The Commerce Department didn’t always adhere to its process for scoring applications seeking $99 million in COVID-relief funds, leading to concerns that some projects could have benefited or been hurt by the disparities, a new audit found.
Further, legislative auditors said they couldn’t review the commerce secretary’s final decision awarding the grants because the process wasn’t documented, which they said limited the program’s transparency. The agency disputed that finding.
Those were two key findings of a new legislative audit made public Monday. The audit attempted to answer lawmakers’ questions about how the first round of so-called BASE grants – short for Building a Strong Economy – were awarded.
“There were some human errors that occurred in this process,” said Rachel Willis, legislative affairs director for the Commerce Department.
“The agency was working extremely hard to get those dollars out the door because of the pandemic and the crisis we were all trying to overcome,” Willis told the legislative post-audit committee Monday.
She noted that Commerce staffers had to sort through hundreds of grant applications totaling more than $1 billion seeking a slice of $99 million in funding.
“We valued the speed in getting those dollars to the folks that needed it as quickly as possible,” Willis said.
The Commerce Department was responsible for reviewing applications and awarding the money, which went to 35 recipients in 24 counties across the state.
About half of the $99 million – $48.6 million – went to projects in Butler and Johnson counties.
Overall, the state received 445 applications totaling $1.7 billion seeking a share of the $99 million that was available from the program.
On average, each of the 35 approved projects received about $2.8 million.
The awards ranged from $13,500 to $10 million.
Sixteen of the 35 approved projects received at least 90% of what they requested, while 11 received less than 50% of what was requested.
There were six projects approved for Johnson County out of 55 requested, four for Butler County out of nine requested, three for Shawnee County out of 14 requested and two for Wyandotte County out of 20 requested.
One of the grants for about $425,000 went to the Mullinville Community Foundation, where a former Commerce Department employee – the late Jonathan Clayton – had been listed as the secretary/treasurer on the group’s board of directors.
Clayton, who vanished and was later found dead in a crashed truck, disappeared amid a criminal investigation into the theft of $120,000 from the Mullinville Community Foundation and $70,000 from a local cemetery board.
The Commerce Department last year filed a lawsuit against the Mullinville Community Foundation seeking the return of the grant money.
Auditors reviewed 10 applications to assess whether Commerce followed its scoring process, selecting them based on geography, the funds applicants requested and were awarded, and the scores applications received.
The audit said the grant applications that passed the eligibility reviews should have
been scored by two Commerce staff members, who used 10 factors in assessing each application for a total of 155 possible points.
The audit found that Commerce didn’t consistently follow its application scoring process for nine of the eligible applications that were reviewed.
Auditors said eight of the nine eligible applications received two scores and one application was scored by one staffer. Commerce staff said it was a mistake and that the application wasn’t subsequently approved for grant funding.
The audit also found that 14 of the 17 total reviews of the nine eligible applications appeared to be incomplete.
The audit found that 14 reviews had blanks instead of scores for addressing a question about the expected impact of the project.
When the auditors asked about the missing scores, department staff said the reviewers likely believed the projects didn’t deserve any points in that category.
“But because they didn’t enter a score, it’s also possible the reviewers unintentionally skipped this question,” the audit said.
Republican state Sen. Caryn Tyson of Parker questioned why, if the agency was trying to quickly process the applications, it only assigned two staffers to the job.
“How much of a priority did the department really make it?”
Willis said the agency thought that two staffers were adequate to do the job as well as the manager who oversaw the program and a third-party vendor that was verifying the eligibility of the applications.
Auditors also said the Commerce reviewers often disagreed on objective application
factors, such as how many community support letters were provided or whether there was evidence of matching funds or project-related bids and estimates.
“Commerce staff said this was human error due to the volume of applications they received and the short time frame they were working within,” auditors said.
Auditors raised concern about disparities in the scoring process.
“Inconsistencies in an application review process such as these matter because they may affect which applications are approved,” auditors said.
“For instance, an application that received only one review wasn’t scrutinized as thoroughly as applications that received two reviews.
“And skipping the question worth the largest number of points decreased the total points these applications could have received, potentially disadvantaging them compared to other applicants,” the auditors said.
“We don’t know how frequent these issues are because we didn’t review all applications,
but we think they’re indicative of issues beyond the 10 that we reviewed.”
Auditors also said they couldn’t document how the commerce secretary, a position held by Lt. Gov. David Toland, made the decision to award the grants.
Commerce staff said Toland made the final grant decisions, including which applicants would receive funding and how much each would get.
Of the 250 applications that were scored, the secretary selected 35 projects for grant funding, according to the audit.
“Commerce didn’t document these award decisions, so we couldn’t review which projects the secretary considered, why he approved the projects he did, or how the amount of funding was determined,” auditors said. “This limits the program’s public transparency.”
Department staff told the auditors that Toland considered the application scores and other factors such as geography, project type, risk and amount of funding when making the final selections.
“Staff said this was a verbal process that happened during meetings with the program manager, but we don’t know how many they held.
“Based on what Commerce staff told us, we don’t think the department documented award decisions for any” of the grant applications.
“Without documentation, we also couldn’t review why the secretary didn’t select some higher scoring projects over lower scoring ones.
“Staff said the secretary reviewed applications on a continuous basis and didn’t require a
minimum score threshold for approval. This process increased the risk that lower scoring projects would be selected over higher scoring projects.”
Auditors noted that there were 11 projects that weren’t approved that received the same or higher scores as the lowest-scoring project that received funding.
The Commerce Department resisted that characterization, saying the review process used a third-party firm to review eligibility and risk, which is documented.
“As our grant review policy states, the final determination may take project diversification and project location into consideration,” the agency said in response to the audit.
“Scores provided by staff were based solely on the metrics outlined in the application and scoring rubric,” the agency said.
“It is the secretary who has the flexibility and authority…to evaluate applications using a broader scope and breadth of factors.
“The secretary has knowledge about economic development opportunities that are not
public or otherwise known by staff scoring the applications.
“The Secretary utilized this knowledge to help make the most strategic decisions for the state,” the agency said.
The agency said Toland considered a wide variety of factors including geographic distribution, whether the recipient was in a rural, suburban or urban setting, and the importance and potential impact a particular project would have on a community.
“Commerce created and carried out a robust grant process in response to a global
pandemic that wreaked havoc on the Kansas and national economy,” the agency said.
The program “has successfully provided funding to support key infrastructure development projects across the state to help expand the state’s base of businesses and residents.
“This was a challenging task given the significant number of applications received and the importance of getting the money into the communities quickly.”
