State auditors and federal officials flag Idaho Vocational Rehabilitation for high-risk status; committee hears $10M federal allotment, $2.7M state match and $1

The Idaho Division of Vocational Rehabilitation (IDVR) was designated a high‑risk grantee by the U.S. Rehabilitation Services Administration (RSA), and legislative auditors told the Joint Finance-Appropriations Committee on Feb. 24 that the division’s internal controls and financial reporting were insufficient to ensure appropriation compliance.

Brooke Dupree, a budget and policy analyst with the Legislative Services Office, briefed the committee on the division’s fiscal picture and said the governor recognized a $10 million non‑cognizable adjustment after RSA re‑allotted federal funds to Idaho. Dupree told the committee that the $10 million federal increase requires a state match and that the division is requesting a $2.7 million one‑time general‑fund supplemental as Idaho’s share of the match. The governor’s recommendation included that $2.7 million and an additional $1.7 million one‑time general‑fund request intended to cover services the division estimates its federal partners will deem ineligible for reimbursement.

Dupree explained the mechanics: “The money came from the Rehabilitation Services Administration. ... when it's getting close to the end of the federal fiscal year, they look at all the grants that they've given to states and they see who isn't going to spend their full grant and that money comes back and gets re allotted to states that they do expect to be able to spend that grant.” She said the federal award carries a required state match (roughly 21.3% of funds expended under the grant) and the requested $2.7 million represents the state match portion for the realloted $10 million.

April Renfro of the Legislative Services Office Audits Division told the committee her office issued an accountability report (Jan. 13, 2025) after work done over the summer and early fall of 2024. The audit found the division “did not establish procedures and control activities to ensure compliance with appropriation laws applicable to fiscal year 2024.” Renfro said RSA designated the division as a high‑risk grantee on May 3, 2024, and imposed specific conditions under 2 C.F.R. § 200.208; RSA also required a corrective action plan that Renfro described as generalized and lacking measurable steps.

Renfro described three report findings from RSA’s fiscal monitoring: failures of internal controls; insufficient financial-management systems leading to incorrect accounting of obligations and expenditures; and inaccurate or unsupported federal financial reporting. She also said the division’s case‑management system did not talk to the state’s fiscal system (LUMA/STARS), complicating timely and accurate charge and period‑of‑performance tracking. That mismatch, Renfro said, contributed to a backlog of invoices and unclear matching of commitments to fiscal years.

IDVR’s interim director, Judy Taylor, told the committee she joined the agency in mid‑June 2024 and that the division recognized shortcomings in prior reporting and internal controls. Taylor said those shortcomings contributed to problems identifying and charging costs to the correct federal period of performance and that the division has begun remediation including technical assistance and hiring contractors to restate prior reporting and implement controls.

Taylor said the division engaged a contractor under an initial professional‑services contract signed Aug. 12, 2024, for $499,999 to address business‑process mapping, control system analysis and forensic accounting; she said a November amendment expanded the contract by roughly $1.9 million and extended its term through Dec. 2025. Renfro said the amended contract raised concerns because the work is costly relative to the division’s budget and because the purchasing office approved one‑time exemptions from competition for both the initial contract and the amendment. Renfro told the committee the contractor is based in Mississippi and that about $900,000 had been paid to date against the contracted work; she also noted the federal grantor did not explicitly mandate hiring the contractor.

Committee members asked for specifics about exposure and timing. Taylor said the division submitted a reimbursement draw for pre‑employment transition services (Pre‑ETS) and that RSA’s initial review produced a “breakage rate” in which “for every dollar that we were asking for reimbursement, we were getting about 25¢.” Taylor and Dupree said that initial breakage and subsequent technical-review findings are the basis for the $1.7 million estimate of services the federal partner may deem unallowable. Taylor said the scope of the forensic audit will reach back to 2019, per federal expectations tied to maintenance‑of‑effort rules, and that RSA has not yet specified any final enforcement amount or remedies.

Dupree provided client data and staffing context: as of the hearing IDVR reported 2,735 active clients and 1,950 qualified disabled Idahoans on a waitlist. Dupree also described authorized staffing and vacancies: the division has 48 authorized FTP with 16.5 vacancies reported in LSO slides; Taylor said that with hiring freezes and other changes the agency currently has up to 22 open FTP positions. Taylor said IDVR has undertaken austerity measures and is pursuing a differentiated practice model intended to let less‑skilled staff perform tasks that do not require master‑level vocational counselors.

Renfro warned that RSA can impose further enforcement under 2 C.F.R. § 200.208, including additional reporting requirements, prior approvals, withholding funds, or requiring repayment of federal funds proportionate to harm. She said RSA may reduce or waive repayment based on mitigating circumstances, but that the final federal response and any enforcement remain uncertain.

No formal committee action or vote was recorded at the hearing; committee members indicated additional oversight hearings or follow‑up will be needed to finalize supplemental decisions and to track audit and remediation progress.