Legislators heard three reports during Sunday’s Post Audits Subcommittee meeting.
The first report was a Performance Evaluation and Research Division Report on the Department of Homeland Security and Emergency Management – Federal Grant Management.
FEMA placed the Department of Homeland Security and Emergency Management (DHSEM) on manual reimbursement effective Jan. 13, 2016.
FEMA notified the department in a November 2015 letter about the state being placed on manual reimbursement—a penalty for not following federal grant requirements dating back to 2009. Manual reimbursements may add as much as 90 days before the state could get reimbursed for expenditures totaling more than $100,000. The penalty affected multiple grant programs.
West Virginia Department of Military Affairs and Public Safety Secretary Jeff Sandy said he was not aware of the FEMA letter.
“It’s disappointing to my staff and the governor’s staff that we were unaware of that letter,” Sandy said.
The Department of Homeland Emergency Management was moved under supervision of Major General James Hoyer, the Adjutant General.
The report determined deficiencies in internal control and management resulted in federal financial penalties. Preliminary recommendations include creating policies and procedures and reporting to the Legislature detailing actions taken.
Hoyer said he has created a matrix of outstanding issues, met with the FEMA Region 3 executive who provided additional fulltime support on behalf of FEMA, and is working to implement updated policies and procedures to address issues. Hoyer asked lawmakers to give him until the January Post Audits Subcommittee meeting to give an update.
Legislators also heard a letter report on the Bureau of Juvenile Services Inventory Management.
Back in February, Sandy requested a series of inventory audits on agencies and divisions under his purview. The Bureau of Juvenile Services is within the West Virginia Division of Corrections and Rehabilitation. It operates 17 Youth Reporting Centers and 10 Juvenile Centers statewide.
The Legislative Auditor determined Juvenile Services’ inventory management system was not operating in compliance with state code or the Department of Administration’s Surplus Property Operations Manual. The Legislative Auditor further found that the inventory management system does not reliably track the agency's assets and does not adequately safeguard those assets from misappropriation.
The inventory record in wvOASIS included 1,880 items, which had a total original acquisition cost of about $31 million. The audit found 180 items—including riding mowers, snow blowers, printers, computers, a bandsaw and a welder—did not list serial numbers. There were 15 items that did not have asset tag numbers.
The audit found that 309 items in Juvenile Services’ inventory record did not have the correct physical locations recorded.
The Legislative Auditor recommended developing corrective action plans to ensure that the asset record in wvOASIS is complete and accurate. The Legislative Auditor also recommended Juvenile Services update its current policy on recording inventory.
Legislators also heard a legislative audit report on the Division of Correction’s 25-year lease of the former West Virginia Penitentiary. Nick Hamilton, senior auditor, said last September, Sandy wrote a memo to the governor's office, expressing several concerns with the Division of Correction’s lease of the penitentiary to the Moundsville Economic Development Council (MEDC).
The report found that from February 1997 to July 2013, the Division of Corrections paid an undetermined amount electric utility costs that were MEDC's responsibility. The report further said from July 2013 to April 2018, the division paid about $204,000 for electric utility cost.
The audit further said poorly drafted language in insurance requirements in a 2004 lease agreements and a 2013 Memorandum of Understanding potentially opened the state to increased liability.
The report found MEDC lost its IRS tax-exempt status for failure to file. As a nonprofit, it was eligible for insurance under the state Board of Risk and Insurance Management (BRIM) but the revocation of its tax-exempt status left questions. BRIM requested a legal opinion, which said the statute does not preclude MEDC’s eligibility for coverage due only to its tax exempt status revocation.
The Legislative Auditor recommended the Division of Corrections comply with the 2013 Memorandum of Understanding and only pay for utilities in which it is responsible. The Legislative Auditor additionally recommended the Division of Corrections try to collect the $203,000 it paid for MEDC's electric utility service.
Additionally, the Legislative Auditor recommended the Division of Corrections to establish a new lease agreement with MEDC and recommended the Legislature to review state code regarding the state Board of Risk and Insurance Management insuring nonprofit entities to determine if the nonprofit is required to be an IRS 501(c)(3) designated entity or a federal tax-exempt entity.
In the report, the Legislative Auditor also expressed concerns with allowing a state agency to enter into a 25-year lease agreement without requiring review of the language, terms and potential long-term effects of the agreement. The Legislative Auditor recommended the Legislature consider drafting legislation requiring any leasing of state property for a period more than 10 years to be reviewed for content to ensure duties and responsibilities are clearly defined.
Suzanne Park, director of MEDC addressed legislators Sunday. She said the organization discovered during the last legislative session that the lease had been terminated effective this year.
She also said she was not aware that the organization’s nonprofit status had been discontinued until the issue later was brought to her attention.
She said she feels it is important that if the state look at the lease, they should remodel it.