SALEM, Ore. — The Oregon secretary of state's office has published a massive report detailing the audits they conducted on state government programs in 2023, monitoring the billions of dollars in extra tax money gathered by the state over the COVID-19 pandemic.
In the report, titled "Keeping Oregon Accountable," state auditors identified $2.9 billion in accounting errors, which they concluded were unintentional mistakes, and proposed ways to fix those mistakes.
Auditors also combed through the books of 18 federal programs spread between 11 state agencies, issuing a total of 31 findings and recommendations.
In particular, the secretary of state's office found major problems with internal controls in the Low-Income Home Energy Assistance Program, block grants for community mental health services, block grants for prevention and treatment of substance abuse, the Medicaid cluster, Temporary Assistance for Needy Families (TANF) and vocational rehabilitation grants to state programs.
Following the money
To better understand those findings, The Story's Pat Dooris spoke with top state auditor Michelle Searfus.
"We audit a lot of programs as mandated by the federal government," Searfus said. "We find a lot of things and we report them as required. We find some common issues amongst the various agencies and programs ... one being subrecipient monitoring — so, the distribution of funds to other entities such as cities and counties and community action agencies, nonprofits, things like that."
Subrecipient monitoring refers to when an agency receives money and passes it along to another agency to do work. The first agency is supposed to keep track of what's happening with that money, but it doesn't always happen.
For instance, under federal rules, the Oregon Department of Emergency Management is supposed to evaluate the risk that groups they fund will follow federal laws related to that funded program. But the auditors reported that in 2020, the agency had no systematic policies or procedures in place to actually evaluate that.
So in 2023, auditors circled back and picked a random sample of 36 groups funded by OEM. They found that four had not bothered to return a questionnaire about their practices, and one of the four was not even listed as a recipient on an OEM spreadsheet meant to track those groups.
"As a part of receiving federal money, if you are distributing it to subrecipients you have to have a risk assessment process in place," Searfus explained. "So there's some questions you ask of the entity you are sending money to, to basically see how they will handle the money so you will know how to monitor them. Do they get federal grants a lot? Do they know how to do it? Or is this their first time getting a federal grant and you may have to keep a closer eye on them to make sure they are spending the money you give them appropriately."
Auditors told OEM to fix the problem, but noted that the agency had experienced significant upheaval and staff turnover as it became its own agency — distinct from the Oregon Military Department in which it used to reside as a smaller office.
Failures in oversight
Another program scrutinized in the report was Temporary Assistance to Needy Families. TANF supports low-income families with children by providing temporary cash assistance. Auditors found problems with the program stretching back 14 years.
Federal regulations require Oregon to collect information monthly, filing quarterly reports with the feds documenting the people receiving money through TANF. A second program requires the state to spend at least a certain amount on needy families, also requiring a quarterly report.
The federal government told Oregon that data they'd received was wrong, and the Oregon Department of Human Services could not provide the correct data to state auditors.
As a result, the auditors could not test if the programs were working correctly — ensuring that less than 20% of clients were enrolled in the program for more than 5 years, or conducting special tests related to client penalties for refusal to work, failure to comply with work verification plans, and tests related to lack of child care for single parents of children under 6 years old.
Searfus said that this problem has been ongoing for a very long time. While everyone seems to be working hard to fix the problem, it still isn't fixed.
"The Department of Human Services has been administrating (TANF) for many, many, many years. They had a prior system where we found many years ago, the data wasn't being reported correctly in these quarterly reports they're required to file," Searfus explained. "We found at the time that it wasn't including all of the information, it was incomplete or wrong when it was coming out of the system into these reports.
"Then they transitioned to a new system three years ago ... things got worse for a little bit. They are improving, but we're still finding challenges with those reports being incorrectly pulled out of the system."
Another example is the Department of Early Learning and Care, which is a new standalone agency like OEM. The agency gets federal money to help children in Oregon thrive in early childhood and beyond.
Auditors reported that the agency could charge a higher or lower rate to the federal government depending on the services provided, but they found that the agency only charged the higher rate — overbilling the feds by $400,000. They directed the agency to pay back the money and check to see if something similar had happened in earlier years. Administrators promised to oblige.
Meanwhile, the Oregon Liquor and Cannabis Commission is required to send 20% of the taxes it collects to cities and 56% to the general fund within 35 days of the end of the month. Auditors found the agency using two different accounting systems, which resulted in them sending too much money.
Auditors also found that the OLCC sent the money on time only twice during the year.
Through the OLCC, Oregon controls all 283 liquor stores in the state, and each is supposed to be audited each year. The secretary of state's office found that 22 were not checked.
Auditors also looked into the disastrous rollout of a new payroll system called "Workday." In April of last year, KGW spoke with state employees who were furious that they were not being paid correctly. The auditors found that of the state's 45,000 or so employees who received a paycheck January 3, 2023, about 10% were paid either too much or too little. Overall, employees were overpaid by $3.5 million. Problems persisted into March of this year.
Auditors found that the rollout of Workday was either not sufficiently scoped or not properly conducted. And when they asked the state for a list of issues, when they were identified and when they were solved, they were told no such list existed.
"It is very interesting. It is not uncommon for us to ask for things like that when looking at IT systems just to see what issues there are, how they're resolved," Searfus said, "and not having that kind of tracking was a challenge for us to audit around as well."