Audit finds control failures at Idaho Vocational Rehabilitation; federal grant reallocation and contractor spending follow

Legislative auditors told the Joint Finance‑Appropriations Committee on Feb. 24 that the Idaho Division of Vocational Rehabilitation (IDVR) failed to establish internal controls needed to ensure compliance with annual appropriation laws, and federal partners have placed the division on high‑risk status.

April Renfro of the Legislative Services Office audits division summarized the office’s Jan. 13, 2025, accountability report and said auditors issued one finding: “the division did not establish procedures and control activities to ensure compliance with appropriation laws applicable to fiscal year 2024.” The report identified failures in financial management systems, incorrect obligations and expenditures reporting, and inaccurate federal financial reporting.

Nut graf: Because IDVR operates multi‑year federal grants that require state matching and strict period‑of‑performance accounting, auditors said the agency’s case management and fiscal systems did not reliably tie commitments to the correct grant period. The U.S. Rehabilitation Services Administration (RSA) designated IDVR a high‑risk grantee; the governor recognized a $10 million federal reallocation (a noncognizable adjustment) that requires state matching funds.

Brooke Dupree, Legislative Services Office budget analyst, outlined the fiscal picture: the $10 million reallocation recognized by the governor in September 2024 is federal funds but requires a state match. Dupree said the federal share is 78.7% and the state share 21.3%, and IDVR requested a $2.7 million one‑time general‑fund supplemental to provide the required match. The governor’s recommendation would provide $1.7 million instead.

Auditors and agency staff described how obligations reported in internal case plans (Individualized Plans for Employment) can span multiple federal grant periods; when billing and invoicing lag and the case management system does not communicate cleanly with the state fiscal system, obligations can be charged to the wrong grant year. Renfro showed that commitments and unliquidated obligations identified by the division exceeded appropriations in FY2023 and FY2024 and that the division’s RSA financial reports included caveats that the reports reflected the best data the agency had at the time.

The audit noted that IDVR hired a third‑party contractor to assist with corrective actions. The initial professional services contract signed Aug. 12, 2024, totaled $499,999 and the division later signed an amendment in November that added $1.9 million and extended the contract through Dec. 2025; invoices paid to date total about $900,000. The Legislative Services audits division reported the vendor is Mississippi‑based and that the contract and its amendment were approved under one‑time exemptions from competition by the state Division of Purchasing.

Director Judy Taylor, who is serving as interim director of IDVR, told the committee the contractor was engaged to reprogram the agency’s case management system and help restate prior expenditures so reporting would reflect the correct period of performance. Taylor said the contractor team brings specialized expertise and that RSA encouraged the state to use a model of oversight and third‑party support; she said the consultant work is intended to fade as state staff are trained.

Committee members asked for more detail about the $1.7 million supplemental the agency requested, the $10 million reallocation and the federal response to prior reporting. Taylor said a forensic audit will look back to 2019 for maintenance‑of‑effort purposes and that some earlier draw requests for the Pre‑Employment Transition Services (Pre‑ETS) program experienced high denial rates when submitted to RSA. Taylor and Dupree told the committee that one draw submitted for Pre‑ETS reimbursement achieved roughly 25¢ on the dollar (about a 75% denial rate) and that the division estimated roughly $1.7 million in unallowable charges related to Pre‑ETS for FY2024; Dupree said the $1.7 million supplemental represents services already rendered that RSA has identified as unallowable for federal reimbursement.

April Renfro warned the committee that if IDVR fails to satisfy corrective actions RSA may impose additional enforcement measures under federal regulations, including requiring reimbursements, enhanced reporting or other remedies. She said RSA has already imposed specific conditions under 2 CFR 200.208 and asked for a corrective action plan; auditors found the initial corrective action plan submitted by IDVR lacked measurable steps and timelines.

Ending: The committee was briefed that the situation is evolving and that additional oversight hearings may be necessary. Auditors and the agency said they will continue to supply updated reports, the forensic audit is underway and staff will follow up with line‑item and matching calculations requested by lawmakers.