Reviewing BASE 1.0 and BASE 2.0 Grant Program Planned Matching Expenditures (Limited-Scope)

Introduction

Representative Kristey Williams requested this limited-scope audit, which was authorized by the Legislative Post Audit Committee at its March 24, 2025 meeting.

Objectives, Scope, & Methodology

Our audit objective was to answer the following question:

1. What types of spending did the Department of Commerce allow recipients to include as planned matching expenditures in their BASE 1.0 and 2.0 grant award agreements?

To answer this question, we reviewed documentation from the Department of Commerce and federal and state laws. We reviewed these things for BASE grant program and matching funds requirements. We also reviewed the planned matching expenditures listed in 72 BASE grant award agreements.

For this work, we did not evaluate recipients’ use of grant funds or their actual matching expenditures. We only evaluated their planned matching expenditures as they were listed in the award agreements approved by Commerce.

More specific details about the scope of our work and the methods we used are included throughout the report as appropriate.

Important Disclosures

Generally accepted government auditing standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. As part of the standards, the U.S. Government Accountability Office requires us to assess the sufficiency and appropriateness of computer-processed data used to support our findings. Our data reliability work identified errors and discrepancies in the BASE grant funding and matching expenditures in the award agreements provided by the Department of Commerce, which we could not resolve. For example, some of the specific grant funding and matching expenditure amounts in individual agreements were inconsistent both within the agreement and in total with other information we received from Commerce.

We discuss in more detail the problems associated with these errors and discrepancies later in the report. Overall, we think the data is not substantively inaccurate or incomplete based on the limited data reliability we conducted. We believe it provides a reasonable basis for the findings and conclusions in the report.

Our audit reports and podcasts are available on our website www.kslpa.gov.

The Department of Commerce allowed BASE grant recipients to use pre- and post-award project-related construction, non-construction, and administrative costs as matching expenditures.

Background

The Building a Stronger Economy 1.0 and 2.0 grant programs (or BASE grant programs) awarded almost $150 million in federal funds to Kansas businesses for infrastructure development.

• The Strengthening People and Revitalizing Kansas (SPARK) Executive Committee created the BASE grant program in December 2021. It used federal American Rescue Plan Act (ARPA) pandemic funds to help with infrastructure development associated with economic development projects. This funding was open to a variety of entities for projects that were delayed or slowed because of the COVID-19 pandemic. These entities included local governments, economic development organizations, community foundations, and nonprofits. It also included private developers, commercial property owners, main street programs, local water districts, and tribes in Kansas.

• Recipients of BASE grant funding could use it for a variety of purposes. These purposes included projects to develop or renovate business parks, parking facilities, industrial offices, and infrastructure such as water and utilities. Recipients were initially required to complete these construction projects within 2 years of signing a grant agreement. They were also required to provide at least 25% in matching funds toward the project.

• The Kansas Department of Commerce administers the BASE grant program. The department was responsible for reviewing applications and selecting award recipients. It is also responsible for monitoring recipients’ grant spending and performance.

• The BASE grant program began in December 2021, and Commerce administered 2 rounds of BASE grant funding.
  • The initial round of funding was called the BASE 1.0 grant program. Commerce accepted applications for the BASE 1.0 grant program from January 31, 2022 to February 28, 2022. There were ultimately 35 recipients of the BASE 1.0 grant program.
  • The second round of funding was called the BASE 2.0 grant program. Commerce accepted applications for the BASE 2.0 program from January 3, 2023 to January 31, 2023. There were ultimately 37 recipients of the BASE 2.0 grant program.

The Department of Commerce selected which applicants to the BASE 1.0 and 2.0 grant programs would be awarded funding after reviewing and scoring all applications.

• The Department of Commerce was responsible for reviewing BASE 1.0 and 2.0 grant applications and determining which applicants would be awarded funding. Their review process consisted of 3 main steps:
  • The department reviewed each application for eligibility.
  • The department then assessed eligible applications using a rubric and assigned a score to each application.
  • Last, the Secretary of Commerce used his professional judgment to select the applicants that would be awarded funding. Department officials told us the secretary considered several factors when making the final award selections. They said these factors included application scores, geographic location, project type, and amount of funding requested.

• For the BASE 2.0 grant program, the department accepted new applications but also reconsidered original applicants to the BASE 1.0 grant program that had not been selected for funding.

• The department’s process for reviewing BASE grant applications was the focus of a May 2025 Legislative Post Audit limited-scope audit.

The Department of Commerce required BASE grant recipients to provide matching funds equal to at least 25% of the project cost.

• There are no federal laws or rules that require or direct the use of matching funds for the BASE grant program. Federal rules only direct the use of ARPA pandemic funds. The rules explicitly state that there are no state matching requirements to receive these pandemic funds. Federal rules do not address states’ requirements for subrecipients. Similarly, there are no overarching state rules that require matching funds for the BASE grant program or that direct the use of such matching funds.

• The Department of Commerce was responsible for administering the BASE grant program. As part of its administration, the department created a matching fund requirement for both BASE grant programs. This requirement was made as an addition to the federal ARPA pandemic fund requirements that directed recipients’ use of BASE grant funds. Officials told us the department chose to implement a matching requirement to leverage additional funding and increase investment in the BASE grant projects.

• The Department of Commerce required that all BASE grant recipients provide at least 25% in matching expenditures. This means that at least 25% of the total cost of a recipient’s project had to come from their own funds instead of BASE grant funds.
  • The contractual terms in some BASE grant award agreements stated that in-kind contributions could also count toward the match if approved by Commerce. In-kind contributions include things like donated equipment and services. Department officials told us they would not allow in-kind contributions in certain situations based on their discretion.
  • The department also allowed recipients to count expenditures from other state and federal awards as part of their matching expenditures. This included funds from awards such as local ARPA funds, Economic Development Administration Grants, and the Historic Preservation Credit.

Department of Commerce officials told us that they allowed pre-award matching expenditures to give recipients credit for project expenses incurred prior to the BASE grant award.

• The department allowed recipients to count expenditures made before the award as part of their matching expenditures, as long as those expenditures were made on or after January 1, 2019. However, land purchases could not count toward the match unless they were made on or after January 1, 2021.

• We interviewed officials from the Department of Commerce to ask them why the department allowed BASE grant recipients to count pre-award expenditures as part of their matching funds. Officials told us that they did this to give recipients credit for project-related expenditures that they had already made with their own funds. They said this would help recipients who had begun work on their grant project prior to the COVID pandemic, which may have negatively impacted those projects.

• Commerce officials had previously reported that pre-award matching expenditures were allowable under federal rules. However, there are no federal rules that require or direct the use of matching expenditures in this case. Thus, there are no federal rules for pre-award matching expenditures either. Federal rules neither allow nor prohibit the use of pre-award matching expenditures for the BASE grant awards.

• Commerce officials told us that they used January 1, 2019 as the earliest date for pre-award expenditures in order to provide maximum flexibility to recipients who had begun projects prior to their BASE award. However, officials did not explain how the specific date of January 1, 2019 was chosen.

Award Agreement Review

We reviewed the planned matching expenditures in all 72 BASE grant award agreements Commerce provided.

• We requested all BASE 1.0 and 2.0 grant award agreements from the Department of Commerce. The department provided us with 72 completed award agreements. We received 35 completed agreements for the BASE 1.0 program and 37 completed agreements for the BASE 2.0 program. Appendix B provides a full list of all 72 BASE grant award agreements we reviewed.

• Each award agreement contained a budget section in which recipients listed their planned expenditures for the project. They listed planned expenditures for the BASE grant funds and planned expenditures for their matching funds. For their matching expenditures, recipients also organized their planned expenditures into categories such as construction materials, non-construction land purchases, administration, and more.
  • The 35 BASE 1.0 award agreements we reviewed included $356.0 million in total project costs. The agreements included BASE grant funds of $101.5 million and planned matching expenditures of $254.5 million. Commerce officials told us they awarded $99 million in grant funds to BASE 1.0 recipients. The reason the award agreements listed $101.5 million in total is because the agreement for the Port Authority of Stafford County included $2.5 million in additional ARPA funds. These funds were a separate appropriation made through 2022 House Bill 2510. This additional funding was included as part of the total BASE grant amount in the award agreement.
  • The 37 BASE 2.0 award agreements we reviewed included $65.4 million in total project costs. The agreements included BASE grant funds of $45.5 million and planned matching expenditures of $19.8 million. Commerce officials told us that $49.5 million in grant funds was initially awarded, but 2 recipients declined their awards. They said that is why the total from the award agreements we were given only amounts to $45.5 million. We discuss this in more depth later in the report.
  • There were minor errors in some of the award agreements resulting in inconsistent amounts of reported planned matching expenditures. These errors also led to inconsistencies in the total project costs listed in those agreements. We discuss this issue in more depth later in the report.

• There were 2 BASE 1.0 grant recipients that we determined to be outliers because their planned matching funds were significantly higher than other recipients. In these cases, it seems the recipients were undertaking very large projects. The BASE grant funds they received only covered a small portion of the total project cost.
  • The City of Wichita was awarded $5.0 million in BASE grant funds but planned to spend $167.6 million in matching funds (97% of the total project cost).
  • HFS KCK, LLC was awarded $3.0 million in BASE grant funds but planned to spend $20.4 million in matching funds (87% of the total project cost).

• Our audit objective directed us to only review the planned matching expenditures listed in each BASE grant award agreement. We did not review recipients’ actual matching expenditures as part of this audit. Actual expenditures may differ from what was planned in the award agreement. Therefore, by the time these grant projects are complete, the actual amount and type of matching expenditures that recipients will have made may differ from what was listed in the award agreements.

Commerce approved planned matching expenditures in 3 main categories, with construction costs (including materials, labor, and site work) being the largest.

• The 72 BASE grant award agreements listed a total of $274.3 million in planned matching expenditures. The budgeted matching expenditures in the award agreements were generally categorized into 1 of 3 types of spending: construction, non-construction, and administration.
  • Construction costs (83% of the total planned matching expenditures) include: (1) Materials, including equipment, and supplies; (2) Labor; (3) Site Work, including demolition, soil boring, and environmental work; and (4) Other/General, which includes all other types of construction expenditures such as engineering, surveying, and signage costs.
  • Non-construction costs (17% of the total planned matching expenditures) include: (1) Land Purchases, including permits; (2) Consulting; and (3) Other/General expenses such as relocation, insurance, and inspection fees.
  • Administration costs (1% of the total planned matching expenditures) include: (1) Payroll; and (2) Other/General expenses such as preliminary engineering reports, architectural designs, and environmental review.

• Figure 1 displays the planned matching expenditures by category for all 72 award agreements we reviewed. The figure shows the planned construction, non-construction, and administration expenditures. The 2 outliers are separated out from all other projects to avoid skewing the data.

• As the figure shows, construction costs were the largest type of planned expense, totaling $226.4 million (83%).
  • The 70 non-outlier recipients planned to meet the matching requirement primarily by spending funds on site work and other/general construction costs. This would include expenditures for things like waterlines, paving, and road closures.
  • The 2 outliers planned to meet the matching requirement primarily by spending funds on construction materials and other/general construction expenses, which included general construction work on a stadium.

• As Figure 1 also shows, planned matching expenditures for non-construction totaled $45.4 million (17%).
  • Most of the total non-construction expenditures planned by the 70 non-outlier recipients was for land purchases.
  • Almost all of the total non-construction expenditures planned by the 2 outlier recipients was for land purchases as well.

• Administration was by far the smallest type of planned expenditure, only amounting to $2.6 million (1%). Of this amount, $1.6 million was planned for administrative payroll. This included payroll for things like project management staff. 8 recipients listed some amount of administrative payroll in their planned matching expenditures.

Commerce approved almost half of planned matching expenditures for costs recipients incurred prior to signing a BASE grant agreement.

• The Department of Commerce allowed BASE grant recipients to count project-related expenditures made prior to their award. Most expenditures could count if they were made on or after January 1, 2019. Land purchases could count toward the match if they were made on or after January 1, 2021. For this work, we were not able to evaluate exactly when the pre-award expenditures were made or whether they met the department’s requirements. The award agreements did not contain that level of information. We were only able to evaluate the amount and type of pre-award expenditures that recipients listed in their award agreements.

• Figure 2 displays the proportion of planned BASE grant matching expenditures that were made prior to the execution of the award agreements. As the figure shows, about half (49%) of all planned matching expenditures were pre-award expenditures. This amounted to $135 million. This is primarily due to the 2 outlier BASE 1.0 recipients, the City of Wichita and HFS KCK, LLC. Overall, the majority of pre-award matching expenditures came from these 2 outlier recipients. These 2 recipients alone listed pre-award matching expenditures totaling $106 million out of the total $135 million.

• Figure 2 also shows the proportion of pre-award BASE grant matching expenditures with the 2 outlier BASE 1.0 recipients (City of Wichita and HFS KCK, LLC) excluded. Without these outliers, the proportion of pre-award expenditures was 35%. This represented $30 million of $86 million total non-outlier matching expenditures.

Other Findings

We identified several issues with the accuracy and completeness of the BASE grant award agreements that could not be reconciled by the Department of Commerce.

• We noticed several discrepancies that indicated potential data reliability problems during our review of BASE grant award agreements.
  • There were minor discrepancies in the total number of BASE grant awards the department provided to us in this audit and the number it had previously reported in other places. This means we can’t be sure the list of agreements we received is complete and accurate. For example, the department gave us 37 BASE 2.0 agreements. However, the department had previously reported 38 BASE 2.0 award recipients in a press release. Furthermore, at the time of this audit, the department’s website listed 39 BASE 2.0 award recipients. Department officials told us that the information available online was outdated. They said some agreements had been terminated or combined, resulting in 37 final BASE 2.0 agreements.
  • There was a difference in the total amount of BASE 2.0 grant award funds. This means we can’t be sure the list of agreements we received is complete and accurate. The 37 BASE 2.0 grant agreements we reviewed listed total grant funds of $45.5 million. Commerce officials told us they initially awarded $49.5 million in grant funds, but 2 recipients declined their awards. However, the department did not provide us with documentation confirming the initial award amount of $49.5 million or the 2 declined awards. Department officials also told us that they still plan to award an additional $4.5 million in BASE 2.0 grant funding, for a total of$50 million overall. It is unclear how the department will award the remaining funding.
  • There were numerous discrepancies in the amount of planned matching expenditures listed within individual award agreements. This means we can’t be sure the total amount of planned matching expenditures we reported in this audit is correct. We identified 11 award agreements (15%) that listed different amounts of planned matching expenditures in different sections of the same agreement. The discrepancies ranged from less than $1 to about $260,000 per agreement, which amounted to $410,700 in total. Department officials told us that these were likely a result of mistakes made by recipients when they filled out the budget sections of the agreements. They said the department did not check for these errors, and so the errors were still present in the signed agreements.

• The department was unable to fully explain these errors and differences. They did not provide supporting evidence or documentation to fully reconcile them. Department officials told us that many of the people who worked on the BASE program no longer work for the department, which limits their ability to track down and correct the errors.

• Finally, we identified 2 instances in which the planned matching expenditures in an award agreement did not meet the minimum 25% threshold set by the department. The BASE 1.0 City of Ottawa agreement listed matching expenditures that amounted to 24.6% of the total project cost. The BASE 1.0 Friends of the Free State Capitol agreement listed matching expenditures that amounted to 24.4% of the total project cost. Department officials told us that these amounts were likely rounded to 25% when the department reviewed these agreements. However, it is still not clear why the department approved the agreements when the listed matching expenditures did not meet the 25% minimum threshold.

• These errors and differences make it very difficult to determine the true amount of planned matching expenditures. We cannot be sure whether the award agreements we received from the department and the funding/expenditure amounts listed therein are completely accurate or consistent. However, we believe these discrepancies are small enough that they do not impact our main findings and conclusions.

Recommendations

Because the Department of Commerce is no longer reviewing applications or awarding new BASE grants, we did not make any recommendations for this audit. Any recommendations intended to address the program issues would have limited applicability and usefulness.

Agency Response

On July 3, 2025 we provided the draft audit report to the Department of Commerce. Its response is below. Agency officials generally agreed with our findings and conclusions.

Department of Commerce Response

July 11, 2025

Legislative Post Auditor

Ms. Chris Clarke

800 SW Jackson, Suite 1200

Topeka, KS 66612

Dear Ms. Clarke:

The Department of Commerce (Commerce) has reviewed the Performance Audit Report titled, “Reviewing BASE 1.0 and BASE 2.0 Grant Program Planned Matching Expenditures.” BASE 1.0 and BASE 2.0 were created from American Rescue Plan Act (ARPA) funding allocated by the Strengthening People and Revitalizing Kansas (SPARK) Executive Committee to address infrastructure and economic development needs that were delayed or slowed due to COVID-19 in an effort to expand the state’s base of businesses and residents.

Summary

In summary, we wish to note the following key points. This is the 3rd audit conducted on the BASE program and the 12th audit reviewing economic development and the Department of Commerce since 2022. Thousands of staff hours have been spent responding to these audits, all at taxpayer expense. Yet, like the other 2 audits conducted on the BASE grants no recommendations to the agency were made in this audit by LPA.

The BASE grant program was funded by federal dollars provided through the American Rescue Plan Act (ARPA). ARPA did not require the State of Kansas to impose match requirements on businesses or communities that received subawards, which were made by the State through the BASE grant program. However, the Department of Commerce voluntarily proposed to impose a 25% match requirement on grantees, believing it is important for these awardees to have “skin in the game”; because match requirements are a best practice in economic development; and because it was important to the SPARK Executive Committee which included myself, President Masterson, Speaker Ryckman, Secretary Burns-Wallace, Bill Pickert, Greg Orman and Jon Rolph.

Commerce has now been audited on its application of match requirements that it voluntarily imposed. Critiques in this audit include that Commerce allowed a grantee that provided a 24.6% match to participate (0.4% below the 25% requirement), and that we permitted activities that were essential to the projects, but that occurred before the grant award date to be counted toward the match.

I unapologetically stand by these decisions. The Department of Commerce exists to grow the Kansas economy. A project that will have a catalytic impact on our economy for decades to come, but that is 0.4% below a voluntarily imposed match threshold, should have the opportunity to come to fruition, not be snuffed out over 0.4%.

Why a Match Requirement

Commerce went above and beyond federal grant requirements by requiring a 25% match for the BASE program. We believed that a match was critically important because a match leverages additional dollars and allows the public dollars to go further.

Having that match requirement for grantees is a best practice in economic development. Kansas Commerce isn’t alone in this belief. Other states including Missouri, Nebraska and Oklahoma required matches for many of their ARPA-funded grant opportunities. A match requirement for BASE 1.0 and BASE 2.0 allowed us to fund more projects across the state. That’s a success.

25% Match Threshold

The audit points out that two grantees did not meet the minimum match requirement. Their matches were 24.6% and 24.4%. Commerce was as accommodating as possible, and due to the significant impact the projects would have on their community, chose to round these figures to the next whole number of 25%. As stated above, this discussion detracts from the incredible fact that due to this match requirement, Commerce leveraged $274,300,000 in additional private dollars being invested in projects that were addressing the economic downturn and hardship created by the COVID-19 pandemic. That’s a success.

Eligible Expenses

Since Commerce voluntarily imposed a match requirement, the federal regulations for the ARPA dollars did not provide guidance related to eligible expenses for the match. In our guidelines, we allowed grantees to count matching expenditures made anytime between January 1, 2019, and the expiration of the grant agreement. This date directly aligns with the stated goal of the grant program, which was to address the infrastructure and economic development needs that were delayed or slowed due to COVID-19. The purpose of the funding was to assist those projects or plans that were created in 2019 and then delayed or stopped because of the pandemic.

Commerce was focused on moving at the speed of business and getting the money deployed, instead of being punitive or punishing applicants during the already difficult situation caused by COVID-19. Allowing eligible expenses that occurred from January 1, 2019, to the expiration of the grant agreement advanced the goal of BASE 1.0 and BASE 2.0. That’s a success.

Furthermore, the audit categorizes the eligible expenses into three types of spending: construction costs, non-construction costs and administration costs. 83% of the eligible expenses were construction costs, 17% were non-construction costs and 1% were administration costs. The smallest type of matching expenses was administration costs. Again, this indicates the eligible expenses are addressing the infrastructure and economic development needs that were paused or stopped due to the pandemic. That’s a success.

None of the three audits conducted on the BASE program shared any information about the success and positive impact of this robust grant program. It is important to not lose sight of the fact that the BASE 1.0 and 2.0 programs have had a tremendously positive impact on Kansas businesses and Kansas communities. The projects supported by BASE 1.0 and 2.0 will set these businesses and communities up for long-term success that would otherwise not have been possible without this program. The following are a few examples of the impact the BASE program has had across the state.

• In Augusta, BASE funding was used to support utility modernization at the Augusta Industrial Park. This allowed for the construction of a new industrial building for future businesses and land acquisition to expand the space available for businesses to locate. That’s a success.

• Long needed transportation infrastructure was added to the Southwest Olathe Commerce District. This investment will now allow for the construction of a 1 million sq. ft. speculative warehouse and distribution facility, which had previously been paused due to the lack of roadway infrastructure. That’s a success.

• The City of Moundridge used BASE funding for infrastructure improvements to support two local business expansions and the creation of a new 20-acre housing development, which will help address workforce shortages in the community. That’s a success.

There are dozens of other projects like these across the state. We are proud of the work that has been done through the BASE program to support Kansas businesses and communities, and we stand by our process and its results.

Sincerely,

David C. Toland

Lt. Governor and Secretary

Appendix A – Cited References

1. Reviewing the Department of Commerce’s Process for Reviewing Building a Stronger Economy (BASE) 1.0 Grants (2025). Kansas Legislative Division of Post Audit.
2. Evaluating SOFTwarfare, LLC’s Use of Building a Stronger Economy (BASE) 1.0 Grant Funding (Limited-Scope) (2025). Kansas Legislative Division of Post Audit.

Appendix B – BASE Grant Recipients

This appendix lists information from all 72 BASE grant award agreements we received from the Department of Commerce. It includes the reported amount of grant funding the recipients were awarded, as well as the total planned matching expenditures as detailed in the budget breakdowns of their agreements. There were errors in some of the award agreements resulting in inconsistent amounts of reported planned matching expenditures. These errors also led to inconsistencies in the total project costs listed in those agreements. The shaded rows display the 12 agreements in which the amount of planned matching expenditures was less than 25% or were listed inconsistently in different sections of the agreement.