Iowa set to pay off Workday contract this month

The state of Iowa should be able to pay the remainder on its contract to acquire the Workday software system once Governor Kim Reynolds signs the final appropriations bill lawmakers approved before adjourning on May 19.

Senate File 615, the so-called “standings” bill, allocates $23.23 million from the state’s general fund to the Office of Chief Information Officer during the current fiscal year, which ends on June 30. That money is to be used for “implementation of a new state central personnel, accounting, and budget system.”

Under contracts signed in October 2019 and February 2020, the state agreed to purchase Workday’s “cloud-based human capital and financial management software solution” to replace the legacy systems now used for human resources, payroll, and finances. Those initial contracts were for $21 million and $28 million.

After U.S. Treasury officials refused to allow the Reynolds administration to use $21 million in COVID-19 relief funds toward the Workday contract, the governor turned to state legislators. Republican lawmakers approved a special appropriation of $21 million in February to pay part of the Workday costs during the current fiscal year. An early version of the infrastructure appropriations bill included $17 million for Workday expenses during fiscal year 2022, which begins on July 1. Under that plan, the state would have needed to spend another $6.23 million to pay off the contract in fiscal year 2023.

During the last two days of the legislative session, amendments pulled the Workday funding from the infrastructure bill and added the $23.23 million line item to standings. When introducing the bill on May 19, Senate Appropriations Committee chair Tim Kraayenbrink said the new allocation would allow the state to pay off the contract.

The Senate unanimously approved the standings bill. House members split mostly along party lines, with all Republicans present and Democratic State Representative Wes Breckenridge voting in favor, and the rest of the Democrats voting no. State Representative Chris Hall, the ranking Democrat on the House Appropriations Committee, commented during debate that the state was “snookered” into paying for Workday.

According to the Iowa Department of Administrative Services website, the Workday human resources, payroll, and expense functions are set to go online in July 2021. The financial and procurement systems will roll out during the third quarter of 2022.

Iowa State University repeatedly delayed its implementation of Workday systems after signing a contract with the company in 2016. A similar story has played out at the Iowa Department of Transportation, Erin Jordan recently reported for the Cedar Rapids Gazette.

The DOT, which signed a $9.4 million deal with Workday in 2017, implemented the human resources and payroll portion of the software in May 2019 — six months after the initial go-live date.

The finance portion, originally scheduled for June 2020 and then delayed to May, now will start July 1, DOT spokeswoman Andrea Henry said.

Workday will continue to charge the state annual subscription costs even after the contracts are paid off, but Iowa lawmakers may not need to allocate funds toward those recurring expenses. Asked whether state agencies will be billed for using the new human resources and financial systems, the Office of Chief Information Officer’s spokesperson Gloria Van Rees told Bleeding Heartland on May 27, “The OCIO is currently in ongoing discussions with state agencies regarding potential fiscal commitments to Workday in light of the appropriations. It would be premature to comment publicly until the conclusion of these discussions.”

Iowa State University struggled to compile auditable financial data after switching to Workday for accounting at the beginning of the 2020 fiscal year. Normally the state’s Comprehensive Annual Financial Report would be published by December 31. More than five months later, the report for fiscal year 2020 is still available only in “preliminary,” unaudited form.

Top image: Iowa WorkSmart logo, taken from the Department of Administrative Services website.

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