Rob Sand: Amended bill restricting state audits still risks billions in federal funding

House Republicans said their changes to a bill limiting the Iowa Auditor of State’s access to certain information fixes issues that would have put billions in federal funding at risk. Democrats, including State Auditor Rob Sand, said the problem remains.

The House approved Senate File 478 Thursday on a 55-41 vote, sending it back to the Senate for review. The bill would limit the Iowa Auditor’s Office in its ability to access personal information when performing investigations.

Republican lawmakers have said the bill is intended to protect Iowans’ privacy. The auditor would be restricted from accessing information such as students’ grades when investigating a public university or patients’ medical records when auditing the state’s Medicaid program. The House amendment exempted these restrictions when the information is necessary to meet recognized auditing standards.

The auditor would not be allowed to publicly disclose private information without the individual’s permission. In cases of embezzlement, theft, fraud or other significant financial irregularities, the auditor could access the information but would need permission of the entity being audited to publish private information. Sand has said his office already follows strict confidentiality requirements.

Did the House amendment fix the bill problems?

The Legislative Services Agency report on the bill found the Senate version of the bill put more than $12 billion at risk. Iowa receives funding from many federal programs that require recipient entities to be audited. If the auditor is not able to access all needed information, the office may have to release a qualified audit or a disclaimer, which may not meet the federal standards.

Democrats said the House amendment still leaves Iowa out of compliance with needed standards. But the bill’s floor manager, Rep. Mike Bergan, R-Dorchester, said the amendment ensures that the auditor’s office is able to access personal information when implementing risk procedure reviews, the audits needed to access federal funds.

“I think that the Senate file that came over here was at risk,” Bergan said. “I believe that the amendment that has been adopted solves those issues.”

Sand said the biggest issue in the House amendment was the change to the state auditor’s subpoena power. If an audited agency does not believe the information requested by the state auditor is necessary to conduct the audit, the auditor’s office is no longer able to issue the entity a subpoena. The bill limits litigation between government offices and agencies, establishing a board of arbitration, with two members appointed by the offices or departments involved in the dispute, and a third member appointed by the governor.

Sand said the creation of the board takes out the system of checks and balances by giving the judicial branch’s power to the executive branch, and to the entities being audited. Comparing the House and Senate language “left us in the office debating which was worse,” he said during a news conference Thursday.

“The fact that we can lose federal funding depending on if we are denied access to records has everything to do whether or not they can keep denying us records,” Sand said. “They can still do that under this House bill, and the claim that this has solved that problem is absolutely false.”

The original bill received bipartisan opposition from national auditing groups and officials, and some, including former U.S. Comptroller General David Walker and the National State Auditors Association, also wrote letters opposing the amended bill.

Republicans say bill prevents misuse of subpoena power

Bergan said the measure will not affect the auditor’s ability to subpoena needed information, citing a section of Iowa Code that authorizes the auditor to have subpoena power in “all matters pertaining to an authorized audit or examination.”

This is for situations outside of authorized audits, he said, referring to a recent Iowa Supreme Court ruling against Sand’s 2021 subpoena of Iowa Communities Assurance Pool (ICAP). The court found the auditor did not have the authority to investigate the public entity insurance pool, as it is not a government agency.

“Sixteen states have reported that its state auditor has no subpoena power at all,” Bergan said. “Those states have effective audits they have no difficulty in complying with state fund requirements.”

Senators submitted an open records request earlier in April following the court ruling, saying they were investigating whether Sand’s office had abused subpoena power in other instances, and wanted to ensure Iowans’ private information was being protected.

Sand said he issued a subpoena while investigating ICAP because it’s an organization using taxpayer funds that was holding board meetings in resort locations like St. Joseph, Michigan, and Marco Island in Florida. Sand said his office understood there was a decent chance of losing the ICAP case, he said, but that the subpoena was issued to try to add spending accountability to local government risk pools.

“The limitations on our audits are the spending of taxpayer money,” Sand said.  “We can’t, and we have no interest, in anything beyond accountability for the spending of tax dollars.”

Democrats say bill is politically motivated

More than holding the auditor’s office accountable, Democrats argued the bill was targeting Sand because he is the only Democrat to hold a statewide elected office. Former Attorney General Tom Miller and Treasurer Mike Fitzgerald, both Democrats, were defeated in the 2022 elections.

Rep. Amy Nielsen, D-North Liberty, argued the bill’s provisions are based on Sand’s position as the sole Democrat and leave him at a disadvantage. If a dispute is submitted to a board of arbitration, the bill gives preference to the governor’s and Republicans’ decision not to release information, as department heads as well as board and commission members are appointed by a governor and approved by the Legislature.

She compared the reductions to the auditor’s powers through this bill with the expansion of authority for Reynolds and newly elected Attorney General Brenna Bird, a Republican, through the government reorganization plan.

“Who’s going to provide the oversight now to protect the taxpayer dollars?” Nielsen said. “The attorney general? This — it just seems that we are allowing embezzlement and theft to happen and then investigate it, because we can’t let the auditor investigate fraud.”

House Speaker Pat Grassley said the bill is not intended to be political.

“We have to keep in mind that just like I won’t be here forever, Gov. Reynolds, Sen. Whitver, Rob Sand, whoever — there’s going to be elections, there’s going to be new people in these offices,” Grassley said. “And we would expect, regardless of party, for them to abide by the expectation of what should be in those audits.”

Sand said he laughed at the idea of this bill not being politically motivated.

“The bill is disgusting and partisan,” Sand said. “Some joker in here wants to convince everybody that this somehow does not have anything to do with the fact that I’m the only elected Democrat representing the state of Iowa. I don’t think there’s a single Iowan that doesn’t see through that.”

The bill returns to the Senate for further consideration.

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