Auditors: Oregon state gov't has compliance problems over requirements for use of federal funds

Keep Oregon Accountable summary shows several Oregon programs need improvements to ensure they comply with federal regulations

The Oregon Secretary of State Audits Division conducts two major financial audits annually: the Annual Comprehensive Financial Report and the Statewide Single Audit.

The Audits Division releases an annual report summarizing the results of the two audits. It released its summary report for fiscal year 2023, called Keeping Oregon Accountable, this week.

The summary report is an anomaly because it includes the first adverse opinion and disclaimer of opinion issued by the Audits Division in over 20 years, according to the Oregon Secretary of State's office.

State auditors followed up on findings that caused unmodified opinions and determined that the agency took the necessary steps to address the adverse opinion.

“This year’s Single Audit came with both good and bad news,” Audits Director Kip Memmott said in a release. “I was very pleased to see the substantial corrective action to address last year’s adverse opinion. But there are still serious control weaknesses at other important programs that must be addressed, many of which have been ongoing for 10 or more years.”

The federal government requires states to audit their financial statements and compliance with federal program requirements to keep receiving federal assistance.

Typically, Oregon received between $11 billion and $12 billion annually, but that funding ballooned to over $20 billion annually once the coronavirus pandemic began.

Auditors found control weaknesses that had gone on for years and issued six qualified opinions and a single disclaimer of opinion for fiscal year 2023. No program received an adverse opinion.

"When an audit shows controls are sufficient and the program is generally in compliance with federal requirements, auditors issue an unmodified or 'clean' opinion," the release said. "Modified opinions — including qualified and disclaimer of — speak to the level of concern auditors have about the quality of internal controls."

The Emergency Solutions Grant Program at Oregon Housing and Community Services (OHCS) received a disclaimer of opinion; it was the second consecutive time the program received this opinion.

"A disclaimer of opinion means there was not sufficient, appropriate evidence for auditors to even issue an opinion on program compliance," the release said.

Meanwhile, qualified opinions are less severe but show that programs lack adequate internal controls to prevent or detect significant noncompliance.

A total of six programs at three agencies -- OHCS, the Oregon Department of Human Services, and the Oregon Health Authority -- received qualified opinions.

Two programs — Temporary Assistance for Needy Families and the Low-Income Home Energy Assistance program — have received qualified opinions for several years.

The federal granting agencies must follow up on these audit findings because they can enforce grant requirements.

"Failure to address critical control weaknesses could include punitive consequences, like sanctions or a change in future funding, or it could be an opportunity for the granting agency to clarify its requirements," the release said.

One can view the full report here.