(The Center Square) – Oregon state auditors found millions in questioned costs and serious control weaknesses at several state programs receiving federal funding, the Oregon Audits Division announced this week.
Annually, the Audits Division conducts two major financial audits: the Annual Comprehensive Financial Report and Statewide Single Audit. It also releases a report summarizing these audits; it released one for fiscal year 2022, called Keeping Oregon Accountable, this week.
The federal government requires states to audit programs that receive federal funding to ensure states are complying with the federal government’s requirements to continue receiving the assistance.
Before the coronavirus pandemic, Oregon typically received $11 billion to $12 billion per year in federal funding. However, in Fiscal Year 2022, that figure ballooned to $21 billion.
“Our financial audits are a critical part of keeping Oregon government accountable to its people,” Audits Director Kip Memmott said. “This year’s statewide audits found some significant issues that we think are important to bring to the attention of Oregonians, the Governor, and the Legislature.”
The audits had more questioned costs and far more modified opinions than those in previous years, a press release said.
Questioned costs refer to program costs that “may or may not be allowed to be paid with federal funds.”
“It serves as a flag for federal funding agencies to review the findings and then decide whether the costs are allowable,” Tracey Gates, a principal auditor with the division, said.
During Fiscal Year 2021, auditors found $10 million in questioned costs. The next fiscal year, questioned costs increased by over $20 million to $35.2 million at 10 programs in five agencies. Of that, $9.1 million were directly identifiable costs. The rest were likely errors based on sample testing, according to the release.
“It’s worth noting that although questioned costs still reach into the millions of dollars, they make up a relatively small portion of total program expenditures,” the release explained. “For example, the Pandemic EBT program at the Oregon Department of Human Services had federal expenditures totaling $568 million, while $17 million of that — about 3% — were questioned by auditors.”
Several modified opinions were also issued in this year’s audits.
“When an audit shows controls are sufficient and the program is generally in compliance with federal requirements, we issue what’s called an unmodified, or clean, opinion,” Gates said. “An unmodified opinion is a good thing. But if we have concerns about the quality of internal controls, we have to issue modified opinions.”
The Emergency Rental Assistance Program at Oregon Housing and Community Services was issued an adverse opinion. It means control weaknesses were widespread enough that controls would not prevent or detect significant noncompliance.
Plus, the Emergency Solutions Grant Program, also at OHCS, received a disclaimer of opinion.
“A disclaimer of opinion means there was not sufficient, appropriate evidence for auditors to even issue an opinion on program compliance,” the release said.
Although qualified opinions are less severe, they indicate that internal controls cannot prevent or detect significant noncompliance.
Auditors offered qualified opinions for five programs in three agencies: OHCS, DHS, and the Oregon Health Authority. Two programs — Temporary Assistance for Needy Families and the Low-Income Home Energy Assistance program — have received qualified opinions, the release said.
So what will happen now due to the results of these opinions?
“It’s up to the federal granting agencies,” Gates said. “They are responsible for following up on our findings, and only they have the authority to enforce grant requirements. This could include sanctions or a change in future funding, but it could also result in a clarifying change to the requirements.”
One can read the full report here.