Audit finds Soft Warfare’s Base 1 grant spending allowable but behind schedule; committee seeks application records

The Legislative Post Audit Committee heard on Jan. 23 the results of a limited‑scope audit of Soft Warfare’s use of a $3 million Base 1 grant administered by the Kansas Department of Commerce.

The audit presentation said Soft Warfare spent grant funds “on items generally allowed in its grant award, but it did not spend all funds within 2 years as the original contract required.” The report records that Soft Warfare had spent just over $1.6 million of the $3 million award as of Sept. 30, 2024, and that the company had spent about $900,000 of its required $1 million match through the same date.

The audit said the Base 1 grant program uses federal pandemic funds for infrastructure‑related costs tied to economic development projects, and that the Commerce Department awarded about $99 million to 35 recipients in April 2022. Soft Warfare’s project was described in its application as a modular data center and a longer‑term educational cybersecurity range at a site in Great Bend. The audit noted Soft Warfare’s application estimated the total project cost at $4 million, with $3 million from the Base 1 grant and a 25% match from the company.

Auditor Kristen told the committee that the company used grant funds to buy land and an existing building in Great Bend, to renovate that building and to purchase equipment for the data center, and that auditors visited the site in December 2024. She said expenditures sometimes differed from the specifics in the award agreement — for example, the company did not install the solar backup system described in the original application — but that the spending “appeared to align with the contract’s overall purpose” of building a data center.

Kristen also flagged the deadline issue: the original award required all grant funds be spent by July 6, 2024. The audit found that as of June 30, 2024, Soft Warfare had spent just over $1.2 million and about $1.8 million of the award remained. The company requested two extensions; a revised contract executed Jan. 23, 2025, moved the spending deadline to June 30, 2025, and Commerce cited federal guidance allowing spending of Base 1 funds through Dec. 30, 2026.

Lawmakers pressed several areas. Representative Williams said she wanted the company’s application and scoring details and asked whether those materials could be produced to the committee. Senator Tyson and other members questioned how Commerce allowed matching payroll expenses dated before the award to count toward the match, and whether it was routine for Commerce to accept expenses incurred prior to the award date. Representative Williams called the situation “stunningly bad” and said the committee might exercise subpoena power to obtain application or scoring records if necessary.

Department of Commerce official Bob North told the committee Commerce followed the statutory process that routed funds to the agency and said the state believes the expenses were eligible. “All the dollars were spent — that’s according to post audit, that’s according to Wit O’Brien’s. These are all eligible expenses,” North said. He said Commerce staff and the outside vendor that handles monitoring maintain frequent contact with grantees, and that changes such as budget deviations or extensions are communicated and documented.

Representatives of Soft Warfare, including Tim Schachter, the company’s general counsel and head of government affairs, said the firm pivoted from constructing a new building to purchasing and rehabbing an existing building and that some lead times (for example, for specialized modular data equipment) lengthened the project schedule. Schachter said the firm is “targeting the end of Q2” 2025 for project completion and that “we do intend to create jobs and staff the facility.” He said quarterly reports had continued after the audit period.

The committee discussed next steps, including a possible broader audit of Commerce’s grant administration and obtaining Soft Warfare’s application and scoring records. Commerce and the company indicated they would follow up with requested information. The committee approved the meeting’s consent calendar, which included acceptance of the completed Soft Warfare performance audit.

Votes at a glance: the consent calendar (minutes from Feb. 3 and acceptance of the Soft Warfare completed performance audit) was approved by the committee with Representative Hall Bridal recorded as abstaining. No formal yes/no tallies were recorded in the transcript.

The committee also scheduled follow‑up and noted the revised grant spending deadline of June 30, 2025, or, under federal guidance, as late as Dec. 30, 2026, if further extension mechanisms apply.