The state’s handling of $138 million in federal homeland-security grants is riddled with misused funds and inadequate oversight by the top officials in charge of the program, according to a state auditor’s report released Monday.
The biggest concern raised by the auditor was the state’s handling of $5.9 million in state and federal funding to buy space in a Centennial office building to serve as the state’s emergency- response headquarters.
The auditor reported that the deal violates federal laws and rules that prohibit the use of homeland-security grants to prepay a long-term lease. The state could be forced to return funding to the federal government, the auditor said.
State Sen. Dan Grossman, D-Denver, called the Centennial arrangement a “sweetheart deal” that benefited the state Department of Local Affairs, which oversees homeland-security grants, at the expense of local governments that need better funding to protect themselves from terrorist attacks and to prepare for natural disasters.
Dan Hopkins, spokesman for Gov. Bill Owens, dismissed the audit’s findings.
“We don’t believe there was any misuse of federal money,” Hopkins said. “We believe the money was used for its intended purpose. The benefits to the state are enormous. We replaced a 50-year-old antique with a state-of-the-art center that will protect Coloradans for decades to come.”
The audit found that state officials fail to conduct analytical reviews of grant applications and local-government budgets in allocating the homeland-security grants.
In some cases, the state fails to make sure the money is being used.
For example, the auditor found a grant recipient with portable radio chargers that were unused and in their original boxes 15 months after the local agency received them.
“The lack of controls over expenditures identified during our audit jeopardizes the state’s compliance with federal requirements, increases the risk that funds are not spent as intended to enhance homeland security and potentially requires repayment of funds to the federal government,” the report said.
The Centennial deal raised the biggest red flag.
The auditor found that state officials agreed to acquire the space without getting an appraisal and “before it completed a security analysis of the above- ground, nearly all-glass structure.”
“The thing that concerns me the most is that they tried to cover it up,” said Grossman, who leads a legislative committee investigating how the state is spending homeland-security money.
State officials changed their records after auditors began questioning the deal on the Centennial office space at 9195 E. Mineral Ave. Officials in charge of the deal reclassified the lease transaction as a “donation” of a $1.1 million building.
To complete the deal, state officials channeled $5.9 million to the project in 2003 and 2004 funding, according to the audit. Of that, $3.2 million came from federal homeland-security grants.
Officials at the state Department of Local Affairs “did not comply with federal laws and guidelines when it used homeland-security grant funds to pay for its office space at South Metro (Fire Rescue District),” the auditor reported.
The state used $1.5 million to make an advance payment on the purchase of the space, even though federal officials said the money cannot be used for that purpose. Local Affairs officials said the state has received assurances from the federal government that such deals are allowed.
In addition, South Metro received preferred treatment in getting its funding from the state, the auditor said.
South Metro received $1.6 million – or 96 percent – of the 2003 “Part II State Homeland Security Grant” funding that was supposed to go local governments to protect “critical infrastructure.” The audit found that state officials have failed to develop a standardized scorecard to evaluate the grant applications.
South Metro also received $1.7 million in “energy and mineral impact assistance” funding from the state – far exceeding the average grant of $210,000 that went to local governments. Of the 289 municipalities that received the grants, 246 provided matching funds.
South Metro, which was not required to fill out the five-page application form for the grant, did not provide any matching funds.
The audit report suggested that state lawmakers consider beefing up the grant-review process by establishing committees with power to control funding decisions.
Michael Beasley, director of the Department of Local Affairs, said such a move would hurt his agency’s flexibility to respond to emergencies.
Staff writer Mark P. Couch can be reached at 303-820-1794 or mcouch@denverpost.com.
