The state Development Office entered into several illegal contracts under the Rise program and the legislative auditor’s office questioned whether homes have been completed under the program, a report from the Legislative Auditor’s Office found.
Adam Fridley, interim director of the Legislative Auditor’s Office presented the audit to lawmakers in Sunday’s Post Audits Subcommittee meeting.
The audit looked into contracts entered by the West Virginia Development Office and whether they complied with state and federal laws for using Community Development Block Grant—Disaster Recovery Funds.
The audit found two main issues. The first is that the Development Office entered into six illegal contracts with Horne LLP, a Mississippi-based accounting and advisory firm, at a cost of about $18 million, the audit said.
The second issue the audit found is that the Development Office entered into seven construction contracts, totaling more than $71 million, for home rehabilitation, reconstruction, and replacement services under Rise, which violated state and federal laws.
Fridley said Horne was in charge of developing a state action plan and assess unmet needs. The company was under contract at a total of $900,000 to provide these project management services. However, between May 2017 and February 2018, the Development Office entered into six additional task order agreements, costing about $18 million.
Fridley said these contracts should have been subject to competitive bidding requirements because they differed substantially from the original contract. He cited an opinion from Legislative Services that these contracts are void under state code.
Fridley told the committee the governor’s office ceased payments to Horne under the additional task orders and a new contract with Horne will be finalized at a cost of $9.4 million.
Fridley said the Development Office violated federal law with seven construction contracts entered with four different construction companies. These contracts were effective before the Development Office received authority from HUD to use grant funds.
The Development Office issued more than $700,000 in payments under these contracts and $400,000 in payments were issued before the office received authorization to use the money, according to the report.
The audit also found the Development Office did not comply with purchasing division requirement when it entered into these seven construction contracts.
The audit issued five recommendations:
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The Development Office should seek repayment or credit against the new contract for money paid for the task order agreements
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The Development Office should not issue payments for any work done under the invalid task order agreements
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The Development Office should cease future payments under current construction contracts for the Rise program
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The Development Office should terminate existing construction contracts and enter into new contracts that comply with federal and state law
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The Development Office should work with HUD to resolve issues regarding funds that were spent before the office was authorized to do so.
House Speaker Tim Armstead, R-Kanawha, asked Fridley about the status of construction performed under contracts.
“Nothing suggests reconstruction or rehabilitation under the program,” Fridley told legislators. “It appears all services rendered thus far were for mobile home replacement units.”
Armstead also asked for the status of applicants who either were approved and still do not have homes or applied and don’t know the status of those applications.
“For those who have applied and don’t know their status, my understanding in reading the policies and procedures is that this shouldn’t have been the case to begin with,” Fridley said. “Those who have had their applications approved and are waiting on reconstruction, rehabilitation of damaged homes, this could be a multitude of things—environmental reviews, other internal processes. The answer would be on a case-by-case basis.”
Senate Minority Leader Roman Prezioso, D-Marion, expressed his concern about the state potentially entering into a new contract with Horne LLP.
“We are continuing to do business with Horne even though they didn’t complete the requirements under their contract?”
House Minority Leader Tim Miley, D-Harrison, asked about the intention of the Development Office entering the six illegal contracts with Horne. Fridley said it appeared to be a lack of awareness of the requirements of state and federal law.
Senate President Mitch Carmichael, R-Jackson, asked to hear from a Department of Commerce representative. However, no one was there to speak.
“I am disappointed there is not someone here,” Carmichael said. “There will be someone here at the next meeting.”
A Commerce representative is scheduled to speak at Tuesday’s Joint Legislative Committee on Flooding meeting, Sen. Ed Gaunch, R-Kanawha, said.
Carmichael said he hopes the office will continue looking into the Rise program.
“I’m hoping this is a continuing audit under the Rise program and there is more to come,” Carmichael said. “This has been a horribly mismanaged program, in my view. It’s been two years post-flood and we still have all of these issues.”
