Audit: Richmond gave over $1 million to charities that didn’t meet criteria while keeping $2.4 million from those that did
VENN
RICHMOND, Va. (WRIC) -- An audit found that, during the 2023 fiscal year, the city of Richmond awarded over $1 million to charitable organizations that did not meet its own criteria -- while also denying $2.4 million in requested funding to those that did. On the whole, auditors expressed concern that taxpayer dollars were not appropriately spent.
Richmond's Office of the City Auditor (OCA) released a report that examined how taxpayer dollars were allocated to various non-departmental charitable organizations during the 2023 fiscal year.
Such grants are designed to benefit organizations that benefit citizens and align with the city's values of housing and human services, education and arts and culture.
Examples of organizations that have previously received such grant funding include the hunger relief charity Feed More, street outreach charity Commonwealth Catholic Charities and art programs like the Richmond Symphony and the Richmond Boys Choir -- among many others.
Overall, these taxpayer dollars are meant to help qualifying organizations benefit the community at large.
To ensure that such funds are appropriately awarded, multiple city departments -- including the Human Services Department, the Department of Public Works (DPW) and the Department of Planning and Development Review (PDR) -- are tasked with reviewing applications submitted by interested organizations and making a recommendation on how much money each should be given, if any.
Per the OCA, during the 2023 fiscal year, the City was "inconsistent" in how it both awarded and monitored organizations' grants. The audit credits these inconsistencies, in part, to lacking oversight and training, as well as poor management.
An area of significant concern, as outlined by the OCA, involved the policies associated with evaluating organizations, approving or denying their applications and, subsequently, ensuring that taxpayer dollars were appropriately spent.
Policies either enforced unfairly or not at all
Policies surrounding grant awards either did not exist or were followed irregularly, the OCA said, leading to questionable decisions being made.
For example, Human Services has an application checklist that evaluates prospective grant recipients on things like how strong their program is, how clear their mission is, how competent they appear to be and whether or not their goals align with the city's.
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Using this checklist, applicants are scored on a scale of 0 and 100. Only organizations that score a minimum of 75 points are meant to qualify for grant approval.
However, despite this, the OCA found that a total of five applicants who scored below 75 were recommended grant funding. This included:
- $20,000 recommended to an unidentified organization that scored 65. Comments on this application included that the organization "did not show other sources of funding" and its "application lacked substance and critical components such as reasonable goals and clear proof of previous success."
- $25,000 recommended to an unidentified organization that scored 70. Comments on this application included that it "lack[ed] key information, including a budget." There was also uncertainty on whether or not this organization was a "key partner."
- $10,000 recommended to an unidentified organization that scored 74. Comments on this application included that it had a "lack of evaluation metrics" and it was "less align[ed] with Human Services' portfolio compared to other applications."
During the audit, the OCA was told that the deputy chief officer for Human Services "could override the review committee’s decisions, even if an applicant scored below 75." They reportedly made such decisions "based on the organization’s known work and past performance, which were not factors disclosed in the application materials."
Additionally, the OCA learned that 13 total organizations -- including two that scored below 75 points -- missed the application deadline, which should have disqualified them from grant approval.
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"Late applications were often accepted by Human Services, particularly from organizations with a history of receiving funding," the OCA said. "After the FY 2023 application deadline passed, an email was sent to previously funded applicants who had not submitted applications extending their deadline as a courtesy due to COVID-19. This new deadline was not publicly communicated or provided to other applicants."
Ultimately, the final approved budget for the 2023 fiscal year included $1.45 million for organizations that did not meet Human Services' own criteria.
By contrast, dozens of organizations that both met the criteria and submitted their applications in a timely manner were not given the grant funding they requested.
Per the OCA, 34 such organizations either were awarded less than they requested or were denied entirely -- despite several being described as providing "critical services" to the city. In total, these discrepancies amounted to $2.37 million.
By not ensuring that all organizations were held to the same standards, the city created opportunities for the misuse of taxpayer dollars, the OCA said.
Issues with reviewers' training, judgement calls
The OCA also noted that a "critical hunger agency" had its requested amount reduced by $150,000 by a reviewer. Said reviewer described the proposal as "strong" but said it was "likely outside of what the City budget might be able to accommodate."
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However, the OCA learned that no one in any of the departments associated with reviewing applications knew how much funding was available, including this reviewer.
"Without this critical information, departments lacked an objective basis to determine appropriate funding recommendations, potentially impacting services for City residents," the OCA said.
When investigating the DPW and the PDR, the OCA found that policies for grant funding recommendations did not exist and that employees were not being trained on how to carry out the process.
"The PDR reviewer stated that this was the first review they performed of a non-departmental grant application and they received no training on how to review applications or what to assess during the review process," the OCA said. "Despite this, they recommended the City award funding of $80,000 to one applicant."
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There was also "confusion over review responsibilities" at the DPW, according to the OCA, which said that a DPW reviewer "could not recall" making a decision on a funding application, claiming "they had never seen" it.
"When shown an email from them [the DPW reviewer] to the Department of Budget and Strategic Planning recommending a grant of $50,000 to the applicant, they explained that the recommendation was based on their knowledge of the organization’s prior work with the City and their belief that the amount was reasonable," the OCA said.
Both the state of Virginia and the city of Richmond require that those who may have a conflict of interest do not work on projects that they may not be able to be objective on. The OCA learned that neither the DPW nor the PDR have any conflict of interest policies.
While Human Services had its employees fill out conflict-of-interest forms for the 2023 fiscal year, they were thrown away "during a warehouse clearing," so the OCA could not verify if any employees worked on applications where such a conflict existed.
"The inconsistency in monitoring and managing conflicts of interest during the grant review process in all participating City departments increases the risk of bias or favoritism in grant decisions, exposing the City to potential fraud, waste, and abuse," the OCA said.
No guarantees that grants were spent appropriately
Auditors also discovered that, once this grant funding was awarded, there was little to no oversight over how it was spent. To investigate such enforcement, the OCA audited the records of 25 of the organizations that were given grants.
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"Instead of verifying documentation and validating outputs, grant managers generally relied on grantees’ self-reported information, trusting that the work was completed as reported," the OCA said.
Further, the OCA found that virtually none of the 25 recipients were held accountable for actually delivering results.
Staff performed little to no visits to the organizations' sites, nor did they request supporting documentation, to ensure that organizations were using grant funding in the ways they agreed to.
"Multiple grant managers explained to the OCA they believed requesting proof of services provided would place an undue burden on the non-profits who received City grant funds," the OCA said.
While final reports are meant to be submitted by organizations at the completion of their contacts, of 25 grants randomly reviewed by the OCA, four never submitted such a report. Eight other organizations did submit a final report, but those reports noted that they did not fulfill their contract as signed. In total, these 12 organizations received $700,000 in funding.
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"Additionally, grant managers confirmed that no significant consequences would be enforced for grantees who failed to meet performance measures," the OCA said.
According to the OCA, there was language in almost all of these organizations' contracts that allowed them to keep any unspent funds if they met their contractual obligations -- however, there was no formal process through which the city could actually verify how funds were spent.
Considering only four of the 25 organizations submitted a detailed breakdown of how they spent their grant funding -- and, again, this relied on the organization to be honest, considering the city did not check behind them -- the OCA concluded that these two factors, combined, created significant risk.
"Without proper documentation and verification, there is a risk that funds could be misused, or excess funds retained without the necessary approvals," the OCA said.
OCA's recommendations and the city's response
The OCA submitted a total of nine recommendations to the city as a result of this audit's findings. These included recommendations to develop and implement the noted missing policies, to strictly enforce application deadlines and to better monitor grant spending, among others.
The city said, in its attached response, that it had implemented four of the recommendations as of the time of the report's publication.
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A few remain open as of the time of reporting. To implement two recommendations associated with better monitoring how grant money is spent, the city said it would need additional staffing.
The other three still-open recommendations are the only three that the city did not fully agree with. This included a recommendation regarding creating a centralized application review and approval process, a recommendation regarding deadline enforcement and a recommendation on letting reviewers know of the total amount of funding available so they can make informed application decisions.
Firstly, the city said it agreed that consistent policies were necessary, but cited concerns about doing so in collaboration with city council, as OCA suggested. The city said it did not want to infringe on the city council's "flexibility" to "propose budget amendments."
Secondly, the city said it agreed that it should enforce deadlines strictly, but contested how the OCA's recommendation was worded. The OCA suggested that, if deadlines were extended, said extension should be offered to all applicants.
"The recommendation as currently worded allows for concessions to be made outside of posted deadlines where both procedures and transparency could be questioned," the city said. "Accepting late applications places an undue administrative burden on review committees who aid in processing applications, outside of the normal procedures. Finally, applications scored in isolation from on time submittals may not have the benefit of being juxtaposed with similar."
As noted previously, the city accepted some late applications throughout the 2023 fiscal year.
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Finally, the city said that it did not believe that sharing total funding amounts with reviewers was a decent concept, as it would cause issues in practice.
"The Administration cannot restrict the potential community benefits provided to the city by imposing a cap on grants," the city said.
The deadline for the implementation of these three recommendations is the 2027 fiscal year.
