Use of CARES Act $1.26B questioned
A report from a legislative watchdog office raises questions about how the Stitt administration spent $ 1.26 billion in federal coronavirus relief.
The draft report issued Wednesday by the Legislative Office of Fiscal Transparency criticized the Stitt administration's handling of CARES Act funds as opaque, marked by shoddy record-keeping, and the office warned some projects may not meet strict federal standards for how coronavirus relief funds could be spent.
“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 Stitt spokesman Charlie Hannema. "We look forward to meeting with the LOFT Legislative Oversight Committee to discuss our concerns with the current LOFT process.”
The report also questioned the decisions behind some spending, including $18.6 million for modernizing the state's welcome centers, $2 million for a tourism push to encourage tourists to visit Oklahoma, $ 100 million for disaster recovery for state agencies. $250,000 for a Cattlemen's Congress event and $80,000 for office furniture.
All told, an estimated $122 million in CARES Act spending may not align with the U.S. Treasury definition of “necessary” pandemic expenditures, the report says. CARES Act funds were intended to cover costs associated with the pandemic that were not previously accounted for in the state budget.
LOFT said it was not provided any documentation for roughly $ 103 million in additional projects, including $81 million for the State Department of Health's surge contracts with hospitals.
“While there may be valid reasons for the approval of ( these) projects ... the lack of documentation and clear communication raise questions,” the report says.
In a lengthy response to the 34-page report, the Stitt administration dismissed LOFT's findings as full of inaccuracies and a “gross misrepresentation” that calls into question the report's credibility.
“LOFT's `evaluation' began with findings in mind and was largely an agenda-driven exercise to simply find fault with the work of the CARES FORWARD Team, perhaps due to the unusual circumstance of the Executive Branch being given direct authority to expend funds by the federal government,” wrote John Budd, the state's chief operating officer, and former Secretary of Budget Mike Mazzei.
Budd and Mazzei led the CARES Forward team established by Gov. Kevin Stitt to oversee coronavirus relief spending. They also said LOFT staffers were provided access and training to review key financial records, but the staffers never accessed the systems to view the documents.
GOP lawmakers who lead the powerful House and Senate appropriations committees expressed frustration about CARES Act funding in the spring because Stitt, as opposed to the Oklahoma Legislature, was in charge of the spending.
Those lawmakers, Sen. Roger Thompson, R-Okemah, and Rep. Kevin Wallace, R-Wellston, lead the legislative oversight committee for LOFT.
The watchdog budget office to oversee state agency spending and performance was formed in 2019 after Stitt signed into law legislation from Senate Pro Tem Greg Treat, R- Oklahoma City, and House Speaker Charles McCall, R-Atoka.
The report from LOFT recommends the Legislature form a centralized body with a documented approval process to oversee federal relief funds. A legislative advisory committee formed to advise Stitt's administration on CARES Act spending received only condensed information about spending projects and was involved in the decisionmaking process after the fact, the report states. CARES Forward leaders challenged that assertion.
Several legislators serve on both the advisory committee and the panel that oversees LOFT.
The report also said the Stitt administration used more CARES Act funds for state agency needs, including information technology, software and tech modernization, than projects for public health, safety or economic stabilization.
Citing the struggles many Oklahomans faced to collect unemployment assistance due to outdated technology at the Oklahoma Employment Security Commission, CARES Forward leaders said the continuity of government was a crucial concern during the pandemic.
“It is, in fact, our most solemn responsibility to provide core services in times of emergency,” they wrote. “The fact that ` modernization' is positioned as a negative thing in LOFT's findings seems completely irresponsible and unsympathetic to the plight of Oklahomans in the pandemic.”
The report also attempts to quantify the economic impact of the COVID-19 pandemic based on economic studies and Centers for Disease Control and Prevention data.
Based on Oklahoma's rolling average of 3,535 new COVID-19 infections per day in late December, the report determines the state has lost roughly $162 million daily due to the pandemic.
“The study indicates there is a positive relationship between controlling the spread of the pandemic and the health of the economy,” the report states.
A “rapid-response” evaluation of Oklahoma's CARES Act spending was one of the first items listed on LOFT's inaugural work plan, which was approved in August.
LOFT only examined the CARES Act spending of the $1.26 billion allocated to the state. The office did not look at separate allocations made to Oklahoma City, Oklahoma and Tulsa counties and the state's Native American tribes.
Budd and Mazzei criticized that the LOFT report only took into account CARES Act transactions made through Dec. 2, ignoring that the original CARES Act spending deadline was Dec. 30.
The report was slated to be presented to state lawmakers at a LOFT oversight committee meeting Thursday, but the presentation was postponed.
If a federal audit of Oklahoma CARES Act spending shows funds were misspent, the state could be required to repay the federal government.