Over the course of LOFT’s four-month evaluation of the expenditure of Coronavirus Relief Funds, several themes emerged regarding the attempted collaboration with CARES FORWARD, the entity created to manage the federal funds:
CARES FORWARD’s Response to Information and Data Requests did not facilitate transparency
In response to LOFT’s request for “any and all” information relevant to expenditures and decision-making by CARES FORWARD, LOFT was provided a “Master” spreadsheet (sometimes referred to as a “summary dataset,”), that lacked key identifying data. No supporting documentation accompanied the spreadsheet. Despite repeated requests from LOFT, CARES FORWARD failed to provide information related to internal processes, which limited LOFT’S ability to ascertain what specific documents would be constructive in the review. To date, CARES FORWARD has not provided a single complete set of documentation for any project funded with Coronavirus Relief Funds.
CARES FORWARD responses were inconsistent with Oklahoma’s requirements and established guidelines related to providing data, documents and records to an independent oversight entity.
Information and transparency are necessary for effective program evaluation. The Oklahoma Legislature recognized this in establishing obligations for agencies LOFT works with to perform its duties. Oklahoma Statutes outline the obligation for agencies to furnish information and cooperate with LOFT:
Title 62, section 8014. “A. Each agency or institution of the state shall, upon request, furnish and make available to the Legislative Office of Transparency all records, documents, materials, personnel, information or other resources the Office deems necessary to conduct performance evaluation as required by this act.”
Several national associations support this approach to provision of information, including the National Conference of State Legislatures. A subset of this organization, the National Legislative Program Evaluation Society (NLPES), adopted the following data access principle in support of its member organizations that conduct program evaluations, performance audits, reviews, studies, or other similar forms of oversight on behalf of state legislatures:
“Having access to all data and information from government agencies, including data and information that is confidential or sensitive in nature and not publicly available, is critical to our ability to provide the thorough, independent, objective, and fact-based assessments and analyses on which legislators rely for decision making. Restrictions on our access to data and information ultimately limits the legislature’s ability to engage in effective oversight and ensure accountability for the use of public resources and the results being produced.”
Additionally, the U.S. General Accounting Office (GAO) requires an auditor or evaluator to report any limitations regarding access to documentation and information.
These data access principles exist to ensure evaluations are based on complete information. As an external evaluator, LOFT does not possess critical insider-level knowledge about an agency’s processes. Even if an evaluator had full access to all agency records and systems, the ability to obtain information would be limited without knowledge of record maintenance processes and system navigation.
Common among audit and program evaluation offices is that the agency under review is responsible for providing data and information, and the auditor or evaluator is responsible for verifying and evaluating the information. LOFT’s peer office in Kansas equated having examiners pull their own data from an agency’s system to asking a financial auditor to put together an agency’s financial statements before auditing them.
CARES FORWARD’s response strategy was inconsistent and failed to evolve
CARES FORWARD created an organizational process on paper but provided no evidence that this process was followed or consistently applied.
CARES FORWARD routinely emphasized speed as the driving component of plans to spend the federal relief funds. While LOFT understands an initial emergency-driven response, the strategy for spending quickly does not appear to have adapted over the eight-month period to a more needs-based approach.
In September 2020, the Legislative Office of Fiscal Transparency began its examination of the State’s distribution and spending of federal aid provided under the CARES Act. The evaluation was limited in scope and duration due to its designation as a Rapid Response report, which are reports intended to provide information needed for immediate funding or policy decisions.
Consistent with LOFT’s role as an oversight agency, the review focused on accountability and compliance. At the onset of the evaluation, LOFT sought guidance from CARES FORWARD, the entity created to manage expenditures of federal funds, including oversight measures instituted to ensure federal funds were spent effectively and appropriately. In response CARES FORWARD provided an organizational chart, their website address and a PowerPoint presentation. This information was insufficient for the scope of LOFT’s review, so LOFT began an independent effort to review expenditures and substantiate documentation.
LOFT discovered a lack of consistent application of processes for data management, incomplete documentation, and a general lack of accessibility and transparency regarding expenditures and decision- making. Based on these factors, coupled with the knowledge that federal auditors and other oversight authorities would be expected to navigate the same systems to conduct their work, LOFT shifted the objective of the evaluation to identifying expenditures that could potentially leave the state open to risk of federal recoupment of funds, and the potential for future (state-funded) ongoing costs associated with programs funded or created as part of the State’s pandemic response. When the second round of federal pandemic relief was announced late December 2020, the evaluation expanded to encompass a third area: how the state could improve its processes in advance of future federal aid.
LOFT recognizes the challenge the State faced in addressing both the public health needs resulting from the COVID-19 pandemic and its related economic disruption. The nature of this evaluative project focuses on mitigating risk of federal reclamation for future funds, as well as ensuring funds are used effectively to protect Oklahoma citizens physically and economically.
The findings of this evaluation identified areas where the CARES FORWARD decisions were effective in addressing certain challenges. For example, the speed and effectiveness with which a new data management platform was set up for use by cities and counties for grant management appeared to be done efficiently and effectively with consistency. Additionally, the distribution of Small Business Grants through the Department of Commerce appeared to be well- administered. 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.
Several of the dedicated funds in the federal CARES act were provided directly to recipients and with specific intent. Examples include grants to higher education, small business loans, and the Paycheck Protection Program. Cities and counties directly received funds passed through by CARES FORWARD and are separately responsible for allocating those funds. Likewise, businesses will be held accountable through audits.
LOFT’s evaluation therefore focuses on the pool of CARES funds that represent the greatest risk to the State: The Coronavirus Relief Funds. The expenditure of these funds was managed and allocated by CARES FORWARD.
Overview of Findings and Recommendations
LOFT’s evaluation resulted in the following findings:
Finding 1: Process for spending Coronavirus Relief Funds lacked structure and clarity
CARES FORWARD inconsistently provided substantive and necessary detail to policymakers about funding proposals or funding decisions; did not track or maintain methodology or explanation for rejected funding proposals; does not maintain an easily-accessible, centralized repository for documentation of funded projects or reimbursements; and deployed a highly-subjective process for approving funding.
Finding 2: A significant component of relief funds was used for pre-existing needs and government modernization
A portion of the pandemic relief funds were used to fulfill long-standing agency needs, including those related to information technology and compliance systems. For example, approximately $148.7 million of Coronavirus Relief Funds were passed through the Office of Management and Enterprise Services for in advance funded IT projects. Other projects are broadly categorized as economic support when more accurate categorization could have been used. Several projects under these categories may be at risk for not meeting the federal standards for “necessary” expenses in responding to the pandemic.
Finding 3: Ongoing state needs would be underfunded if not for additional aid
In funding projects indirectly related to the pandemic, CARES FORWARD missed opportunities to better address outstanding direct needs, such as a more strategic deposit into the Unemployment Insurance Trust Fund and investing in health initiatives like testing and contact tracing to limit the spread of the virus.
LOFT recommends the following:
- The Legislature should consider forming a centralized body and documented approval and rejection processes for expending federal relief, with clear communication, accountability, and an emphasis on adequate documentation
- The State Office of Management and Enterprise Services should provide training and clear examples to state agencies regarding eligible and ineligible funding requests
- The Legislature should consider requiring any state agency or program receiving non- routine federal aid to use the state’s data system to provide documentation
- Future processes for tracking expenditures should require categorizing projects with common coding techniques to better reflect their purpose
- Prior to expending any future aid, Oklahoma should adopt clear guidelines and processes that result in better alignment to the Executive’s vision for how federal relief funds benefit the State
- The Legislature should consider requiring the reporting of data to NCSL for the enhancement of transparency and readily available state comparisons
- Future disbursement of federal aid should be accompanied with a clear strategic plan that provides for more transparency and meaningful involvement from both the Executive and Legislative branches. The strategic plan should benchmark spending outcomes to key performance indicator directly attributable to an economic recovery and ensuring the health and safety of Oklahomans
Finally, LOFT recommends the following expenses be given further review by the Legislature: