For the second straight year, the state of Iowa missed a deadline for releasing a detailed report on state finances. Officials publicly acknowledged the delay last week but have not explained why the Annual Comprehensive Financial Report for fiscal year 2021 is not complete.
Staff at the Iowa Department of Administrative Services, which compiles this report, have not responded to five inquiries from Bleeding Heartland about the matter over the past two weeks. Staff at the Iowa Department of Management, which prepared a public notice about the late report, likewise ignored three attempts to clarify the source of the problem.
ISU SWITCH TO WORKDAY CAUSED LAST YEAR'S DELAY
States typically release their Annual Comprehensive Financial Report within six months of the end of a fiscal year. Iowa's fiscal year runs from July through June, and for many years, the Department of Administrative Services completed the annual report by December 31.
However, the report covering the 2020 fiscal year was published nine months behind schedule, due to extensive problems collecting accurate data for Iowa State University. The university had switched to the Workday computer system for accounting at the start of the fiscal year.
State auditors later determined ISU hadn't properly trained employees to use the new system and had no "policies and procedures in place to ensure an independent review of the financial statements or the underlying transactions.” The problems led to inaccuracies in the draft financial statements ISU submitted to the state, requiring “material adjustments” and creating "a significant delay" in producing the annual report.
University administrators acknowledged in October "the deficiencies in processes and lack of appropriate training on the Workday system." They promised better training and a more rigorous process would ensure "timely completion of financial reports" with "material accuracy" and supporting documentation.
ISU communications staffer Angie Hunt told Bleeding Heartland last month that the university "submitted all year-end financials, responded to audit questions and completed recommended changes for the final financial statements by Nov. 12, 2021." That's about six weeks later than the October 1 deadline for most state government entities to send fiscal year-end data to the Department of Administrative Services.
When the fiscal year 2021 report might be ready is unclear. The State Auditor's office confirmed to Bleeding Heartland on January 27 that auditors are "still waiting for financial statements and supporting documentation from the GAAP [Generally Accepted Accounting Principles] team at the Department of Administrative Services." Spokesperson Sonya Heitshusen referred further questions to that agency.
NEW NOTICE CITES "CIRCUMSTANCES ASSOCIATED WITH THE COVID-19 PANDEMIC"
In a normal year, Iowa would post its Annual Comprehensive Financial Report in late January to the Electronic Municipal Market Access (EMMA) website, the leading source of information on municipal bonds.
The State of Iowa's Annual Comprehensive Financial Report (ACFR) was not issued on December 31, 2021. This is due to circumstances associated with the COVID 19 pandemic. The State will complete the ACFR and promptly post to the EMMA website as soon as available.
A similar notice posted to the EMMA site last year said a reporting entity had “not been able to provide the required financial information,” without naming ISU.
ISU's accounting issues have no relationship to the COVID-19 pandemic; the university switched to Workday for accounting in July 2019.
I repeatedly sought further details on how the pandemic could have affected the state's ability to finish the report, and whether any entity other than ISU was late to submit fiscal year 2021 financials. Tami Wiencek of the Department of Administrative Services ignored all messages, as did Lunde and communications staff for the Department of Management.
There's no specific penalty for being late to complete an Annual Comprehensive Financial Report. Last year's extended delay, which affected dozens of other state audits, did not affect Iowa's credit rating.
However, any ongoing accounting problems at ISU could spell trouble for future financial reporting by other state entities. Under contracts Iowa signed in 2019 and 2020, most of state government is scheduled to switch to the Workday computer system for accounting during the third quarter of 2022.
Appendix: January 25 notice from Iowa Department of Management Director Joel Lunde, posted on the EMMA website January 26