Legislative Office of Fiscal Transparency Rapid Response Evaluation: Coronavirus Relief Funds February 2021 Legislative Office of Fiscal Transparency State Capitol Building, Room 107 2300 North Lincoln Blvd. Oklahoma City, OK 73105 okloft.gov LOFT: Coronavirus Relief Funds Rapid Response Evaluation 2 Table of Contents LOFT Oversight Committee .............................................................................. 3 Executive Summary .......................................................................................... 4 Introduction ................................................................................................... 11 Finding 1: Process for spending Coronavirus relief funds lacked structure and clarity. ............................................................................................................ 14 Finding 2: A significant component of relief funds was used for economic support and government modernization. ..................................................... 24 Finding 3: Ongoing State needs would be underfunded if not for additional aid. .................................................................................................................. 28 Summary of Recommendations ..................................................................... 33 About the Legislative Office of Fiscal Transparency ...................................... 34 Appendices ..................................................................................................... 35 Appendix A. Methodology ..................................................................... 35 Appendix B. Explanation of Single Audits .............................................. 36 Appendix C. FBI Director Comey Letter ................................................. 37 Appendix D. CFT Project Comparison Matrix......................................... 39 Appendix E. CFT Email – “Aggressive and creative” .............................. 40 Appendix F. Institutions of Higher Education Survey ............................ 41 Appendix G. All Transactions equal to or greater than $20,000 ........... 42 Appendix H. Business Continuity Project ............................................... 76 Appendix I. IT Projects/Government Modernization Projects............... 77 Appendix J. State by State Comparison of Coronavirus Relief Funds Utilization ............................................................................................... 81 Appendix K. Economic Project Scoring Matrix Template ...................... 84 Appendix L. Communication with representative of CARES FORWARD and OMES............................................................................................... 85 Appendix M. State Oversight of Federal CARES Act Relief Funds .......... 87 Appendix N. Analysis of Unemployment Rates ..................................... 88 Agency Responses .......................................................................................... 89 LOFT: Coronavirus Relief Funds Rapid Response Evaluation 3 LOFT Oversight Committee LOFT: Coronavirus Relief Funds Rapid Response Evaluation 4 Executive Summary 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: LOFT: Coronavirus Relief Funds Rapid Response Evaluation 5 “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. Project Background 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 LOFT: Coronavirus Relief Funds Rapid Response Evaluation 6 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