In its rush to respond to the coronavirus pandemic, the Oklahoma State Department of Health paid out more than $20.4 million for protective equipment that it has no record of receiving, a report from the state auditor has found.
The purchases were part of 62 wire payments the health department made last year for protective equipment that totaled almost $37 million, according to a routine statewide audit.
The Oklahoma State Auditor & Inspector released the report Tuesday night.
The auditor’s report also found that the health department mistakenly paid one vendor $32,232 twice, and the funds had not been returned as of Dec. 11.
About $18.8 million in purchases were not reported to the state’s accounting system during the 2020 fiscal year, which ended June 30. Eight payments totaling more than $11.2 million were recorded in the state’s system after the fiscal year had ended, and 10 payments totaling more than $7.6 million had not been not entered as of September 30.
In an emailed statement to The Frontier, Health Commissioner Dr. Lance Frye said the agency will work to address the audit’s findings, which span “decisions made under a prior administration.”
Gov. Kevin Stitt appointed Frye in late May after former Health Commissioner Gary Cox stepped aside because lawmakers chose not to hold a hearing to confirm his nomination.
The audit’s “findings are key as we continue reviewing all of our agency’s processes to ensure that our financial transactions are secure, properly documented and transparent — now and in the future,” Frye wrote. “OSDH is conducting a thorough review of the audit internally, as well as a forensic analysis of our PPE supply and financial records.”
Frye did not answer The Frontier’s question about missing documentation for $20.4 million in protective equipment.
“We will be able to respond to any inquiries on specific aspects of the audit as soon as the review is complete,” Frye wrote.
In an emailed statement to The Frontier, Stitt said the state “prioritized the health and lives of Oklahomans by turning over every rock” to secure the protective gear for health care workers and first responders during the global supply shortage.
“I appreciate Auditor Byrd’s report and am confident the Oklahoma State Department of Health will keep implementing its findings and use the lessons learned to continue to be transparent,” Stitt said.
In a response in the report, the health department wrote that it does not typically utilize wire transfer payments and also admitted “mistakes were made.”
“The Oklahoma State Department of Health became one of the primary responders to the COVID-19 pandemic which impacted many areas of the agency, including the Financial Services department,” the agency wrote in a response included in the audit. “Responding timely and appropriately in the early days of the pandemic required businesses to adjust processes.”
The agency has since implemented payment procedures for wire transfers to prevent future mistakes, it said.
As the state Health Department scrambled to secure face masks, gloves and other life-saving equipment in response to the pandemic, the agency paid some vendors before the state received the material.
Stitt’s executive order last March suspended many of the requirements of the normal purchasing process, such as obtaining competitive bids and buying through preferred states vendors so agencies could quickly respond to urgent needs for personal protective gear and other equipment.
Though the state authorized the Oklahoma State Department of Health to make advance payments for personal protective equipment, it “did not negate the agency’s responsibility for recording the expenditure into the statewide accounting system,” the report said.
“It appears, given the unusual circumstance of using clearing account funds and the rush to make, and in some cases, pre-pay necessary purchases, OSDH did not record the expenditure into the statewide accounting system,” the report states.
Because the health department didn’t report $18.87 million in wire transfer payments to the state accounting system before the fiscal year ended, the agency understated its expenditures. The Office of Management and Enterprise Services was notified to correct the misstatement, according to the report.
The auditor’s report recommended the Health Department review all of its wire transfer payments to ensure it received all of its supplies or enlist Oklahoma Attorney General Mike Hunter to seek reimbursement from vendors. Vendors should also provide documentation to the agency before payment moving forward.
In its response in the auditor’s report, the Health Department said it no longer pays deposits to secure orders for protective equipment, which was an “essential” practice, as the material was in high demand last year.
Last year, states raced to secure personal protective equipment and other material to combat the pandemic. Many states had to compete with other agencies and the federal government for medical equipment that was in short supply.
“The Oklahoma State Department of Health is currently working with the Oklahoma Attorney General to either receive the purchased items or obtain a refund,” the agency’s response said.
The Oklahoma Attorney General’s Office already has been tasked with attempting to return a $2 million stockpile of hydroxychloroquine purchased by the state last year after former President Donald Trump touted its use as a treatment for the coronavirus.
In January, Hunter filed a lawsuit against a Tulsa piano bar owner on behalf of the Health Department seeking more than $1.8 million for N95 masks the state claims were never delivered. That case is pending.
Hunter requested an investigative audit in April 2020 into the health department’s spending of state-appropriated funds after media reports disclosed steps the health department had taken to procure N95 masks and other protective equipment during the pandemic. Critics called the agency’s methods risky.
The Oklahoman reported last year that health officials had been moving forward with a $9.5 million purchase of N95 masks from a company they knew was under investigation by the FBI.
A spokesman for the Oklahoma State Auditor & Inspector said the investigative audit is ongoing.
