Governor taps American Rescue Plan for IT project predating pandemic

Governor Kim Reynolds has allocated $13 million from the state’s American Rescue Plan funds for a data project that has been in the works since 2019.

Last year, the governor approved a request from the state’s Office of Chief Information Officer (OCIO) to pay for the Master Data Management Program with $13 million from the Coronavirus Aid, Relief, and Economic Security (CARES) Act. But those funds were never spent, according to pandemic spending reports and documents obtained through public records requests.

OCIO recently transferred the $13 million earmarked for the data management project back to the agency that administers Iowa’s Coronavirus Relief Fund, spokesperson Cayanna Reinier told Bleeding Heartland on September 29. She added that OCIO is “in the process of restarting” the project and “looking forward to moving ahead” with it, now that the governor’s office has approved the use of American Rescue Plan funds.

It’s far from clear this program is an eligible expense under the latest federal relief package.

COVID-19 RELIEF FUNDS APPROVED, BUT NOT SPENT

The Master Data Management Project was part of a strategic plan OCIO drafted in 2019, to “Leverage and integrate State of Iowa data for better decision making and information sharing.” A CARES Act funding request OCIO submitted to the governor’s office in July 2020 described plans to develop “Prioritized Data Streams” for the state’s public health, human services, corrections, education, workforce development, and revenue agencies.

In a nod to federal guidelines that required CARES Act funds to be used for “necessary expenditures incurred due to the public health emergency,” OCIO said the data management project would provide “backbone for analytics during another pandemic.” However, the request for proposals OCIO released in July 2020 mentioned the pandemic only in passing, saying the project “will focus on critical data during emergent situations like the Covid-19 pandemic.”

The governor approved the transfer of $13 million from the state’s Coronavirus Relief Fund to OCIO for the data initiative, and the agency selected a vendor for the project in September 2020. But weekly reports on CARES Act spending, which OCIO submitted to the governor’s office late last year, did not mention any expenditures for the Master Data Management project. Last October, a spreadsheet maintained by the Iowa Department of Management showed that $39,335 of the funds allocated for the data project had been spent. That figure did not change for months.

In June 2021, state records showed OCIO had “obligated” $350,000 of the funds earmarked for the data project, and had spent $161,700. But by September, pandemic spending databases showed OCIO had spent just $4,144 from that line item.

Since CARES Act funds must be used by the end of the 2021 calendar year, I sought to clarify the status of the project. Twenty days after my inquiry, OCIO’s Reinier replied via email on September 29, “No Coronavirus Relief Fund dollars were spent on Master Data Management.” The entire $13 million had been transferred back to the Department of Management on September 23, she said.

REASON FOR DELAY UNCLEAR

Documents I’ve received from OCIO do not shed light on why the agency paused the data management project. Ryan Foley reported for the Associated Press in October 2020 that the initiative “may not fit the intended purpose” of federal COVID-19 relief funds. Days earlier, State Auditor Rob Sand and the U.S. Treasury Department’s Office of Inspector General had informed state officials that Iowa’s contract to purchase the Workday computer system, signed before passage of the CARES Act, was not an allowable use of pandemic funds.

Iowa’s Chief Information Officer Annette Dunn told Foley last October that the Workday and data management projects were both “essential to the pandemic response,” because “outdated technology” had hindered the state’s efforts to manage the public health emergency. But after U.S. Treasury officials stood by their assessment, Reynolds agreed in December to return to the Coronavirus Relief Fund the $21 million earmarked for Workday expenses.

OCIO’s Reinier did not reply to inquiries about why the agency put the Master Data Management project on hold for the past year, and whether there were concerns the $13 million expense might be deemed ineligible for CARES Act dollars. UPDATE: Reinier said on October 1 that “Due to COVID priorities, the MDM was put on hold until Oct 1, 2021. A contract has still not been signed and we are working on it now.”

Asked whether state or federal auditors had warned the governor’s office that the data program was not an allowable use of CARES Act funds, Reynolds’ spokesperson Alex Murphy said no. In a September 29 email, he explained that switching funding sources would provide “ample time to successfully complete the project.” Funds Iowa received through last year’s pandemic relief must be used for projects completed by December 31, 2021. In contrast, the American Rescue Plan’s State and Local Fiscal Recovery Funds can be used through the end of 2026.

Asked when Reynolds decided to use American Rescue Plan dollars for the Master Data Management project, Murphy did not respond.

The State Auditor’s office declined to comment on the use of federal funding for this program.

The U.S. Treasury’s Office of Inspector General has not responded to Bleeding Heartland’s inquiry about the matter. Treasury does not give prior approval to states’ plans for using pandemic relief dollars. Rather, federal auditors may review questionable expenditures after the fact. UPDATE: In an October 2 email, Acting Inspector General Richard Delmar had no comment on this article or on whether anyone from his office has communicated with state officials about using federal funds for the data project.

IS THIS PROJECT ELIGIBLE FOR AMERICAN RESCUE PLAN FUNDS?

Congressional Democrats and the Biden administration intended for state and local governments to have more flexibility with American Rescue Plan funds than was permitted under the CARES Act. So unlike last year’s controversy over pandemic funds for Workday, state officials will not have to show that the Master Data Management Program is a necessary expenditure incurred due to COVID-19 and not accounted for in the most recent state budget.

Even so, federal guidelines constrain how state or local governments can use American Rescue Plan funds. The statute outlined four kinds of eligible expenditures, and the Treasury Department gave many examples of each in an Interim Final Rule, published in May. The broad expense categories are:

  • Programs responding “to the public health emergency or its negative economic impacts, including assistance to households, small businesses, and nonprofits, or aid to impacted industries such as tourism, travel, and hospitality”;
  • Premium pay for those “performing essential work during the COVID–19 public health emergency,” which could include employees of nursing homes, hospitals, home health care providers, farms, food processing plants, grocery stores, restaurants, transportation companies, warehouses, schools, child care providers, or government agencies in the areas of public health, public safety, or social services;
  • Providing government services that would otherwise be impacted by pandemic-related revenue losses; and
  • Programs making “necessary investments in water, sewer, or broadband infrastructure.”

Integrating data across state agencies has no relationship to the first, second, or fourth categories.

As for the third point, Treasury’s guidelines give recipients “broad latitude” to use American Rescue Plan funds “for the provision of government services.” One example mentioned is “modernization of cybersecurity, including hardware, software, and protection of critical infrastructure.” But the Master Data Management project is not about cybersecurity.

OCIO’s request for proposals described the importance of “bringing the state’s data sources together,” in order to help agencies “gain a more holistic understanding of the needs of Iowans today and in the future.” Phase 3 will involve aligning data collection across the Iowa Department of Public Health, Department of Human Services (excluding Medicaid), Department of Education, Department of Revenue, Department of Corrections, and Iowa Workforce Development. The “mastered Customer data” (stored in a “secure, cloud-based environment”) will then be used to improve data collection and “support data driven business decisions within Iowa’s service programs.”

Some may dispute whether this kind of project qualifies as a government service. For now, let’s assume it does.

The bigger problem for the Reynolds administration is that the latest federal relief package was designed to help backfill state or local budgets dealing with revenue losses. To be more precise:

“For the provision of government services to the extent of the reduction in revenue due to the COVID–19 public health emergency relative to revenues collected in the most recent full fiscal year prior to the emergency.”

The Interim Final Rule and a frequently asked questions page on Treasury’s website explain in detail how governments can calculate revenue lost due to the pandemic. We don’t need to worry about those mathematical formulas, because Iowa’s state government hasn’t lost revenue compared to the fiscal year before the novel virus arrived.

On the contrary, Reynolds was shouting from the rooftops this week about the record-setting $1.24 billion surplus in the state’s general fund at the end of the 2021 fiscal year. That fact alone suggests the data project may not be an allowable use of American Rescue Plan dollars.

As mentioned above, OCIO says they transferred the $13 million allocated from the CARES Act back to the Department of Management on September 23. The timing suggests the governor decided relatively recently to tap the funding stream she has repeatedly bashed as a “blue state bailout.”

State Senator Claire Celsi, the ranking Democrat on the Appropriations subcommittee that approves the budget for OCIO and the governor’s office, told Bleeding Heartland on September 30,

I am disappointed but not surprised that the Reynolds Administration continues to misappropriate CARES Act and American Rescue Plan funds for routine governmental functions – on projects that predate the pandemic.

Especially concerning is that Reynolds and her department directors continue to ask the Legislature for far less money than is required to properly fund Iowa department budgets.

We’ve seen a lack of investment in the office of the OCIO consistently have a devastating effect across state government. But the Governor must encourage her department heads to ask for appropriations through the regular budgeting process, not steal COVID-related money to patch things up after the fact.

Iowa GOP lawmakers have rejected Democratic proposals to establish any legislative review of Reynolds’ decisions on COVID-19 relief funds.

During this year’s session, Iowa House and Senate Republicans approved $44 million in supplemental appropriations to pay off the state’s Workday contract. Reynolds should ask the legislature to earmark additional state funds for the Master Data Management program. She could then redirect the $13 million from the American Rescue Plan to help Iowans adversely affected by the pandemic.

Top photo: Governor Kim Reynolds speaks as Lieutenant Governor Adam Gregg looks on during a September 2, 2021 news conference.

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