In light of audit, Shelley Zumwalt faces difficult Senate confirmation for tourism secretary

M. Scott Carter, The Oklahoman

Shelley Zumwalt — the embattled executive director of the Oklahoma Tourism and Recreation Department and the governor's choice for tourism secretary — could face a difficult confirmation process in light of a newly released audit, the leader of the Oklahoma Senate said Thursday.

Speaking at his Thursday afternoon press conference, Senate Pro Tempore Greg Treat said he wasn't sure the Senate would advise and consent to Zumwalt's nomination. Zumwalt was harshly criticized in an audit released Tuesday by State Auditor and Inspector Cindy Byrd. Zumwalt has been named by Republican Gov. Kevin Stitt as his Cabinet secretary for tourism.

"That comes into question," Treat said. "I can't make any firm commitments either way."

Treat said the Senate wanted to make sure that Zumwalt was treated fairly during the confirmation process, but added that "we want to make sure we take the executive nomination process very serious."

May 1 is the deadline for the governor's office to send its list of nominations to the Senate.

Byrd's audit criticized the management of the Oklahoma Employment Security Commission and Zumwalt, who was the agency's executive director at the time. The audit questioned how Zumwalt approved $8.5 million in contract payments to Phase 2, a firm where her husband is employed.

"Subsequent contracting and payments were transacted by Oklahoma Employment Security Commission and signed by Shelley Zumwalt, who was appointed as the executive director of OESC in May 2020," Byrd said in a media statement accompanying the audit. "By April 2022, Zumwalt had approved additional contracts and change orders to P2 totaling $8.5 Million."

More: State audit critical of tourism director Shelly Zumwalt. AG calls for director's resignation

During this period, Byrd wrote, "Zumwalt failed to disclose the fact that her husband, John Zumwalt, was employed as the Vice-President of Phase 2."

Byrd said Zumwalt was required to complete annual forms attesting that no related party transactions existed in the performance of her duties regarding the expenditure of funds, and in three separate instances, Zumwalt checked "No" on those forms.

On Tuesday evening, Zumwalt denied any wrongdoing.

"The initial contracts and all agreements to begin work with Phase 2 were executed before I was appointed by the OESC Board of Commissioners on May 27, 2020," Zumwalt said. "I did not have any decision-making authority when OMES hired Phase 2 to work with OESC in May of, excuse me, in March of 2020."

Audit questions Communities Foundation of Oklahoma expenditures

The audit also raised numerous questions about how the state spent millions in federal COVID-19 funds and said new purchasing rules established by the Office of Management and Enterprise Solutions were not in the best interest of Oklahoma.

Byrd's audit — more than 200 pages long — reviewed $13 billion worth of expenditures of federal funds and questioned how more than $30 million of those funds were spent, including more than $276 million in Emergency Rental Assistant funds.

Those funds, sent to the state during FY 2021 and FY 2022, were earmarked to help Oklahomans with rental and utility assistance. Byrd said OMES contracted with the Communities Foundation of Oklahoma, a nonprofit entity, to receive $241 million of the funds and implement the program.

Among the audit's findings:

  • OMES advanced lump sum payments to CFO for its administrative costs to oversee the ERA grant without monitoring or requiring documentation for how much CFO actually expended for program and administrative costs.

  • Reports for the ERA program, which the OMES Director of Budget, Policy, and Gaming Compliance submitted to the U.S. Treasury, reflected 100% of the $241 million was expended. However, as of June 2022, since the start of the grant program, CFO withheld $10 million dollars in excessive management fees.

  • CFO also has $15 million in unexpended grant funds advanced by OMES.

  • CFO directed $6.5 Million to relocate refugees from Afghanistan into Oklahoma. This was not an allowable expense for this grant. The State of Oklahoma had other grants available for these types of services.

The audit also questioned CFO's spending, including:

  • $8,600,000 for excessive management fees.

  • $6,594,079 for Afghan refugee relocation.

  • $4,300,000 for subawards paid and no supporting documentation was obtained.

  • $834,521 for unallowable bonuses paid to subcontractors.

  • $41,391 paid to JGC without a contract.

  • $33,339 for inappropriate credit card expenditures including visits to entertainment venues, cooking class, succulent planting class, painting, and restaurants.

Federal funds provided for administrative costs are not intended for the nonprofit to make a profit, Byrd said. She said the CFO was only allowed to charge for actual administrative costs incurred during the execution of the grant.

"In last year’s Federal Single Audit, our office alerted the State about the excessive management fees from CFO and we recommended OMES take action. Our recommendations were ignored," Byrd said in a media statement. "Compounding this error, in an email to CFO, the OMES Director of Budget, Policy and Gaming Compliance gave incorrect guidance regarding the retention of administrative fees and seemed to give permission to CFO to keep the unused grant funds.”

On Thursday, Treat said Senate leaders were concerned by the findings in the audit. "It all deals with central purchasing at the core of the problem," Treat said. "That audit ... it causes me grave concerns."

Treat said he and other Senate leaders would continue to review the audit's findings before deciding on what action to take. The Second Session of the 59th Oklahoma Legislature ends at 5 p.m. May 31.

This article originally appeared on Oklahoman: Shelley Zumwalt faces difficult confirmation following scathing audit

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