Lawmakers refused to fund no-bid contracts before Reynolds used federal virus aid

Iowa Capitol Dome
The dome of the Iowa State Capitol. (Photo by Joe Raedle/Getty Images)

Gov. Kim Reynolds decided to use $21 million in federal pandemic relief aid to pay for unrelated no-bid contracts with a hand-picked software company after lawmakers declined to make the appropriation.

The software company, California-based Workday, has ties to current and former members of Reynolds’ staff.

The decision to use the money intended to help Iowans recover from the COVID-19 pandemic led State Auditor Rob Sand, a Democrat, and the U.S. Treasury Department’s inspector general, part of President Donald Trump’s GOP administration,  to order Reynolds to return the money to a special state fund used for pandemic-related expenses. If she doesn’t, Sand said, the money would have to be returned to the federal government at the end of the year.

Auditors also questioned Reynolds’ use of about $450,000 in CARES Act aid to help pay her staff expenses. 

“We think it was an allowable expense,” Reynolds told reporters at a campaign event Wednesday, the Associated Press reported. Reynolds added that state officials will make their case to federal officials.

“We’re going to reach out and talk about why we believe it was an appropriate expense and hopefully we’ll get the answer we think we should get,” Reynolds said. “And if not, we’ll readjust and do what we need to do. We’re not going spend dollars in a manner that is not appropriate,” she added, according to AP.

Lawmakers reject Reynolds’ request for gambling money

State Rep. Chris Hall, D-Sioux City, is the ranking member of the Iowa House Appropriations Committee, which is controlled by Reynolds’ colleagues in the Republican Party. 

The panel turned down Reynolds’ request for $21 million in state gambling revenues for the cloud-based Workday accounting and human resources system, which also handles budget documents, Hall said. That decision came because the pandemic-related temporary closures of casinos had reduced the amount the state had in the fund Reynolds had eyed for the software service, he added.

State Rep. Chris Hall is a Democrat from Sioux City. (Photo by Iowa Legislature)

“After the Legislature declined to fund the Workday contract, the governor’s office indicated they would find the money another place (in the state budget),” Hall said. “Instead, they found it in the CARES Act.”

Congress passed the CARES Act to pay for pandemic-related expenses incurred after the pandemic spread in the United States. Reynolds began pursuing a deal with Workday last year, before COVID-19 spread in Iowa.

Hall, who agreed with the auditors’ findings, said Iowans and the businesses where they work are struggling. The $21 million could pay for assistance that is more important than pursuing a software system at the moment, he said.

“We should be putting these dollars toward the purposes intended and not funding personal priorities” rejected by state lawmakers, he added.

Hall said state lawmakers were unwilling to back Reynolds’ request, which named Workday specifically, in part because the administration didn’t go out for bids.

“The Workday contract raised flags because it circumvented the competitive bidding process,” Hall said. “That process is there to avoid corruption.” 

It’s not unusual for the state to approve a no-bid contract a few times a year, perhaps, Hall said. But a $21 million request for a project that turned out to be $50 million over two years almost always would mean going out for bids, he added. 

Governor handpicked California firm familiar with her staff for no-bid contracts

Records show Reynolds listed a separate line item for the “Workday System” under the Office of the Chief Information Officer for $20,889,000 in her budget for the current fiscal year, but the House removed it.

Gov. Kim Reynolds has been asked to repay $21 in pandemic relief she wants to use for software. (Photo by Linh Ta/Iowa Capital Dispatch)

Reynolds’ current and former staff members have a history with Workday. Her former chief of staff, Jake Ketzner, is listed on the Iowa Legislature’s website as a lobbyist for the company. Ketzner did not return calls Tuesday and Wednesday.

Pat Garrett, Reynolds’ press secretary, said, “Jake Ketzner no longer works for the state of Iowa and has not been involved in the state’s Workday contracts.”

Garrett didn’t say if the state has paid Workday yet, and if so, what source of money was used.

Reynolds’ chief financial officer, Paul Trombino has worked on the state’s broader contract with Workday. The system was installed at the Iowa Department of Transportation months after Trombino resigned as director of the agency.

Reynolds aide had installed Workday at ISU

Former state lawmaker and administrator Jim Kurtenbach has taught business classes at Iowa State University. (Photo courtesy of Iowa State University)

Jim Kurtenbach, a former Republican state legislator, helped install Workday at Iowa State University, where he was vice president and chief information officer from July 2016 until Nov. 30, 2017, when he abruptly resigned the $252,794-a-year position. ISU conducted no candidate search before giving the dual roles to Kurtenbach, who had been involved in a controversy after he offered then-ISU President Steven Leath additional pilot training.

Current ISU President Wendy Wintersteen noted Kurtenbach’s role in establishing Workday at ISU when she helped announce his resignation.

“Jim has been integral in enhancing security across the university’s enterprise technologies; modernizing IT infrastructure; implementing Canvas, a new learning management system; and initiating the switch to Workday to update and streamline our information systems and processes,” Wintersteen said in a statement on the day Kurtenbach resigned.

Reynolds appointed Kurtenbach as director of the Iowa Department of Administrative Services, which handles most large state contracts, effective July 1, 2019. He quit the $154,300-a-year job eight months later, on March 6, 2020, shortly after the state signed the second of two contracts with Workday. 

“I am proud that we have improved the culture of this department in a manner that is customer-focused and outcome driven,” Kurtenbach said in a statement at the time. “With these achievements in place, now is an acceptable time for me to return to life as a private citizen and to new professional challenges.” 

Kurtenbach did not return email and phone messages Wednesday morning.

State lawmaker: Computer improvements needed, but funding a question

The Cedar Rapids Gazette reported that the state signed contracts with Workday in October 2019 and February 2020 worth $50 million combined. The package was scheduled to be installed in July 2021 and July 2022, the Gazette reported. 

Sen. Joe Bolkcom is a Democrat from Iowa City. (Photo courtesy of Iowa Senate)

Sen. Joe Bolkcom, D-Iowa City, said in an interview this week the state’s computer system should have been replaced 10 or 20 years ago. “The state is totally in need of a new system,” but should have sought competitive bids for a $21 million contract, he added.

Bolkcom said the question is why the governor would use pandemic aid needed by small businesses trying to stay open and Iowans fighting an unprecedented pandemic that threatens their lives. 

“This is a basic cost of state government,” Bolkcom said. “It ought to be paid by state taxpayers. It’s a real stretch to use pandemic relief, as (Reynolds) is finding out.”

Before it adjourned in June, the Legislature gave Reynolds broad authority to manage the state budget through the pandemic, including spending federal relief funds. Lawmakers gave Reynolds expanded authority to transfer dollars that had been appropriated, including from one department to another, and to access up to 10 percent of the state’s economic emergency fund.

House Appropriations Chairman Rep. Gary Mohr, R-Bettendorf, and Vice Chair Holly Brink, R-Oskaloosa, did not return emails and phone calls Tuesday and Wednesday. Republicans control the committee and hold the majority in both chambers of the Legislature.

After Democrats called for a Senate Oversight Committee meeting on the Workday matter in March, committee Chairwoman Amy Sinclair, R-Allerton, told the Cedar Rapids Gazette one wasn’t needed. “My job as government oversight is to look in case things are done improperly,” Sinclair said. “At this point, I’ve seen nothing that’s illegal. I’m not going to speak to optics. It’s not my optics.”