An audit from the North Carolina State Auditor Beth Wood’s office reveals that the state’s Pandemic Recovery Office didn’t properly monitor $159.9 million in federal COVID-19 funds.
NCPRO falls under the Office of State Budget and Management (OSBM), which is part of Democrat Gov. Roy Cooper’s administration.
It’s also not the first time this has happened, as Wood chided the office last year for not tracking federal COVID-19 funds.
Auditors say NCPRO’s monitoring procedures required monthly reviews of subrecipients’ of state agencies’ expenditure reports, but auditors found no such evidence.
They also tested a sample of 40 direct expenditures of state agencies and found no evidence of review of supporting documentation.
Auditors also reviewed all 23 subrecipients that were assessed as high-risk and found that the additional monitoring activities, a requirement of NCPRO’s monitoring plan, were not completed for 9 (39%) of the subrecipients.
They say inadequate monitoring increases the risk that federal funds may not be used in accordance with the federal requirements, which may have reduced funding available to respond to the COVID-19 pandemic.
NCPRO management told auditors that they didn’t have adequate personnel to complete the monitoring procedures established at the beginning of the program.
Subsequent legislation identified NCPRO as responsible for administering additional federal COVID-19 programs, and management did not revise existing monitoring procedures to reflect these additional responsibilities. Also, monitoring procedures did not require the results of reviews or other monitoring activities to be documented.
Auditors say federal regulations require NCPRO to establish and maintain effective internal control over the federal award that provides reasonable assurance that the entity is managing the award in compliance with federal statutes, regulations, and the terms and conditions of the federal award.
They also need to monitor the activities of the subrecipient to ensure that the subaward is used for authorized purposes, and in compliance with federal statutes, regulations, and the terms and conditions of the subaward.
Auditors recommended that NCPRO management review and revise monitoring procedures over future federal programs as necessary in response to changes in operations, including evaluating the feasibility of procedures with the available personnel.
In addition, management should ensure that monitoring procedures over future federal programs include a requirement that personnel document the completion of the procedures.
Kristin Walker, state budget director, OSBM, and Stephanie McGarrah, executive director, NCPRO, said they accept the findings and made improvements to ensure future federal funds are adequately monitored.
The audit was part of the recently released Statewide Single Audit, which also had findings on the Department of Commerce, which incorrectly used $18,028 of Unemployment Insurance (UI) administration award funds.
During the audit period, the Department spent $116.8 million to administer the UI program.
In administering the UI program, funds are allowed for both automation and nonautomation expenditures for the first 15 months of the award period and only automation expenditures for the remaining 21 months of the award period.
Auditors tested 26 out of 1,750 UI expenditures, totaling $5.9 million, related to awards that were in the automation-only period and found four errors totaling $18,028 that were not allowed.
The department may be required to pay the funds back to the federal government, which could have been used for automation activities such as purchasing new computers and software for the UI program.
Department management told auditors that reviews of the expenditures were not detailed enough to ensure only allowable expenditures were charged to the award during the automation period.
Auditors recommended that department management should develop and implement detailed review procedures over expenditures to ensure compliance with federal award requirements.
Department of Commerce Secretary Machelle Baker Sanders said the department agrees with the findings and has implemented corrective actions to strengthen internal controls and help prevent future errors.
Other findings in the Statewide Single Audit include the Dept. of Public Instruction, the Dept. of Health and Human Services, and the Dept. of Public Safety.