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NC failed to make sure $3 billion in COVID relief was spent properly, audit says

North Carolina potentially misspent federal COVID-19 relief money, according to a state audit released Thursday, because officials failed to monitor how more than $3 billion was actually used.

The audit did not find misspending. That could be because there was none, or because it flew under the radar due to the gaps the audit described.

The audit focuses on Democratic Gov. Roy Cooper’s administration — specifically the state budget office and the N.C. Pandemic Recovery Office. It says those officials “did not design and implement procedures to ensure that Coronavirus Relief Funds were being spent in accordance with” the rules for the money.

“As a result, there was an increased risk that recipients could have misused the funds without the misuse being detected and corrected timely,” North Carolina Auditor Beth Wood wrote.

North Carolina received over $3.5 billion in the federal government’s 2020 COVID-19 Recovery Act, and Wood’s office said nearly all of that money — $3.1 billion — was divvied up without proper oversight.

In an interview Thursday, State Budget Director Charles Perusse said his signature is on roughly 500 contracts with recipients of that relief money, and he stands by the work his office did in tracking it.

“We followed state and federal law every step of the way,” Perusse said. “We believe we were good stewards of the funds. And the audit did not find any misspending.”

Speed versus caution

There has been a conflict during the pandemic between getting coronavirus relief aid out quickly, or doing it with the most oversight possible.

That also came up, The News & Observer has reported, surrounding overpayments of unemployment benefits to people during the pandemic. Early on, the state was criticized for taking too long to get people benefits. More recently new issues have arisen about the state paying people too much, largely due to not catching it when people are untruthful — either accidentally or intentionally — on their unemployment applications.

For the broader COVID relief pacakage in question here, the N.C. General Assembly voted several times, starting in May 2020, on how the money should be spent.

Lawmakers put the state budget office in charge of getting the money out to the various programs. The first round of spending included nearly $400 million for public schools, $180 million for universities, $125 million for business loans through the Golden LEAF Foundation, $25 million for family caregivers and home-delivered meals, $20 million for emergency food assistance, and millions more.

Wood said that because of the lack of oversight, state government was “limited in its ability to know whether funds were achieving legislatively intended results and take timely corrective action if necessary.”

Perusse said when the 2020 aid was approved, it had to be spent within a year or else the state would forfeit the money. Cooper sent the legislature his own spending proposal in March of 2020, Perusse said, but the legislature did not pass the first official plan until May, adding to the time crunch.

“We acknowledge that we can always do better ... but on this we did the work in an incredibly short amount of time,” Perusse said.

No complaints of misspending

Lee Lilley, a top Cooper aide in charge of pandemic recovery efforts, was previously his liaison to the General Assembly. He said Thursday that he never heard any lawmakers’ complaints that money wasn’t going where they wanted, or that it was being misspent.

And lawmakers would have had ample opportunities to lodge any complaints, either privately or publicly.

“There were regular reports to the legislature, quarterly, on how the money was being spent,” Cooper spokesman Ford Porter said.

In a written response to Wood’s audit, Perusse said his office and the Pandemic Recovery Office also did not have enough staff to do the necessary work, since the legislature only gave them half of what they asked for. But the office did have nine specific safeguards in place, which he laid out in his audit response, saying he will use the audit’s findings to strengthen those where possible.

“We take the findings presented in this report very seriously, and we have already begun making the changes to address them,” Perusse wrote.

Under the Dome

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