Secretary of State’s Office needs better grant oversight, audit says

Minnesota’s Office of the Secretary of State needs to improve its oversight of grants to comply with state law, a newly released report says.

The Office of the Legislative Auditor (OLA) conducted a performance audit of Secretary of State Steve Simon’s office from January 2020 through December 2022, something OLA’s Financial Audit Division does with several state programs and organizations each year to ensure they’re not misusing public resources or failing to follow state laws.

Simon’s office fared well in the review but wasn’t perfect. OLA’s report, which was released Tuesday, noted that the office is required by state law to be able to verify that the grant money it distributes is being used properly. The Secretary of State’s Office aims to do that by requiring grantees to submit financial reports and include invoices or receipts for reported expenses.

Specifically, OLA reviewed the $11.3 million in grants the office distributed to over 300 political subdivisions for the implementation of absentee ballot drop boxes. The auditors randomly sampled 41 of those contracts and found that 15 (36%) didn’t have invoices or receipts in their financial reports, meaning there wasn’t any way to verify that all grant funds were spent on eligible expenses or that they even spent all of their funds and returned unused portions.

The auditors determined one reason Simon’s office failed to catch that is that it didn’t have policies and processes in place to monitor how grantees spent their funds, make sure they provided invoices or receipts, or review the grantees’ documents. Another was the office’s contradictory requirements for grantees, with some saying the documents have to be provided upon request and others mandating inclusion in their financial reports.

“Without having policies and procedures in place to review invoices or receipts and compare them to the financial report amounts, the office could not be certain that grantees met applicable matching requirements, accurately completed their financial reports, spent grant funds on eligible expenses, and returned all unspent grant funds to the office,” OLA’s report says.

To fix the issue, the auditors recommended Simon’s office review all grant documents it receives to verify it has the necessary items, revise contracts to clarify what grantees are required to submit and create better internal policies to make sure all grants are being monitored for compliance.

OLA reviewed several other financial operations the Secretary of State’s Office manages — ranging from payroll expenditures to fee collections, asset inventory and other expenditures — and reported no other significant issues.

In a response to OLA’s findings, Simon told the office that he “accepts the finding and agrees with the recommendation,” adding that his office bought a grants management system in May that other state agencies already used and is in the process of implementing that system. That’s expected to be ready for next year’s presidential primary. He added that the office will also update its agreements to provide more clarity about grantee requirements, as OLA recommended.

A spokesperson for Simon’s office also issued the following statement to 5 EYEWITNESS NEWS:

“The Office of the Legislative Auditor regularly audits state divisions. This regularly scheduled audit included only one finding. Overall, the audit highlights the dedication and effort of the staff at the Office of the Minnesota Secretary of State who work diligently to serve the people of Minnesota. Our office has already implemented a solution to the finding which will improve our grant management process for local governments.

To read OLA’s full report, click here.