State Auditor report shows federal stimulus funds were misspent in Mississippi, elsewhere

A new report from Mississippi State Auditor Shad White shows hundreds of millions of dollars of federal stimulus funds were misspent in the state, and the auditor's office is hearing similar stories from states throughout the nation.

Each year the state auditor releases a "Single Audit," which analyzes all of the federal funds coming into Mississippi and how state departments spent them.

"This audit is intended to let the taxpayers see how their money was spent, warts and all," White said in a news release.

Due to federal COVID-19 related stimulus programs, namely the CARES Act and ARPA, this year's Single Audit likely looked at the largest amount of federal funding in state history, White said during a Tuesday morning teleconference. White thanked his staff for putting in significant work to handle such a large task.

"This audit is a bit different than the other audits that have been done during my four-year tenure as state auditor because this involved a ton of federal stimulus money, federal stimulus money that flowed as a result of the COVID-19 pandemic. I think that the fact that this audit involves so much money shows the important and critical role that state auditors around the country play in making sure that money that's handed out to states is spent properly," White said.

Of the notable instances of misuse outlined in the audit, White highlighted a number of key findings.

First, the report found that in fiscal year 2021 the Mississippi Department of Employment Security saw a 301% increase in unemployment benefit overpayments compared to the previous year. That amounts to "at least $473 million in improper or fraudulent unemployment payments," including payments to people in prison and residents of other states, according to the audit.

The audit also cited MDES for other instances of misuse on non-COVID-19 related workforce development programs. In one instance, MDES spent thousands of dollars on a model of Chinese-made drones that Congress has barred the federal government from using due to national security concerns.

White also noted misuse of federal Medicaid funds by the Mississippi Division of Medicaid, with people who should not be eligible for the program receiving benefits. This came after similar findings in last year's Single Audit.

During the teleconference Tuesday, White directed attention toward one section of the audit in particular, which dealt with the Mississippi Department of Education. The audit found that MDE had improperly given advanced notice to a particular vendor when seeking a contract to help purchase laptop computers for schools, using COVID-19 relief funds appropriated to them by the state legislature.

According to the audit, MDE gave the eventual winning bidder draft versions of the specifications and details of its Request For Qualifications 20 days before the RFQ was posted. While MDE told the auditor's office they also gave advanced notice to other vendors, the Single Audit points out that the unsuccessful bidders were only given about a week's advanced notice. It also claims the winning vendor was allowed to make suggestions to MDE, some of which were factored into the eventual RFQ.

"The winning bidder received them 20 days in advance, while the remaining two vendors received them 7-8 days in advance. Additionally, the specifications sent to the winning bidder were marked “draft” and redline comments were added to the specifications by the winning bidder when they were returned to MDE," the Single Audit reads.

The winning bidder was later revealed to be CDW, a publicly traded company which provides technology to businesses and schools.

"I think the big takeaway for me is that the taxpayers expect that when procurement happens in government, that it happens in a fair competitive process so that the taxpayers get the biggest bang for their buck. We expect as taxpayers for folks spending government money to get bids from vendors and weigh those bids based solely on the price that the vendors will charge and the quality of the goods and services that they're going to provide," White said. "When you break that bidding process taxpayers do not, are not, guaranteed that they're going to get the most bang for their buck."

White said the lessons learned from the MDE bidding process can be applied broadly.

"Really you could apply the lesson here to any time government is spending money, whether it's a small county or city government all the way up to a big state agency spending a lot of stimulus funds," White said. "Folks around the state need to know that we're watching these processes, and we're going to highlight it when a vendor, for example, gets added information that other vendors did not get, or a vendor gets a chance to edit the documents that are sent out to trigger the bid process. That's a broken procurement process and should not have happened."

White said the levels of misuse of COVID-19 stimulus funds seen in Mississippi are far from uncommon. In his conversations with auditors from other states, White said he hears many of the same things.

"Virtually every state that we have talked to has had similar issues. In fact, the state of California briefed all of the state auditors last summer on the loss to fraud from their unemployment compensation fund, and they estimate that they lost as much as $11 billion in the state of California. So, this is tragic, it's unfortunate, but it also happened all across the country," White said.

There will be lessons to be learned from the way pandemic relief money was distributed, White said, just as there were from previous stimulus programs.

"One of the big picture lessons that I think we learned from the stimulus dollars that flowed during the COVID-19 pandemic, that the federal government tried to pump out a bunch of money very very quickly, and the nation, meaning the state of Mississippi and virtually every other state, was not prepared to disburse that money and also guarantee that no fraud would happen," White said. "To me, the lesson of the 2008 financial crisis and that stimulus was that the federal government needed to find a way to prop up the economy without handing out large amounts of sums to big powerful corporations.

"The lesson from this stimulus is going to be we need to find a way as a country to push money out to prop up our society, when that's necessary, without losing a lot of that money to fraud."

The full Single Audit report can be found on the state auditor's website.

This article originally appeared on Mississippi Clarion Ledger: Auditor Shad White releases Single Audit showing misspending