Grand jury finds mismanagement, waste in Oklahoma’s pandemic relief funds for education

OKLAHOMA CITY — A Multi-County Grand Jury investigation of the Governor’s Emergency Educational Relief (GEER) fund found significant mismanagement and misspending of millions of dollars intended to reduce disruption to the education of students impacted by the COVID-19 pandemic. Although the Grand Jury found no instances of criminal action or willful corruption, the jurors’ report characterized the handling of grant money and utter lack of internal controls as “irresponsible, disappointing, and indefensible.”

Attorney General Gentner Drummond called for the Grand Jury probe shortly after his January 2023 dismissal of a frivolous lawsuit the Governor had brought against ClassWallet, a Florida vendor that was the digital platform for two GEER initiatives heavily criticized by federal and state auditors. Drummond contended ClassWallet was not responsible for the rampant mismanagement and that the litigation was a smokescreen for negligent state actors – an assessment borne out by today’s Grand Jury report.

In 2020, the Governor launched several initiatives with GEER funds his office had received for pandemic relief in education. He awarded $8 million to Bridge the Gap (BTG) to provide up to $1,500 grants for low-income families to purchase education materials. Another $10 million went to Stay in School (SIS), a program to provide tuition assistance of up to $6,500 for low-income private school students adversely affected by the pandemic.

While many of the problems surrounding Oklahoma’s use of GEER funds have been well documented, the report states that “this Grand Jury set out to investigate how and why the State failed to properly manage its federal grant money.”

‘A different objective’

The Governor rejected guidance from the Trump Administration’s U.S. Department of Education that a state agency or office experienced with federal grants should serve as the funds’ fiscal agent, according to the Grand Jury. The Governor’s then-Secretary of Education, who also served as Secretary of State, urged the Governor to use the State Department of Education (SDE), which had ample staffing and expertise for such work. However, the Governor and school choice activists reportedly believed the SDE could not be trusted to support low-income families attending private schools.

“Without consulting the agency, the Governor’s Office assumed SDE would be unwilling to support such initiatives instead of supporting public schools. Evidence received by this Grand Jury shows this assumption was unfounded,” states the 31-page report.

Instead, jurors note that the State “relied on unvetted, unqualified private individuals and individuals with virtually no accountability to the State to carry out these political objectives.”

Bridge the Gap was led by the executive director of a school-choice nonprofit, Every Kid Counts Oklahoma (EKCO). Stay in School was spearheaded by the executive director of the state branch of the American Federation for Children (AFC-Oklahoma).

Jurors say there is nothing to indicate the Governor’s Office vetted the individuals to determine their capability to oversee millions in federal grants subject to stringent compliance. The EKCO director allegedly represented that his nonprofit had the staffing and expertise to administer BTG even though he was its only employee at the time. Similarly, the Grand Jury saw nothing to suggest that either the EKCO director or the AFC-Oklahoma director – entrusted with public funds despite no formal contract with the State – conducted any analysis to fulfill the federal directive that GEER funds help schools “most significantly impacted” by COVID-19.

“Though BTG and SIS did not meet the programmatic requirements for GEER Fund monies, their general frameworks were clearly consistent with meeting a different objective: establishing a school voucher program,” the report states.

To serve as a “pass-through” for GEER money, the Governor ultimately landed on the Office of Educational Quality and Accountability (OEQA) despite its lack of training or expertise in federal grant management. OEQA’s then-executive director was assured he would not be involved beyond signing a contract for ClassWallet to administer Bridge the Gap and Stay in School.

Investigators found that August 2020 contract to lack any safeguards to protect personally identifiable information of grant applicants, The Grand Jury was troubled to learn the AFC-Oklahoma director had in her possession a spreadsheet with such information. “More disturbing is the fact that the spreadsheet contained information that families did not provide in their applications, such as political party registration and voting districts,” the report states. “This indicates that, unbeknownst to families, their information was being collected and processed for purposes other than that for which it was disclosed.”

Preferential treatment

Hundreds of families seeking SIS and BTG grants were allowed to apply two days before the promoted Aug. 10, 2020, launch of the application process. Families from five nonprofit private schools were selected to be part of an “Open House,” a particularly helpful perk since both SIS and BTG told the public they would distribute monies on a “first come, first served” basis.

But others received preferential treatment, too, as many applicants not from the five private schools also applied during that Aug. 8 event. It is unclear how these early applicants learned of the opportunity. Because there was one application encompassing both BTG and SIS, applicants could pursue one or both grants.

“The evidence received by this Grand Jury irrefutably establishes that BTG and SIS awards were not bestowed in a fair or equitable manner” the report notes.

Ultimately, 486 applicants for BTG and SIS funds applied before the public start date.

Stay in School was riddled with problems, including $1.8 million in payments to nonprofit private schools in which students were not charged tuition or paid at significantly discounted rates. In other instances, the program approved excessive payments for private schools that did not have to submit detailed information on their tuition rates, full scholarships, work study and the like.

“Private schools were allowed to merely submit an invoice reflecting their full tuition rates,” states the Grand Jury. “When these additional considerations are factored into the calculation, however, almost all SIS awards exceeded actual financial responsibility.” More than $5.3 million in SIS funds went to families who attested they had no pandemic-related financial hardship.

By Aug. 11, 2020 – a day after the official kickoff of the application process – Stay in School funds were nearly depleted. The State Auditor found that SIS dollars were denied to an estimated 657 students of eligible families who actually had experienced financial woes due to the pandemic.

Similar mismanagement plagued Bridge the Gap. On Aug. 25, 2020, ClassWallet asked the EKCO director who would serve as the program administrator to be given access to review expenditures. He did not respond. Six days later, ClassWallet asked for clarity about what items could be purchased by families, to which the EKDO director – who would be named the Governor’s Secretary of Education the following month – replied, “Blanket approval with vendors on your platform.”

State auditors estimate about $1.7 million in BTG funds went to more than 39,000 purchases of non-education-related items such as doorbell cameras, smartwatches, refrigerators, Xbox systems and even Christmas trees.

“The EKCO Director’s authorization of all integrated vendors on the platform effectively disregarded all internal control options offered” by the vendor, states the report.

Lack of accountability

In the end, the Grand Jury concludes the BTG and SIS fiascos resulted from the State’s disregard of existing administrative safeguards by delegating its authority to private individuals who lacked the necessary expertise to manage federal monies.

“The State bestowed these individuals and organizations with control over millions of dollars in federal funding without any vetting process or formal agreement assuring their accountability to the State,” writes the Grand Jury.

“Similarly, the State contracted with a private vendor without requiring compliance with grant specific requirements, such as monitoring and recordkeeping obligations. The systemic deficiencies in the BTG and SIS programs resulted in the waste and misspending of millions of dollars in emergency relief funds, subjecting Oklahoma taxpayers to liability for repayment to the federal government and depriving hundreds, if not thousands, of Oklahoma families and students from receiving the educational pandemic aid that they needed and were entitled to receive.”

Jurors contend the problems were easily preventable if SDE had been allowed to administer the programs.

“While many of the issues revealed by our investigation were caused by ill-advised decisions by private individuals, the State bears the ultimate responsibility to account for its own misuse of federal funds. It cannot delegate or contract away this duty,” the report states.

The Grand Jury offers several recommendations, including but not limited to:

• The State should establish mandatory and ongoing training requirements in federal grant management for any agency receiving at least $10 million annually in federal funding.
• State agencies or offices receiving more than $10 million annually should be required to promulgate written rules or adopt written internal policies establishing appropriate federal grant management guidance.
• The State should establish a training program for elected officials, agency and department heads, and others that encompass procurement and purchasing standards; competitive bidding requirements; identification and resolution of conflicts of interest, recordkeeping and retention requirements; the implementation of internal controls; and recognizing and preventing fraud and mismanagement.
• A state agency receiving federal grant money should ensure that its use is overseen by personnel with sufficient training and experience in federal grant management.

Read the full report.