A new audit has found several deficiencies in how some Wisconsin departments disbursed a portion of the federal COVID-19 relief money provided to the state during the pandemic, including spending that didn’t comply with federal rules and almost $1.3 million that state agencies inappropriately charged to federal funds.
The audit, released Friday by the nonpartisan Legislative Audit Bureau, focuses on the $5.9 billion in federal assistance administered by state agencies in fiscal 2021-22. The $1.3 million in questioned costs identified by the bureau represents less than 1% of the total allocated by the state that year.
All told, the bureau tested internal controls and compliance with laws and regulations for 22 federal programs and made 64 recommendations “to improve administration of federal programs and to address deficiencies in internal controls over financial reporting,” according to the report.
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The recommendations relate to 26 findings, including seven internal control deficiencies identified by the bureau in another audit released in December, which found the state Department of Administration did not provide information it claimed the governor used in determining how to hand out billions of dollars in pandemic aid over the past two years. Republican lawmakers have criticized the governor’s spending choices and have moved to give themselves control of the money.
Of the latest findings, the bureau considers one to be related to a material weakness and 17 related to “significant deficiencies.”
In one instance, the state Department of Health Services failed to comply with federal requirements accompanying the grants. According to the report, DHS received more than $855,000 in federal funds for inappropriate expenses — including a $395,000 payment that was later refunded by the vendor and a roughly $460,000 payment that was duplicated in the agency’s reimbursement request to the Federal Emergency Management Agency.
The report notes the transactions were identified in a reimbursement request provided by another state agency, and procedures to identify duplicate or refunded payments were not in place at the time. Subsequent reimbursement requests were handled by the state’s accounting system to properly remove duplicated or refunded transactions.
In another instance in early 2021, DHS failed to make the appropriate payment to the Centers for Medicare and Medicaid Services for Medical Assistance premiums. As a result, CMS reduced the state’s funding to account for the missed payment. DHS ultimately paid the invoices, despite the reduction, resulting in a $43 million overpayment.
“DHS was unaware that this had occurred until we informed them in March 2023,” according to the report. “We determined that DHS did not adequately review the award notice detailing the reduction and perform additional steps to assess if the award reduction was appropriate.”
Agency officials indicated they will work with the federal government to obtain a credit on future Medicare premium invoices to collect the overpayment, according to the report.
The audit also found that the state Department of Administration made two payments of $161,363 — through the Minor League Sports Team Grant Program on Jan. 5, 2022, and Live Event Small Business Program on Jan. 12, 2022 — to the same applicant. Details about the payments posted by DOA show they were made to Northland Family Holdings, LLC, the parent company of the Wisconsin Lumberjacks Hockey Club in Spooner.
The report states that DOA, while administering the funds, “did not establish effective internal controls to assess the appropriateness of making a payment to an applicant that applies under multiple programs.”
The audit bureau recommends the agency implement controls to prevent future situations in which a grant applicant is eligible for funding under multiple programs and seek repayment of the inappropriately provided funds.
DOA spokesperson Derek Spellman confirmed Friday that Northland Family Holdings was the recipient of the two grants and the department is currently working with the organization to recover the Live Event Small Business grant payment.
The bureau also questioned more than $52,000 in rental and utility assistance payments provided by DOA through the Wisconsin Emergency Rental Assistance program. The bureau notes the agency provided those funds to 22 individuals who may have been ineligible to receive the funds.
In those instances, the bureau determined benefits were paid to individuals for whom DOA did not have the necessary documentation, or to individuals from whom DOA had not received proper renter verification forms or documentation of payments made for utility assistance.
“Should DOA determine that it provided rental and utility assistance to individuals who were ineligible to receive WERA Program benefits, it will identify alternate eligible Department funding sources or seek to recoup improper benefit payments made, as appropriate,” according to a response from the agency included in the report.
The audit also found a few instances in which the University of Wisconsin System failed to comply with federal requirements for the use of money allocated through the Higher Education Emergency Relief Fund (HEERF).
In one case, UW-Platteville used about $23,500 in federal funds to create online tours to provide an alternative way for prospective students to view the campus during the pandemic. However, the bureau found the tour content to be “predominately marketing because it included encouragement for viewers to enroll at UW-Platteville.”
“We consider any activities that encourage enrollment to be recruiting activity prohibited under federal regulations,” according to the report.
In a response memo, UW-Platteville officials say they believe the funds were properly used but will remove the tour’s cost from the university’s federal funding allocation and replace it with other allowable costs.
At UW-Superior, officials used more than $30,000 in HEERF aid to offset lost revenue from the sale of alcohol at sporting and other events, as well as $1,500 for student entertainment for a summer event. The bureau identified those expenses as unallowable costs.
“UW-Superior will review all HEERF Institutional and Strengthening Institutions Program expenses and ensure there is adequate documentation and that all expenses are allowable,” the university noted in response to the audit bureau.
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