Audit finds flaws in Minnesota spending on COVID response

An audit of nearly $400 million in pandemic-response spending found instances in which Minnesota agencies exceeded emergency authority or failed to properly document purchases or track supplies.

The purchases were made in 2020 and 2021 during an unprecedented public health emergency, and amid time pressures to respond to the spread of COVID-19. State agencies still had responsibilities to ensure the public's money was well-spent, perhaps even more so as emergency increases in state and federal funding raised the risk of misuse, said Lori Leysen, a financial audit deputy in the Office of the Legislative Auditor.

"Having strong controls is even more important than ever," she said, "because you're creating the potential opportunity for fraud, waste and abuse."

The audit spot-checked about a third of the 637 state agency purchases coded as emergency responses to the pandemic. The resulting report, published Thursday, also called out the Minnesota Department of Health for inaccurate inventory records compared to its actual supplies of facemasks, gowns, COVID-19 tests and vaccines. A manual count found the discrepancies, which could leave the state confused about its actual needs.

"Especially at the beginning of the pandemic, when things were very critical and things were needed immediately, you needed to have that strong count right from the get-go," Leysen said.

Responses from agencies generally defended their work, noting that the highlighted purchases all complied with state laws — even if they deviated from usual practices.

The Department of Employment and Economic Development was faulted for a direct purchase in May 2020 of online skills training for furloughed or out-of-work Minnesotans, before it had emergency authority from Gov. Tim Walz to bypass the usual vendor selection process.

The Secretary of State's Office similarly made three purchases exceeding $450,000 without that authority, while the Minnesota Department of Education used emergency authority to spend $75,000 on a trauma information tool kit that the legislative auditor deemed a non-emergency expense. The tool kit was proposed before the pandemic and wasn't completed until the end of 2022.

"Staff had to manage massive increases in work volume, adapt to remote business processes and resolve numerous emergency needs as the state supported Minnesotans through the pandemic," Evan Rowe, DEED's deputy commissioner, said in a written reply to the audit. "Despite these challenges, the transactions evaluated in the report saw payment accuracy rates of over 99.8%, and as is clear in the report, all transactions were lawful and consistent with Minnesota Statutes."

Steve Grove, now publisher of the Star Tribune, was the DEED commissioner at the time of those purchases.

While agencies had greater flexibility under Walz's public health emergency declaration, they also were dealing with mixes of federal and state funds that each came with requirements. The audit found that the governor's office used $2,875 in federal COVID funding inappropriately in response to civil unrest.

In a written reply, Walz's chief of staff, Chris Schmitter, said the expenditure is no longer being charged to the federal coronavirus relief fund. However, the state has other eligible expenditures that it will likely charge to the fund in its place.

The state's Human Services and Veterans Affairs departments also were noted in the audit for failing to pay about $116,000 in sales and use taxes for purchases of personal protective equipment such as gowns and gloves.

Leysen said the audit was an important review of spending under emergency authority, and offers lessons to state agencies about the need for accounting practices that can easily be scaled up and maintained in pressure situations.

"We don't know what next crisis is going to occur," she said.