The Nebraska state auditor found reason to question whether the state received nearly 400,000 COVID-19 tests promised in a contract with the Utah-based company that operated TestNebraska.
The question over the tests was just one issue the Nebraska Auditor of Public Accounts found with the TestNebraska contract between the state and Nomi Health in its audit of financial statements, according to a management letter released Wednesday.
As of November, state agencies had signed at least five no-bid contracts with Nomi Health, worth up to more than $69 million total. The auditor’s findings related to the first of those contracts, for the effort to provide free COVID-19 testing across the state, known as TestNebraska.
The auditor noted issues with providing supporting documentation and keeping contract language clear and unambiguous — both issues that can increase risk for loss or misuse of funds, according to the letter.
The contract, signed April 21, 2020, stated that Nebraska would receive 1.2 million test kits, according to the letter. But the Department of Administrative Services, which handles state contracts, didn’t have documentation proving the state received more than 803,000 of them.
It had a list showing 1.23 million kits were received, but it couldn’t be traced to supporting documents, such as receipts, according to the letter. That led the auditor to question if the state had actually gotten nearly 397,000 of the kits — valued between $9.9 million and $12.9 million.
And, the letter states, the auditor couldn’t verify that all the tests were received by dates set out in the contract.
In its response, DAS said that it provided records supporting that the test kits required by the contract where shipped.
“DAS’ own records indicate that there was a lack of packing slip documentation maintained during the pandemic, particularly in the early months of June, July, and August 2020, however, such test kits were received,” it reads. “Records of the Department of Health and Human Services (DHHS) show that tests were administered at TestNebraska sites in these months.”
It provided the number of tests performed according to lab records and a count of warehouse inventory, saying that those show the state received at least 995,900 kits. DAS said Nomi provided documentation that supports more than 1.2 million.
The department told teams receiving the kits about documentation procedures and expectations, which included filling out a form. However, DAS acknowledged some did not adhere to those expectations.
“DAS will ensure that such performance issue will not occur again in the next pandemic,” it said.
Another issue: An amendment to the contract in October 2020 required Nebraska to pay Nomi Health for “services its asked to provide associated with the collection sites.” Those payments, the letter says, were “largely retroactive,” for services already performed. They totaled more than $2.9 million.
And, language in that October amendment wasn’t clear that there would be additional service and management fees, according to the letter, yet those charges were on every invoice received by the state over five months the auditor analyzed.
“Consequently, during that five-month period, the State paid Nomi $3,489,063 in direct costs and an additional $548,231 for management and service fees,” the letter reads.
Agreements to make retroactive payments are “often problematic,” according to the letter, and could violate a provision in the state’s constitution that bars state and local governments from making extra payments for past services. In its response, DAS insisted it didn’t violate the state constitution.
“When the State accepted and utilized these essential services in responding to the pandemic, the State became legally responsible to compensate the contractor for such costs, whether pursuant to an oral contract, implied contract, or quasi-contract,” the DAS response reads.
It’s best practice that agreements should be in writing, DAS wrote, but there weren’t any disagreements between Nomi and DAS.
“DAS has procedures in place to ensure that deliverables are accurately tracked and documented, contracts are stated clearly, and agreements are put into writing before payment becomes due,” it reads. “In this circumstance, there were gaps in performance in following these procedures under the stress of a global emergency. DAS will strive to ensure that such gaps do not occur.”
Nebraska’s initial contract with Nomi was worth about $27 million, but it grew to about $62 million. That contract ended July 31, 2021.
In a statement, CEO and founder Mark Newman said "Nomi Health delivered all COVID-19 tests under its contract with the State of Nebraska ahead of schedule." He also noted that the audit was critical of DAS' record keeping, and that Nomi itself was not the subject of the audit. He pointed to DAS' response to the audit.
"In the State’s own words: ‘all test kits required under the contract were shipped,’ ‘the contract was fulfilled’ and ‘there was no violation.’ Anything beyond that is invalid," Newman said. "We are honored to help power one of the nation's leading COVID responses in Nebraska.”
Gov. Pete Ricketts and others have praised TestNebraska for its role in helping the state double its testing early on in the pandemic as other states struggled. But the practice of inking no-bid contracts with Nomi has drawn criticism in Nebraska and elsewhere. Four state lawmakers in Nebraska called for the state to cancel its initial contract.
Newman previously said Nomi doesn’t seek out no-bid deals but serves as a last stop in emergencies.
In other Nebraska contracts, Nomi committed to provide staff for COVID-19 testing and vaccination sites, provide COVID-19 vaccine scheduling services, provide nursing staff at the Central Nebraska Veterans’ Home and run a call center to help hospitals find beds for patients.
Ahead of the call center contract, Nomi made a $20,000 donation to the Nebraska Republican Party. A Ricketts spokesperson has said the donation didn’t influence the state’s work with Nomi.
In 2021, state financial disclosure records show the company also donated $5,000 each to GOP gubernatorial candidates Jim Pillen and State Sen. Brett Lindstrom. It donated another $10,000 to Pillen, who went on to win the nomination, on May 2.
Update: This story has been updated to include a statement from Mark Newman, CEO and founder of Nomi Health.