Preliminary Audit Report on "Management Controls over the Commonwealth of Virginia's Efforts to Implement the American Recovery and Reinvestment Act Weatherization Assistance Program"

The Department of Energy's (Department) Weatherization Assistance Program received $5 billion under the American Recovery and Reinvestment Act of 2009 (Recovery Act) to improve the energy efficiency of homes, multi-family rental units and mobile homes owned or occupied by low-income persons. Subsequently, the Department awarded a three-year Weatherization Assistance Program grant for $94 million to the Commonwealth of Virginia (Virginia). This grant provided more than a ten-fold increase in funds available to Virginia for weatherization over that authorized in Fiscal Year (FY) 2009. Corresponding to the increase in funding, the Recovery Act increased the limit on the average amount spent to weatherize a home (unit) from $2,500 to $6,500. Virginia's Department of Housing and Community Development (DHCD) administers the Recovery Act grant through 22 local community action agencies. These agencies (sub-grantees) are responsible for determining applicant eligibility, weatherizing homes, and conducting home assessments and inspections. Typical weatherization services include installing insulation; sealing ducts; tuning and repairing furnaces; and, mitigating heat loss through windows, doors and other infiltration points. Virginia plans to use its Recovery Act Weatherization funding to weatherize about 9,193 units over the life of the grant - a significant increase over the 1,475 housing units that were planned to be completed in FY 2009. Given the significant increase in funding and the demands associated with weatherizing thousands of homes, we initiated this audit to determine if Virginia had adequate safeguards in place to ensure that the Weatherization Program was managed efficiently and effectively. The State of Virginia's DHCD had not implemented financial and reporting controls needed to ensure Weatherization Program funds are spent effectively and efficiently. Specifically, DHCD had not: (1) Performed on-site financial monitoring of any of its sub-grantees under the Recovery Act; (2) Reviewed documentation supporting sub-grantee requests for reimbursements to verify the accuracy of amounts charged; (3) Periodically reconciled amounts paid to sub-grantees to the actual cost to weatherize units; (4) Maintained vehicle and equipment inventories as required by Federal regulations and state and Federal program directives; and (5) Accurately reported Weatherization Program results to the Department. Exacerbating weaknesses in DHCD's financial controls, the Department's most recent program monitoring visit to Virginia, made in 2008 before passage of the Recovery Act, did not include a required financial review. Hence, the financial control weaknesses discussed above were not detected and had not been addressed. As described in this report, these control and reporting weaknesses increase the risk that Recovery Act objectives may not be achieved and that fraud, waste or abuse can occur and not be detected in this critically important program