Questionable federal grant spending could put Oklahoma on the hook for millions

(The Center Square) – An audit of $13 billion in federal grant money by Oklahoma State Auditor Cindy Byrd shows questionable spending of millions that could be clawed back by the federal government.

The largest amount in question is $21 million allotted to Communities Foundation of Oklahoma, a nonprofit tasked with overseeing $241 million for the Emergency Rental Assistance program.

The audit questions $8.6 million in questionable management fees and $4.3 million used for subawards that did not have documentation.

The nonprofit also spent $6.6 million on Afghan relocation services.

“This was not an allowable expense for this grant,” according to the audit. “The State of Oklahoma had other grants available for these types of services.”

The Communities Foundation of Oklahoma was questioned about its spending last year as well, especially the management fee, Byrd said in an interview with The Center Square.

“Federal guidelines only allow you to charge administrative costs directly attributable to operating the grant,” Byrd said. “What this nonprofit did, they took for this year we are auditing, $7 million for true administrative costs but they also took $8.6 million as their management fees, which is clearly in violation of what the federal grant guidelines allow.”

But the real problem is the Office of Management and Enterprise Services had to responsibility to manage these funds but did not, Byrd said.

“No one at OMES had the necessary experience or didn’t appear to have the necessary experience to even make these judgement calls,” Byrd said. “There is an email from the director of budget to Community Foundation telling them they can just have this money. In the mail it says in accordance with grant guidelines, you can have these funds. But the problem is that’s not what the grant guidelines state.”

OMES did not take corrective action to alert Communities Foundation of Oklahoma that they may have to repay these funds or even inquire of the federal government what they need to do, she said.

The attorney general’s office has requested an investigative audit, Byrd said.

The issues could put Oklahoma on the hook for the questionable spending.

“The federal government could claw this money back and if they do, it will be for Oklahoma to pay back,” Byrd said.

Byrd is asking the Oklahoma Legislature to investigate a pilot program process to determine if it has become a way to sidestep competitive bidding processes.

“Rolling Solicitations” began as a pilot program in 2019. OMES directors, the chief information office, and the purchasing director could place any vendor of their choice on a list, according to the audit released Tuesday afternoon. Those contractors could be awarded a state contract without going through the competitive bid process.

OMES should have sought legislative approval for the program but did not, according to the audit.

“In my opinion, Oklahoma is rapidly becoming a no-bid state,” she said. “This is a grave disservice to every Oklahoman. The ‘Rolling Solicitation’ design allows for circumvention of financial safeguards and could place potentially better State vendors at an unfair disadvantage.”