Audit: Governor improperly used COVID funds for salaries

A state audit report on government spending released Monday accused Iowa Gov. Kim Reynolds of using nearly $450,000 in federal coronavirus relief funds to pay salaries for 21 staff members for three months last year and concealing the spending by passing it through the state Department of Homeland Security and Emergency Management.

State Auditor Rob Sand said a review of the state’s payroll system shows the money was used to pay the Republican governor’s office staff, but it’s unclear why she had to take federal money to pay the salaries.

"What is not clear, is why these salaries were not included in the governor’s budget set prior to the fiscal year and prior to the pandemic," he said in the audit report. "Based on this information, we conclude that the budget shortfall was not a result of the pandemic."

Sand said he had asked Reynolds’ office twice for documentation to support the spending and was told the governor’s staff members during March, April, May and June of 2020 were fully focused on responding to COVID-19 and protecting Iowa but never provided proof of the expenditure on the COVID response.

He wrote Reynolds’ office in October, telling her that paying staff salaries without proper documentation likely wouldn’t get federal approval but said they ignored his suggestion.

Sand said he requested information from the Department of Homeland Security and Emergency Management and was initially provided a spreadsheet listing the governor’s employees with a section labeled FY 2020 Shortfall and the amount of $448,448.86. A subsequent version was sent to him in which the section title was amended to COVID-19 Personnel Costs with the same amount of money.

"That spreadsheet that shows they changed the headers to basically instead of say shortfall to say COVID 19 is a pretty big deal," he told The Associated Press, suggesting that the attempt by Reynolds’ administration to conceal the use of the federal money was to fill a salary gap.

Alex Murphy, a spokesman for Reynolds, said in a statement that the U.S. Treasury Department had allowed the use of coronavirus relief money to reimburse salaries for governors.

"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," the statement said. "This has always been our justification for the expense. We are now working with Treasury to provide them documentation, per their request."

Reynolds earlier addressed the issue in September at a news conference after Laura Belin, publisher of the liberal-leaning online blog Bleeding Heartland, reported on the issue after seeking documents through Iowa’s public records law.

Reynolds said then that the federal coronavirus relief law allowed salaries to be paid for workers whose job requirements were significantly changed due to the coronavirus pandemic.

"CARES funding can be used for salaries. That’s very clear in what allowable allocations are," she said.

Sand said his office looked further into the spending because the Office of Inspector General requested an inquiry. He said the federal agency has reviewed his office’s findings and agreed with them. It could be a problem that Reynolds’ office is trying to come up with documentation after telling the auditor’s office twice that they had no such documentation, Sand said.

"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," he said.

Sand said the state may be required to repay the money to the federal government.

The audit isn’t the first time Reynolds has been found to have spent federal funds for non-approved use.

In December 2020, Reynolds had to return $21 million in COVID-19 relief money after using it to upgrade an outdated state information technology system.

The funds were initially allocated for payments related to the state’s contract with Workday, a cloud-based human resources, finance, and planning system being implemented to modernize the state’s IT infrastructure. Of the allocation, $4.45 million had already been spent.

Reynolds said U.S. Treasury officials initially assured the state the Workday project was an allowable expense but has now determined the payments were not allowed expenditures under the federal Coronavirus Aid, Relief, and Economic Security Act.