Idaho vocational rehabilitation designated high-risk after reporting lapses; $10 million federal infusion, $2.5 million contractor, and state supplement sought

The Joint Finance-Appropriations Committee was told Feb. 24 that the Idaho Division of Vocational Rehabilitation (IDVR) was designated a high‑risk grantee by the federal Rehabilitation Services Administration after auditors found failures in fiscal controls and federal reporting, prompting a $10 million noncognizable federal adjustment and urgent state budget questions.

The finding by April Renfro of the Legislative Services Office audits division said “the division did not establish procedures and control activities to ensure compliance with appropriation laws applicable to fiscal year 2024.” The designation by RSA followed IDVR’s notification that the legislature did not act on a supplemental request and that the agency faced an over‑obligation risk.

Why it matters: IDVR assists Idahoans with disabilities to obtain and retain employment. Committee members were warned that persistent reporting and control problems could threaten the division’s ability to pay vendors and staff, erode federal funding, and reduce services for people on the agency’s waitlist.

Auditors and agency officials gave the committee multiple figures to show the scale of the problem. IDVR reported about 2,735 active clients and roughly 1,950 qualified applicants on a waitlist. The division’s budget analyst and auditors detailed that the federal reallocation process produced a $10,000,000 increase in available federal funds late in 2024; that award requires a state match of roughly 21.3 percent. To access the $10 million, IDVR has requested a $2,700,000 one‑time general fund supplemental for the required state match. The governor recommended a supplemental package that includes the $2.7 million match and an additional $1,700,000 one‑time general fund intended to cover services the federal partner might ultimately deem unallowable.

Audit findings and federal actions

April Renfro, the Legislative Services Office auditor who led the accountability review issued Jan. 13, 2025, told the committee that her team found a set of problems: weak internal controls, an insufficient financial management system, unsupported federal reporting, and failures to account for and report obligations accurately. The audit noted that case commitments recorded in the agency’s case management system did not track cleanly to the state fiscal year appropriation cycle and that delays in billing and payment produced a large invoice backlog at the end of FY2024.

Renfro said RSA designated IDVR as high‑risk on May 3, 2024, and imposed specific conditions under 2 CFR 200.208. She described RSA’s corrective‑action demands and said the federal agency can require additional reporting, additional monitoring, and, ultimately, seek recovery of federal funds if it determines an identifiable federal interest was harmed.

Contractor work and costs

IDVR engaged an outside contractor to help stabilize reporting and implement corrective actions. A professional services contract signed Aug. 12, 2024, was originally for $499,999; a November amendment expanded the scope, extended the period of performance, and increased the total to approximately $2.4 million. IDVR has paid nearly $900,000 to the contractor as of the committee update.

Director Judy Taylor, who is serving as interim director of IDVR, told the committee the contractor was selected in part because the firm had specialized experience reprogramming the agency’s case management system to fix period‑of‑performance reporting issues and because the firm’s staff previously worked with RSA’s technical assistance center. “If we didn't get this help in to start working away on the expectations of our federal funders, we would not have been an ongoing concern,” Taylor said. She told the committee that the contractor team provides what she described as more than 200 years of combined experience and that IDVR plans a phased handoff so state staff can assume responsibility over time.

Pre‑ETS, draw requests, and potential disallowances

Committee members pressed officials about a high failure rate on federal reimbursement requests tied to pre‑employment transition services (Pre‑ETS). Taylor said a recent reimbursement draw for Pre‑ETS showed a high disallowance rate — “for every dollar that we were asking for reimbursement, we were getting about 25 cents” — and that IDVR estimated $1.7 million in services already rendered may be found unallowable by federal reviewers. April Renfro’s office said contractor reports indicated roughly a 20 percent disapproval rate in a February update sample, but the audits team and the agency emphasized the numbers varied by program and by the documentation available for specific draws.

Federal matching, timing, and exposure

LBB staff and auditors reminded the committee that the federal grant requires a state match (reported in committee materials as about 21.3 percent of expenditures) and that federal grant spending runs on a different fiscal calendar than the state budget, which complicates tracking of obligations, carryovers and closeouts. The forensic and fiscal audits underway will reach back to 2019 to address maintenance‑of‑effort and period‑of‑performance questions. Renfro told members the federal partner will ultimately determine whether to seek repayment, reduce future awards, or extend corrective terms; the precise financial exposure remains uncertain while federal reviews continue.

Next steps and oversight

Legislative auditors told the committee they have added the matter to the 2024 single‑audit work and that the forensic review and federal monitoring will be ongoing. Director Taylor and auditors said they would provide additional documentation and follow‑up answers to specific budget questions, including a clearer breakdown of the $2.7 million match calculation. Committee members signaled they may schedule further oversight hearings before finalizing budget actions for FY2026.

Ending note

Officials asked legislators to weigh the immediate disruption that would result if IDVR lost federal funds or control against the cost of remediation. Taylor said the division’s mission — helping disabled Idahoans enter the workforce — “transcends temporary challenges,” and urged continued support while corrective steps and audits proceed.