Auditor Rob Sand says his office did not ignore court spending errors • Iowa Capital Dispatch

Iowa Auditor Rob Sand disputed claims made by Republican leaders that his office was aware of a coding error that led to a misallocation of court debt funds years before taking action on the issue.

Sand held a news conference Tuesday about his report on the Iowa Judicial Branch, which found that $27.5 million in court debt receipts had been misallocated due to a coding error. The report had followed up on letters sent to the auditor’s office by House Speaker Pat Grassley and Iowa Department of Management Director Kraig Paulsen that more than $53 million of these funds had been misallocated — an amount Sand said was inaccurate.

In an October letter to Sand, Grassley wrote that the auditor’s office had been alerted of a financial irregularity by the Department of Transportation in 2022, but that these issues were not mentioned in the judicial branch audits for fiscal years 2021 and 2022.

“I am writing to gain an understanding from you as to why your office has taken no action since being made aware of these drastic issues at least two years ago,” Grassley wrote. “The State Auditor’s office exists for this very purpose. When you are made aware of misallocated funds by a branch of government, it is your duty to Iowans to investigate, alert the public, and seek to rectify the issue. Your inaction in this case is baffling and inexcusable. If there is any other explanation why it appears that the taxpayer’s watchdog was sleeping on the job, I would be very interested to hear it.”

Sand said the auditor’s office has been in contact with officials from the state judicial branch and DOT multiple times after being notified of the issue in October 2022, and that the office remained in contact with the judicial branch in conducting internal and independent investigations into the issue.

According to the auditor’s report, there were seven state funds that were under-allocated because of the error from fiscal years 2021 through 2024 — the largest being the Road Use Tax Fund, which was under-allocated by more than $10.4 million, and the Victim Compensation Fund by $7.2 million. In the same time period, the state general fund received an over-allocation of $27.5 million, in addition to the SOS Revolving Fund being over-allocated $90,174 and the Jury Witness Fund by $74,166.

Iowa Attorney General Brenna Bird released a statement in October criticizing the auditor’s office for failing to catch the misallocation related to the Victim Compensation Fund that goes toward services like sexual assault examinations, medical reimbursements and counseling.

“No domestic violence victim should have to stay with their abuser because they cannot afford to leave,” Bird said. “The State’s self-proclaimed ‘taxpayer watchdog’ failed at the most basic job of being an auditor: conducting an audit. Crime victims should not have to worry about whether victim services will be there when they need them.”

But Sand pushed back against Bird’s characterization of the issue, saying that the underfunded government accounts never ran out of money when they were impacted by the error.

Sand asked for an apology to his staff for the criticism of the auditor’s office over this subject, and making it a “political” issue.

“I’m asking again, the people who distort the facts around this issue for political gain to publicly apologize to our staff — I would settle for a private apology to our staff that works on these issues,” Sand said. “These accountants and the auditors in this office, they work long hours. It is a difficult profession to be in right now, … Our employees know that their families and their friends are seeing these headlines, and they know that they’re doing their job, they know that they are doing good quality work. But because of these attacks, they have to deal with it. They shouldn’t have to, and they deserve an apology.”

Paulsen, speaking with reporters Tuesday, said although the funds impacted by the error retained money despite the misallocation, it does not mean services — and their recipients in the state — were not affected by the lack of funds.

“You don’t spend your bank account down to zero every month, and neither do state entities funded by court debt,” Paulsen said. “When the funds run low, you cut back and so do state entities. Have citizens been harmed? That’s a question the Legislature should ask.”

While Sand said his office has never had staff with the ability to review coding to check for problems like in this case, Paulsen said the fact the misallocation occurred because of a coding error should not have prevented the office from being able to identify the funding irregularities.

“Don’t get bogged down in thinking auditing has anything to do with coding or programming a computer,” Paulsen said. “… [I]f that was the case, that you had to understand some computer language to audit, then how does the auditor of state do a single audit? How do they go from agency to agency? … There’s still a few very small communities who use paper, but otherwise, there’s no government in the state of Iowa that doesn’t have their financials in the computer system. So if that’s a limitation, how do they … do any of their audits? And the truth is, they do, because it’s not a limitation.”

The programming errors that led to the funds misallocations were found to have likely began after changes were made to the judicial branch’s information technology system for the process for distributing judicial fees and fines to government programs in 2020 and 2021, as directed by the Iowa Legislature.

While the error has been fixed moving forward, the misallocation that occurred in previous years cannot be fixed through administrative action, although the Legislature could take action when lawmakers reconvene in January 2025.

State Court Administrator Robert Gast said in a letter Dec. 6 that the judicial branch has implemented “new programming to correct programming errors in its case management system” as of Nov. 22, 2024, including retroactive corrections to distributions dating back to July 1, 2024. It has also contracted with a third party to review programming changes made to the branch’s IT system, is working with the state auditor “to set up an engagement to review the financial findings and verify that the over and under allocation numbers and the funds impacted as calculated by JBIT are accurate” and is developing an internal process to audit future programming changes.

“The branch cannot move funds that were misallocated in prior fiscal years,” Gast wrote. “We are interested and willing to work with all court debt stakeholders to correct all misallocations from FY21 through FY24.”