This story was produced in partnership with the Oklahoma nonprofit newsroom Oklahoma Watch.

United States Department of Education auditors recommended clawing back more than $650,000 in misspent federal coronavirus relief funds from Gov. Kevin Stitt and reviewing an additional $5.5 million in purchases, according to a federal audit released Tuesday.

The questioned spending came from Stitt’s Bridge the Gap Digital Wallet program, which gave $1,500 grants to low-income families for educational purchases like computers and school supplies during the pandemic. 

Auditors pinpointed questionable expenditures like arcade games, Christmas trees, smart watches, sofas, televisions and refrigerators totaling $652,720. The extraneous items made up more than 10% of all purchases. The $5.5 million is the total of purchases the auditors did not analyze and could contain unauthorized items.

The tally of noneducational items families purchased with program funds was higher than previously reported in a joint investigation The Frontier and Oklahoma Watch published in May.

Auditors also found Oklahoma failed to follow federal guidelines for four of Stitt’s five educational relief programs, the report shows. 

State officials gave the Florida-based company ClassWallet a no-bid contract to administer the Bridge the Gap Digital Wallet program and distribute grants to families.

The auditors also found poor record keeping for another relief program managed by ClassWallet called Stay in School. The program distributed tuition grants for up to $6,500 to students already attending private schools during the pandemic. 

Oklahoma could not provide supporting documentation that students who received grants were actually enrolled and registered at private schools, according to the audit.

Kate Vesper, a spokeswoman for the governor, said Tuesday that the state started an internal audit of Oklahoma’s educational relief funds several months ago. 

“Governor Stitt has called for more audits than any other governor in our state’s history and is proactive in monitoring and ensuring appropriate use of Oklahoma taxpayer dollars,” she said. “His commitment to transparency and accountability is no different here.”   

But the state has refused to release a review of the program by a private contractor. 

Oklahoma responded by placing blame on ClassWallet, saying the company assured there would be no fraud. But the state said it would take steps to improve its monitoring of federal grants.

According to the audit, Oklahoma said that it was working in a ”high-pressure environment” due to the effects of COVID and that it acted in good faith to “ensure funds associated with Bridge the Gap initiative were properly expended when it contracted with ClassWallet.”

But the auditors say the state cannot just pass blame to ClassWallet.

Oklahoma did not say it would return the funds or review for any other unallowable Bridge the Gap expenditures, auditors wrote.

“As the recipient of the GEER grant funds, Oklahoma was responsible for ensuring that its grant funds were used properly,” auditors said.

The Frontier and Oklahoma Watch reported in May the state had returned $2.9 million in unused educational relief funds to the U.S. Department of Education. The audit revealed the funds were returned to the U.S. Department of Education and reallocated in May 2021 to the Oklahoma Department of Education to be distributed to public schools for summer school programs. 

Oklahoma did not utilize ClassWallet’s monitoring capabilities

State officials claim it was ClassWallet’s responsibility to oversee the relief money and have threatened to sue the company. 

Secretary of Education Ryan Walters, who is now a candidate for state superintendent, claimed during a debate in June that he discovered that ClassWallet hadn’t upheld its end of the contract and that he’s working to hold the company accountable. But emails show that Walters worked to secure ClassWallet the state contract even before Stitt named him Secretary of Education in September of 2020.

Oklahoma Secretary of Education Ryan Walters. Michael Duncan/NonDoc

Under the contract, ClassWallet gave the state access to a system to view reports and summaries of purchases, but it wasn’t until February 2021 — a month after the program ended  — that the former director of statewide operations for Oklahoma accessed the information, and they only did so once, the audit said. 

The auditors found that “​​Oklahoma did not use all available controls in ClassWallet’s digital wallet system” to monitor how grant money was spent. 

Walters granted “blanket approval” to purchases made from pre-approved vendors on the ClassWallet platform, which included Office Depot and, for a short time, Home Depot. Walters was executive director of the nonprofit organization Every Kid Counts Oklahoma and not a state official when he approved the purchases. 

Oklahoma’s ‘Stay in School’ program also lacked proper oversight 

For the Stay in School program, auditors were unable to verify eligibility for eight of 10 randomly selected students.

Students who attended eligible private schools could receive tuition assistance through the program. But ClassWallet subcontracted the eligibility verification to a separate company that automatically deletes emails after 90 days.  

Auditors recommend Oklahoma review the eligibility of all participants, or at least a larger sample. 

In December 2020, Stitt issued a report about the Stay in School program, citing it as evidence that private schools aren’t just for the wealthy.

“Gov. Kevin Stitt’s Stay in School Fund program proves the strong desire of Oklahoma parents from all income levels and all locations for school choice, proves the state can provide needy families a quality education for an average of as little as $5,132 per child, and proves that private schools across Oklahoma will gladly accept children from the lower rungs of the economic ladder.”

Parents who received grants said they were grateful for the financial assistance during the pandemic. One parent said that without the grant money, her daughter would have had to leave her parochial school in Oklahoma City for her last year of junior high.

“Her mental health suffered a lot during the pandemic. That has been the case for so many kids and the comeback has been slow. She missed out on … many cherished events. I cannot imagine what she would have gone through had she had to leave her school, too,” the parent wrote. She asked not to be named out of concern for her daughter’s privacy. 

For Stay in School, Bridge the Gap Digital Wallet, and two other educational relief programs, called Learn Anywhere Oklahoma and Skills to Rebuild, the state couldn’t show auditors evidence that relief money went to organizations “most significantly impacted by the coronavirus or deemed essential for carrying out emergency educational services,” as required by the program. 

The one program that did meet federal guidelines was an incentive grant program managed by the state Department of Education. Stitt used $8 million to match the department’s $8 million, for a total of $16 million distributed for internet connectivity, mental health support, and other initiatives.

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