The huge influx of federal money that came into Oklahoma last year amid the coronavirus pandemic was spent quickly on public health, small business grants and other needs, but a large chunk of it was spent on state agency wishlists and technology upgrades that were only tangentially connected to the pandemic.
That’s among the conclusions of a draft report by the Legislative Office of Fiscal Transparency released Wednesday. The report also criticized the way many projects were approved, saying Gov. Kevin Stitt’s CARES FORWARD team “deployed a highly subjective process for approving funding.”
“While LOFT does not presume to judge the merits of individual projects, the lack of explanation around decision-making does raise questions as to how projects were — or were not — deemed essential to Oklahoma’s recovery,” the report said.
The Legislative Oversight Committee is scheduled to discuss the Legislative Office of Fiscal Transparency report and the Stitt administration’s responses to it in a hearing at 11 a.m. Thursday. The final report, with suggestions from the committee, is expected to be released later this week.
In a statement Wednesday evening, the governor’s office said it welcomed the report and will detail its concerns with the evaluation process used by the Legislative Office for Fiscal Transparency.
“Legislative oversight of spending is a critical government function, and we are happy to continue working with our partners in the Oklahoma House and Senate as they fulfill their Constitutional duties,” said the statement on behalf of the CARES FORWARD team. “We look forward to meeting with the LOFT Legislative Oversight Committee to discuss our concerns with the current LOFT process.”
In the meantime, here’s some key takeaways from the report:
What CARES Act Money Did the Report Examine?
Oklahoma received $1.53 billion in funding from the federal government under the CARES Act that passed last spring. The transparency office’s report only looked at the state’s allocation of $1.26 billion. It didn’t examine other, separate pots of CARES Act money to Oklahoma and Tulsa counties and Oklahoma City. Oklahoma tribes also received direct payments under the Coronavirus Relief Fund portion of the CARES Act.
Who Was In Charge of the CARES FORWARD Team?
Stitt put state Chief Operating Officer John Budd, then-Budget Secretary Mike Mazzei (who left the Stitt administration in October) and Transportation Secretary Tim Gatz in charge of the CARES FORWARD team, but they had a lot of help. Ultimately, it was the governor’s call to make the final spending decisions.
The CARES FORWARD team established seven “pillars” of spending to cover assistance for economic aid, education, health and mental health, technology and infrastructure. Each pillar had either cabinet secretaries or other high-ranking agency officials to organize spending and projects in their areas.
The Legislature was also informed of the progress of CARES Act spending and projects through its Legislative Advisory Committee.
The LOFT Had Problems Collecting Information About the Spending
The Legislative Office of Financial Transparency began its “rapid response report” for CARES Act spending in September with a focus on accountability and compliance. But the office said it was hamstrung by incomplete information from the CARES FORWARD team. Part of that included problems accessing the state’s PeopleSoft accounting system run by the Office of the Management and Enterprise Systems.
“LOFT has consistently been provided incomplete data sets from which to search, has been unable to verify individual transactions due to aggregated data, and has found instances where the only expense validation were comments that documentation would be provided later,” the report said.
The transparency office examiners also didn’t get many supporting documents for contracts and grants at the Oklahoma State Department of Health and the Department of Human Services because those agency’s financial systems are separate from the main OMES PeopleSoft accounting system.
What Did LOFT Find Questionable About the Spending?
It said the state spent millions on technology projects and other agency equipment that had been requested for several years but never funded from the state’s budget. The federal money allowed the state to finish those technology projects under the auspices of pandemic preparedness. It said about $148.7 million was passed to the Office of Management and Enterprise Services for “advance-funded IT projects.”
“A portion of the pandemic relief funds were used to fulfill long-standing agency needs, including those related to information technology and compliance systems,” the report said.
The report also said the state waited too long to provide additional funds to the state’s unemployment insurance trust fund, which had been deluged by unemployment claims and had numerous technology problems during the pandemic. Although $100 million was sent to the trust fund, the report said it came too late to offset an increase in unemployment insurance taxes for employers.
Among the documents unearthed by the report was an April 2020 email from Mazzei encouraging state agency chief financial officers to be “aggressive and creative” in pursuing COVID-19 expense reimbursements. In addition, one of the lines in a project scoring sheet included whether the project was a “major priority of the Stitt administration.”
Did the Report Point to Any Success Stories?
The report said the crisis around the pandemic and the many needs of Oklahomans makes it hard to be overly critical about the spending.
“LOFT recognizes that this pandemic was a uniquely disruptive event: it is important to note flexibility is needed within any crisis-response situation, and no plan can fully account for every decision,” the report said. “However, understanding the strategic deviations from any plan can ensure public accountability.”
The Legislative Office of Financial Transparency said the CARES FORWARD team did a good job managing grants to cities and counties and quickly getting money to those communities. It also said the state’s process for awarding small business grants through the state Commerce Department worked well.
“Those categories, along with many others, are not included in LOFT’s analysis due to their low degree of risk to the state, but should be noted as areas of accomplishment,” the report said.
What Recommendations Did the Report Make?
Essentially, the report said the Legislature should have more control over the spending of federal funds to deal with the effects of the pandemic. It also said the executive branch should provide training and guidance to state agencies on what are acceptable uses of any future federal money related to COVID-19. Its recommendations were basically a warning shot to do better with the processes around spending any federal relief funds.
What Response Did the CARES FORWARD Team Give to the Report?
In a strongly worded Jan. 20 response letter included with the report, the CARES FORWARD team said the report failed to accurately describe the work done by state government agencies to alleviate the effects of the pandemic.
“In contrast, and despite the frequent and positive feedback provided on an ongoing basis by members of our Legislative Advisory Committee, LOFT has produced what appears to be an agenda-driven document which seeks only to cast negative light on the monumental accomplishments of the CARES FORWARD Team’s work to distribute coronavirus relief funds in the middle of the global COVID-19 pandemic,” the letter said.
Who Else Is Looking at the State’s CARES Act Spending?
At the request of Attorney General Mike Hunter, State Auditor and Inspector Cindy Byrd is also looking into CARES Act funding. Byrd said her office’s investigative audit should be finished in the next couple of months and sent to Hunter. The attorney general last week filed a $1.8 million lawsuit against a supplier of personal protective equipment who failed to deliver on shipments of masks.
Separately, the federal government set up three entities to examine CARES Act spending: the Pandemic Response Accountability Committee, the Congressional Oversight Commission and the Special Inspector General for Pandemic Recovery. So far, none of those panels have issued any Oklahoma-specific reports.