Gov. Kim Reynolds misappropriated almost $450,000 in federal pandemic relief funds to cover the salaries and benefits of 21 employees in her office, according to a report published by the Iowa State Auditor’s Office on Monday. This is not the first time Auditor Rob Sand has issued a report alleging Reynolds misused CARES dollars meant to help the state pay for COVID-related expenses.
In October 2020, Sand sent the Reynolds administration a letter advising it that $21 million in CARES Act funds had been misappropriated by the governor, who had designated that money to make payments on a computer system upgrade Reynolds signed a contract for months before COVID-19 was first identified in December 2019. The governor rejected Sand’s conclusion, and claimed payments on the computer system were allowed under federal regulations. The Office of Inspector General (OIG) of the U.S. Treasury Department agreed with Sand, and in December 2020, Reynolds had to return the $21 million to Iowa’s Coronavirus Relief Fund.
In his letter, Sand also noted that the governor’s office had failed to provide the necessary documentation to justify the use of $448,449 CARES Act funds on office staff. The use of pandemic relief “to cover salaries and benefits for staff working [the governor’s] office” was first reported by journalist Laura Belin of Bleeding Heartland in September 2020. Belin discovered the transfer of CARES funds to cover salaries and benefits for 21 employees in the governor’s office while reviewing documents from the Iowa Department of Management.
The auditor’s office looked at that transfer of $448,448.86 in CARES Act funding from the amount allocated to the Iowa Department of Homeland Security and Emergency Management to the governor’s office in a section of its audit report released on Monday. The report covers all the major federal programs administered by the state during the 2020 fiscal year, which ran from July 1, 2019 to June 30, 2020.
According to the report, the auditor’s office examined the pandemic funds to pay the governor’s staff because OIG “requested that we review this issue for compliance.” Auditors found the money was used to cover “62.59% of the total salaries/benefits of the twenty-one employees for the period” from March through June 2020.
Federal regulations allow CARES Act money to be used for “the payroll and benefits expense for public safety, public health, health care, human services, and similar employees as ‘substantially dedicated,’” according to the report.
“Based on the Federal Register, the Office of the Governor employees do not meet the definition of public safety, public health, health care, human services and similar employees to be considered as ‘substantially dedicated,’” the auditors wrote. “Accordingly, the Office of the Governor is required to maintain documentation of the ‘substantially dedicated’ conclusion with respect to its employees.”
Auditors requested that documentation from the governor’s office.
“In response to our request for this documentation, a spokesperson from the Office of the Governor stated that ‘during the March 15 through June 30 time period, the Office of the Governor was fully focused on responding and protecting Iowa from COVID. Like guidance used for other departments heavily focused on COVID response, the Office of the Governor assumed a percentage of time dedicated to pandemic response.’”
Auditors noted, “Documentation to support this conclusion was never provided.”
Based on the records the auditors did review, they concluded “the budget shortfall” in the governor’s office the CARES Act funds were used to cover “was not a result of the pandemic.”
“The governor had a budget shortfall, she had too many people on her personal staff and didn’t have a big enough money to pay them all, so instead of addressing either the budget that she had or the number of staff she had, she decided to use CARES Act money instead,” Sand said summarizing what auditors found in an interview with the Gazette.
The auditor’s report states that OIG “reviewed and concurred with” its assessment. “Also, the Treasury OIG informed this Office they had met with representatives from the Office of the Governor and told them the same.“
The governor’s office put out a written statement in response to the auditor’s report.
During this time, the Governor’s staff spent a vast majority of their time responding to the pandemic. In fact, many members of Gov. Reynolds’ staff worked seven days a week out of the State Emergency Operation Center to provide direct support to Iowans. This has always been our justification for the expense. We are now working with Treasury to provide them documentation, per their request.
If OIG decides whatever documentation the governor’s office provides does not establish the work performed by the 21 employees was substantially dedicated to COVID issues, part or all of the money may have to be repaid to the Treasury Department.
Speaking to the Associated Press, Sand pointed out that auditors had twice asked the governor’s office for documentation that would justify the use of pandemic relief, but received nothing.
“If you’re coming up with documentation after the fact after you’ve said twice you don’t have it, that should be concerning too,” Sand said.