Iowa auditor slams state for delays threatening universities

To make up for missed deadlines by the state, Iowa Auditor Rob Sand’s office for the first time has churned out “single audit reports” for each of Iowa’s public universities to spare them from threats of federal sanctions and to assure they comply with financial reporting mandates.

In a May 23 letter to the U.S. Department of Education, Sand’s office committed to doing the single-audit reports — and to keep doing them annually for each university going forward — to avoid future delinquencies or concerns about delayed reporting.

“Because we do not anticipate the Department of Administrative Services, State of Iowa to be able to complete the (annual comprehensive financial report) in a timely manner to permit issuance of a statewide single audit by the March 31 deadline, we have agreed with the universities to prepare individual single audit reports in future years,” Deputy Auditor Ernest Ruben wrote to the federal government. “We have every expectation those reports will be issued as required.”

The problem, as first reported by Laura Belin with the Bleeding Heartland blog, is tied to the Department of Administrative Services’ responsibility to prepare financial documents and a draft of the “annual comprehensive financial report.”

Typically, the state submits that information and a draft report to the auditor’s office for an independent audit, allowing the auditor to complete his work on the recently-wrapped budget year’s annual report by Dec. 31. The auditor’s office then issues an “internal control letter” within 60 days and a “statewide single audit” by the federal deadline of March 31.

The chain of events is important, according to Sand’s office, as his statewide single audit report can’t happen until the annual report is finished.

But given turnover within the Department of Administrative Services, the “steep learning curve” for new employees, new human resources software and the “complicated nature of preparing the state’s financial statements,” a data delay began months ago.

“While the (generally accepted accounting principles) team has been working to complete these items, their progress must significantly improve or the state risks significant delays in receiving federal funds,” according to a March 2 letter from the auditor’s office to state Department of Management Director Kraig Paulsen. “Such delays could have serious consequences.”

Go-round

In May, the U.S. Department of Education notified Iowa’s public universities that failing to submit compliance and financial audits on time “might jeopardize some of the institutions’ certifications and result in additional monitoring for a minimum of five years,” according to the auditor’s office.

As a go-round, the auditor got to work on the single university audit reports — completed and filed this week.

In a statement, Board of Regents spokesman Josh Lehman said, “We look forward to working with the auditor on the timely completion of individual single audits going forward, and anticipate compliance with federal regulations.”

Sand, Iowa’s only Democrat elected statewide, in a statement levied criticism at state Republican leadership for the delays.

“Despite billions of dollars in surplus, the governor and Republican legislative majorities responsible for your tax dollars have for years undervalued their own financial management team that prepares the material that we review for required audits,” he said. “The bottom line is we cannot audit what we have not been provided.”

In a statement, Department of Administrative Services spokeswoman Tami Wiencek said, “The ACFR is being finalized and will be delivered to the Auditor's Office in mid-July for its review. DAS is reviewing the process of compiling the report to ensure its timeliness going forward."

The governor’s office declined to comment, but noted Gov. Kim Reynolds received the highest grade for fiscal responsibility among the nation’s governors in a report issued last year by the conservative group the Cato Institute.

Delays aren’t new

Although the state auditor hasn’t before filed single audit reports for the universities to account for statewide financial reporting delays, Sand said the delays aren’t new.

In 2020, according to the auditor’s office, delay of the state’s single audit “caused significant concern for state agencies and universities, who were on the cusp of federal agencies withholding federal dollars due to the delay in issuance.”

Last year, because of the pandemic, federal officials offered an automatic extension through Sept. 30, 2022 to file the state’s single audit.

“No such extension is available this year,” according to the auditor’s office.

The auditor’s office did not find "instances of non-compliance or material weaknesses“ related to major programs on any of the three state campuses. According to the audits:

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