Iowa Gov. Reynolds signs bill limiting state taxpayer watchdog

Iowa’s taxpayer watchdog will face new restrictions on his office’s ability to access certain records when auditing government programs for waste, fraud and abuse.

Republican Gov. Kim Reynolds on Thursday signed into law Senate File 478, despite strong condemnation from nonpartisan and bipartisan auditors and CPA organizations.

The lone Democrat elected to statewide office, Sand last week said the bill "is about politics and protecting insiders."

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Republicans have denied claims the bill is a personal attack meant specifically to target Sand, and say the bill protects Iowans’ personal information and puts into state law general accounting standards.

Iowa Democrats have decried the bill as a “power grab” that dilutes the statutory and constitutional powers of the auditor’s office to ensure taxpayer dollars are not being misspent, putting billions in federal funds at risk.

A fiscal analysis by the nonpartisan Legislative Services Agency warns Senate File 478 could limit the ability of the state auditor to perform oversight on programs that total more than $12 billion.

The agency warns the bill may limit the scope of an audit performed by the auditor’s office, which could impact the state’s bond rating and ability to comply with federal award requirements.

Information such as criminal files, hospital records, student records, peace officers' reports and attorney work product would be off limits, unless necessary to comply with government auditing standards, any state or federal regulation, or if the auditor is investigating alleged or suspected embezzlement or theft.

Denial of information requested by the auditor’s office for an audit would lead to a modified opinion stating the office was unable to obtain all documents needed to sufficiently audit to federal standards. That could potentially lead to federal agencies withholding, suspending or disallowing cash payments to the state through programs such as Medicaid and federal food assistance programs for women, infants, children and others.

LSA notes Iowa Code and federal law already maintain the strict confidentiality of information and records obtained during the course of an audit, including medical and student education records.

Critics of the legislation include the National State Auditors Association, the Institute of Internal Auditors, and former U.S. Comptroller General David Walker, who served under both Democratic and Republican presidents. They say the legislation would hamper the state auditor’s ability to prevent fraud and misuse of taxpayer funds.

The bill also makes changes to the state auditor’s subpoena power. The bill directs disputes over access to records between government offices and agencies to a three-member arbitration panel rather than a court.

The arbitration panel’s ruling would be final, with the auditor no longer able to challenge the decision in court.

The arbitration panel is comprised of the auditor’s office, the state department or agency that is being investigated, and a representative of the governor’s office.

Sand said that would allow any agency being audited to hide records from the auditor's office as long as the governor agrees, erasing the auditor’s access to Iowa courts for independent review.

In a statement Thursday, Sand called it a “pro-corruption bill” that will “allow insiders to play fast and loose with Iowans’ tax dollars.”

Sand, a former Iowa assistant attorney general who prosecuted public corruption cases, said it was “akin to letting the defendant decide what evidence the judge and jury are allowed to see.”

“Governor Reynolds ignored a bipartisan group of oversight and accounting professionals opposed to the bill, as well as members of her own party who voted against it,” he said. “More importantly, she ignored Iowans who want to know how their tax dollars are spent.”

Reynolds, during an appearance on Iowa PBS "Iowa Press“ last month, said “Iowans expect the executive branch to be able to work things out.”

“It puts a process in place that allows us to do that,” the governors said. “If my agencies have some conflict, we bring them in, we set them down, and we ask them to work it out. … And I just don’t think it’s unreasonable that we can’t come to some resolution through the arbitration process.”

Comments: (319) 398-8499; tom.barton@thegazette.com