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Audit questions thousands in expenditures by recipients of MDT grants – Daily Montanan

['Arren Kimbel-Sannit', 'More From Author', '- February']

Date: 2022-02-09 00:00:00

Legislative auditors said this week that insufficient internal controls at the Montana Department of Transportation led them to question $278,000 in costs related to the allocation of federal grants, and that more unsupported expenditures could still loom.

MDT concurred with the findings and said it was working to shore up its monitoring and compliance efforts.

The findings came as part of the Legislative Audit Division’s biennial financial compliance audit of the department and were presented to lawmakers on Tuesday. In most cases, the concerns expressed in the audit concerned a lack of proper documentation by grant applicants and not misspent funds.

The largest source of questioned costs came from the department’s disbursement of federal COVID-19 relief funds intended for live entertainment venues. Auditors, based on just a sample of 76 total grantees, identified a total of $189,000 in expenditures by recipients of the grant funds that were not supported by documentation submitted to the department. Auditors called for the department to conduct additional monitoring and reviews of grant recipients, some of which MDT has said is already underway.

Then-Gov. Steve Bullock announced in August 2020 that the state would use $10 million in federal Coronavirus Relief Funds to support live entertainment businesses and nonprofits, supplanting up to 25% of a venue’s 2019 gross revenue. Although MDT’s focus lies in physical infrastructure, it has significant experience handling federal funds, and thus partnered with the Governor’s Office to chunk out the grants.

“We had resources, the request was made, we were trying to play team,” Julie Brown, the department’s deputy director, told the Legislative Audit Committee on Tuesday. “I believe the history is, we offered to help out with this process because there was a lack of resources and knowledge with how to proceed with these grants.”

But the audit suggested the department should have done more to monitor and evaluate recipients of the entertainment funds due to the limited experience that most entertainment venues have dealing with federal funding.

“These sub-recipients are higher risk, and under federal regulations, we would have expected a more robust sub-recipient monitoring of grantees,” legislative audit staffer Courtney Johnson told the committee.

MDT required a final report from grantees in January of 2021, according to the audit. The audit division reviewed six of these reports, and found two grantees spent $95,000 without proper documentation. The first self-certified $36,000 in spending with an Excel spreadsheet, auditors wrote, and the second reported final costs not mentioned in their initial application totaling $59,000.

The department had also completed its own audit of eight grantees it determined to be particularly high risk, including one that had previously been denied but was later approved for funding after talks between the Governor’s Office and MDT, according to the legislative audit. As part of this review, the department questioned $94,261 in costs, a finding that the legislative audit affirmed.

In its response to the legislative audit, department officials said they had begun conducting further reviews of some grantees and were working to recapture some of the unallowable funds. MDT completed an audit of the recipient who reported $59,000 in questioned costs, and found them to be allowable, the department said, and was still in the process of auditing the applicant with the $36,000 expense.

In a separate review of 18 applicants, the department found that 15 had supported their costs, while three had some unallowable expenditures.

“We’re working on either recovering the funds right now or receiving additional support (explaining the costs),” MDT Chief Auditor Natalie Gibson told the committee.

Legislative auditors identified several other instances where the department’s handling of federal money didn’t pass muster.

For example, the department improperly purchased two vans totaling around $76,000 via a sole-source procurement process — in other words, with no competitive bidding — using money from the federal Formula Grants for Rural Areas program. State policy only allows single-source procurement when only one vendor can supply the state with a product. MDT told auditors it would annually review its policies to ensure compliance with procurement law.

In other instances, the department lagged in the recovery of questioned costs by recipients of Formula Grants for Rural Areas monies — $13,000 in expenditures by rural transit areas between 2019 and 2020 that were not allowed but not returned to the state by the end of the legislative audit period. In general, the auditors found, department personnel were not adequately monitoring recipients of these grants, or at least couldn’t document that they were.

Lawmakers debated not signing off on the audit until Montana Department of Transportation Director Mack Long could be present to explain these deficiencies, but ultimately voted to approve it. However, members of the committee were clear that the director was to attend next time his department came up for an audit.

“DOT is a real big animal in the state, and we spend a lot of money here,” said Sen. Jason Ellsworth, R-Hamilton. “I think there are a couple of underlying questions that still need to be answered in totality.”

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