This is the accessible text file for GAO report number GAO-10-796R 
entitled 'Independent Oversight of Recovery Act Funding for 
Mississippi's Weatherization Assistance Program' which was released on 
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GAO-10-796R: 

United States Government Accountability Office: 
Washington, DC 20548: 

June 30, 2010: 

Mr. Don Thompson:
Executive Director:
Mississippi Department of Human Services: 750 North State Street:
Jackson, MS 39202: 

Subject: Independent Oversight of Recovery Act Funding for 
Mississippi's Weatherization Assistance Program: 

Dear Mr. Thompson: 

The American Recovery and Reinvestment Act of 2009 (Recovery Act) 
assigns GAO a range of responsibilities to help promote accountability 
and transparency.[Footnote 1] One of the act's recurring requirements 
includes having GAO conduct bimonthly reviews of selected states' and 
localities' use of funds made available under the act.[Footnote 2] 
GAO's review of the use of Recovery Act funding in Mississippi this 
year included the Weatherization Assistance Program. The 
Weatherization Assistance Program, administered by the Office of 
Energy Efficiency and Renewable Energy within the U.S. Department of 
Energy (DOE), enables low-income families to reduce their utility 
bills by making long-term energy-efficiency improvements to their 
homes by, for example, installing insulation, sealing leaks, and 
modernizing heating equipment, air circulation fans, and air-
conditioning equipment. For a full description and requirements of the 
Weatherization Assistance Program, see appendix XVIII of GAO-10-605SP. 

As part of our overall review of the weatherization program in 
Mississippi, we visited community action agencies responsible for 
weatherization activities located in Columbia, D'Lo, McComb, and 
Meridian. In our review of client files, and other data provided by 
the Division of Community Services (DCS) personnel and one community 
action agency, we found several problems at the community action 
agency, which we shared with DCS. We also identified issues concerning 
the quality of oversight of the program by Mississippi Department of 
Human Services' (MDHS) Division of Program Integrity (DPI), which we 
have discussed with MDHS officials. This correspondence confirms the 
substance of our conversations with DCS and MDHS officials. 
Accordingly, we are reporting on (1) the extent that the state 
monitoring program provides sufficient oversight of community action 
agencies to ensure that the agencies expend Recovery Act funds 
effectively while preventing fraud, waste and abuse, and (2) the 
extent that local agencies have sufficient internal controls in place 
to ensure that the agencies expend Recovery Act funds effectively 
while preventing fraud, waste and abuse. We conducted this performance 
audit from January 2010 through May 2010 in accordance with generally 
accepted government auditing standards. Those standards require that 
we plan and perform the audit to obtain sufficient, appropriate 
evidence to provide a reasonable basis for our findings and 
conclusions based on our audit objectives. We believe the evidence 
obtained provides a reasonable basis for our findings and conclusions 
based on our audit objectives. 

The Recovery Act appropriated $5 billion for the Weatherization 
Assistance Program--which DOE is distributing to each of the states, 
the District of Columbia, and seven territories and Indian tribes. DOE 
allocated $49.4 million in Recovery Act funding to Mississippi for its 
Weatherization Assistance Program. This represents a large increase in 
funding over prior years when the state's allocation typically ranged 
from $1.5 million to $2 million. The increased funding will allow more 
than 5,000 homes to be weatherized in Mississippi. As of March 31, 
2010, 2,460 or 45 percent of planned homes had been weatherized. The 
program is scheduled to be completed March 30, 2012. 

DCS, a division within MDHS, is responsible for administering these 
funds and overseeing the weatherization activities of the nine sub 
grantees or community action agencies responsible for weatherizing 
homes. In order to ensure that these funds are expended appropriately 
and efficiently, DOE requires that DCS monitor the programmatic and 
fiscal operations of community action agencies. 

In March 2009, DOE established requirements for the use of Recovery 
Act funds for the Weatherization Assistance Program.[Footnote 3] As 
such, DCS is required to conduct comprehensive monitoring of each 
community action agency at least once a year. This is to include a 
review of client files and community action agency records, as well as 
the inspection of at least 5 percent of the weatherized units or units 
in the process of being weatherized. While not required, DOE strongly 
encourages the inspection a higher percentage of units. 

DCS Monitoring Efforts Identified Mismanagement in the Weatherization 
Program: 

DCS has implemented a monitoring plan that generally exceeds the 
requirements established by DOE. In its Recovery Act training and 
technical assistance review plan, DCS states that it plans to monitor 
more than 22 percent of all homes completed. As of March 31, 2010, DCS 
has monitored 33 percent, and has set a goal for itself to monitor 40 
percent of all homes completed from April 2010 through the end of the 
program. It was during the course of monitoring community action 
agencies' weatherization activities that DCS identified significant 
mismanagement by one community action agency, Southwest Mississippi 
Opportunity (SMO). 

DCS determined that SMO failed to provide adequate oversight of 
contractors weatherizing homes and SMO program staff. Specifically, 
DCS determined that SMO staff did not perform adequate inspections of 
homes weatherized and that 23 of 40 homes weatherized by SMO 
contractors exhibited poor workmanship. DCS also determined that SMO 
was 188 homes behind schedule. Other problems identified by DCS 
included incomplete client files and a lack of qualified staff. DCS 
subsequently terminated its subgrant with SMO because of SMO's failure 
to take corrective action as directed by DCS. 

During the course of GAO's review of SMO's client files we determined, 
and DCS concurred, that SMO paid contractors in excess of the levels 
established by DCS. The Director of DCS told us that the amount paid 
for labor should not exceed 110 percent of material costs. GAO 
determined that SMO had paid contractors between 200 percent and 400 
percent of material cost. Because these actions did not correspond 
with DCS policy, DCS has required that SMO reimburse more than $38,000 
in Recovery Act funding to DCS. DCS subsequently modified its 
guidelines for community action agencies regarding labor costs, 
raising the rate from 110 percent to 125 percent. The new rate is 
significantly lower than that paid by SMO. 

During our review of client files we also found that the reporting of 
labor costs by community action agencies visited were not uniform, 
and, in some cases, labor costs were unclear, and we could not 
determine what work those costs reflected. In response DCS has 
implemented a uniform labor invoice form to be included in all client 
files, which should aid in future file reviews. 

Independent Monitoring of the Weatherization Assistance Program Can 
Better Assure the Program's Integrity: 

MDHS' DPI is responsible for performing independent reviews of all 
federal grants received by MDHS that are administered by its divisions 
such as DCS. For the Recovery Act Weatherization Assistance Program, 
MDHS requires DPI to monitor fiscal and programmatic records. In 
addition, DPI has established a policy to inspect 10 percent of homes 
completed by each community action agency. 

DPI monitors visited SMO in early December 2009 and inspected the 
files and homes of 10 clients, as well as SMO's fiscal and program 
operations. DPI's visit coincided with DCS' ongoing review of SMO 
which resulted in termination of SMO's Recovery Act Weatherization 
Assistance Program. DPI monitors did not identify any problems with 
SMO's fiscal and program operations although SMO had paid contractors 
in excess of levels established by DCS. MDHS officials stated that DPI 
monitors did not find problems with the 10 homes inspected because 
their visit was performed after the initial problems were found and 
corrected. However, DPI officials previously stated that they were 
unaware that DCS had directed SMO to discontinue home weatherization 
because of poor workmanship. A draft report prepared by DPI stated 
that there were no significant adverse findings noted during its 
review of SMO. 

Given the large increase in funding for the Weatherization Assistance 
Program we believe there is a need for vigorous and independent 
oversight of the program to ensure that Recovery Act funds are spent 
efficiently and effectively. Based on the findings discussed above we 
believe that the Weatherization Assistance Program would benefit by 
ensuring that DPI reviews are sufficiently thorough to ensure that 
special attention is paid to weatherization financial and program 
files in an effort to identify problems such as those found at SMO. 
Similarly, we believe that MDHS should ensure that DPI coordinates the 
results of their reviews of weatherization activities by community 
action agencies with DCS. 

Agency Comments and Our Evaluation: 

MDHS provided us with written comments on a draft of this 
correspondence. The comments are enclosed. 

MDHS concurred with our finding that SMO paid contractors beyond 
acceptable levels as set by DCS and agreed with our statement that DCS 
required SMO to reimburse $38,000 in Recovery Act funding. MDHS also 
provided updated information regarding the $16,000 of disallowed costs 
incurred by SMO. MDHS stated that these funds have been accounted for 
and thus SMO is not required to refund them. Our correspondence has 
been amended accordingly. 

MDHS commented on our characterization of DPI and DCS interaction 
regarding the review of SMO. We stated that DPI officials told us that 
they did not coordinate their review of SMO with DCS and were unaware 
of the problems discussed above, referring to problems DCS found at 
SMO. MDHS stated that we did not explain that DPI does not coordinate 
regular monitoring visits with any funding division in order to 
maintain independence of the funding division's relationship with the 
subgrantee. While a level of independence between DPI and DCS may be 
necessary it should be noted that because DPI did not coordinate with 
DCS, DPI was unaware of issues with SMO that were so significant as to 
warrant terminating home weatherization by SMO. In addition, because 
DPI was unaware of these problems it prepared a draft report that 
stated there were no significant adverse findings noted during its 
review of SMO. We have amended our correspondence to reflect the fact 
that DPI should coordinate the results of their weatherization 
monitoring activities with DCS to ensure that reports are thorough and 
accurate. 

MDHS disagreed with our statement that DPI did not identify any of the 
problems that DCS identified. According to MDHS the reason DPI did not 
find any problems in the homes was because they had already been 
corrected. We amended our correspondence to reflect MDHS' concern. 
However, we continue to believe that all home inspections should 
include a thorough review of program files because, as we note, SMO 
had paid contractors far above levels established by DCS. Notably, 5 
of the ten homes inspected by DPI had overpayments of between 300 
percent and 400 percent of material costs, which indicates that DPI's 
inspections need to be more robust. 

We are sending copies of this report to DOE's National Energy 
Technology Laboratory in Pittsburgh, Pennsylvania; Mississippi's 
Office of the State Auditor; and Mississippi's Recovery Act 
Coordinator, Office of the Governor. The report also is available at 
no charge on the GAO Web site at [hyperlink, http://www.gao.gov]. 

Sincerely yours, 

Signed by: 

John K. Needham:
Director:
Acquisition and Sourcing Management Issues: 

[End of section] 

Enclosure: Comments from Mississippi Department of Human Services: 

State of Mississippi: 
Haley Reeves Barbour, Governor: 
Department Of Human Services: 
Don Thompson, Executive Director: 
P.O. Box 352: 
Jackson, Mississippi 39205: 
Telephone: (601) 359-4500: 
[hyperlink, http://www.mdhs.state.ms.us[ 

June 18, 2010: 

Mr. John K. Needham, Director: 
Acquisition and Sourcing Management Issues: 
U.S. Government Accountability Office: 
Washington, D.C. 20548: 

Re: Independent Oversight of Recovery Act Funding for Mississippi's 
Weatherization Assistance Program: 

Dear Mr. Needham: 

This correspondence is in response to your June 2010 letter regarding 
the Mississippi Department of Human Services, Division of Community 
Services' (DCS) and Division of Program Integrity's (DPI) supervision 
and monitoring of Mississippi's Weatherization Assistance Program. The 
Government Accountability Office (GAO) conducted a performance audit 
from January 2010 through May 2010 by visiting various community 
action agencies responsible for weatherization activities in 
Mississippi. As a result of GAO's findings and concurrent with the 
aforementioned letter, the state continues its efforts to provide 
sufficient oversight of this program. Listed below are responses and 
improvement plans currently in progress to address the state's 
monitoring and implementation abilities: 

1. On page three of the GAO Draft Report session entitled DCS 
Monitoring Efforts Identified Mismanagement in the Weatherization 
Program, it states that the Director of DCS quoted that the amount 
paid for labor should not exceed 110 percent of material costs. DCS 
subsequently increased the labor costs guidelines for community action 
agencies, raising the rate from 110 to 125 percent of material costs. 
Therefore, the amount paid for labor should not exceed 125 percent of 
material costs. It was determined by GAO that Southwest Mississippi 
Opportunity (SMO) paid contractors between 200 and 400 percent of 
material costs. These actions did not correspond with DCS policy. 

2. In the same paragraph on page three, the report states that as a 
result of the overpayment of material costs to SMO contractors, DCS 
required SMO to reimburse more than $38,000 in Recovery Act funding. 
The Executive Director of SMO also provided documentation of $16,000 
of expenses incurred to rework homes that had not been weatherized 
properly. After a review of these expenditures, DCS learned that they 
were coded incorrectly. Therefore, it was determined that the 
disallowed cost was $1,998.44 and the remaining $14,001.56 was 
eligible expenditures. DCS ceased processing Requests for Cash in 
December of 2009 and no additional requests were processed because of 
the problems that were identified at SMO. This action minimalized 
additional costs from being incurred by SMO in finalizing weatherized 
homes and operational costs. At this time, SMO is not required to 
refund DCS because all available funds were accounted for. 

3. GAO stated on page three of the draft report under the heading 
Independent Monitoring of the Weatherization Assistance Program Can 
Better Assure the Program's Integrity that DPI monitored SMO in 
December 2009. DPI officials told GAO that "they did not coordinate 
their review of SMO with DCS and were unaware of any problems." This 
is true; however, it was not explained that DPI does not coordinate 
regular monitoring visits with any funding division in order to 
maintain independence of the funding division's relationship with the 
subgrantee. 

4. The same paragraph on page three of the draft report states that 
"DPI did not identify any of the problems that were identified by DCS 
during the same period." This monitoring visit of the work performed 
on the homes would warrant no problems because this visit was 
performed after the initial problems were found and corrected. 
Therefore, the monitors would not have been expected to find any 
problems. DPI agrees that the monitors did not pick up on the fiscal 
problems noted by DCS. 

5. Communication between the DCS and DPI has been substantially 
increased to ensure the accountability of the ARRA Weatherization 
funds and these divisions will continue to work together cooperatively 
on new guidelines, policies, ideas and challenges. 

We appreciate this opportunity to provide input to your draft report. 
Please contact Sollie Norwood, Director of Community Services at (601) 
3594768 or solliemorwood@mdhs.ms.gov or Laura Griffin, Director of 
Program Integrity at (601) 359-4900 or laura.griffin@mdhs.ms.gov if 
you have questions or need additional information. 

Sincerely, 

Signed by: 
Don Thompson: 

DT:lb: 

cc: Jim Elgas, Senior Analyst, Mississippi Team: 
Sollie Norwood: 
Laura Griffin: 

[End of section] 

Footnotes: 

[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb 17, 2009). 

[2] Recovery Act, div. A, § 901, 123 Stat. 191 

[3] Weatherization Program Notice 09-1B, Department of Energy, March 
12, 2009. 

[End of section] 

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