Audit: Border-to-border broadband grantees met contract speed goals, but DEED failed to follow state grant-monitoring rules

The Office of the Legislative Auditor reported that grantees in the Border-to-Border Broadband Development Grant Program built infrastructure that met contract locations and state speed goals, but the Minnesota Department of Employment and Economic Development did not follow some required state grant-monitoring procedures.

Mariam Nada, the program evaluation manager for OLA, told the Legislative Audit Commission auditors reviewed broadband grants and found that DEED contracts with a third-party vendor to validate whether infrastructure built by grantees met goals specified in grant contracts. The auditors said, based on that validation, the broadband grantees in the sample built infrastructure to serve contract locations and meet state speed goals.

At the same time, auditors found multiple violations of Office of Grants Management (OGM) policies in DEED's post-award oversight. In a review of 43 grants, DEED collected only about half of required progress reports and collected no progress reports for four grants in the sample. OGM policy prohibits agencies from making payments when progress reports are past due; auditors found DEED made at least $5,000,000 in payments while progress reports were past due. The audit also reported that DEED did not conduct annual monitoring visits within the first year for any of its 11 broadband grants that exceeded $250,000, contrary to OGM policy. Auditors also found many grant closeout evaluations were missing required information and the agency's standard closeout template lacked a section for recording financial or audit concerns.

DEED Commissioner Matt Verlick acknowledged the findings and said the agency faced pandemic-era challenges including staff shortages, remote work, and supply-chain and permitting delays that affected project timing and monitoring methods. Verlick said DEED used desk audits and virtual monitoring during the pandemic to protect staff and grantees and that, in many cases, projects had little to inspect in the first year because work was delayed. He said DEED has implemented changes since the audit period: aligning forms with OGM, a revamped workforce grants monitoring process, additional monitoring staff, a new reimbursement payment request template that confirms quarterly progress report status, and a process to stop payments when reports are not received.

Committee members pressed DEED for more grantee-level detail. Senator Pratt and others said they want breakdowns showing which grantees have high rates of unsuccessful outcomes or missing reports so the Legislature and DEED can identify grantees that need additional oversight or assistance. DEED said it has increased documentation and updated forms and will continue to improve monitoring practices.

The auditors recommended DEED ensure program staff comply with OGM requirements on progress reports, monitoring visits, payment controls, and closeout evaluations. DEED said it is implementing corrective actions and continuing to refine policies and templates to increase compliance and documentation.

No formal votes or decisions were taken at the hearing; the commission adjourned after questions and the agency's response.