A scathing report from a legislative oversight group found a state purchasing division failed to scrutinize billions in agency spending, posing a “financial and legal risk” to Oklahoma.
The Office of Management and Enterprise Services’ central purchasing division didn’t review at least $3 billion in purchases that state agencies claimed were exempt from oversight during the 2022 fiscal year, according to a report the Legislative Office of Fiscal Transparency released Thursday.
State agencies failed to cite any specific reason for more than $2 billion of the exempt purchases. Central purchasing does not vet purchases to ensure they actually qualify for an exemption — it just takes the agency’s word for it, the report found.
The figures include over $1 billion in expenditures from the Oklahoma Department of Transportation. The agency’s work on roads and bridges falls outside of state purchasing laws.
Central purchasing usually handles the acquisition, bidding, evaluation and legal aspects of state agency purchases. But a number of exemptions in state law allow agencies to circumvent the process.
And state agencies are increasingly claiming exemptions from procurement rules intended to provide oversight on how taxpayer money is spent. Adjusted for inflation, purchases state agencies claimed as exempt nearly tripled between fiscal years 2012 and 2022, with the vast majority of that increase occurring after 2018.
These figures don’t include purchases made by some of the largest agencies, including the Oklahoma State Department of Education and the State Department of Health, because they do not report spending through the statewide accounting software.
The report blamed the lack of spending scrutiny for the Foggy Bottom Kitchen scandal at the Oklahoma Tourism and Recreation Department in 2022. Unreviewed payments to the restaurant company ballooned to over $17 million. Tourism officials claimed exemptions on payments to Swadley’s for management fees, construction expenses, and equipment used to produce food, so central purchasing staff did not review any of the spending. This lack of oversight occurred despite warnings from an internal auditing team at the Office of Management and Enterprise Services that found the Tourism Department wasn’t following state procurement laws when buying items with state purchasing cards, the report found.
This lack of oversight has also led to state agencies signing an increasing number of government contracts without competitive bidding.
Between the 2019 and 2022 fiscal years, state agencies signed $1.1 billion worth of sole-source contracts, which can be awarded without a competitive bidding process, according to the report. State agencies signed the same amount of no-bid contracts over the previous seven years.
State law requires agencies to fill out a form and attach it to the purchase for no-bid contracts, but no outside entity verifies those transactions, according to the report.
At his weekly press conference, Gov. Kevin Stitt said he supports legislation to do away with all exemptions to state procurement rules.
Stitt said he believes all state contracts should be awarded competitively.
“Every single contract should have an RFP (request for proposal) and it should be an open bidding process, ” Stitt said.
The Office of Management and Enterprise Services agreed with most of the findings in the report, but argued in its official response that it is barred from questioning whether agencies qualify for exemptions.
According to state law, the state purchasing director “shall have sole and exclusive authority and responsibility for all acquisitions used or consumed by state agencies.”
State purchasing director Dan Sivard, resigned from his position the day before the oversight report was released. Caden Cleveland, the spokesperson for the Office of Management and Enterprise Services, said his resignation had nothing to do with the impending report.