Report: Oklahoma state agencies spent billions without oversight

A new scathing report has been released regarding state agency spending in Oklahoma.

OKLAHOMA CITY (KFOR) - A new scathing report has been released regarding state agency spending in Oklahoma.

The new report comes from the Legislative Office of Fiscal Transparency (LOFT), a group that essentially monitors government resources, including state tax dollars, and holds agencies accountable when it comes to funding.

On Thursday, the LOFT released a report on 'Central Purchasing Act Exemptions.'

In 1959, the Oklahoma Legislature created a 'centralized purchasing division.' Its purpose was to provide oversight and accountability for purchases made by state agencies, and government groups have to go through this division to get purchasing approved unless there is an exemption.

However, the report says that even though that division exists, many state agencies are circumnavigating the process, and violations have not been refered to the Oklahoma State Auditor or the Attorney General for review.

"During this evaluation, we really saw a shift from a centralized to a very decentralized scenario where the agencies were in control of much of the spending rather than a central unit," said LOFT Executive Director Mike Jackson, while noting that exemptions are used to expedite purchasing, but many transactions lack external accountability and oversight prior to a purchase being made.

In turn, they are spending billions of taxpayer dollars without those purchases being analyzed.

The LOFT report states that even when purchases are overseen, the rules aren't enforced.

In Fiscal Year 22, officials say state agencies spent $3 billion on purchases that were not overseen by the 'centralized purchasing division,' compared to $538 million that was.

"As you can imagine, probably a majority of purchases are under $250,000 so for all those dollars to be unaccounted for is a problem," said Representative Ryan Martinez, R-Edmond.

"I wouldn't be opposed to scrapping the whole exemption process and starting over and just seeing what that looks like."

When the Central Purchasing Act was created, it provided just seven exemptions that state agencies could use to make purchases outside of the division's control.

Today, LOFT estimates there are 87 full or partial exemptions.

Processes are too time consuming

"It may take up to 150 days from the agency's initiation to award."

LOFT report

The Legislative Office of Fiscal Transparency determined that the division's processes ensure that purchases are fair and competitive, but they are very time consuming.

"The Division has a 61-point requisition checklist used to oversee agencies using Central Purchasing, and depending on the complexity of the procurement, it may take up to 150 days from the agency's initiation to award," the report stated.

In fact, it said that if agencies followed the rules, it would take an average of 95.8 business days for their purchase to be approved.

The report also said that the division doesn't provide guidance to agencies on how to use the available exemptions properly, resulting in mismatched and inconsistent use.

"We have a legal opinion that we've gone by for a while that basically excluded us from the authority over exempted agencies [so] if there's a different or better legal opinion, we support it," said OMES Interim Executive Director John Suter.

Lack of oversight

During the last fiscal year, state agency purchasing using exemptions exceeded $3 billion.

"For example, prior to the COVID pandemic, emergency acquisitions averaged approximately $2 to $3 million; in FY22, emergency purchases exceeded $50 million, continuing to climb even after the expiration of an executive order related to pandemic spending," the report states.

Officials stressed that purchased listed as exempt are not reviewed by the Central Purchasing Division, but they do have access to them.

"A recent and well-publicized example of how exemptions can be used to evade oversight is the 'Mast Concession Lease' agreement between the Oklahoma Tourism and Recreation Department (OTRD) and Swadley's," the report states.

In that case, the Oklahoma Tourism and Recreation Department used an exemption that allowed them to avoid oversight on the resale of merchandise through department retail outlets, including restaurants.

However, the report says that the invoices from Swadley's were for management fees, construction expenses, and equipment used to purchase food- nothing related to items being resold.

In April of 2022, the state canceled its contract with Swadley’s after allegations of fraudulent activity and improper bidding practices came to light. The company was accused of misspending millions of taxpayer dollars, an accusation the restaurant group denies.

Division doesn't enforce Central Purchasing Act

"The Central Purchasing Division contends it does not have statutory authority to review exempt purchases. However, even among non-exempt transactions, LOFT found the division does not effectively use its authority to enforce agency compliance with the Central Purchasing Act," the report states.

LOFT says the division has a limited interpretation of its authority.

It also stated that current management puts an emphasis "on the Division serving as a 'partner' to agencies rather than an investigative or compliance office."

The division does use an audit team to conduct post-expenditure reviews of agency purchases. However, those audits are conducted on just a fraction of the purchases made by state agencies.

"From a fiscal perspective, in FY 22, just $14.9 million of the $538 million in agency purchases overseen by Central Purchasing were audited," the report states.

When the audit team's findings didn't match that of the state agency, officials say there was nothing in place for the division to determine which party was correct.

And when an agency is not compliant with the rules, there is no punishment.

Authorities say the division has the ability to limit an agency's spending, suspend all spending, and send reports to the Oklahoma Attorney General or Auditor Inspector.

However, none of those actions have been taken against any agency in the last 10 years.

"During the time OTRD was making payments to Swadley's, the agency was also the subject of a P-card audit. Among the Audit Team's findings were a violation of competitive bidding requirements, split purchasing to avoid purchase limits, improper documentation of purchases, improper purchasing of IT equipment, and prohibited purchases of alcohol. Despite nine formal findings, the Audit Team found that OTRD 'significantly complied with the State Purchase Card Procedures and the agency's internal purchase card procedures,'" the report states.

Even after the findings were brought to light, officials say the Central Purchasing Division didn't suspend the agency from being able to use a purchase card, reduce its purchasing power, or increase the number of audits conducted on the Department of Tourism.

When the agency was accused of making split purchases, which was classified as a felony, LOFT says the division didn't alert anyone.