Gov. Kim Reynolds has asked the U.S. Treasury Department to reconsider its determination the state’s use of $21 million in coronavirus relief funds for a new computer system isn’t allowed under federal law.
The U.S. Treasury Department’s Office of Inspector General determined Oct. 16 the transfer of money from the state’s Coronavirus Relief Fund — filled with $1.25 billion in federal money — wasn’t allowable because the state already had planned the new computer system before the pandemic, and the upgrades were not necessary to address the public health emergency.
But Reynolds’ staff responded in a letter Monday that because the state already had planned the system upgrade but there wasn’t money in the budget for it was exactly why the transfer should be allowed under the Coronavirus Aid, Relief and Economic Security Act, or CARES Act.
“The expenditures incurred under it between March 1, 2020, and December 30, 2020, were not accounted for in the most recently approved budget and are necessary due to the current public health emergency,” Sam Langholz, senior legal adviser, wrote. “They are thus allowable expenditures under the CARES Act.”
In October 2019 and February — the month before cases of the novel coronavirus were confirmed in Iowa — the state signed two parts of a $57 million contract for a new computer system from Workday, a California-based company.
The deal sidestepped traditional competitive bidding and raised questions because Workday had hired Reynolds’ former chief of staff, Jake Ketzner, as a lobbyist, according an investigation in February by The Gazette.
The new system is scheduled to roll out in two phases, one in July 2021 and the other a year later.
Reynolds initially had expected the Workday money to come from an appropriation from the Technology Reinvestment Fund, Langholz said in Monday’s letter.
“But ultimately no such appropriation was included in final budget enacted into law by the Legislature and the Governor on June 30, 2020,” he wrote. “And no line item for this project had been included in the Fiscal Year 2020 budget.”
In July, Reynolds transferred $91 million from the state’s coronavirus relief fund to the Office of the Chief Information Officer, with $21 million to go to the Workday contract, The Gazette reported in August.
Democratic lawmakers criticized the move, saying a computer system upgrade seemed like a stretch for pandemic aid. But Reynolds’ spokesman, Pat Garrett, said at the time Workday would play an “integral role” in the state’s COVID-19 response.
Langholz expanded on that in the letter.
“First, both the Human Capital Management system and Adaptive are cloud-based, mobile-enabled solutions that will permit state government to productively continue functioning when many state employees are operating remotely to reduce the risk of transmission of coronavirus,” he wrote.
He said the Workday system would be more adaptive in an emergency and would help the state “forecast to properly respond to the public health emergency and its second-order economic effects.”
Further, Langholz said, the CARES Act gives discretion to state leaders to decide what is necessary.
The Inspector General’s staff — which likely heard some of the state’s arguments in an August meeting with the Reynolds administration — had asked the state to reply by Monday with how officials would repurpose the $21 million not considered an allowable expenditure.
It’s unclear whether the agency will reconsider its earlier decision.
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