Auditors issue first 'adverse' ruling in decades for Oregon's reckless COVID spending

Spending in question totals more than $400 million.
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For the first time in decades, state auditors have called out reckless spending of more than $400 million in federal pandemic aid that continued until just a month ago.

In response to the coronavirus pandemic, Oregon created the Emergency Rental Assistance Program (Oregon ERA). It offered federal funding to stop Oregonians from losing their homes.

The Oregon Housing and Community Services administered the program, distributing $426 million in emergency rental assistance through June 2023.

However, according to an audit released this week by the Oregon Audits Division, the way OHCS did this came with substantial risk.

"OHCS employed limited oversight of the funds and, in its haste, skipped critical controls, including over financial accounting and contract administration," according to a press release from the Oregon Secretary of State's office.

Financial auditors in the Statewide Single Audit acknowledged these control weaknesses earlier this week as well.

"In fact, the severity and pervasive aspect of the control weaknesses led financial auditors to issue an adverse opinion for the program — the first from the division in more than 25 years," the release said.

The auditors understand that the agency wanted to get the money to people as quickly as possible, but said controls are still necessary to ensure the right people are getting the money.

"Money that is spent out of compliance with federal guidelines runs the risk of being clawed back by the federal government," the release said.

The lack of controls made the program susceptible to fraud. However, Oregon's ERA denied about $37 million requested by 1,813 applicants.

Another issue Oregon ERA suffered from was the rushed implementation of new software and a "fragmented" customer service system. It caused application processing delays and communications challenges, resulting in frustration from consumers and local partners.

“There is no doubt OHCS, like all of Oregon government, was working under unprecedented emergency conditions during the pandemic,” Audits Director Kip Memmott said. “As auditors, it’s our job to ensure public monies are being spent in accordance with program guidelines and properly accounted for. It’s extremely concerning that OHCS is unable to verify whether millions of dollars went to the Oregonians who needed and deserved this money the most.”

Here are some of the recommendations auditors made for OHCS, according to the release:

• Better prepare for future emergencies given the agency’s important role under Oregon’s emergency management framework, including conducting an after-action review of Oregon ERA with local partners;

• Improve internal controls over contract monitoring;

• Improve internal controls over reporting program outcomes, especially when it comes to reporting the number of Oregon ERA applications paid, households assisted and dollars spent;

• Improve internal controls over detecting and preventing fraud; and

• Continue efforts to obtain timely, complete, and quality client data to better understand and respond to Oregon’s housing needs.

The state's ERA ended in June 2023. However, since then, OHCS has been working on administering funds to address the state's homelessness problem.

"By implementing the audit recommendations and applying lessons learned, OHCS can ensure future programs are successful and funding is properly accounted for," the release said.

One can read the full report here.