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Auditor: Gov. Reynolds misused $21 million in CARES Act funds for state software system

FILE: State Auditor Rob Sand meets with reporters in his office on January 9, 2020. (Photo: Caroline Cummings).
FILE: State Auditor Rob Sand meets with reporters in his office on January 9, 2020. (Photo: Caroline Cummings).
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Gov. Kim Reynolds improperly used $21 million in COVID-19 relief money to pay a software company the state contracted before the pandemic began, according to a new audit published by the state auditor's office Monday.

State Auditor Rob Sand said Reynolds was not authorized under the CARES Act to spend those millions on upgrading the state's human resources and accounting software system to Workday, a company with which the state signed a deal in 2019 before the pandemic. Iowa received $1.25 billion in CARES Act funding.

Sand consulted with U.S. Treasury Department's Office of the Inspector General, which confirmed his office's findings, he said.

“At the end of the day this money is supposed to be used for relieving the pandemic, we’re in the middle of a public health emergency. People are getting sick, people are dying, people are dying. There are economic effects," Sand said in an interview. "So the idea that this money is going towards a computer system for the state of Iowa is undoubtedly, we have concluded, absolutely inappropriate”

The report details what CARES Act funding can cover, which includes necessary expenditures incurred due to the COVID-19 public health emergency; costs not accounted for in the state budget most recently approved before the federal relief package was enacted at the end of March; and expenses during the period that begins on March 1, 2020, and ends on December 30, 2020.

The audit found the software upgrade with Workday didn't meet these requirements and Sand said the governor needs to redeploy those funds for lawful use or return them to the federal government.

“She’s already allocated the money, but it’s not too late for her to reallocate it towards something that’s actually going to mitigate the pandemic" Sand said. "If she doesn’t do that, then Iowa taxpayers are going to have to repay that $21 million."

The governor's office did not respond for a request for comment Monday afternoon.

But according to the report, the governor's office justified the spending by saying “with Workday, the State of Iowa will be able to act quickly to assist essential government employees, giving them flexibility in a number of ways, such as requesting COVID-related hardship help, easier ways to request Family and Medical Leave Act leave types, and automate processes for donating leave, and borrowing leave.”

The audit found the reasoning insufficient.

"The statement regarding how Workday affects state employees, a portion of whom are themselves working on the public health emergency, is essentially a restatement of the purpose of Workday in general, which did not change with the emergence of COVID19," the document says.

The state inked a deal with Workday, where the governor's former chief of staff is a lobbyist, without a typical competitive-bidding process, according to The Cedar Rapids Gazette.

Federal pandemic relief money for governor's staff salaries 'questionable'

The report also determined the governor's use of nearly $450,000 in CARES Act money to pay her staff's salaries to be "questionable." Reynolds has defended the decision, but the auditor said it's "not entirely accurate" to say coronavirus relief fund money can be used for salaries.

The guidance for CARES Act spending says payroll expenses qualify for employees "whose services are substantially dedicated to mitigating or responding to the COVID19 public health emergency," but it excludes “payroll or benefits expenses for employees whose work duties are not substantially dedicated to mitigating or responding to the COVID-19 public health emergency."

"Salaries may qualify only when certain conditions are met. The work the governor’s staff are doing that is directly related to the pandemic must be tracked separately from their ordinary work, and supported with appropriate documentation," the report details.

Sand said the governor's office will need to keep thorough records and documentation to prove additional pandemic-related work on top of their normal jobs; otherwise he warned the funds may also need to be repaid to the federal government.

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