Oklahoma auditor finds $29 million in questionable grant spending

Written By: John Dobberstein

(OKLAHOMA) Oklahoma State Auditor and Inspector Cindy Byrd released an audit report Tuesday that is sharply critical of the state’s lack of oversight on federal grant spending in 2021, as more than $29 million in transactions is being questioned.

Read this story on the Broken Arrow Sentinel here. 

Byrd investigated nearly $40 million designated for the Governor’s Emergency Education Relief Fund (GEER), which was designed for governors to best decide how to meet the needs of educating students during the pandemic.

Byrd said two GEER programs – Bridge the Gap and Stay in School – had “significant issues. BTG had a budget of $8 million dollars to help low-income families purchase education supplies, curriculum, technology and tutoring for their child to effectively learn at home during COVID. Some 5,000 families received $1,500 each to be spent at designated retailers, but Byrd said the state didn’t place any restrictions or parameters on which items families could purchase.

The state found $1.7 million was spent on various non-educational items such as kitchen appliances, power tools, furniture and entertainment. Almost 20% of the total purchases were spent on items not related to educational learning per grant guidelines. Eleven months ago the federal government demanded $650,000 be returned, and Byrd’s office identified an additional $1.1 million questionable spending.

The SIS program had a budget of $10 million to help low-income families cover the families’ portion of school tuition to keep children in their existing private school. The audit, according to Byrd, uncovered “a deliberate operation to give selected private schools and individuals preferential treatment by allowing early access for application submission prior to the date this program was offered to the general public.”

Byrd also said awards were provided to 1,073 students whose family attested they hadn’t suffered an economic hardship due to the pandemic.

Because the state disregarded grant objectives, Byrd said, 657 students of low-income families who qualified for the SIS program didn’t get the financial assistance they requested because funds were exhausted.

“Of the $6.5 million in question, $1.8 million was paid to private schools in excess of the families’ tuition responsibility,” Byrd said.

For updates, subscribe to our free newsletter!

“The state abdicated its responsibility to administer and oversee the GEER funds and placed outside individuals in the role of program decision-makers of the GEER award without a contract to govern their involvement,” Byrd said Tuesday. “These individuals neither had the authority nor did they meet federal qualifications to administer or oversee these grant funds.

The state of Oklahoma also neglected to monitor and file the proper federal compliance reports for the GEER funds, Byrd noted. In June 2021 the federal government warned the State of Oklahoma about its lack of monitoring and reporting of the GEER grant. The state then hired a consulting firm to monitor the GEER funds, she said.

The state of Oklahoma has paid $325,000 to the firm to monitor the GEER program but the firm has not fulfilled the duties for which it was paid, Byrd said – adding the same consulting firm has been paid $1.3 million dollars to date to perform subrecipient monitoring and reporting requirements for both the CARES and GEER program, which are the largest questioned costs in the audit.

“This was a tangled web of government agencies, non-profit organizations, and nongovernment individuals representing special interest groups managing millions of tax dollars with no contracts and no written agreements,” Byrd said. “Oklahoma has systemic issues that make me very concerned for taxpayers.”

Byrd said her department is reporting $12.2 million in “questioned costs” due to reporting problems.

The state was awarded federal dollars through the Coronavirus Aid, Relief, and Economic Security Act of 2020 (CARES) to mitigate the effects of the pandemic. Byrd said the state spent $1.1 billion on personal protective equipment (PPE), health services, payroll and other COVID-related expenses.

State agencies, counties and cities were required to submit reimbursements of expenditures to the state, but the state didn’t obtain sufficient documentation to ensure the payments were made for COVID-related expenditures and did not ensure that the goods or services were received prior to payment.

Oklahoma received more than $376 million dollars for the Emergency Rental Assistance (ERA) program to assist households unable to pay rent or utilities during the pandemic. In 2021, the average award per application was $1,975, but Byrd said the state “failed to properly oversee the expenditures of this program” and allowed an OKC foundation administering the program to charge a management fee in addition to the actual ERA program administrative expenditures, “effectively doubling the amount charged for administrative costs.”

“Because of the administrative overcharge, many Oklahomans who applied for ERA awards were denied assistance because the unallowable charges were kept by the OKC foundation,” Byrd said, noting that in 2022 her office alerted the state to the unallowable costs but the state failed to stop the overcharges – which resulted in $8.6 million more unallowable costs through June of 2022.

“If these processes continue, the total state of Oklahoma ERA program unallowable costs may increase to $15 million by the end of SFY 2023,” she said.

For updates, subscribe to our free newsletter!

The annual audit is a federally mandated examination of how the state spends federal grant money and whether the state complied with federal regulations.

The audit report covers $14 billion dollars of expenditures, which are audited through a federal formula provided by the federal government.

Byrd’s office is required to report “questioned costs” that don’t align with the objectives of the grant. She said the federal government will review the reported questioned costs and determine if the state must repay misappropriated funds.

“Every federal grant comes with very strict requirements which the state of Oklahoma agrees to follow,” Byrd said. “Any person in charge of managing federal grants needs a certain level of proficiency because the compliance regulations are very complicated.”

Gov. Kevin Stitt’s office Tuesday continued to insist an out-of-state contractor was to blame for the problems.

“During the COVID pandemic, Governor Stitt had a duty to get federal relief funds to students and families in Oklahoma as quickly as possible and he responsibly accomplished just that,” said Stitt spokeswoman Kate Vesper. “The state maintains its position that a negligent out-of-state vendor should be held accountable to recover the federal taxpayer dollars in question, and the auditor’s report further supports that is what ought to happen.”

But Oklahoma Attorney General Gentner Drummond said the audit report “is deeply troubling” and illustrates the need for an investigative audit of GEER funds, which he said he requested shortly after taking office.

“A number of concerning items from the audit will require further investigation. I refuse to tolerate what amounts to a pervasive culture of waste, mismanagement and apparent fraud,” Drummond said.

Oklahoma House Speaker Charles McCall, R-Atoka, said Byrd’s conclusions were “extremely troubling” for the state and taxpayers, noting that lawmakers were excluded from the appropriations process for the funds in favor of the executive branch “unilaterally” making all the decisions.