The Joint Committee on Flooding met Tuesday and heard an update on the Department of Homeland Security and Emergency Management—Federal Grant Management and an update on the RISE program.
Earlier this month, members of the Post Audits Subcommittee heard a report from the Performance Evaluation and Research Division on the Department of Homeland Security and Emergency Management (DHSEM). FEMA placed DHSEM on manual reimbursement effective Jan. 13, 2016.
FEMA notified the department in a November 2015 letter about the state's placement on manual reimbursement. The report said the action was a result of several years of the department’s inability to comply with grant requirements and failing to remedy issues-- specifically, issues regarding sub-recipient monitoring.
Manual reimbursements may add as much as 90 days of additional time for any reimbursement request exceeding $100,000.
Only West Virginia and Puerto Rico are subject to this manual reimbursement process, according to the report.
In Tuesday’s meeting, committee members heard from Jimmy Gianato, a Homeland Security consultant. Gianato mentioned issues with sub-recipient monitoring, which he said has been a problem since 2010.
“The biggest challenge is not having enough staff to do sub-recipient monitoring and do disaster recovery,” Gianato told the committee.
The manual reimbursement penalty affects the Hazard Mitigation Grants program, Public Assistance grants, the Community Assistance program, Cooperating Technical Partners, the Emergency Management Performance grants and includes all open grants, including the 2016 flood grants, according to the PERD report. Gianato said FEMA lifted the manual reimbursement requirement during the 2016 floods but only for that event.
Michael Todorovich, director of the West Virginia Division of Homeland Security and Emergency Services, also addressed the committee Tuesday. Todorovich said the department is working on policies to improve oversight of the grants.
“I truly believe you will see some significant positive results,” Todorovich said.
Committee members asked about steps the department is taking to prevent manual reimbursements in the future.
Todorovich said the department has a full monitoring staff that is part of internal review.
Committee members also asked if the department is working to improve poor sub-recipient monitoring. Todorovich said there had been problems with returning phone calls expeditiously but the department is working on a system where every phone call that comes in is logged, assigned to someone and noted when it's completed.
Todorovich said he is working on a spreadsheet to give to committee members on grants, detailing the amount of money available, the amount of money spent, and the remaining amount of money.
Maj. Gen. James Hoyer, adjutant general, said his biggest priorities are communication, management, hiring more people, and following up. He said staffing challenges have been part of the problem.
“We want to build as much capability internally for the state that we can afford to make sure that we have that capability going forward,” Hoyer said.
“I want to build a capable staff in the state of West Virginia so when FEMA has a disaster somewhere else, they want to call on us going forward,” Hoyer said.
Committee members also heard updates on the RISE program. The Legislative Auditor previously conducted an audit of the RISE program, detailing issues with construction companies that did work for the program.
Justin Robinson, director of the Post Audit Division, and Adam Fridley, legislative audit manager, said they anticipate releasing a report in December.
Fridley said since the time of the last report, the West Virginia Development Office has executed new contracts. He said all active cases in the system are currently under contract.
Hoyer said there are 410 cases outstanding – 171 that require total reconstruction, 153 that require some form of rehabilitation, and 86 mobile home replacement units. So far, 39 homes have been completed.
Hoyer said there are contracts in place to manage these 410 cases. However, of those 410, he said there may be other issues including environmental assessments before going into the queue to the actual contractors.
Legislators asked Hoyer about the timeframe to complete these outstanding cases.
“We’re on a good path but I still believe … we have 24 months of work to do with the goal of expediting as quickly as we can,” Hoyer said, noting weather is a factor determining how quickly work is done.
Legislators also asked Hoyer if West Virginia is still listed as a “slow spender” under the U.S. department of Housing and Urban Development. West Virginia is now listed as “on pace.” “Slow spender” means spending less than 10 percent of the monthly pace required to fully use the grant by the target closeout date, which is Dec. 30, 2023. “On pace” means spending greater than 10 percent of the monthly pace.
Legislators heard an update of General Revenue figures during Sunday’s Joint Committee on Government and Finance Subcommittee meeting.
Deputy Revenue Secretary Mark Muchow presented October number, where collections were $359.2 million, which was about $2.3 million above estimates. Muchow said this is 1.5 percent above last year’s numbers.
Muchow said year-to-date collections totaled more than $1.478 billion, which was $122 million above estimate. He said October marks a 13.5 percent growth rate the first four months into the 2019 fiscal year.
“This is a strong growth rate,” Muchow said.
Muchow said October’s numbers were attributed to a few factors including consumer sales tax and severance tax. The state was $4.2 million above estimate in consumer sales tax and 14.4 percent ahead of last year.
Personal income tax took a pause. He said personal income tax was $6.5 million below estimate but he said the figures are still strong and were 11.7 percent ahead of last year.
Muchow said severance tax was $5.4 million above estimate and 50.4 percent ahead of last year.
He said oil and gas had higher production numbers, representing a more stable pricing compared to last year. He said numbers are much closer to the national average this year as compared to last year. However, he said there is caution for severance tax because recently, oil prices have taken a dip.
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.
Tom Azinger was sworn in Friday in the West Virginia House of Delegates chamber to fill the seat in District 10.
Gov. Jim Justice appointed Azinger earlier this week to fill the seat vacated by Delegate Frank Deem, R-Wood, who passed away earlier last month at age 90. Deem served a total of 48 years in the Legislature and was first elected to the House in 1954.
Azinger, of Vienna, previously served 10 consecutive terms in the House from 1995-2015.