Melissa Davlin: Thank you both so much for joining us this week. First of all, Represenative Horman, what happened?

Wendy Horman: I received a message from the governor’s office just before 5:00 on Friday afternoon that there was a potential problem with some spending authority for the Division of Vocational Rehab. So I took that conversation up with our own staff starting Monday to try and get to the bottom of what was going on.

Davlin: When you say a potential problem, what did you know at the time?

Horman: That there was a shortage of funds. That the state owed some bills for services rendered to support our disabled population, and that there was insufficient spending authority. Cash and spending authority are two different things in government accounting. Having the cash to use is different from having the spending authority, which the legislature grants. So they had cash, but they didn’t have spending authority.

Davlin: And basically they were notified, as far as we know, that they bumped up against their spending authority.

Horman: Yes.

Davlin: Senator VanOrden, you’ve worked on this budget in the past. What does this agency do?

Julie VanOrden: They provide services through vendors for handicapped individuals to be employed. And a lot of those vendors have services that they offer right there in their facility where a lot of handicapped people can be employed and do things that benefit their communities and have that satisfaction of having a job.

Davlin: When we’re talking about bills that may or may not be unpaid, it’s to those vendors who provide these services for Idahoans across the state?

VanOrden: Correct. That is who receives the funds.

Horman: It also might be educational providers. Idaho State University is the top one on the list with the amount of money owed, because they’re taking courses that will help them be employed.

Davlin: When we’re talking about money owed, how much are we talking?

Horman: That appears to be a moving target. Initially when we were contacted, we were told $4.7 million. The list we were provided was over $5 million. In the hearing, it came out that only $2.7 million was necessary. That’s one of the things we’re trying to get to the bottom of right now. The state wants to pay the bills it owes, and the committee wants to make sure that these providers are paid for services that they have rendered. What is unclear right now is what exactly is owed for services rendered and what isn’t.

Davlin: How does that happen? I know that the state has put a lot of work into making sure that we account for all of the money paid, and all of the bills that we owe. How do you have such a wide swing between maybe $2.7 million and maybe $5 million?

Horman: I wish I knew the answer to that question. When the director was asked in committee, is this a Luma problem? Because we have heard of problems with the system that the state uses to pay bills, called Luma. It’s new, we’ve had some issues with implementing that system. And she said it was not Luma related. Subsequently, when we started hearing from vendors that the numbers they were seeing on that spreadsheet weren’t accurate with what they knew of what they were owed, subsequent emails showed that there had been an error in processing some of these payments that was Luma related. So, that’s what our staff is working on right now, is trying to get to the bottom. Who has been paid and when? What do we still owe? Those are the bills we do want to pay.

VanOrden: The other thing about the sheet that was given to us with all the vendors on it, and we asked are these current? When were these services rendered? Are they being rendered? Have they been rendered? And, what the director had said was, I understood it for her to say, these are what we think. These are projections. So, these are what we are allowing them to use. So, I think that’s why she’s saying is $2.7 million might cover this $5.7 million that is an estimate. But we just don’t know, because the other conversation that was had in the committee, statements that she made were that if it’s more than the $2.7 million, that we can move it into the next year’s budget.

Davlin: But in the next year’s budget, aren’t you going to have to pay for next year’s expenses as well?

VanOrden: Yes we will. So what does that look like? Is it, you know, I don’t know if you call it a reversion or what, but that was a concern that came up in the committee also. Some other questions that came up in the committee that I had were that during the budgeting process, when she came in with the analyst and they presented her budget, one of the things that she was requesting was to take a half a million out of the trustee and benefits category and put it in operational expenses. Well, now she’s having some of the expenses that were outside of trustee and benefits come back in. So, my concern is why did we take them out of there in the first place?

Davlin: Basically moving pots of money around from one to the other?

VanOrden: Yes. But she’s come up short in trustee and benefits, and she had asked us to take those out. So that’s a concern to me. And I asked her in the committee, during that hearing, why that was happening. And she told me that these expenses, operating expenses, were going to benefit the trustees. So that’s how she qualified and justified those expenses being pulled.

Davlin: At the end of the day, how might this affect Idahoans who receive services through the Division of Vocational Rehab?

VanOrden: The vendors could pull back those services, reduce those services. So maybe the trustees, the people that are getting those services, might not get the full range of services that they were expecting.

Davlin: Do we know when we’ll know what the full consequences are? What’s the potential timeline in other words?

Horman: Well, we are supposed to come back next Wednesday to finish session and adjourn sine die finally. We hope to have the answers to our questions by then so that we can take action. One of the problems in the hearing was it was difficult to get absolute answers. So we took action based on the information we had at the time. The committee asked great questions. Subsequent to that hearing though, we did start hearing from vendors and receiving questions that threw the accuracy of the numbers we were presented during the hearing into question. And so, that’s why we pulled the bill back. Our staff is working diligently, even as we speak, to try and verify those numbers. If it was a Luma problem, if it wasn’t, what do we owe? And we hope to have those by next Wednesday.

Davlin: Can you assure vendors that they are going to get paid at this point?

Horman: If they have rendered services, absolutely.

Davlin: Can you assure trustees that they will continue to receive services at the same level moving forward?

Horman: You know, management of that process happens in that agency. And that was the concern the governor brought to us in the letter that was provided. Initially, we didn’t have anything in writing. The co-chair and I made sure that we had all of this in writing, and that was how it was described, as a potential mismanagement situation. So what the agency chooses to do with services will be their business. It will be our business to make sure they have the funds to pay for what they’ve agreed to.

Davlin: How do you make sure this doesn’t happen again with this agency or any others?

Horman: We’ve called for an audit. The governor immediately called for an independent audit. We included language in our bill as well to have an independent audit. There are a few shades of this happening before with previous agencies. I think both the governor and JFAC immediately moved to audit, so we can verify what we know and what we don’t know, and if there’s a problem with internal controls. So that will proceed as well.

Davlin: You mentioned the budget that you put forward on Wednesday during this meeting to shore up the rest of the fiscal year. That was pulled back on Wednesday afternoon. What’s next?

Horman: Right now, our staff is working on verifying those numbers, identifying what we owe, so we can prepare to pay those bills.

Davlin: Is it possible that when you come back on Wednesday that JFAC is going to have to meet again and you’re going to have to put together a new appropriation?

Horman: It’s possible, yes. It’s also possible that changes would be made to their appropriation for the upcoming fiscal year.

Davlin: Understood. How do you know this isn’t happening in other agencies?

Horman: That’s a great question. We have struggled with verifying some of the numbers in the new Luma system, but the controller’s office has been working diligently on that. I’ve been in weekly meetings on that since December to make sure that the numbers we are seeing in the system are accurate. That work is ongoing, and we will of course consider other requests as they might come forward if we’re finding problems. We know that an error happened once before and some double payments were issued out of Health and Welfare just because of a functional error in Luma. That’s been corrected moving forward. But our auditors will be taking a very close look, looking backward.

Davlin: Alright, Senator VanOrden, Representative Horman, thank you so much for joining us.

VanOrden: Sure, thank you.