INVESTIGATION: RI State Agency Mismanaged $41M in Federal Grants
Thursday, May 15, 2014
The Rhode Island Emergency Management Agency mismanaged $41 million in federal funds, spending money on unauthorized expenses, charging expenditures to grants after their expiration, and generally failing to keep track of where federal dollars were going and how they were spent, according to an internal state audit obtained by GoLocalProv.
The issues identified in the audit, completed at the end of 2013, have already resulted in the return of $3.01 million in federal funds, according to the Governor’s office.
The 19-page audit details more than half a dozen failures to follow proper procedures and guidelines for 19 grants the state agency spent from 2008 to 2013. Overall, the report, which was produced by the state Bureau of Audits, found the administration of federal grants at the Rhode Island Emergency Management Agency was divided among three different departments acting independently of each other—often with conflicting information about how much money was left and when it had to be used.GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLAST
“There was a silo mentality resulting in a lack of communication and sharing of information between the three groups,” the report states. “The lack of authority, procedures, and controls allowed funds to be transferred between grants without proper documentation or approval. This finding is consistent throughout the audit and is reflected throughout this report.”
The report is already generating a reaction from several candidates for Governor. Clay Pell called the findings “disappointing.” Ken Block said the report illustrates why state agencies need to be “professionalized.” The campaigns of Providence Mayor Angel Taveras and Cranston Mayor Allan Fung likewise took news of the audit as occasion to reaffirm their candidates’ commitment to bringing fiscal discipline to state government. (See below for full responses.)
State officials said they had responded swiftly to the audit.
“This audit gave us an opportunity to identify and correct any potential deficiencies and to ensure stability of our response and recovery efforts throughout the state. Once identified, we addressed them as rapidly as possible so that we remain focused on our very important mission to protect the life and property of our citizens,” said Jamia McDonald, the executive director of RIEMA.
In a separate statement, a spokesman said Major General Kevin McBride, the Adjutant General for the state and the commander of the Rhode Island National Guard, has confidence that now “both agencies are in compliance with state and federal regulations.” (See below for full statement.)
Audit: funds misused for payroll, lobbyist
In particular, the report found that RIEMA was not compliant with federal guidelines on the use of grants for employee compensation. RIEMA was “unable to substantiate the expenditures for payroll” to support its use of federal funds, which could result in the agency owing money to the federal government, the report said.
The state agency also spent funds after grants were set to expire, did not properly track state matching funds, and did not keep a thorough inventory of equipment it had purchased with federal funds.
It didn’t follow state rules either.
The agency spent a total of $39,938 on meals, hotel room, training room, and equipment rentals without going out to bid for the work. And, the report added, the requisitions for the purchases orders for those events were submitted two weeks after the expenses had been incurred. The expenses were for training sessions and conferences, according to the Governor’s office, which said the issue involved “method and process” and “not the validity or appropriateness of the grant expense.”
RIEMA also did not keep tabs on federal funds that it passed on to cities and towns.
Under federal guidelines, the state agency must ensure that any city or town that receives more than $500,000 in emergency management grants submit to an audit and correct any findings. At the time of the RIEMA audit, the staff was apparently unaware that an audit had found issues in Johnston’s management of a public assistance grant for those affected by natural disasters. Audits for four communities were missing. For those communities that had submitted them, RIEMA’s copies were missing several pages.
One recipient, Providence, also inappropriately spent federal grant funds on lobbying expenses, the report claims. The city used nearly $5,000 from a federal grant to hire Capital Strategy Group, LLC to consult on “medical response systems” grant and lobby federal lawmakers, between 2011 and 2012. The money was also used to cover travel expenses, according to the Governor’s office.
When the state issued a “compliance deficiency letter” to Providence officials last September, the city responded with a legal opinion justifying the expenses, the Governor’s office said.
The director of the Providence Emergency Management Agency, Pete Gaynor, told GoLocalProv that the majority of the 124 grant recipients across the country had hired a Washington, DC-based lobbyist to “promote the grant.” He said Providence participated.
“During the past year, in cooperation with RIEMA and the federal auditors, PEMA provided documentation that demonstrated this practice was legal and allowed under the grant guidance; we satisfied the auditor inquiry. The audit is completed and formally closed,” Gaynor said in a statement provided by city spokesman David Ortiz.
Audit called for 21 reforms at state agency
State authorities at the Bureau of Audits conducted the audit last year at the request of both the Governor’s office and McBride “to ensure that all federal funds were appropriately managed,” according to Chafee spokeswoman Faye Zuckerman.
The audit came on the heels of staffing changes at RIEMA. McDonald, the former deputy chief of staff for Chafee, became acting executive director in April 2013. In the following months, she “conduct[ed] a thorough evaluation of the agency’s operations,” according to a news release from the Governor’s office, announcing her appointment as permanent executive director last July.
The audit was four months later, on November 4. Zuckerman said RIEMA had responded with a “corrective action plan” by the end of the month. At a follow-up meeting this week, state auditors concluded that the agency had implemented 20 out of the 21 recommendations they made, according to Zuckerman.
The outstanding item involves the proper allocation of “indirect costs.” Zuckerman said RIEMA has been working with the state Office of Accounts and Control to resolve the issue. “We anticipate the process improvement to require more time. We do not have a completion date at this time,” Zuckerman said.
She noted that under state law, RIEMA has a full year to fix the problems identified in the audit. “RIEMA implemented all but one corrective action within five months’ time,” Zuckerman said.
In a separate statement, a spokesman for the Rhode Island National Guard noted that the audit followed “a period of significant natural disasters” in the state.
“The Adjutant General is extremely pleased with the direction the new Executive Director has taken with respect to the findings and recommendations. To date, most have been addressed,” said the spokesman, Lt. Col. Peter Parente.
Candidates for Governor react to report
Asked to comment on the audit, several candidates for Governor expressed concern about its findings.
“The apparent lapse in administration and oversight of federal grants by RIEMA is disappointing. I am pleased there is new agency leadership, and hopeful the auditors’ recommendations will be implemented,” said Pell, a Democrat. “Having served as a Coast Guard officer, I have seen how vitally important emergency preparedness and management are to Rhode Island—not only because of the impact of climate change and extreme weather, but for economic development as well.”
On the GOP side, Barrington businessman Ken Block emphasized his professional experience in streamlining government spending. “As Governor, I will professionalize our state government and establish strong management practices in all the agencies that I am responsible for. When government operations are mismanaged, the resulting inefficiency represents an unacceptable cost to taxpayers. My professional career has been spent identifying wasteful spending and making government programs operate more efficiently, and I will bring that experience to the Governor’s office,” Block said.
“Any time we can cut unnecessary waste or mismanagement in state government, we should do it, especially when we need now more than ever to invest in our families and communities,” added Dawn Bergantino, the campaign communications director for Taveras, a Democrat.
Bergantino pointed to Taveras’ record as Providence mayor—notably, the closing of a $110 million deficit with cuts in each department, including the mayor’s office—as an example of the “fiscal leadership” he would bring to the state as Governor.
“As Governor, he will bring the same type of fiscal leadership to root out this kind of waste and strengthen our state's economy and has pledged to lead a comprehensive review of our state budget to ensure our financial resources are being used most effectively. He wants to make sure that we can expand on programs that work, eliminate those that don’t, and be responsible with our state budget dollars,” Bergantino said.
The campaign manager for Fung, a Republican candidate, pointed to the RIEMA audit as an example of “systemic problems” in state government. “Bloated government and lack of oversight are systemic problems plaguing Rhode Island. Couple that with high taxes and a poor business climate, it’s no surprise Rhode Islanders are voting with their feet. We can turn this state around, however, starting on day one of a Fung administration,” said Patrick Sweeney.
The campaign for General Treasurer Gina Raimondo, a third Democratic contender for Governor, did not respond to repeated requests for comment.
State officials requested second audit
In the wake of the first audit, state officials requested a second one for the costs of renovating and expanding the Rhode Island National Guard Command Readiness Center in Cranston. That audit, completed in April, overall gave the project a clean bill of financial health.
“A recently conducted audit of the Command Readiness Center construction project by the Bureau of Audits found that the Rhode Island National Guard was in strict compliance with purchasing and contract procedures,” Parente said.
He concluded: “The Adjutant General is confident that both agencies are in compliance with state and federal regulations.”
Correction: A previous version of this report identified Jamia McDonald as Governor Lincoln Chafee's former chief of staff. She was deputy chief of staff.
Stephen Beale can be reached at [email protected]. Follow him on Twitter @bealenews
Related Slideshow: Audit Grant Administration Violations
From payroll expenses to purchasing requirements, a new audit found major violations in how a state agency handled—or mishandled—tens of millions in federal funds. Below is a snapshot of each major violation, based on excerpts from the report of the state Bureau of Audits. The report was completed at the end of last year.
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