Audit: Reynolds misused $21 million in pandemic aid

The Iowa Legislature opens its next session Jan. 11. (Photo by Perry Beeman/Iowa Capital Dispatch)

Iowa Gov. Kim Reynolds misused $21 million in CARES Act pandemic-relief aid for a state software system that was approved months before COVID-19 arrived, state Auditor Rob Sand said Monday. 

In an audit report, Sand said Reynolds should shift the $21 million back to the state’s pandemic relief fund to be used for other, allowable expenses.

Sand added that $448,449 in pandemic aid Reynolds used to pay her own staff expenses also is questionable and may have to be repaid, depending on how much time the staff members spent on pandemic response.

In a report, Sand said he checked the U.S. Treasury Department’s inspector general, who agreed with his findings. 

Sand issued a statement that Reynolds’ “decision to use millions of CARES Act dollars to help implement a new software system for state government was not an allowable use of the funds.” Sand and the inspector general told Reynolds the $21 million should be returned to the Coronavirus Relief Fund.

Sand is a Democrat who has hired both Democrats and Republicans for his top staff positions. Reynolds is a Republican. 

In an Oct. 16 letter to the Iowa Department of Management, Sand said the money would need to be shifted back to pandemic-related work by the end of the year, or federal regulations will require that the state government give the money back to  the federal treasury. 

Among the rules governing CARES Act are sections that say the money has to be used for expenses incurred in the pandemic response after March 27, when the CARES Act was enacted. Sand said the Workday software package, for human resources and accounting work, was approved last year, well before the pandemic spread to Iowa. 

Reynolds’ office, in justifying the expense, said “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.” 

Sand didn’t buy the explanation. 

“These expenditures are not ‘due to the public health emergency,’” Sand wrote. “The state of Iowa signed a contract in 2019 for these expenditures prior to the emergence of COVID-19. 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 COVID-19,” Sand said in his report. 

Sand said Reynolds’ staff indicated CARES Act money, in this case $448,449, can be used for staff salaries.

“This is not entirely accurate,” Sand wrote. CARES Act documents say the money can be used for pandemic-related payroll expenses involving public safety, public health, health care, human services and others “substantially dedicated” to responding to the pandemic. 

Sand said Reynolds’s office would have to track the work of the staffers related to the pandemic separately to make a case that the aid can be used. 

“That means an inadequate focus on (the) pandemic by those employees, or an indirect focus, and/or an inadequate record-keeping effort, could result in those funds also having to be rapaid to the federal government,” Sand wrote. “That would result in a loss for Iowa taxpayers.”

Sand said the state properly used the aid for the Small Business Relief Grant Fund, and for buying protecting equipment for essential workers and expanding COVID testing.

David Roederer, director of the Iowa Department of Management, which handles budgeting, referred questions to the governor’s office. 

Pat Garrett, the governor’s press secretary, did not immediately return an email seeking comment. 

State Sen. Claire Celsi, D-West Des Moines, issued a statement saying she was “disappointed” by the misuse of federal aid. 

“Instead of directing more money to testing and contact tracing, paid sick leave for essential workers, food assistance, child care subsidies, additional money for rent assistance, unemployment insurance, utility assistance, providing (personal protective equipment) to health care workers and educators, and to help schools prepare for the winter season — and myriad of other uses — Gov. Reynolds is using the CARES Act money as a means to fund pet projects and make Iowa’s budget appear flush with excess funds,” Celsi said. 

Reynolds noted late last year that the state government’s mainframe computer system needed to be updated.

Perry Beeman
Senior reporter Perry Beeman has nearly 40 years of experience in Iowa journalism and has won national awards for environmental and business writing. He has written for The Des Moines Register and the Business Record, where he also served as managing editor. He also is former editorial director of Grinnell College. He co-authored the recently published book, "The $80 Billion Gamble," which details the lottery-rigging case of Eddie Tipton.