WEST DES MOINES — Gov. Kim Reynolds says her administration will try to convince federal auditors to allow its plan to spend $20 million in coronavirus relief funds on a long-planned information technology system.
Reynolds said the state believes spending federal virus aid to purchase and implement a new accounting and human resources system for the executive branch is “an allowable expense.”
She said that if auditors disagree, the state will change course.
“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 told reporters Wednesday. “And if not, we’ll readjust and do what we need to do. We’re not going to spend dollars in a manner that is not appropriate.”
The U.S. Department of Treasury’s inspector general wrote to the governor Oct. 16 to say the agency had reviewed the expenditure and determined it does not meet the rules of the Coronavirus Aid, Relief and Economic Security, or CARES Act.
“While the new and modern Workday system may provide additional functionality, these upgrades are not necessary to address the public health emergency and were already planned before the COVID-19 pandemic outbreak,” Deputy Inspector General Richard Delmar wrote. “As such, funding the Workday contract with Coronavirus Relief Fund proceeds is not a reasonable, allowable use of funds.”
He asked Dave Roederer, director of the Department of Management, to reply by Monday with Iowa’s corrective action plan for returning that money to Iowa’s Coronavirus Relief Fund.
State Auditor Rob Sand said on Monday the use of pandemic funds for the Workday project was inappropriate.
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He warned Iowa would be on the hook to repay the federal government $20 million if it’s not diverted to an allowable use, such as virus testing, contact tracing and personal protective equipment.
The state signed contracts in October and February to pay Workday $50 million over five years for the new IT system, skipping traditional competitive bidding procedures and choosing a company whose lobbyist, Jake Ketzner, was Reynolds’ former chief of staff, The Gazette reported in February.
When The Gazette detailed the unusual route the state took to arrive at a contract with Workday, the governor’s office said Ketzner was not involved.
Reynolds initially planned to fund the annual payment to Workday with money from the Rebuild Iowa Infrastructure Fund, Sen. Joe Bolkcom, ranking Democrat on the Iowa Senate Appropriations Committee, told The Gazette in August.
But since that fund is fed by gambling revenue from Iowa’s state-licensed casinos, which were closed for 11 weeks because of COVID-19, there wasn’t enough money for the Workday expenditure.
The Workday system was not scheduled to be implemented until July 2021 and July 2022.
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The Associated Press and Gazette reporter Erin Jordan contributed to this report.
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