North Carolina – September 20, 2010

The content below was excerpted from the North Carolina Appendix (PDF, 35 pages) of GAO's most recent bimonthly review of the Recovery Act.[1]

What We Did

Our work in North Carolina focused on gathering information about 2 programs funded under the Recovery Act—the Early Head Start Program and the Public Housing Capital Fund. We also reviewed the use of Recovery Act funds for budget stabilization in one local community and at the state level, and monitoring and reporting within the accountability community. For descriptions and requirements of the programs we covered, see appendix XVIII of GAO-10-1000SP.

  • For the Early Head Start program, we visited two grantees—Guilford Child Development (GCD) and Johnston-Lee-Harnett Community Action, Incorporated (JLHCA). We selected GCD, which is expanding an existing Early Head Start program, because it received the largest amount of Early Head Start Recovery Act funds in North Carolina and the largest amount of Recovery Act funds for the renovation or construction of facilities. We selected JLHCA because it was using Early Head Start Recovery funds to implement a new Early Head Start program. During our visits, we spoke with senior program and fiscal officials about how they were spending their Early Head Start Recovery Act funds. We also reviewed a selection of each program's Early Head Start files to assess how the grantees documented enrollment, eligibility, and certain required health screenings.
  • For the Public Housing Capital Fund we visited two public housing agencies—Charlotte Housing Authority (CHA) and Beaufort Housing Authority (BHA)—to determine how funds were being used. We selected CHA because it received the largest capital grant allocation. We selected BHA because it received one of the smallest grant allocations in North Carolina. We interviewed the housing officials and performed testing of expenditures and examined accounting records and external audit documentation. Additionally, we interviewed Department of Housing and Urban Development (HUD) officials in Greensboro, North Carolina, regarding their oversight of Recovery Act funds and their procedures for assisting and monitoring public housing agencies in administering these funds.
  • We interviewed state budget officials in North Carolina's Office of State Budget and Management (OSBM) to gather information about the state's use of Recovery Act funds and fiscal condition, including challenges to future economic recovery. We selected the City of Wilmington for a local budget review in order to assess the impact Recovery Act funds are having at the local government level. Located in the southeastern section of the state, Wilmington is one of the largest cities in North Carolina and its unemployment rate is below the state's average. We asked both state and local officials to discuss: (1) the amount of Recovery Act funds its entity is expected to receive, (2) how the funds are being used and their potential impacts, and (3) whether the officials have plans for when Recovery Act funds are no longer available.
  • To obtain an update on the monitoring of Recovery Act funds by North Carolina's accountability community since our last report, we interviewed senior administrators with the North Carolina Office of the State Auditor (OSA), Office of Economic Recovery and Investment (OERI), and OSBM's Office of Internal Audit (OIA).

What We FoundBack to top

Early Head Start

Nineteen Early Head Start grantees in North Carolina received about $24.2 million in Early Head Start Recovery Act expansion funds for the first year of a 2–year grant period. Overall, while both grantees are spending their Recovery Act funds, we found that they were at risk of not spending their entire first-year grants by the end of fiscal year 2010, as required. GCD's senior officials reported that they would have an estimated $336,882 of unspent funds this year due to delays with construction and hiring. Senior officials for JLHCA reported that a delay in receiving the grant award would leave them with about $75,000 to $100,000 of unspent personnel funds. Officials representing both grantees reported that they will request that OHS approve a carryover of the unspent funds into fiscal year 2011. Despite the delays, GCD and JLHCA officials reported having created jobs with their Early Head Start Recovery Act funds for the reporting period April 1, 2010, to June 30, 2010.

Public Housing Capital Fund

We found internal control weaknesses related to procurement practices using Recovery Act funds at both PHAs we visited. We also found that one of the two PHAs we visited did not maintain proper documentation of its use of Recovery Act funds. Specifically, at CHA we found that officials did not follow their procedures for reconciling and approving monthly purchase card transactions, including documenting reviews of statements by approving officials and providing training to card holders. We also found that BHA did not maintain proper documentation of its use of Recovery Act funds. Although BHA received a Recovery Act public housing capital fund formula grant of approximately $201,000, we were unable to determine how those funds were used. BHA officials did not provide a general ledger or properly track the use of Recovery Act funds. In our review of the documentation supporting the external audit, we found significant departures from auditing standards. In addition, we found that the BHA board's oversight practices did not meet its own standards.

State and local budget stabilization

As state officials begin to work on the 2011–2013 biannual budget, state budget officials project nearly a $3 billion budget shortfall that will likely have to be dealt with through budget cuts or revenue enhancements. Wilmington officials told us that $8.1 million in Recovery Act grants it received provided much needed extra funding for some city projects and services, but did not affect many other departments that had budget reductions. Wilmington officials raised property taxes and used the city's fund balance to balance its budget.

Accountability

We learned that in addition to Single Audits, North Carolina's oversight entities—OSA, OERI and OIA—conduct a range of work to ensure recipients' compliance with applicable laws and regulations. For example, since our May 2010 report, OSA completed a review related to the North Carolina Department of Environment and Natural Resource's compliance with Davis-Bacon provisions of the Recovery Act. OERI officials reported working with state agencies to implement their corrective action plans in response to OSA findings in reports issued in 2010 as well as monitoring compliance among the state's recipients and subrecipients of Recovery Act funds with Recovery Act and OERI requirements related to procurement. Finally, since our May 2010 report, OIA issued a report on several state agencies' compliance with state and federal regulations applicable to the Recovery Act State Fiscal Stabilization Fund (SFSF) and issued risk assessments of Recovery Act programs in three agencies.

Full September ReportBack to top

Recovery Act: Opportunities to Improve Management and Strengthen Accountability over States' and Localities' Uses of Funds
GAO-10-999
Recovery Act: Opportunities to Improve Management and Strengthen Accountability over States' and Localities' Uses of Funds
(Appendixes)
GAO-10-1000SP
  • [1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
  • [2] A project is defined in the Recovery Act as qualified for the green reserve requirement funding if it addresses green infrastructure, water or energy efficiency improvements or other environmentally innovative activities. The Recovery Act requires that a state set aside at least twenty percent of its grant for these types of projects.
GAO Contact
portrait of of Cornelia M. Ashby

Cornelia M. Ashby

Director, Education, Workforce, and Income Security

ashbyc@gao.gov

(202) 512-8403

portrait of of Paula M. Rascona

Paula M. Rascona

Director, Financial Management and Assurance

rasconap@gao.gov

(202) 512-9508