Gov. Kim Reynolds said Monday she will return to Iowa’s Coronavirus Relief Fund the $21 million regulators said she misspent on a new computer system.
The announcement acknowledges a defeat for Reynolds, who had argued in October that a $57 million contract with cloud-computing company Workday was “necessary” to address the pandemic — even though the contract was signed months before COVID-19 hit Iowa in March.
“Following multiple conversations with the Treasury Department last spring, we believed we had assurances that the upgrade to Workday qualified as an allowable expense,” a news release from the Governor’s Office said. “We would not have moved forward without those assurances.”
But the U.S. Treasury Department denied Reynolds’s Oct. 26 appeal and asked the governor to return the money to the relief fund by Dec. 18, the news release said. State Auditor Rob Sand also determined the $21 million Workday expenditures was not allowed.
“The really important thing ... is that there’s $21 million that can mitigate the pandemic for ordinary Iowans,” Sand said Monday after the announcement.
He mentioned increased COVID-19 testing sites and small business relief grants as two options for spending the remaining $47.3 million in the relief fund.
“There are a lot of things that can be done that are both legal and better for Iowans,” he said.
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The Iowa Department of Management already has spent $4.45 million of the $21 million allocated in July to pay for the state’s Workday contract, according to the news release.
The Governor’s Office has not said where in the state budget that $4.45 million will come from, but Sen. Joe Bolkcom, ranking Democrat on the Iowa Senate Appropriations Committee, said the $305 million surplus in the state General Fund or the Rebuild Iowa Infrastructure Fund could be tapped.
The state plans to find supplemental funding for the Workday project.
“Replacing the State’s outdated IT systems remains a critical need, and has received overwhelming bipartisan support from the Legislature and elected officials,” the news release states. “As such, the Workday implementation will continue as planned. The estimated costs and timelines of the project have not changed.”
In July, Reynolds transferred $91 million from the state’s 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.
However, the deal with Workday had been in the works since October 2019 when the state signed the first of two contracts to pay $57 million over five years for the new system. The deal, which The Gazette detailed in February, sidestepped traditional competitive bidding procedures and included a company whose lobbyist, Jake Ketzner, was Reynolds’ former chief of staff.
When The Gazette reported on the unusual route the state took to arrive at a contract with Workday, the Governor’s Office said Ketzner was not involved in the deal.
It also was unclear how the Workday system would be useful during the pandemic because the first phase of implementation wasn’t scheduled to start until July.
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