As elections loom, federal audit slams Oklahoma Gov. Stitt's administration
A withering federal audit of Oklahoma's handling of pandemic relief funds turned into another fount of criticism against Gov. Kevin Stitt and his Cabinet, but it remains to be seen whether the negative findings will have political implications.
Stitt won his primary election handily, but his education secretary, Ryan Walters, has yet to secure the Republican nomination in the state schools superintendent race.
Walters and Shawnee Public Schools Superintendent April Grace will continue to an Aug. 23 runoff. The GOP winner will be the likely favorite in a Nov. 8 general election against Democrat Jena Nelson.
Walters was heavily involved in a program that a U.S. Department of Education audit found was rife with misuse of federal grant funds. The program gave $1,500 grants to Oklahoma families for education-related costs, but auditors found over $650,000 worth of non-educational purchases.
Grace said the adverse audit is evidence Walters is “not qualified for the position of state superintendent” nor to lead the Oklahoma State Department of Education, an agency that oversees billions of taxpayer dollars.
“We have a few hundred million in federal funds that flow through the (state) department every year, and part of the department’s responsibility is meeting the regulations that go with those funds,” Grace said. “This is one example of clearly the kinds of issues we could see from year to year if Ryan Walters were overseeing those funds.”
Walters did not return a request for an interview.
The governor’s office said it is reviewing the federal report and is conducting an internal audit, spokesperson Kate Vesper said.
The state will take “swift and appropriate action” if it is determined a vendor failed to ensure grant funds were spent properly or if an individual misused grant money, Vesper said.
Walters led the field of Republican candidates for state superintendent with 41% of the primary election vote. Grace earned 31%.
There is no reason to think Walters won’t be the leader in next month’s runoff, said Pat McFerron, president of the polling and political consulting firm Cole, Hargrave, Snodgrass & Associates.
McFerron said a report from a Biden-led U.S. Department of Education will have little sway with Republican primary voters. Nor would it erode GOP support for placing education funds directly in parents’ hands, he said.
A bill that would have created education savings accounts for families to use for private-school costs failed in the Republican-led Oklahoma Legislature this year.
“Ultimately, I think that Republican primary voters, especially, would rather have parents in charge of that spending than school administrators,” McFerron said. “I don’t think an investigation like this fundamentally changes whether a person is for or against school choice.”
The U.S. Department of Education released its audit on Monday of the Governor’s Emergency Education Relief (GEER) Fund, a $40 million grant awarded to Stitt from the 2020 CARES Act.
Stitt had discretion over how to use the funds, as long as they supported schools and students most significantly impacted by the pandemic or were used to carry out emergency educational services.
The governor dedicated $10 million to a Stay in School fund that subsidized tuition for private-school students. Another $8 million went to the Bridge the Gap Digital Wallet, which distributed $1,500 grants directly to Oklahoma families to use for educational needs.
The U.S. Department of Education audit found the state failed to follow federal regulations in both programs to ensure funds were spent properly and given to eligible students.
Poor monitoring by state officials of the Bridge the Gap initiative resulted in $650,000 spent on non-educational items, including smartwatches, doorbells, furniture and air conditioners, auditors said. Oklahoma Watch and The Frontier first reported on questionable Bridge the Gap expenses in May.
The governor’s office told the two media outlets that blame for misused funds lies with ClassWallet, the company the state contracted with to disburse Bridge the Gap funds.
But the state was ultimately responsible for making sure all expenses fell in line with federal rules, auditors said. ClassWallet denied fault to Oklahoma Watch and The Frontier.
State officials didn’t take advantage of available controls in Class Wallet’s system that could have limited purchases to educational items, the federal report states. Walters personally declined use of the extra filters, ClassWallet told auditors, according to the report.
“The decision to not take advantage of the digital wallet system’s pre-approved purchases option resulted in grant recipients (families) using Bridge the Gap GEER grant funds to purchase items that were not education-related,” auditors wrote.
Walters told auditors he believed some vendors had been removed from the system because they didn’t line up with the purpose of the grant, according to the report. He gave blanket approval to the remaining vendors, the report states.
Some companies in the system, like Staples and The Home Depot, sell non-educational items that families then purchased, auditors said.
Investigators found more than 3,100 purchases that did not appear to be education related.
Since Oklahoma Watch and The Frontier first reported the questionable purchases in May, Walters has denied knowledge of improper spending until Stitt appointed him as education secretary in September 2020.
“During that point in time, I found a contract where a vendor was saying that they were doing something and I began to look at the reports coming in and saw that they were working outside their contract,” he said in a June 22 superintendent candidate debate.
However, Walters was heavily involved in securing the ClassWallet contract even before he was appointed to the governor’s Cabinet, auditors found. The nonprofit where Walters is executive director, Every Kid Counts Oklahoma, participated in the contracting process between the state and the company.
After the contract was secured, Walters helped decide what spending controls ClassWallet should use, according to the audit.
Walters was also an appointed commissioner of the Office of Educational Quality and Accountability, the state agency the governor’s office tasked with overseeing the Bridge the Gap initiative.
Auditors said the governor’s office couldn’t provide documents to show why it selected ClassWallet or other contractors for GEER-funded programs. A lack of records for the governor’s Stay in School initiative meant auditors were unable to verify whether all recipients were eligible for grants to support private-school tuition.
The state had a company check every applicant’s eligibility, but the business automatically deletes email records every 90 days, the report states. All documents pertinent to a federal award must be retained for three years, according to the code of federal regulations.
The only GEER-funded program that complied with federal regulations for record-keeping and oversight was one handled by the state Education Department, auditors said. The state agency distributed $10.9 million to improve student internet access, distance learning, teacher training and summer enrichment programs.
The head of the agency, Joy Hofmeister, will face Stitt in the Nov. 8 general election for governor. Hofmeister switched to the Democratic party this year to make her gubernatorial run.
“Gov. Stitt weaponizes audits to distract from his administration’s own self-dealing, incompetence and arrogant disregard for the law,” Hofmeister said in a statement. “This federal audit speaks for itself.”
Last year, the governor requested the Oklahoma State Auditor and Inspector’s Office conduct an investigative audit of the state Education Department.
Stitt said he asked for a review of how well the agency oversees public-school spending of taxpayer dollars. Hofmeister at the time called it “yet another attack on Oklahoma’s public education system.”
The school district recently reported to police questionable management of a third-party contract. The district said the incident affected about $20,000 within the Talent Management Department, and the head of the department has resigned.
Tulsa Superintendent Deborah Gist said the governor’s audit request is an attempt to divert attention from his own negative press, particularly from misuse of GEER funds.
“The corruption and cronyism associated with Kevin Stitt and Ryan Walters are not only horrible for Oklahoma from our ability to function let alone thrive, it is also resulting in scandal after scandal to the tune of millions and millions of your taxpayer dollars,” Gist wrote in a Facebook post July 10. “In my experience, people who deflect so aggressively have something to hide — particularly during campaigns.”
Reporter Nuria Martinez-Keel covers K-12 and higher education throughout the state of Oklahoma. Have a story idea for Nuria? She can be reached at email@example.com or on Twitter at @NuriaMKeel. Support Nuria’s work and that of other Oklahoman journalists by purchasing a digital subscription today at subscribe.oklahoman.com.