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Metro counties are spending hundreds of thousands of dollars in COVID-19 relief money to third-party vendors that help officials distribute the state and federal dollars among small businesses and nonprofits.

There was no cap on how much counties could pull from their federal CARES Act allocations to cover administrative costs, but the Minnesota Legislature has set a 2.5% limit on a new round of state funding.

Some counties say they will keep contracting with independent entities to administer relief grants. Anoka County, meanwhile, will carry out the process in-house, raising concerns among some county leaders and residents about favoritism and transparency.

Vendors contracting with counties help establish a website to distribute and receive grant applications, ensuring that applicants meet criteria and submit all required documentation before recommending grant award amounts.

In Ramsey County, a $375,000 contract with the Metropolitan Consortium of Community Developers helped administer the grants to small businesses using federal CARES funds, said county spokesman John Siqveland. The county is now working to finalize a new contract with the same vendor for administering state dollars.

In Dakota County, manager Matt Smith said the county will continue contracting with a third-party vendor. During the first round of federal grant dollars, the St. Paul-based vendor NextStage was paid $354,300 for services, but the county later switched vendors, contracting with Baker Tilly and paying the firm about $113,890 for two additional rounds of grants.

Scott County is also working with NextStage, and paid $134,148 for administration of its CARES Act business relief program.

"Every county is different. In our case, we don't really feel like we had the staffing capacity to do it," Smith said, adding that Dakota County has 80 vacant staff positions due to the financial pressures of the pandemic.

When Anoka County was allocating $6 million in federal CARES dollars last year, it paid $110,450 to Central Minnesota Development Co., an Andover-based loan agency, and $166,020 to Minneapolis nonprofit Metropolitan Consortium Community Developers. For a new round of relief grants, funded with $7 million from the state, county staff have taken over administration. There is a March 15 deadline to distribute grants.

Anoka County Commissioner Mandy Meisner said she was worried whether county staff had the bandwidth to run the grant process internally, but she said staff are being reassigned to focus on that work. She said she also had concerns about the potential for favoritism of grant applicants but is confident that existing guidelines will provide checks and balances.

Meisner said the decision boiled down to giving more funding to struggling businesses rather than paying for administrative costs. "There's more money available to help the community," she said.

A committee of county staffers, led by economic development specialist Jacquel Hajder, oversees the application process and approval of grants. Other committee members include the county administrator, county attorney, accounting director and finance and internal auditors.

The 763 PAC, an Anoka County political group focused on economic development, raised concerns about the shift to oversight by county staff, saying in a tweet that news of the change is "disturbing."

County spokesman Erik Thorson said there was never a long-term contract with vendors, and the federal relief grant program was more restrictive than the state's. With more flexibility for using state dollars, the county opened the application process to freelance musicians and artists as well as seasonal organizations that didn't meet the $10,000 revenue requirement for federal grants.

Cory Kampf, finance division manager, said the county is carrying over a robust system of checks and balances by having a team review applicants and utilizing guidelines first established with independent vendors. He said staff is being as "objective as possible to get as much money into the hands of businesses."

"We do have a good review process in place," he said. "That decision doesn't rest with one person."

Kim Hyatt • 612-673-4751