Independent Oversight of Recovery Act Funding for Mississippi's Weatherization Assistance Program
Gao ID: GAO-10-796R June 30, 2010The American Recovery and Reinvestment Act of 2009 (Recovery Act) assigns GAO a range of responsibilities to help promote accountability and transparency. One of the act's recurring requirements includes having GAO conduct bimonthly reviews of selected states' and localities' use of funds made available under the act. GAO's review of the use of Recovery Act funding in Mississippi this year included the Weatherization Assistance Program. The Weatherization Assistance Program, administered by the Office of Energy Efficiency and Renewable Energy within the U.S. Department of Energy (DOE), enables low-income families to reduce their utility bills by making long-term energy-efficiency improvements to their homes by, for example, installing insulation, sealing leaks, and modernizing heating equipment, air circulation fans, and air-conditioning equipment. As part of our overall review of the weatherization program in Mississippi, we visited community action agencies responsible for weatherization activities located in Columbia, D'Lo, McComb, and Meridian. In our review of client files, and other data provided by the Division of Community Services (DCS) personnel and one community action agency, we found several problems at the community action agency, which we shared with DCS. We also identified issues concerning the quality of oversight of the program by Mississippi Department of Human Services' (MDHS) Division of Program Integrity (DPI), which we have discussed with MDHS officials. This correspondence confirms the substance of our conversations with DCS and MDHS officials.
DCS has implemented a monitoring plan that generally exceeds the requirements established by DOE. In its Recovery Act training and technical assistance review plan, DCS states that it plans to monitor more than 22 percent of all homes completed. As of March 31, 2010, DCS has monitored 33 percent, and has set a goal for itself to monitor 40 percent of all homes completed from April 2010 through the end of the program. It was during the course of monitoring community action agencies' weatherization activities that DCS identified significant mismanagement by one community action agency, Southwest Mississippi Opportunity (SMO). DCS determined that SMO failed to provide adequate oversight of contractors weatherizing homes and SMO program staff. Specifically, DCS determined that SMO staff did not perform adequate inspections of homes weatherized and that 23 of 40 homes weatherized by SMO contractors exhibited poor workmanship. DCS also determined that SMO was 188 homes behind schedule. Other problems identified by DCS included incomplete client files and a lack of qualified staff. DCS subsequently terminated its subgrant with SMO because of SMO's failure to take corrective action as directed by DCS. During the course of GAO's review of SMO's client files we determined, and DCS concurred, that SMO paid contractors in excess of the levels established by DCS. The Director of DCS told us that the amount paid for labor should not exceed 110 percent of material costs. GAO determined that SMO had paid contractors between 200 percent and 400 percent of material cost. Because these actions did not correspond with DCS policy, DCS has required that SMO reimburse more than $38,000 in Recovery Act funding to DCS. DCS subsequently modified its guidelines for community action agencies regarding labor costs, raising the rate from 110 percent to 125 percent. The new rate is significantly lower than that paid by SMO. MDHS' DPI is responsible for performing independent reviews of all federal grants received by MDHS that are administered by its divisions such as DCS. For the Recovery Act Weatherization Assistance Program, MDHS requires DPI to monitor fiscal and programmatic records. In addition, DPI has established a policy to inspect 10 percent of homes completed by each community action agency.
GAO-10-796R, Independent Oversight of Recovery Act for Mississippi's Weatherization Assistance Program
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GAO-10-796R:
United States Government Accountability Office:
Washington, DC 20548:
June 30, 2010:
Mr. Don Thompson:
Executive Director:
Mississippi Department of Human Services: 750 North State Street:
Jackson, MS 39202:
Subject: Independent Oversight of Recovery Act Funding for
Mississippi's Weatherization Assistance Program:
Dear Mr. Thompson:
The American Recovery and Reinvestment Act of 2009 (Recovery Act)
assigns GAO a range of responsibilities to help promote accountability
and transparency.[Footnote 1] One of the act's recurring requirements
includes having GAO conduct bimonthly reviews of selected states' and
localities' use of funds made available under the act.[Footnote 2]
GAO's review of the use of Recovery Act funding in Mississippi this
year included the Weatherization Assistance Program. The
Weatherization Assistance Program, administered by the Office of
Energy Efficiency and Renewable Energy within the U.S. Department of
Energy (DOE), enables low-income families to reduce their utility
bills by making long-term energy-efficiency improvements to their
homes by, for example, installing insulation, sealing leaks, and
modernizing heating equipment, air circulation fans, and air-
conditioning equipment. For a full description and requirements of the
Weatherization Assistance Program, see appendix XVIII of GAO-10-605SP.
As part of our overall review of the weatherization program in
Mississippi, we visited community action agencies responsible for
weatherization activities located in Columbia, D'Lo, McComb, and
Meridian. In our review of client files, and other data provided by
the Division of Community Services (DCS) personnel and one community
action agency, we found several problems at the community action
agency, which we shared with DCS. We also identified issues concerning
the quality of oversight of the program by Mississippi Department of
Human Services' (MDHS) Division of Program Integrity (DPI), which we
have discussed with MDHS officials. This correspondence confirms the
substance of our conversations with DCS and MDHS officials.
Accordingly, we are reporting on (1) the extent that the state
monitoring program provides sufficient oversight of community action
agencies to ensure that the agencies expend Recovery Act funds
effectively while preventing fraud, waste and abuse, and (2) the
extent that local agencies have sufficient internal controls in place
to ensure that the agencies expend Recovery Act funds effectively
while preventing fraud, waste and abuse. We conducted this performance
audit from January 2010 through May 2010 in accordance with generally
accepted government auditing standards. Those standards require that
we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe the evidence
obtained provides a reasonable basis for our findings and conclusions
based on our audit objectives.
The Recovery Act appropriated $5 billion for the Weatherization
Assistance Program--which DOE is distributing to each of the states,
the District of Columbia, and seven territories and Indian tribes. DOE
allocated $49.4 million in Recovery Act funding to Mississippi for its
Weatherization Assistance Program. This represents a large increase in
funding over prior years when the state's allocation typically ranged
from $1.5 million to $2 million. The increased funding will allow more
than 5,000 homes to be weatherized in Mississippi. As of March 31,
2010, 2,460 or 45 percent of planned homes had been weatherized. The
program is scheduled to be completed March 30, 2012.
DCS, a division within MDHS, is responsible for administering these
funds and overseeing the weatherization activities of the nine sub
grantees or community action agencies responsible for weatherizing
homes. In order to ensure that these funds are expended appropriately
and efficiently, DOE requires that DCS monitor the programmatic and
fiscal operations of community action agencies.
In March 2009, DOE established requirements for the use of Recovery
Act funds for the Weatherization Assistance Program.[Footnote 3] As
such, DCS is required to conduct comprehensive monitoring of each
community action agency at least once a year. This is to include a
review of client files and community action agency records, as well as
the inspection of at least 5 percent of the weatherized units or units
in the process of being weatherized. While not required, DOE strongly
encourages the inspection a higher percentage of units.
DCS Monitoring Efforts Identified Mismanagement in the Weatherization
Program:
DCS has implemented a monitoring plan that generally exceeds the
requirements established by DOE. In its Recovery Act training and
technical assistance review plan, DCS states that it plans to monitor
more than 22 percent of all homes completed. As of March 31, 2010, DCS
has monitored 33 percent, and has set a goal for itself to monitor 40
percent of all homes completed from April 2010 through the end of the
program. It was during the course of monitoring community action
agencies' weatherization activities that DCS identified significant
mismanagement by one community action agency, Southwest Mississippi
Opportunity (SMO).
DCS determined that SMO failed to provide adequate oversight of
contractors weatherizing homes and SMO program staff. Specifically,
DCS determined that SMO staff did not perform adequate inspections of
homes weatherized and that 23 of 40 homes weatherized by SMO
contractors exhibited poor workmanship. DCS also determined that SMO
was 188 homes behind schedule. Other problems identified by DCS
included incomplete client files and a lack of qualified staff. DCS
subsequently terminated its subgrant with SMO because of SMO's failure
to take corrective action as directed by DCS.
During the course of GAO's review of SMO's client files we determined,
and DCS concurred, that SMO paid contractors in excess of the levels
established by DCS. The Director of DCS told us that the amount paid
for labor should not exceed 110 percent of material costs. GAO
determined that SMO had paid contractors between 200 percent and 400
percent of material cost. Because these actions did not correspond
with DCS policy, DCS has required that SMO reimburse more than $38,000
in Recovery Act funding to DCS. DCS subsequently modified its
guidelines for community action agencies regarding labor costs,
raising the rate from 110 percent to 125 percent. The new rate is
significantly lower than that paid by SMO.
During our review of client files we also found that the reporting of
labor costs by community action agencies visited were not uniform,
and, in some cases, labor costs were unclear, and we could not
determine what work those costs reflected. In response DCS has
implemented a uniform labor invoice form to be included in all client
files, which should aid in future file reviews.
Independent Monitoring of the Weatherization Assistance Program Can
Better Assure the Program's Integrity:
MDHS' DPI is responsible for performing independent reviews of all
federal grants received by MDHS that are administered by its divisions
such as DCS. For the Recovery Act Weatherization Assistance Program,
MDHS requires DPI to monitor fiscal and programmatic records. In
addition, DPI has established a policy to inspect 10 percent of homes
completed by each community action agency.
DPI monitors visited SMO in early December 2009 and inspected the
files and homes of 10 clients, as well as SMO's fiscal and program
operations. DPI's visit coincided with DCS' ongoing review of SMO
which resulted in termination of SMO's Recovery Act Weatherization
Assistance Program. DPI monitors did not identify any problems with
SMO's fiscal and program operations although SMO had paid contractors
in excess of levels established by DCS. MDHS officials stated that DPI
monitors did not find problems with the 10 homes inspected because
their visit was performed after the initial problems were found and
corrected. However, DPI officials previously stated that they were
unaware that DCS had directed SMO to discontinue home weatherization
because of poor workmanship. A draft report prepared by DPI stated
that there were no significant adverse findings noted during its
review of SMO.
Given the large increase in funding for the Weatherization Assistance
Program we believe there is a need for vigorous and independent
oversight of the program to ensure that Recovery Act funds are spent
efficiently and effectively. Based on the findings discussed above we
believe that the Weatherization Assistance Program would benefit by
ensuring that DPI reviews are sufficiently thorough to ensure that
special attention is paid to weatherization financial and program
files in an effort to identify problems such as those found at SMO.
Similarly, we believe that MDHS should ensure that DPI coordinates the
results of their reviews of weatherization activities by community
action agencies with DCS.
Agency Comments and Our Evaluation:
MDHS provided us with written comments on a draft of this
correspondence. The comments are enclosed.
MDHS concurred with our finding that SMO paid contractors beyond
acceptable levels as set by DCS and agreed with our statement that DCS
required SMO to reimburse $38,000 in Recovery Act funding. MDHS also
provided updated information regarding the $16,000 of disallowed costs
incurred by SMO. MDHS stated that these funds have been accounted for
and thus SMO is not required to refund them. Our correspondence has
been amended accordingly.
MDHS commented on our characterization of DPI and DCS interaction
regarding the review of SMO. We stated that DPI officials told us that
they did not coordinate their review of SMO with DCS and were unaware
of the problems discussed above, referring to problems DCS found at
SMO. MDHS stated that we did not explain that DPI does not coordinate
regular monitoring visits with any funding division in order to
maintain independence of the funding division's relationship with the
subgrantee. While a level of independence between DPI and DCS may be
necessary it should be noted that because DPI did not coordinate with
DCS, DPI was unaware of issues with SMO that were so significant as to
warrant terminating home weatherization by SMO. In addition, because
DPI was unaware of these problems it prepared a draft report that
stated there were no significant adverse findings noted during its
review of SMO. We have amended our correspondence to reflect the fact
that DPI should coordinate the results of their weatherization
monitoring activities with DCS to ensure that reports are thorough and
accurate.
MDHS disagreed with our statement that DPI did not identify any of the
problems that DCS identified. According to MDHS the reason DPI did not
find any problems in the homes was because they had already been
corrected. We amended our correspondence to reflect MDHS' concern.
However, we continue to believe that all home inspections should
include a thorough review of program files because, as we note, SMO
had paid contractors far above levels established by DCS. Notably, 5
of the ten homes inspected by DPI had overpayments of between 300
percent and 400 percent of material costs, which indicates that DPI's
inspections need to be more robust.
We are sending copies of this report to DOE's National Energy
Technology Laboratory in Pittsburgh, Pennsylvania; Mississippi's
Office of the State Auditor; and Mississippi's Recovery Act
Coordinator, Office of the Governor. The report also is available at
no charge on the GAO Web site at [hyperlink, http://www.gao.gov].
Sincerely yours,
Signed by:
John K. Needham:
Director:
Acquisition and Sourcing Management Issues:
[End of section]
Enclosure: Comments from Mississippi Department of Human Services:
State of Mississippi:
Haley Reeves Barbour, Governor:
Department Of Human Services:
Don Thompson, Executive Director:
P.O. Box 352:
Jackson, Mississippi 39205:
Telephone: (601) 359-4500:
[hyperlink, http://www.mdhs.state.ms.us[
June 18, 2010:
Mr. John K. Needham, Director:
Acquisition and Sourcing Management Issues:
U.S. Government Accountability Office:
Washington, D.C. 20548:
Re: Independent Oversight of Recovery Act Funding for Mississippi's
Weatherization Assistance Program:
Dear Mr. Needham:
This correspondence is in response to your June 2010 letter regarding
the Mississippi Department of Human Services, Division of Community
Services' (DCS) and Division of Program Integrity's (DPI) supervision
and monitoring of Mississippi's Weatherization Assistance Program. The
Government Accountability Office (GAO) conducted a performance audit
from January 2010 through May 2010 by visiting various community
action agencies responsible for weatherization activities in
Mississippi. As a result of GAO's findings and concurrent with the
aforementioned letter, the state continues its efforts to provide
sufficient oversight of this program. Listed below are responses and
improvement plans currently in progress to address the state's
monitoring and implementation abilities:
1. On page three of the GAO Draft Report session entitled DCS
Monitoring Efforts Identified Mismanagement in the Weatherization
Program, it states that the Director of DCS quoted that the amount
paid for labor should not exceed 110 percent of material costs. DCS
subsequently increased the labor costs guidelines for community action
agencies, raising the rate from 110 to 125 percent of material costs.
Therefore, the amount paid for labor should not exceed 125 percent of
material costs. It was determined by GAO that Southwest Mississippi
Opportunity (SMO) paid contractors between 200 and 400 percent of
material costs. These actions did not correspond with DCS policy.
2. In the same paragraph on page three, the report states that as a
result of the overpayment of material costs to SMO contractors, DCS
required SMO to reimburse more than $38,000 in Recovery Act funding.
The Executive Director of SMO also provided documentation of $16,000
of expenses incurred to rework homes that had not been weatherized
properly. After a review of these expenditures, DCS learned that they
were coded incorrectly. Therefore, it was determined that the
disallowed cost was $1,998.44 and the remaining $14,001.56 was
eligible expenditures. DCS ceased processing Requests for Cash in
December of 2009 and no additional requests were processed because of
the problems that were identified at SMO. This action minimalized
additional costs from being incurred by SMO in finalizing weatherized
homes and operational costs. At this time, SMO is not required to
refund DCS because all available funds were accounted for.
3. GAO stated on page three of the draft report under the heading
Independent Monitoring of the Weatherization Assistance Program Can
Better Assure the Program's Integrity that DPI monitored SMO in
December 2009. DPI officials told GAO that "they did not coordinate
their review of SMO with DCS and were unaware of any problems." This
is true; however, it was not explained that DPI does not coordinate
regular monitoring visits with any funding division in order to
maintain independence of the funding division's relationship with the
subgrantee.
4. The same paragraph on page three of the draft report states that
"DPI did not identify any of the problems that were identified by DCS
during the same period." This monitoring visit of the work performed
on the homes would warrant no problems because this visit was
performed after the initial problems were found and corrected.
Therefore, the monitors would not have been expected to find any
problems. DPI agrees that the monitors did not pick up on the fiscal
problems noted by DCS.
5. Communication between the DCS and DPI has been substantially
increased to ensure the accountability of the ARRA Weatherization
funds and these divisions will continue to work together cooperatively
on new guidelines, policies, ideas and challenges.
We appreciate this opportunity to provide input to your draft report.
Please contact Sollie Norwood, Director of Community Services at (601)
3594768 or solliemorwood@mdhs.ms.gov or Laura Griffin, Director of
Program Integrity at (601) 359-4900 or laura.griffin@mdhs.ms.gov if
you have questions or need additional information.
Sincerely,
Signed by:
Don Thompson:
DT:lb:
cc: Jim Elgas, Senior Analyst, Mississippi Team:
Sollie Norwood:
Laura Griffin:
[End of section]
Footnotes:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb 17, 2009).
[2] Recovery Act, div. A, § 901, 123 Stat. 191
[3] Weatherization Program Notice 09-1B, Department of Energy, March
12, 2009.
[End of section]
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