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Audit finds Oklahoma State Department of Health misspent millions, potentially violated state laws

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Provided / The Oklahoman
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Oklahoma's PPE czar Gino DeMarco (left) and Gov. Kevin Stitt (right) stand in front of a stockpile of personal protection equipment and medical supplies during a press conference in Oklahoma City, Okla. in April 2020.

Oklahoma’s state auditor independently released her office’s investigation into the state department of health, which found it might have broken the law in its race to secure PPE at the beginning of the pandemic.

State Auditor Cindy Byrd published the audit Wednesday, after a records request from news nonprofit The Frontier. Her office completed and delivered the audit to the attorney general’s office in May 2021. It is typical protocol for the auditor to submit findings to the attorney general, who then decides whether those findings will be made public. Attorney General John O’Connor’s office has to date declined to release those findings.

Byrd said in a release on Wednesday that, after reviewing state law with outside counsel, she felt confident her office does have the legal authority to release the nine-month-old audit on its own — without approval from O’Connor’s office.

“I feel compelled, both legally and ethically, to release the full audit report to the public,” her statement reads in part. “Oklahoma taxpayers paid for it – they should get to see it.”

It found that poor planning and communication led to state department of health officials losing millions of dollars; more than $5 million worth of supplies still haven’t been delivered. It also found that the agency might have violated state purchasing laws by paying for products before they were delivered, and by allowing non-agency employees to finalize purchases.

In 2020, reports surfaced that the Oklahoma State Department of Health had been buying medical protective equipment from shady sellers undergoing FBI investigations, and that it had paid for shipments that never came. Then-Attorney General Mike Hunter requested an audit into the agency’s spending at that time.

Byrd’s office completed the misspending investigation in May 2021, and submitted its findings to Hunter’s office. He resigned five days later, citing personal reasons. In the months after, The Frontier requested the audit. Byrd declined, saying the determination was left to O’Connor’s office. O’Connor’s office also declined, simply saying it couldn’t comment on an ongoing investigation.

The events within the audit took place in spring of 2020. The pandemic had just begun unfolding in Oklahoma, and there was a global personal protective equipment shortage. The state’s hospitals were running out of necessary masks, gowns and other products to prevent infections. The audit depicts a messy, hasty process to secure equipment.

“To keep hospitals open and our frontline workers safe, I issued executive orders to get PPE to our state as quickly as possible,” Gov. Kevin Stitt is quoted in a statement on the audit. “Looking back today, we can acknowledge that there were technical errors while still knowing we did everything we could to protect citizens of this state during an unimaginable time.”

One issue the audit raises early in the report: the agency didn’t have a plan in place for procuring necessary goods and services in a public health emergency.

“OSDH did not have a comprehensive emergency procurement policy or procedure in place prior to the COVID-19 emergency, greatly increasing the state’s risk for fraud, waste, and loss of funds,” the audit reads. “As a result, prepayments were made in violation of the Oklahoma Constitution and goods have still not been received for over $5.4 million paid by the state.”

Auditors said that when they got their hands on financial records, they were inconsistent. Government officials buying the products mostly relied on wire transfers, and there was no standardized procedure for documenting those.

“(The auditor’s office) received hundreds of pages of supporting documentation in disarray,” the report reads. “At the time we requested the information, OSDH Finance was in the process of trying to organize the information and reconcile back to the wire transfers made.”

A lack of protocol wasn’t the agency’s only problem on that front. Communication was too.

Stitt appointed deputy tourism director Gino DeMarco to oversee the PPE process. At the time, DeMarco said in an email obtained by The Oklahoman that the agency’s typical procurement procedures were “essentially irrelevant” under the immense strain the pandemic created.

The audit found that as an agency outsider, DeMarco did not always clearly communicate with health department officials.

“It became apparent during our review of documentation, that because purchases were being directed by Gino DeMarco, who was not an OSDH employee, OSDH Finance staff were not always aware of the details about the purchases,” the audit reads.

The investigation found a few problems that might have broken state law.

It raises concerns that state law doesn’t allow agency officials to delegate purchasing power to anyone who is not an agency employee. So Stitt and the Secretary of Health at the time might not have had the authority to delegate that power to DeMarco.

Because of high demand, PPE makers were requiring prepayment. State law requires officials to pay for goods and services after they’re delivered, and after they have been accepted as satisfactory.

“Therefore, it appears that advancing payments for PPE violates … the Oklahoma Constitution, which prohibits the credit of the State from being ‘given, pledged, or loaned to any individual, company, corporation, or association,’” the audit states.

The audit explains that certain purchasing laws were suspended because of the governor’s executive orders declaring a health emergency, but none of the orders touched on that part of the law.

Auditors raised concerns about pay hikes for the Commissioner of Health that were approved over the past two years. It is now more than $335,000. The audit raises the concern that the OSDH director makes significantly more than comparable positions, such as the directors of the Oklahoma Health Care Authority and the Department of Human Services. It doesn’t list the salaries for those positions.


Read the full audit below:

Catherine Sweeney reports for StateImpact Oklahoma, focusing on health.
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