Castro identified unsupported questioned
costs within these grant expenditures tested, we recommend Treasury
OIG determine the feasibility of performing additional follow-up with New
Jersey to determine if there were other instances of unsupported balances
within the remaining portion of this grant balance.
Castro noted unsupported Aggregate Reporting less than $50,000 and
Aggregate Payments to Individuals questioned costs of $72,008,351 and
$137,077,969, respectively, resulting from our reconciliation procedures
performed over New Jersey’s GrantSolutions portal reporting and its GL
detail. Castro recommends Treasury OIG determine the feasibility of
performing additional follow up with New Jersey to obtain expenditure
support with sufficient expenditure level detail needed to support CRF
amounts claimed, such as vendor names and identifying transaction
details.
Castro noted unsupported questioned costs of $205,520,362 in the form
of discrepancies between the corrected GL detail expenditures against the
sub-recipient GL details for the Transfers greater than or equal to $50,000
population. Castro recommends Treasury OIG determine the feasibility of
performing additional follow up with New Jersey to determine if there
were other instances of unsupported questioned costs within the
Transfers greater than or equal to $50,000 population.
New Jersey self-identified a total of $1,007,050 in potential fraudulent
transactions for the New Jersey Economic Development Authority that
were still being investigated during our desk review. We recommend
Treasury OIG determine the feasibility of requesting that New Jersey
perform an assessment to determine if all fraudulent transactions have
been removed from NJEDA’s CRF claimed amounts in the GL balances.
Then, we recommend Treasury OIG determine the feasibility of following
up with New Jersey to obtain the missing NJEDA populations questioned
as other matters and, utilizing the listing of potential fraudulent
27
Desk Review of the State of New Jersey
transactions provided by NJEDA, determine if the $1,007,050 potential
fraudulent amounts were properly reversed.
*****
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. 31 We appreciate the courtesies and
cooperation provided to our staff during the desk review.
Sincerely,
Wayne Ference
Partner, Castro & Company, LLC
31
https://www.ignet.gov/sites/default/files/files/Silver%20Book%20Revision%20-%208-20-12r.pdf
28
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