Reynolds to return $21M in pandemic aid that officials said was improperly spent

Gov. Kim Reynolds announced Monday she will return $21 million in federal pandemic aid to the state’s coronavirus relief fund after the federal government confirmed it was improperly spent on a human resources software project.

Nearly $4.5 million of the allocation had already been spent on the state’s contract with Workday, a software system that was planned to upgrade the state’s information technology infrastructure.

State Auditor Rob Sand and the federal Treasury Department’s inspector general raised questions in mid-October about Reynolds’ use of federal CARES Act money for the project. The Workday contract with the state was signed in 2019, before the pandemic began.

“It’s a shame that during the middle of a global pandemic there was even the thought to spend $21 million on a fancy new software system and not on saving small businesses or increasing our testing capacity,” Sand said in a statement Monday. “Iowans can rest assured that our office will continue to work on our own and potentially in conjunction with other federal agencies to ensure that every dollar of CARES ACT money is properly accounted for.”

Reynolds’ release said the state still believes the expenses were allowable under the CARES Act but will “respect the decision” of the Treasury Department’s inspector general.

“The COVID-19 pandemic only further highlighted the critical need for integrated IT systems that will improve operational efficiency and effectiveness for the State of Iowa,” Reynolds said in a news release. “Following multiple conversations with the Treasury Department last spring, we believed we had assurances that the upgrade to Workday qualified as an allowable expense. We would not have moved forward without those assurances.”   

Reynolds also said the Workday project will move forward, as it has “received overwhelming bipartisan support” from the Legislature and elected officials.  The governor’s release states that the project will need supplemental funding to support completion of the project. She did not specify where she plans to get the money.

Reynolds, a Republican, asked the GOP-controlled Legislature to approve the Workday project during its 2020 session. Lawmakers turned her down, saying there wasn’t sufficient gambling revenue in the state’s infrastructure fund due to the pandemic.

Some lawmakers also raised concerns because the state bypassed the competitive bidding process before contacting with Workday, which hired the governor’s former chief of staff as one of its lobbyists.

The money had to be returned to the coronavirus relief fund by the end of the year or be remitted back to the federal treasury. Reynolds’ release says the money will be returned to the state fund by Friday.

Out of $1.25 billion the state received from the CARES Act, just over $47 million is still unspent. According to Reynolds’ release, the state will allocate the remaining money by the Dec. 30 deadline “but an extension from the federal government would allow time to use the funds to create additional programs and support other needs among Iowans.”

The governor has called on Congress to “do their job” and approve an additional coronavirus relief package before the end of the year.