Audit: Money for state's welfare-to-work program went to subcontractor, not needy

OKLAHOMA CITY (AP) _ A company administering Oklahoma's welfare-to-work program used more than $550,000 to help itself, not the people for whom it was supposed to find work, federal auditors allege.

Friday, March 29th 2002, 12:00 am

By: News On 6

OKLAHOMA CITY (AP) _ A company administering Oklahoma's welfare-to-work program used more than $550,000 to help itself, not the people for whom it was supposed to find work, federal auditors allege.

Federal officials are seeking the return of $561,649 from the Oklahoma Employment Security Commission and the Tulsa Housing Authority, the latter of which provided the federal money to IndEx Inc. of Tulsa through a subcontract.

Wayne Rowley, president IndEx, died in February.

Officials with the OESC and the Tulsa Housing Authority said they do not have the money to repay the funds.

``We disagree totally. ... Their conclusions are horrible,'' said Roy Hancock, executive director of the Tulsa Housing Authority. ``We don't have the money to give them and we don't have any intention of giving the money back.''

The commission and authority also may have to find a way to pay an additional $1 million in welfare-to-work money after state auditors found the money was misused. The state audit is to be released Tuesday at the OESC meeting, The Daily Oklahoman reported.

The state audit discovered many of the same problems detailed in the federal audit. Information released in 2000 indicated that IndEx was paid $415,460 to help 220 welfare recipients find jobs. According to the audit, 27 people were served and of those, six found work. The audit said three of the six still were working, including one employed at IndEx.

Jon Brock, executive director of the OESC, said while funds were obviously misused, he does not think the commission or the housing authority should have to repay all the money.

``It's just a very unfortunate, terrible situation,'' Brock said. ``There is no doubt money was misspent by IndEx, but people were helped. It's not as though everyone was sitting on their thumbs.''

The federal fine should shrink as the OESC and the housing authority move through the appeals process with the federal Labor Department, Brock said.

If the commission has to repay federal welfare funds, money from a penalty fund set up for such repayments could be used. But Brock said the money from the fund is being used to pay 21 salaries in the department because of the state's strapped finances.

Brock said he is working with the Legislature to get extra funding for agency salaries so the penalty money can be spent as it was intended. Commission officials cannot use money from other grants to pay the fine.

After the 2000 audit was released, Brock thought the state would be able to get some money back from the Labor Department to use with reputable agencies to help Oklahomans. He said Thursday he does not think that will happen.

State and federal auditors reviewed how the $22.5 million Oklahoma received from the federal grant was spent, including the 15 percent controlled by Gov. Frank Keating.

The federal audit found not only was the money misspent, but the subcontract to IndEx from the housing authority was illegal because there were no competitive bids.

Housing authority officials initially said they gave the contract to IndEx at the direction of the governor. They later said it was a miscommunication.

Keating's chief of staff, Howard Barnett, said the governor never directed anyone to choose IndEx for the welfare program.

However, auditors said they had evidence that the governor not only wanted Rowley and IndEx to receive the money, but needed a governmental entity to act as a pass through because the OESC could not give the money directly to IndEx.

``It's absolutely false,'' Barnett said. IndEx at the time was a nationally renowned program.

Keating asked Rowley to make a presentation to the housing authority as an example of what he wanted replicated, Barnett said. Someone at the authority must have misunderstood the gesture and thought the governor was requesting IndEx, he said.

But auditors said the intent was clear.

The federal audit said no matter how IndEx received the subcontract, state officials should have recognized the company's poor performance and that IndEx's financial management systems were inadequate to account for federal grant funds.

``Very little of the grant funds were payments to participants. The funds went to support IndEx,'' federal auditors wrote.