Though the jury found no evidence of criminal activity or willful corruption, the report outlines the timeline for how more than $8 million was misspent through private partnerships the jury concluded were rushed and lacked meaningful oversight.
Politics over experience
Oklahoma Gov. Kevin Stitt is one of the main subjects of the report, which took jurors two months to compile. Jurors said Stitt let politics get in the way of proper fund management.
In 2020, the Trump Administration released the Governor’s Emergency Educational Relief (GEER) Funds to states, intending to get money to educational agencies most significantly impacted by the pandemic or essential for emergency educational services. Oklahoma received $39.9 million of those funds.
Instead of using the Oklahoma State Department of Education to handle the federal grants — an agency with significant staffing resources and experience in federal grant management — Stitt instead turned to two pro-school choice private nonprofits through no-bid contracts: Every Kid Counts Oklahoma, whose then-executive director is the now-State Superintendent Ryan Walters; and the Oklahoma chapter of the American Federation for Children, a group founded by former Trump Secretary of Education, Betsy DeVos.
Every Kid Counts Oklahoma oversaw the $8 million Bridge the Gap program, which gave money to low-income families for educational materials. The American Federation for Children ran a $10 million scholarship program, “Stay in School,” designed for low-income families attending private schools.
The jury found Stitt did not want OSDE to manage some of the GEER funds because of differences in political ideology between him – a pro-school choice advocate – and the department, headed by then-State Superintendent Joy Hofmeister.
“Witnesses universally acknowledged that by this point in time, the relationship between the Governor’s Office and SDE was strained, owing in large part to continuing policy disagreements over school closures and mask mandates,” the report reads. “More than that, witnesses privy to the decision-making process all agreed the decision to bypass SDE was driven by another perceived policy difference over so-called ‘school choice.’ … Without consulting the agency, the governor’s office assumed SDE would be unwilling to support such initiatives instead of support public schools.”
The jury said it received evidence the governor’s assumption was unfounded.
Jurors also note OSDE handled $8 million in separate GEER funds successfully. Combined with $8 million in other pandemic-era federal funds, it created a competitive Incentive Grant program to provide local districts with assistance for emergency needs. Federal and state audits concluded all of OSDE’s GEER funds were appropriately managed and complied with federal regulations.
The report details a hastily made contract with Every Kid Counts and the American Federation for Children that lacked safeguards that would have made it compliant with the intent of the federal funding.
It says there is no indication the governor’s office made any effort to vet the organizations. According to the report, the picks were made in part due to statements made by Walters that his organization had the necessary staffing and experience for federal grant management — despite Walters being the organization’s sole employee and having no federal grant experience.
“Basic due diligence by the state would have uncovered this glaring lack of qualifications,” the report reads.
The motive behind the Bridge the Gap and Stay in School programs, the report says, was to test out school vouchers in Oklahoma. And during the 2023 Oklahoma Legislative Session, lawmakers passed a voucher-like tax credit bill to subsidize private school enrollment.
“To be sure, witnesses involved in the implementation of these programs — from both inside and outside state government, from senior state officials down — uniformly acknowledged that the Governor’s Office intended [Stay in School] to serve as a ‘test case’ or ‘pilot program’ for establishing an Oklahoma school voucher program,” the report reads.
Programs plagued with problems
The report references a “Digital Platform Company,” Florida-based ClassWallet, which was contracted to operate a digital marketplace for the Bridge the Gap and Stay in School programs.
ClassWallet did not have the capability to process applications from families to determine income eligibility. It suggested contracting with an “Information Management Company” to process the applications, according to the report. Walters asked if ClassWallet could subcontract with the company instead of a direct contract with the state, to “avoid the governor seeming to pay two groups for one process.”
Crucially, the report says, ClassWallet’s contract did not specify whether it was a sub-recipient of the federal grant award — which would make it responsible for adhering to federal requirements, or whether it was just a contractor. And, because the Information Management Company subcontracted through ClassWallet, it had no definitive obligation to comply with federal requirements.
ClassWallet’s contract also failed to protect the personal information of applicant families. An Excel spreadsheet was obtained through a state audit from American Federation for Children Executive Director Jennifer Carter. It contained parent and student names, addresses, phone numbers, emails and schools, as well as information not on the applications: political parties and voting districts.
“This indicates that unbeknownst to families, their information was being collected and processed for purposes other than that for which it was disclosed,” the report reads.
The launch of Bridge the Gap and Stay in School was also inherently unfair, the report said. Despite public-facing announcements saying the program launch would be Aug. 10, 2020, five private schools were selected to attend an “Open House” enrollment event for six hours on Aug. 8.
The Open House allowed 486 applicants to submit their applications before advertising said the program would be publicly accessible. Nearly $2 million was awarded in Stay in School contracts from this early access, making up 20% of the program’s available funding. The report says by the second day of the applications being officially opened, its funds were nearly depleted.
Of these five schools, three did not require students to pay any tuition, and the other charged significantly discounted rates of less than $1,000 per student. Despite that, four of the schools received the maximum $6,500 per-student award, and the other received $6,000 per student. In total, these five private schools were awarded more than $1.8 million.
Jurors attempted to learn why these schools were selected but said the ability to investigate that process was “significantly hampered” because Carter and the Information Management Company were not contractually obligated to keep written communications records.
More than half of the awards, totaling $5.3 million, for Stay in School were provided to families who indicated on their applications they did not experience or anticipate any decrease in income that year. Additionally, more than $11,000 was awarded to families who did not meet the household income poverty guidelines.
Between excessive tuition payments to private schools and awards to families whose financial circumstances should have made them ineligible, more than $6.5 million of federal funding was misspent on the Stay in School program, according to the report.
“Had the state adequately administered and monitored the [Stay in School] program, hundreds more Oklahoma families in need could have received emergency tuition assistance,” the report reads.
The state auditor estimated 657 eligible students actually experiencing COVID-19 related financial hardships were denied access to the program due to drained funds.
As for the Bridge the Gap program, a joint investigation by Oklahoma Watch and The Frontier first brought to light the mishandling of the program’s funding. As detailed in the investigation and later in audits, families were allowed to purchase all manner of non-education-related items with program money. Walters, described in the report as the program’s “chief architect,” gave ClassWallet “blanket approval” for the families’ purchases.
A state audit found nearly 40,000 unallowable items were purchased, including gaming consoles, television sets, doorbell cameras, smartwatches, grills and Christmas trees.
The report said Walters made public statements boasting of his collaboration with ClassWallet and served as the primary administrator of Bridge the Gap. But, when investigators began to probe Walters, who had by September been appointed Secretary of Education, he claimed not to have any specific knowledge or involvement aside from public promotion.
“Any such claim by [Walters] is fully belied by all other evidence and testimony received by this Grand Jury,” the report reads.
Jurors admonish the “opaque processes” and “loose dealings” with federal funds, saying it was justifiable the state’s failure to “ensure competent management and oversight” of the two programs prompted the federal government to investigate. It notes the actions may jeopardize Oklahoma’s eligibility for future federal funds.
The report acknowledges the decisions to manage GEER funds were made “swiftly under chaotic circumstances” during the height of the pandemic. However, jurors argue it is “precisely because of these circumstances” the state should have turned to the State Department of Education for its experience and resources.
“Instead, the state opportunistically chose to capitalize on the sudden influx of federal aid money to launch publicly funded, private education initiatives,” the report reads. “What’s worse, the state relied on unvetted, unqualified private individuals and entities with virtually no accountability to the state to carry out these political objectives.”
The governor’s office did not return a request for response.
Dan Isett, director of communications for Walters’ office, blamed ClassWallet for the program’s mishandling, saying it did not “carefully and efficiently” use taxpayer funds.
“Superintendent Walters’ deep commitment to fiscal responsibility and taxpayer accountability has been borne out during his time as Secretary and now as State Superintendent,” Isett said. “Under his leadership, OSDE has instituted the highest standards to ensure the most efficient use of taxpayer money possible.”
Walters has been under increasing scrutiny over using state funds for public relations contracts, travel for speaking appearances, his classroom Bible initiative of at least $3 million and mounting lawsuit expenses.
Former Oklahoma Attorney General John O’Connor filed a lawsuit against ClassWallet in August 2022, but the current Attorney General Gentner Drummond dismissed the suit in January 2023, saying it was clear “state actors and other individuals” were to blame. The grand jury investigation was called for by Drummond.
Recommendations for better practices
While the jury did not find criminal actions, it did compile a list of recommendations for state agencies, offices and the legislature:
The state should mandate federal grant management training for any agency receiving at least $10 million in federal funding annually.Each agency that receives at least $10 million in federal funds annually should create internal policies for grant management.The state should create a training program for officials, agency heads and chief finance officers for several management components, including preventing fraud and mismanagement, and implementing internal controls.Agencies or offices that receive federal grants should ensure the management of the funds is overseen by qualified personnel.The legislature should enact new laws that:Limit an agency or office’s authority to delegate federal funding decisions to private entities or citizensMandate agencies or offices to vet private entities or citizens that collaborate on managing federal fundsProhibit agencies or offices from working with private entities or citizens without a detailed, written contractRequire those collaboration contracts to be published for public inspectionVoid any contract with a private entity or citizen on behalf of an office or agency that wasn’t given written approval to do so by the office or agencyState officials should use available state resources and experience “regardless of political and philosophical differences.”
“The Grand Jury concludes that the fundamental problem from which all other deficiencies in the [Bridge the Gap] and [Stay in School] programs stem was the state’s disregard of existing administrative safeguards in the interest of advancing a political and philosophical agenda,” the report reads. “While there is nothing inherently improper with elected officials pursuing their own policy goals, the politically motivated decisions in this case were made at the expense of ensuring responsible stewardship of public money.”
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