Gov. Kim Reynolds’ decision to use $21 million of federal COVID-19 relief funds on a new computer system she awarded a no-bid contract last year came after the Iowa House of Representatives rejected her request to use $21 million in state gambling revenue to pay for the system, Iowa Capital Dispatch reported on Thursday.
The Iowa House Appropriations Committee turned down the governor’s request to use gambling revenue to make payments on the $50 million contract with Workday, a California-based software company, because of a decline in revenue after casinos were closed due to COVID-19, State Rep. Chris Hall told the Dispatch’s Perry Beeman.
Hall, a Democrat from Sioux City, is the ranking member on the committee. The committee, like both the Iowa House and Senate, is controlled by the Republican majority.
“After the Legislature declined to fund the Workday contract, the governor’s office indicated they would find the money another place [in the state budget],” Hall said. “Instead, they found it in the CARES Act.”
CARES Act funds can only be used for expenses related to the pandemic, as Iowa Auditor Rob Sand explained in a letter to the Reynolds administration made public earlier this week. To use the money, the state must show the expenses it is paying:
1. are necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019 (COVID–19);
2. were not accounted for in the budget most recently approved as of March 27,2020 (the date of enactment of the CARES Act) for the State or government; and
3. were incurred during the period that begins on March 1, 2020, and ends on December 30, 2020.
Reynolds approved the contract with Workday in October 2019, almost five months before the period during which expenses that can be paid with CARES Act money began.
In his letter dated Oct. 16, Sand said the U.S. Treasury Department Office of the Inspector General agrees with his assessment. If the Treasury Department determines the funds were misspent, the state will have to reimburse the federal government the $21 million. States have until the end of the calendar year to spend the money they were awarded under the CARES Act.
Sand also found a lack of documentation justifying the use of $448,449 in federal pandemic relief to pay the salaries of various members of the governor’s staff.
Reynolds has not held a news conference this week and her office has not issued a statement on Sand’s findings, but reporters were able to ask the governor about the $21 million as she was exiting a campaign event for Sen. Joni Ernst on Wednesday.
“Well, we think it’s an allowable expense,” Reynolds said. She added that her office would be sending a letter to the Treasury Department, asking the inspector general to reconsider whether the $21 million can be spent on the contract with Workday.
This isn’t the first time the contract with Workday, a company with little state-level experience, has been questioned. Reynolds originally awarded the contract through an out-of-state procurement company, which allowed her to sidestep the standard bidding process for major contracts. It has also been pointed out that Workday got the no-bid contract after hiring Jake Ketzner, Reynolds’ former chief of staff, as a lobbyist.
Both Workday and Reynolds have denied that Ketzner played any part in Workday receiving the $50 million contract.
Contacted for comment by Iowa Capital Dispatch, the governor’s office did not reply when asked if the $21 million had already been paid to Workday.