Exclusive: Iowa spent CARES Act funds on governor's office software switch

UPDATE: Weeks after publication, state officials said this payment had been “inaccurately coded to the federal CARES program,” which was “anticipated” to cover this expense but did not. They said the database would be corrected to reflect the coding error. More details are at the end of this post. Original text follows.

Iowa’s Office of Chief Information Officer spent $39,512 in federal COVID-19 relief funds on a project to migrate computers in Governor Kim Reynolds’ office from Google suite to Microsoft Office 365.

Public databases showing expenditures from Iowa’s Coronavirus Relief Fund do not indicate the governor’s office was the beneficiary of that November payment from OCIO to the vendor Insight Public Sector for unspecified “IT Outside Services.” Documents obtained through public records requests show the money covered the cost of the Google to Office 365 migration.

The governor’s office reimbursed OCIO for that expense in mid-December, days after the Reynolds administration was forced to backpedal on other COVID-19 funds spent on computer technology. Earlier the same month, Bleeding Heartland had sought records related to goods and services OCIO purchased on behalf of the governor’s office using money from the Coronavirus Relief Fund. 

The governor’s spokesperson Pat Garrett has not replied to inquiries about who authorized the initial spending on switching from Google to Office 365 or what funding source eventually covered the cost.

“OUTSIDE SERVICES” FOR AN UNNAMED BENEFICIARY

Iowa’s Coronavirus Relief Fund received $1.25 billion from the federal government in April 2020 through the Coronavirus Aid, Relief and Economic Security (CARES) Act. Nearly $74 million of that total has been allocated to OCIO, which is using $50 million for broadband grants and the rest on various technology products or services.

The Iowa Pandemic Recovery Report Payment Explorer allows users to search expenditures by date or department. OCIO has made dozens of purchases in the categories of “IT Equipment & Software” or “IT Outside Services.” The database does not describe the products or services purchased, nor does it indicate which unit of state government received them.

This screenshot (click link to enlarge) shows a $39,512 payment from the Coronavirus Relief Fund to Insight Public Sector on November 24.

Records provided to Bleeding Heartland in late February included a Statement of Work and purchase requisition from July 2020, describing how Insight Public Sector would facilitate the migration of computers in the governor’s office from Gmail and Google Drive to Office 365 software for a total fee not to exceed $40,928. Paul Trombino, who was Reynolds’s chief operating officer last year, is identified as the “project sponsor” in the governor’s office.

On an invoice dated August 31, the Arizona-based company billed OCIO $39,512 for “Iowa-16489-OfficeofGovernor-Googleto365.” According to the OCIO’s public information officer Gloria Van Rees, the migration was completed on November 9.

A spreadsheet maintained by the Iowa Department of Management (which handles disbursements from the state budget and federal funding sources) also shows the November 24 payment from OCIO to Insight Public Sector, labeled “COVD.” This screenshot shows part of the spreadsheet. I added the red box around the relevant line.

A different area of the same spreadsheet shows two entries for December 16 in the amounts of -$39,512 and -$1,393.16, which are labeled “IGOV Office 365 Migration from OCIO.” This screenshot shows that portion. Again, I added the red box to make the area easier to see.

The negative amounts represent the governor’s office reimbursing OCIO for those payments, Van Rees confirmed in a March 12 email. “OCIO does not know what funding source the Governor’s Office utilized,” she added.

I couldn’t find invoices or purchase orders corresponding to the smaller refunded amount. Van Rees clarified that the agency had paid Insight Public Sector $1,393.16 in October for a tool called BitTitan, “used to transfer data from Google to Microsoft.”

Documents indicate that expenditure did not involve any COVID-19 relief funds. The $1,393.16 payment does not appear on the Coronavirus Relief Fund “checkbook,” and it is not labeled “COVD” on the Department of Management’s spreadsheet showing OCIO’s transactions during the current fiscal year.

A “NECESSARY” EXPENSE DUE TO THE PANDEMIC?

Under guidance the U.S. Treasury Department released last year, states and local governments can use CARES Act funding to cover “necessary expenses incurred due to the public health emergency,” that were “not accounted for” in the government entity’s most recent budget and arose between March 1 and December 31, 2020.

Switching from Google to Office 365 was not covered under any line item in the state budget appropriation for the governor’s office, and the costs occurred within the required period. But how this expenditure could be tied to COVID-19 is unclear.

Sources who have professional experience with both software systems mentioned a number of possible advantages in choosing Office 365 for an organization with a few dozen employees. Many prefer Outlook’s folder system for sorting mail to Gmail’s labels. Shortcuts and searches for old emails are easier to navigate as well. Some Microsoft apps like Teams have better functionality, especially for collaborative work and coordinating calendars.

None of those attractive features bear any relation to the coronavirus pandemic. The governor’s spokesperson Garrett didn’t respond to inquiries about who approved spending COVID-19 relief funds on a software migration. He also didn’t clarify whether any of Reynolds’ senior staff are using an MS Office tool to monitor employees’ productivity, which has drawn some criticism in the tech world as a means of “workplace surveillance.”

I sought clarification on the sequence of events from Trombino, who became director of Iowa’s Homeland Security and Emergency Management Department in January. Who authorized the initial expenditure from the Coronavirus Relief Fund? Who decided to reverse course in December, and what state funds were tapped to reimburse OCIO for the software migration expense? The Homeland Security agency referred all inquiries covering the director’s tenure on Reynolds’ staff to Garrett.

Documents provided by OCIO do not reveal how the state selected Insight Public Sector for this or other projects. Legislative records indicate the company did not employ an Iowa lobbyist during 2020. The firm is now represented by Jeff Boeyink, who managed the Terry Branstad/Kim Reynolds 2010 campaign and served as the governor’s chief of staff early in Reynolds’ tenure as lieutenant governor.

PLAN PROCEEDED DESPITE WORKDAY CONTROVERSY

While the Google to Office 365 computer migration was underway, the governor’s office was engaged in a public battle over a different CARES Act expenditure. State Auditor Rob Sand and the U.S. Treasury’s Office of Inspector General advised Reynolds in October that using $21 million to implement the Workday software system across state government was “not an allowable use” of federal COVID-19 relief funds.

A letter from Treasury’s Deputy Inspector General Richard Delmar to Iowa Department of Management Director Dave Roederer noted that the “computer system upgrade was already planned and budgeted for prior to the CARES Act,” since the state had contracted with Workday in 2019. (Trombino was involved in that decision, but Chief Information Officer Annette Dunn was the driving force behind the contract.) Although OCIO had told federal officials the Workday system would “play an integral role in the State’s response to COVID-19 and the demands the pandemic has placed on state government,” Delmar was unconvinced.

While the new and modern Workday system may provide additional functionality, these upgrades are not necessary to address the public health emergency and were already planned before the COVID-19 pandemic outbreak. A reasonable alternative is the continued use of Iowa’s current legacy system. As such, funding the Workday contract with Coronavirus Relief Fund proceeds is not a reasonable, allowable use of funds.

Reynolds disputed that conclusion. The governor’s senior legal counsel at the time, Sam Langholz, argued that the Workday contract was not covered under any state budget line item and was connected to the pandemic: “The urgency and necessity of having remotely accessible and more robust and agile human resources systems and budgeting systems arose because of the public health emergency.”

Such logic didn’t carry the day. On December 2, the Reynolds administration received a letter from Treasury’s OIG affirming its determination that implementing the Workday computer system was not an allowable use of CARES Act funds. Consequently, Roederer informed Delmar on December 11 that the state would return the $21 million allocated for Workday-related expenses and “will not use proceeds from the Coronavirus Relief Fund to make any additional payments on the contract with Workday.”

The governor’s office announced that decision in a December 14 news release, which did not agree with the OIG’s conclusion but said it “respects the decision.” That statement claimed, “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.” 

Garrett did not respond to messages seeking details on when those conversations happened and who was involved. Delmar said via email last month, “OIG cannot speak to guidance verbally given by Treasury management, if that occurred. There was no written assurance along these lines that we are aware of.”

During Iowa House and Senate debates over a supplemental $21 million appropriation to cover Workday expenses, which Reynolds signed into law last month, several Republican legislators asserted that federal officials had green-lighted CARES Act spending for Workday but “changed their mind” later. (According to Delmar, “This was never stated by Treasury OIG employees.”) State Senator Tim Kraayenbrink said the governor’s office had nine phone calls with Treasury officials, during which they discussed using COVID-19 relief funds for Workday. He offered to share further details, such as the dates of those calls, with Senate colleagues but didn’t reply to my emails seeking more information.

Although Insight Public Sector’s work for the governor’s office occurred during the pandemic, it would seem difficult to demonstrate that transferring data or software on staff computers was “necessary to address the public health emergency.” Reimbursing OCIO for migration expenses on December 16 may have been a way to pre-empt a negative assessment from state or federal auditors.

Also possibly relevant: I submitted my first public records request related to OCIO’s use of CARES Act funds on December 9.

I wondered whether staff at the State Auditor’s office were aware of the payment for the Office 365 migration, or of any other expenditures not related to Workday that may have been approved for the Coronavirus Relief Fund, but later shifted to other funding streams. Communications staffer Sonya Heitshusen replied on March 5, “The Auditor’s Office cannot comment on any of these questions at this time.”

A TRANSPARENCY GAP

Although public databases show thousands of transactions related to COVID-19 in Iowa, with some details about each expenditure, missing information obscures where some of that money is going and which goods or services it is buying.

OCIO is not the only state agency to serve as a conduit for CARES Act funds directed to the governor’s office. As Bleeding Heartland reported last year, federal money helped cover salaries and benefits for 21 of Reynolds’ permanent staffers. But that Coronavirus Relief Fund disbursement passed through Homeland Security, which had not requested the funding.

Thanks to the unusual arrangement, state databases and published reports attribute that $448,449 “State Government COVID Staffing” expense to Homeland Security, rather than to the governor’s office, where the money helped cover a fiscal year 2020 shortfall unrelated to the pandemic.

Bleeding Heartland continues to investigate whether indirect payment routes concealed other Coronavirus Relief Fund expenditures on equipment or personnel for the governor’s office.

UPDATE: After ignoring previous inquiries on the subject, Garrett emailed shortly after this post was published to say the governor’s office did not use CARES Act money for this expense. Asked to explain, he said,

The money was ultimately paid out from IGOV. Your article shows that reimbursement dated December 16th. As I noted in my previous email, CARES money was not used for this. 

As shown above, OCIO paid the invoice on November 24, using money from Iowa’s Coronavirus Relief Fund. Following additional scrutiny of the state’s use of CARES Act funds for technology expenses, the governor’s office reimbursed the agency on December 16. But COVID-19 relief funds were approved for this purpose last summer and used for the initial payment.

SECOND UPDATE: Garrett again objected, “The governors office paid for the migration to office 365. No CARES Funding was ultimately used.” He did not answer my other questions, including “who approved the idea to spend CARES Act funding on this? And who decided to reverse course in December?”

LATE UPDATE: Records provided by the Iowa Department of Management on April 2 showed that OCIO had transferred $21 million back to the Coronavirus Relief Fund, reflecting the agreement not to use CARES Act funds for Workday expenses. There was no transfer of $39,512 back to the fund, however. The Department of Management referred follow-up questions to OCIO. In an April 7 email, Van Rees told Bleeding Heartland,

Insight was paid out of OCIO’s general fund. The initial payout from OCIO was coded by DAS [Department of Administrative Services] as Coronavirus Relief payment, as there was initial information that is where funds would be reimbursed from. However, OCIO was not reimbursed using CARES funding by IGOV. We are working with DAS to change the coding to appropriately reflect the funds. Once the coding is changed there will be no reference to CARES funding on any part of the transaction.

This was the first I’ve heard about a supposed coding error affecting the database that showed this expenditure as coming out of the Coronavirus Relief Fund last November.

Van Rees said in an April 14 email,

The state checkbook does not illustrate a bank account from which funds are withdrawn. It illustrates coding to federal and state programs to keep track of monies across multiple state agencies. In this instance it illustrates how the payment was inaccurately coded to the federal CARES program in November. The payment from the OCIO general account was coded correctly for the information we anticipated at the time. The coding for the expense became incorrect when we were not reimbursed with funds coded as CARES funding. As the coding is now incorrect, we are processing a correction to appropriately reflect the proper vector of the funds. This is not uncommon, and the correct and responsible course of action is to process a correction document to move the expense from CARES funds to OCIO operating funds. This process leaves the original transaction intact and will create new entries to remove the expense from CARES funds and add the expense to the OCIO operating funds.  After the correcting transaction is processed, the net result will be that it will no longer tabulate as a CARES expenditure.

Linda Leto of the Iowa Department of Management later clarified on April 23,

Money is transferred from the Iowa Coronavirus Relief Fund (ICRF) fund to a state agency.  […] The agency then makes payments to vendors. Payments to vendors are not made directly from the ICRF fund. 

The federal program is called the Coronavirus Relief Fund, and that is what is referenced on the payments to vendors.  It is not the fund the transactions were paid from.  They are just coded to associate the transaction with CFDA 21.019, Coronavirus Relief Fund (the federal program associated with the grant we received).

Top image: Screenshot from Governor Kim Reynolds’ news conference on December 16, 2020, the same day the governor’s office quietly reimbursed OCIO for expenses related to the Google to Office 365 migration.

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