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CHARLESTON -- The State of West Virginia continued to pay on a lease 32 months after the agency left the property, resulting in approximately $1 million wasted, according to the State Auditor's Office.
State Auditor J.B. McCuskey gave members of GATE -- the Joint Government Accountability, Transparency and Efficiency Committee -- a full report on the waste Tuesday morning.
"The long and the short of this is government is big, clumsy and we are occasionally very bad at spending our money," McCuskey said. "The overarching thing I have found from this is as a government, we spend a lot of money spending money, and we don't spend a lot of money monitoring how it's being spent."
According to the report, the State Auditor's Office discovered improper lease payments from the Department of Health and Human Resources to Pin Oak Properties for property at the Middletown Mall in Fairmont. The auditor's office discovered these lease payments in March.
DHHR used to maintain offices at the Middletown Mall, but DHHR hasn't been in that property since May 30, 2015, when it moved to a new state office complex in downtown Fairmont. The combined cost of the two leases was $30,907.34. Over three years, that ballooned to nearly $1 million in lease payments and no solid documentation that DHHR ever canceled the lease.
"A routine request by the auditor's office to the WVRED (West Virginia Real Estate Division) for a copy of the termination letter was met with hesitation and a delay until the Division Director of WVRED could return several days later," according to the report. "Even more concern was found when DHHR informed auditor employees that DHHR self-generated the lease invoices for the Middletown Mall, and had, for the preceding months, requested that the check payments be personally picked up by DHHR employees instead of being mailed to the purported landlord of Middletown Mall."
Upon discovering these improper payments, the State Auditor's Office refused to process further payments to Pin Oak Properties and initiated further investigations by the office's fraud and public integrity units.
"The appropriate documentation never made it from DHHR to the Real Estate Division to cancel the lease," McCuskey told committee members. "So, for 32 months the lease payments were made by DHHR to the property owner, whose name changed several times. There are some intricate financial changes and name changes that could have potentially raised red flags along the way, but made it very difficult."
The audit cites DHHR for lack of financial controls and oversight. It also criticizes WVRED for not requiring signed lease termination letters, as well as not seeing the red flags when Pin Oak Properties made payee change notices.
One way to catch this earlier, McCuskey said, is doing away with paper checks. He said starting this year that, except in rare circumstances, all transactions with vendors will be done electronically.
McCuskey told committee members that the lease isn't up on the Middletown Mall property until 2019, but state law allows the state to exit leases as long as the state gives a 60-day notice.
"Obviously this is pretty close to home," said state Senate Minority Leader Roman Prezioso, D-Marion, whose district includes Fairmont. "When did DHHR finally introduce to you a document to say this contract ends?"
"They didn't," McCuskey said.
"If they were receiving this money for rent and no one was in their facility, it seems to me they would have some liability for responsibility," Prezioso said. "That clearly looks to me like fraud."
McCuskey said he hopes to bring legislation next year that will make it a crime for vendors to take money from the state when no services are rendered.