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Iowa will return $21M in CARES Act funds for IT expenses, governor's office says

The money will still be used in Iowa, at the governor's discretion. The Treasury Department determined using it for IT expenses was not allowable.

DES MOINES, Iowa — Gov. Kim Reynolds' office announced on Monday that Iowa will return $21 million of CARES Act funding to the federal government after the Department of Treasury affirmed its stance that the money could not be used to update the state's information technology infrastructure.

The funds were originally allocated to pay for the state's contract with Workday, a cloud-based system used for human resources, finance and planning in state government. 

A press release from the governor's office says the state already spent $4.45 million on the project. 

The state is expected to return the funds by Friday, Dec. 18.

“The COVID-19 pandemic only further highlighted the critical need for integrated IT systems that will improve operational efficiency and effectiveness for the State of Iowa,” Reynolds said in a statement. “Following multiple conversations with the Treasury Department last spring, we believed we had assurances that the upgrade to Workday qualified as an allowable expense."

"We would not have moved forward without those assurances.”

Reynolds' office says replacing the state's "outdated IT systems remains a critical need," which is why the state will move forward with the implementation of the system. 

The state will allocate the remaining $47.3 million by Dec. 30 for the system, but Reynolds' office says "an extension from the federal government would allow time to use the funds to create additional programs and support other needs among Iowans." 

State Auditor Rob Sand released a report in October detailing why the use of pandemic relief funds was not allowable. The Department of Treasury's Office of the Inspector General teamed up with the Democrat to write the report. 

"This is the right outcome. That money wasn't compliant," Sand said Monday afternoon. "It wasn't going to mitigate the pandemic. And the great news here is that now that money is free to actually get used for purposes that will help Iowans mitigate this pandemic." 

Sand said the money will be sent back to Iowa's CARES Act account, but it must be used by Dec. 30 at the governor's discretion. 

"We are in the middle of a public health catastrophe and an economic one all at once," Sand said. "The reason the federal government said this money has to get spent by the end of the calendar year is because in order to alleviate suffering. There are people that need this money now."  

The governor's senior legal counsel responded to the OIG later, asking them to reconsider their decision. 

Reynolds herself defended the decision to use CARES Act funding to pay for Workday, but did include that her administration would adjust if the OIG said to do so. 

"We do believe it's an allowable expense," Reynolds said on Oct. 21. "Almost every single governor across this country has actually asked their congressional delegation, as well as the administration, to give more flexibility with the dollars, and that's across the board."

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