Audit flags Idaho Vocational Rehabilitation; RSA designates program high‑risk and governor recognizes $10M reallotment

Legislative auditors told the Joint Finance-Appropriations Committee on Feb. 24 that the Idaho Division of Vocational Rehabilitation lacked procedures to ensure compliance with appropriation requirements, prompting the federal Rehabilitation Services Administration (RSA) to designate the division a high‑risk grantee. The governor recognized a $10 million noncognizable federal reallotment for IDVR; the division is requesting a $2.7 million one‑time state match to access the funds and has estimated $1.7 million in costs that federal partners may deem unallowable.

April Renfro of the Legislative Services Office audits division summarized an accountability review issued Jan. 13 that found a failure ‘‘to establish procedures and control activities to ensure compliance with appropriation laws applicable to fiscal year 2024.’' Renfro told the committee the division also had problems with ‘‘insufficient financial management system’’ controls, ‘‘failures to account for and report obligations and expenditures properly,’' and ‘‘inaccurate and unsupported federal financial reporting.’'

Brooke Dupree, a Legislative Services budget analyst, described the fiscal sequence that produced the $10 million: RSA reallocated (reallotted) federal funds late in the federal fiscal year and the governor used deemed authority to recognize the noncognizable adjustment so the division would not run out of spending authority. Dupree told the committee the $10 million federal reallotment requires state matching funds; RSA’s stated federal share is about 78.7% with a state share of 21.3%, and the division requested $2.7 million in one‑time state funds as that match.

IDVR interim director Judy Taylor said the division faces a backlog of commitments and service obligations. Taylor reported 2,735 active clients and about 1,950 qualified Idahoans on a waitlist and told lawmakers the agency had been under ‘‘extra scrutiny’’ after submitting draw requests that were not supported to RSA. Taylor said the division’s first draw request for its Pre‑ETS (pre‑employment transition services) program had a large disallowance rate and that, as a result, the division estimated $1.7 million in state funds would be needed to cover services that federal partners could rule unallowable.

The audit also reviewed the division’s use of a third‑party contractor hired to implement corrective actions. The agency initially signed a professional services contract for $499,999 and later amended it in November, increasing the contract by $1.9 million and extending it through Dec. 1, 2025. Renfro told the committee the division had paid nearly $900,000 to date and cautioned that the full contract amount would require state match because federal dollars used to pay the contractor will need matching funds when drawing federal reimbursements.

Renfro said RSA designated IDVR as a high‑risk grantee May 3 and imposed ‘‘specific conditions’’ under 2 CFR 200.208. RSA required a corrective action plan; the division submitted a plan June 17, but auditors found it ‘‘generalized’’ and lacking specifics and timelines. Renfro said RSA has a menu of enforcement options that range from requiring additional reporting and project monitoring to, in extreme cases, requiring repayment of federal funds proportionate to the federal interest harmed. She said RSA could also reduce or waive recoveries based on mitigating factors.

Dupree walked the committee through recent appropriations and spending patterns. She reported trustee and benefit spending has risen and that IDVR received a noncognizable adjustment of $10 million for federal funds that the division must match. Dupree also noted a prior FY 2024 supplemental request was not approved during the 2024 session and that the governor’s recommended budget included the $2.7 million one‑time state match and a separate $1.7 million recommendation for services the federal partner has deemed potentially ineligible.

Committee members pressed agency leadership on specific technical points: why administrative costs (personnel) appeared large relative to trustee and benefit payments; how Pre‑ETS spending compared with the federal 15% threshold (Taylor said year‑to‑date Pre‑ETS was 8.38% but will increase as summer programming is delivered and that historically the program has reached and exceeded the 15% requirement); and what the time frame is to resolve federal questions. Renfro said the audits division added this work to the statewide single audit and that some figures may emerge as that work and the forensic accounting are completed; she added RSA had set a Sept. 30 deadline for some corrective steps.

Why it matters: IDVR provides supported employment services and transition services for Idahoans with disabilities. Auditors told legislators the division obligated more services than its funding could support, and federal findings could require repayments or other enforcement actions that would affect service levels and partner programs across workforce development.

Next steps: The committee heard that a forensic audit and additional federal monitoring are under way. IDVR requested the state match to liquidate the $10 million federal reallotment; lawmakers asked for additional detail on the $1.7 million estimate of unallowable costs and on contract oversight and cost‑benefit. No formal committee vote was taken during the hearing; staff and auditors will provide follow‑up materials, and the audit work will continue.