Attorney: board acted within authority on $1 million recoverable grant; auditors reclassified it as loan receivable

Commissioner O’Keefe raised a concern about a significant deficiency in the agency’s FY2024 audit: an item the board approved in 2023 as a “grant recoverable” was recorded by auditors as a loan receivable on the financial statements. He asked whether the board had the legal authority to approve the recoverable grant if the auditors treated it as a loan. Commissioner O’Keefe moved that the agency attorney provide a written legal opinion clarifying the board’s authority; Commissioner Porter seconded the motion.

Agency counsel responded in the meeting and provided an immediate oral opinion: the board acted within its authority to approve a recoverable grant as intended. Counsel read the audit language aloud, noting the auditors captured the agency’s intent: the board approved a recoverable grant in which an expenditure would be recorded in one year and revenue would be recorded in a later year when, and if, funds were returned. Counsel said the auditors reclassified the item for accounting purposes and that the reclassification resulted in an audit adjustment (loan receivable recorded on the balance sheet, with a reduction of expenditures). Counsel also said that the auditors recommended corrective action: staff and counsel should consult with auditors early in similar future cases.

Commissioner O’Keefe said he wanted a written legal opinion to have a record and to ensure the board’s practice is documented. After discussion, the board voted on the motion to request a written legal opinion. The roll call showed limited support for the motion; three commissioners voted yes (Matlow, Porter, O’Keefe) and the rest voted no. Counsel indicated the agency complied with statute and that the agency’s intent to make a recoverable grant was lawful, while the auditors’ accounting classification created the single significant deficiency reported for the audit period.