Denver says it’s ‘made great strides’ in implementing changes after pandemic fund audit

The city of Denver’s finance office says it’s “made great strides” in implementing fiscal changes after a follow-up report from the city’s auditor earlier this month that said federal pandemic funds were still at risk for fraud and abuse.

Denver Auditor Timothy O’Brien said in a July 7 letter about the follow-up audit that the city’s Department of Finance “fully implemented only one recommendation and did not implement four other recommendations it agreed to in the original audit report. Therefore, we determined the risks associated with the audit team’s initial findings have not been fully mitigated.”

The follow-up said that Denver still isn't accurately tracking interest earned on some federal relief funds and not “sufficiently” reconciling some bank statements to reflect these earnings. Without mechanisms to track earned interest, the audit warned that Denver risks not using all of its available funds before they expire.

A department spokesperson told The Center Square in a statement Thursday that “we are confident that we are strong stewards of the city’s emergency resources and that, the Coronavirus Relief Funds (CRF) were never at risk.”

“We made great strides in implementing the recommendations from the 2021 audit report in a timely manner by ensuring we complied with the most effective fiscal best practices,” the spokesperson added, noting that department officials met with the Audit Committee on July 21, after the follow-up audit was released.

O’Brien’s office first flagged the initial issues in an audit from 2021.

“By still not adequately accounting for interest, the city risks forfeiting additional valuable aid it could otherwise use to help the Denver community as our residents continue recovering from the pandemic,” O’Brien said in a statement. “I hope the Department of Finance will continue working to fill in these crucial gaps in its process.”

Denver received more than $126.9 million in federal relief funds throughout the pandemic to use for emergency rental assistance, creating business relief accounts, unemployment insurance payments, and other programs.

In turn, the city must reconcile its spending and the interest earned on the pandemic relief funds on monthly bank statements, a process that would help “ensure accurate records and reduce the risk of errors and fraud,” the audit said.

The initial audit from last year found the city had $1.8 million in interest that it did not account for in its bank statements.

The department spokesperson added that “We look forward to a continuous, transparent dialogue with the Audit Committee and Auditor’s office.”

A statewide audit last year found that Colorado paid out more than $73 million in "likely or potentially fraudulent" unemployment insurance payments because the state Department of Labor and Employment lacked similar tracking measures to ensure the funds were paid to legitimate sources.

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