Va. Inspector General finds Tobacco Commission in need of improvement

The Virginia Tobacco Region Revitalization Commission has not met grant-monitoring requirements in the Code of Virginia, according to an audit released Thursday by the Office of the State Inspector General.

Among other problems revealed by the audit, the commission — which disburses money from the 1998 national tobacco settlement agreement to promote economic growth and development in communities that were economically dependent on tobacco — has also not hired a financial viability manager to oversee grants awarded to businesses and organizations. Instead, the commission gave the role to its current grants director, the audit reported.

The OSIG audit also found that the commission has not performed or documented visits to 23 grant recipients out of 30 studied, although the commission responded in the report that operating, planning and broadband fiber projects can be monitored without visits, “as there is not anything to see.”

During the course of the audit, commission staff notified the inspector general’s office of possible fraudulent activity involving one commission grantee and that was referred to OSIG’s investigative unit.

The commission has developed action plans to address OSIG’s findings by December 2020.

The audit is not the first time the commission has fallen under scrutiny. In 2011, the Joint Legislative Audit and Review Commission found that the commission did not do enough to boost communities in Southern and Southwest Virginia most affected by the reduced market for tobacco. A year earlier, in 2010, former Virginia Secretary of Finance John Forbes II was sentenced to 10 years in federal prison for embezzling $4 million from the tobacco commission. 

The commission has distributed $1.1 billion in 2,215 grants during the past 20 years. It was created by the General Assembly in 1999 and has funded projects that expand access to health care, broadband internet, educational opportunities and tourism initiatives in communities that were once economically reliant on tobacco crops. The commission has also provided more than $300 million in indemnification payments to tobacco growers and quota holders.

Its education branch, which includes student loan repayments, was not included in the audit, which studied a sample of grants and loans awarded during FY 2015 and FY 2018. 

Among the audit's other findings, OSIG noted that there is no written guidance for the commission’s program managers to follow in monitoring the commision's grants. Additionally, Its software program, SmartSimple, does not allow the commission’s employees to enter outputs for grants and loans, except for those that fall under the Tobacco Region Opportunity Fund, which assists localities in the tobacco-producing region in creating jobs and investments.

Other issues include unclear requirements regarding matching funds, including minimum amounts and deadlines for matching grant funding with outside investments. The audit noted that no grantee program has failed to meet its match requirement, although three out of 31 grants tested had not met the minimum match by deadline. The commission noted in the report that it has an alternative match schedule in which the match may be “made up” in the later portion of a given grant period because some projects (like new manufacturing businesses) may incur heavy capital costs at the outset.  

OSIG has recommended that tobacco commission staff follow state law by analyzing, documenting and reporting the financial viability of projects and feasibility of all grants, loans and other distributions of money.