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A legislative audit of $200 million in COVID-19 response grants found adequate oversight by the Minnesota Department of Health but instances in which it failed to explain its awards or guard against conflict of interest.

The report released Wednesday by the Office of the Legislative Auditor (OLA) gave the department credit for its overall management of a new grant program in the teeth of a new and unnerving pandemic.

However, grant reviewers sometimes skipped required elements for decision-making, such as whether applicants had access to other financial resources or would be in jeopardy without the funding, said Lori Leysen, an OLA deputy legislative auditor. In other cases, variations between grant requests and actual awards were unexplained in paperwork.

"When you have missing elements to the score sheet, and then there's some inconsistencies between award amounts, it makes you question some of those possible decisions that they came to," she said.

In a written reply, state Health Commissioner Jan Malcolm disagreed with some of the findings and said some others had already been fixed. Overall, she said she was pleased that her department adequately controlled the disbursement of money — at a time when her reviewers were transitioning to remote work and when health care providers and public health agencies were clamoring for funding.

"It was a brand new grant program that was needed to be stood up in record time," Malcolm said in an interview Wednesday morning. "Normally, grant processes take a lot longer to build and execute, but there was a real urgency in getting these dollars out and I think it made a real difference that we were able to get those dollars out so quickly."

The grants included $50 million in emergency funding issued in spring 2020 for the response to the first COVID-19 wave in Minnesota. The largest awards went to hospitals as they created drive-thru COVID-19 testing sites and installed negative airflow systems in patient rooms to reduce the risks of spreading the infectious disease.

Hennepin Healthcare received $5 million while HealthPartners received $4 million and Allina Health received $3.5 million. Smaller grants went to elder-care facilities, fire departments, clinics and public health agencies. The smallest award of $342 went to the ambulance provider in Sunburg, Minn.

An additional $150 million was then allocated by the Legislature to continue pandemic response efforts, allowing providers to pay staff and add supplies of COVID-19 tests, masks and other personal protective equipment. The department received more than 2,432 requests totaling $1 billion, according to its report to the Legislature last year. Malcolm said 1,314 grants were issued.

Leysen agreed with the challenges of the program amid the pandemic, but said some of the review policies should be second nature — even in a crisis — for a department with extensive experience managing and issuing grants. Among 35 grant reviewers, 29 didn't complete required conflict of interest forms and six only partly completed the forms.

The disclosures are intended to ensure "equity among all applicants that are applying, so there is no unfair advantage," she said.

The department under the emergency circumstances sought waivers to some grant requirements, including doing site reviews to determine if the money was being spent appropriately. The auditor in August had faulted the state Department of Human Services for falling short on this requirement in issuing grants to address homelessness. But because of the waiver it didn't assess the Health Department's performance.

Leysen said this was appropriate under the circumstances of the pandemic, but urged departments to only seek such waivers when necessary and to return to normal grant-awarding procedures as soon as possible.

The grant program was unusual in that the department awarded the money to recipients in advance, rather than reimbursing them after the fact for expenses. The audit encouraged the department to quickly complete its checks of recipients and to claw back any money that wasn't spent. Malcolm said that process should be completed by the end of October.