UPDATED: State ends no-bid contract for literacy program


(Updated to reflect comment from Reading Roadmap executive director with details of an independent audit that raised issues.)

The state’s social service agency on Friday ended a contract with the administrator of a literacy program after an audit uncovered $2.3 million in questionable expenses using welfare funds.

The Department for Children and Families announced the state halted a no-bid contract with Hysell & Wagner because of an audit started during former Gov. Sam Brownback’s administration that wasn’t finalized and was never made public.

DCF “is committed to ensuring that recipients of federal and state funds are spending those funds efficiently,” agency Secretary Laura Howard said in a statement.

“After reviewing the results of a DCF audit and despite heightened oversight during the first six months of 2019, it’s clear that Hysell & Wagner is falling short of this basic standard,” Howard said.

The company was the administrator of the Reading Roadmap program, which was started in the fall of 2013 under the Brownback administration to promote early childhood literacy.

The company was on a year-to-year contract with the state. It was paid was about $9.8 million during the last fiscal year from state welfare funds.

Kelly’s administration discovered the unpublished audit as it reviewed who received state welfare grants.

The audit questioned how $2.3 million was spent from February 2014 to December 2015.

Further investigation since January found that welfare funds were used to pay for 38 trips between Kansas and the homes of company executives in Washington and San Diego during fiscal year 2019.

State officials also found that welfare funds were used to cover about $443,000 in excessive payments to company executives surpassing federal salary limits during 2019.

They also found that administrative expenses charged to the Kansas Reading Roadmap program were 15% higher than permitted by the grant.

Andrew Hysell, the executive director of the program, said he was floored by DCF’s decision. He said his firm was just renewed for fiscal year 2020.

“We were totally shocked and surprised,” Hysell said. “Based on the tenor of the statement they sent out, which seems to make this a political issue, I don’t know what to do. I don’t know how to respond to an over-the-top kind of attack.”

The agency would not make the audit available saying it was still in draft form and had not been finalized.

DCF issued the draft audit to Hysell & Wagner Aug. 15. The company has up to 30 days to respond.

Hysell said his firm worked with the state to address its concerns, noting it had been cleared in earlier federal audits.

“We’ve been audited and we’ve passed federal audits, meaning we meet federal guidelines,” Hysell said.

“If they felt this way, why did they renew the grant and cancel it like this?”

Hysell provided copies of audits done by an independent firm.

In 2016, auditors found that not all of the money advanced to schools in the program was spent during the grant period.

The audit found that the money was not returned to the state in a timely fashion. The audit recommended additional staff training to ensure that didn’t occur again.

Auditors also noted that financial reports needed  to be complete and accurate.

They said those reports should be completed using required accounting basis and need to be supported by accounting records or reconciled with accounting records.

The audit notes that the firm replaced its finance director in 2016 and later hired a part-time accountant to assist with grant reporting and monitoring.

The agency said it worked with Hysell & Wagner in a straightforward manner to resolve the problems.

“DCF has, in good faith, worked with Hysell & Wagner to educate and correct the identified issues,” the agency said in a statement. Despite these efforts, Hysell & Wagner continues to struggle with the heightened monitoring requirements and has rejected revisions in their FY 2020 contract…”

Gov. Laura Kelly said the literacy contract heightens the concerns about no-bid contracts.

“I’ve always been concerned about the use of no-bid contracts and lack of accountability under the previous administration,” Kelly said in a statement.

“It’s clear,” she said, “that the state of Kansas cannot continue to support Hysell & Wagner’s administration of the Kansas Reading Roadmap program.”