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Richmond audit cites poor record keeping in first review of COVID aid expenditures

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COVID-19 health equity pilot

Firefighters and volunteers distributed personal protective equipment in Richmond in 2020. The city doled out $37.6 million of federal emergency aid at the start of the pandemic, but an audit has found that officials fell short in ensuring accountability.

The city of Richmond doled out $37.6 million of federal emergency aid at the start of the COVID-19 pandemic, helping thousands of households and businesses stay afloat. A recent audit, however, has found that officials fell short in ensuring accountability.

Following the completion of an internal audit on the city’s use of federal CARES Act funding that was awarded to help states and localities with the crisis, city officials have concurred that better management and oversight is needed for future allocations of emergency aid.

Many of the findings and recommendations in the report, which was reviewed by the city Audit Committee on Tuesday, address the city’s continued practice of contracting nonprofits and organizations to manage the award of gift cards to aid recipients.

The report also notes the city is set to receive approximately $150 million in federal aid from the American Rescue Plan Act and that new mechanisms to ensure accountability are needed to make sure the money is used effectively to help the community.

“Without improved grant management and oversight, the City cannot effectively monitor the sub-recipients’ performance to ensure compliance with the contract terms and conditions and adherence to the [Coronavirus Relief Fund] guidelines,” the report says. “As such, the City was at risk of using CRF funds to pay for services that were not provided or unallowable expenditures.”

According to the report, the majority of the funding — $25.1 million — was spent on housing supports, public health expenses and small-business assistance from the start of the pandemic in March 2020 to Dec. 31, 2020.

The city also allocated $4.6 million to bonus hazard and sick pay for city employees. Officials used the rest of the money on improving telework capabilities, personal protective equipment, COVID testing and facilitating online learning for students in public housing.

While the city’s auditors said much of what they reviewed seemed to be in order, they issued eight specific recommendations based on several problems they encountered.

With regard to grant contracts the city signed to distribute the funding, some recipients did not adhere to reporting requirements. The auditors also found that some nonprofits used funding differently than how they originally planned, but that the city never amended their agreements to document the changes.

In one example cited in the report, an organization retained $71,000 for administrative costs from the funding it received despite no specific mention of that in the agreement. City officials, however, according to the report, said they had agreed to let the organization use 10% of the money on those costs.

The auditors also found that there were issues with accounting for eviction diversion and prevention efforts, resulting in duplicate payments and ineligible payments for outstanding balances incurred before the start of the pandemic.

“CRF funding was used for ineligible expenditures totaling at least $84,000. This amount could be significantly higher,” the report says. “In addition to non-compliance with the CRF guidance, these funds could have been used to assist more residents in danger of eviction.”

Approximately 3,000 tenants received rental assistance. The average amount awarded was about $2,300.

The audit also said turnover and other issues in the Office of Community Wealth Building resulted in accounting problems, including 88 unaccounted for gift cards valued at $44,000.

The city has recently made plans for similar grant programs involving the distribution of gift cards as part of an aid program for families struggling to find infant formula and a gun buyback event that is planned for later this year.

Following Tuesday’s audit committee meeting, Richmond Chief Administrative Officer Lincoln Saunders acknowledged the shortcomings, but said it was partially a consequence of the city acting fast in an emergency.

“To be honest, I’m proud of how much we were able to do quickly,” he said. “I’m not trying to downplay the need to take lessons from this, but this team found a way to get $40 million into the community to help people in a time of crisis.”

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