Iowa auditor, governor bicker over private school tuition oversight

DES MOINES — State agencies have refused to provide some information about Iowa’s taxpayer-funded private school financial assistance program to the state auditor’s office as the parties disagree over whether state law permits them to share the requested information.

While conducting an annual financial audit of state government, Iowa Auditor Rob Sand’s office requested certain information about Iowa’s Education Savings Accounts program. Created by the Legislature in 2023, the program allows Iowa families, initially based on their incomes as it was phased in, to receive state-funded scholarships of more than $7,000 to put toward a K-12 private school education.

Sand said Tuesday his staff requested and was denied information to determine whether state funds were being distributed only to eligible families and whether state agencies were conducting proper oversight of the program and its expended funds — more than $104 million in the state budget year covered by the audit.

Gov. Kim Reynolds’ office, the Iowa Department of Education and the Iowa Department of Revenue said Tuesday that state law prohibits them from providing the information requested by the Auditor’s Office because of the manner in which it was requested. They said the request is outside the scope of an agreement the parties signed at the start of the annual financial audit — which is called the Annual Comprehensive Financial Report — and because of that, a new agreement is needed.

Sand and the accountants in his office believe their request falls within the scope of the original agreement and disagree that a new agreement is needed.

The audit says the state agencies should “document their procedures, processes and controls over the various aspects of the ESA program and provide this documentation to the Auditor of State’s Office,” and should “provide the Office of Auditor of State with information as requested for purpose of the audit.”

The state’s response says it disagrees with the auditor’s office “in its determination of criteria, condition, cause, effect, and recommendation.”

“The Iowa Department of Management and Iowa Department of Administrative Services signed a letter of engagement with the Iowa State Auditor with mutually agreed upon parameters prior to the 2024 financial audit. The Iowa State Auditor sought information beyond the agreed upon scope of the engagement letter,” said a joint statement from the state education and revenue departments.

“Despite multiple responses informing the Iowa State Auditor’s office that targeted inquiries regarding the Students First Education Savings Account program operation were not within the scope of the ACFR and would require a separate letter of engagement for a performance audit to be filed, the Iowa State Auditor refused to do so,” the joint statement continued. “The Iowa State Auditor has attempted to use the critically important ACFR process in place of a performance audit.”

During a news conference Tuesday at the Iowa Capitol, Sand said the state’s refusal to share the requested information results in a “material weakness” in the annual audit, which he called “a big deal.”

“That means that we can’t say that the state has sufficient controls to detect financial reporting errors or waste, fraud and abuse,” Sand said. “The mission of this office is to shine a light on how the state spends your money, hold government agencies and lawmakers accountable, and help prevent waste, fraud and abuse. We can’t do that when the governor gives her approval to hiding documents and thumbing their noses at transparency for Iowans.”

Reynolds, speaking at a separate news conference Tuesday at the Capitol, said if Sand’s office submits a new engagement letter, the state will provide the information. Sand’s office called that “yet another excuse to hide documents from the State Auditor.”

“If he really wants to get to the bottom of it,” Reynolds said, “then sign the engagement letter. Lay out what the scope of the work is. Be transparent, and we will provide it. And that is all laid out in the response that we gave to them.”

Reynolds also accused Sand of being politically motivated and noted his staunch and consistent opposition to the Education Savings Account program. Sand, like most statehouse Democrats, has opposed the use of state funds for private school tuition assistance at the level allowed in the ESA program.

Reynolds and Sand are both up for re-election in 2026. Reynolds has not said whether she will seek another term as governor, although in the same news conference she said “stay tuned” for news on that question. Sand has not ruled out a run for governor, and recent state fundraising reports show he raised $8.4 million in 2024, including $7 million of it from his family.

“The auditor should be nonpartisan, non-biased, but he has publicly been against educational freedom and ESAs since the day that we signed it into law,” Reynolds said. “He’s not a nonpartisan auditor. He’s a political actor. He’s using his office for political gain.”

Sand noted the staff who worked on the annual audit have collective experience of more than 100 years and he provided a statement from two accountants in the office who have served under four state auditors attesting the work on the audit was within the scope of a normal, annual financial audit.

“As CPAs who have served under four State Auditors, we can say this report comes from the same mission of nonpartisan accountability as our work has for decades. As a new material state program, auditing standards require us to consider this program related to the ACFR (annual audit),” says the statement signed by Deputy Auditors of State Brian Brustkern and Pam Borman, provided by the auditor’s office.

The parties also disagree over whether recent Iowa Supreme Court opinions — one issued in 2021 and reaffirmed in 2024 — clarify that a second engagement letter is not required during the course of an audit.

In a 2021 opinion, justices said the state auditor is not necessarily required to provide a formal engagement letter identifying objectives and standards to initiate an audit.

That opinion was delivered two years before statehouse Republicans passed a law that put some constraints on the scope of the state auditor’s authority and defined the timing of the auditing process. That 2021 opinion was cited by the Iowa Supreme Court again in a 2024 ruling in a case in which Sand’s office justified the withholding of emails from a public records request by claiming they were part of an audit.

Comments: (515) 355-1300, erin.murphy@thegazette.com

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Download: 24 ACFR SAS 122 Letter_FINAL.pdf