State Auditor's Office will change practices after failing to catch secret settlements

Documents show various funding streams that were tapped by eight state agencies to pay settlements

Erin Jordan
Published: April 2 2014 | 5:24 pm - Updated: 7 April 2014 | 3:06 pm in

DES MOINES -- The State Auditor’s Office will be changing the way it interviews agency officials following the discovery of at least $427,000 in settlements paid to terminated public employees since January 2011.

State Auditor Mary Mosiman said the settlements weren’t caught by her office, which touts itself as the “taxpayers’ watchdog.”

“The questions we ask during an annual audit would not have picked up on a settlement agreement outside of DAS (Department of Administrative Services) guidelines,” Mosiman told The Gazette.

The Auditor’s Office is required by law to make a complete audit of the books, records and accounts of every department in state government.

Most agencies have too many payroll transactions for auditors to review each one, so they use a sample, Mosiman said. Unless one of the 24 settlements in 12 agencies came up in the sampling, the Auditor’s Office wouldn’t have researched the payments, she said.

State auditors also interview various officers in each agency, Mosiman said. Questions posed in past years haven’t specifically asked the source of funding for payments made to employees upon departure. A typical payment might be unused vacation, she said.

Mosiman plans for her auditors to identify the source of funds used for these payments as a way to make sure secret settlements aren’t being offered.

Because of an ongoing investigation, she would not elaborate on how state agencies that paid settlements included the money in their budgets. “I can’t get into the details of what we’re looking at,” she said.

The auditor’s role came under legislative scrutiny Wednesday when the Iowa Senate passed an amendment to the fiscal 2015 administration and regulation budget bill that included a $10,000 appropriation to the State Auditor’s Office from now to the end of the fiscal year June 30 to pay the cost of conducting examinations concerning personnel settlement agreements.

The examinations would look at agreements made by the state with terminated state employees since January 2011 that were not approved by the State Appeal Board.

“This is sometimes like finding a needle in a haystack, so we have to be patient,” said Sen. Liz Mathis, D-Cedar Rapids. “We’re giving them several months to do it. They’re going to give us monthly progress reports.”

Senators approved the extra money on a 28-19 vote after majority Democrats rejected a change by Sen. Julian Garrett, R-Indianola, that sought to take the examinations back to 1999 and give the auditor’s office 30 days to complete the task. “It’s purely investigating where the facts take us and it doesn’t appear to be a partisan witch hunt,” Garrett said of his proposal.

Republicans said they wanted to go farther back given reports this week that similar settlement agreements were paid to at least six employees under the previous Culver-Judge administration.

But Sen. Matt McCoy, D-Des Moines, said the undisclosed settlements by the Culver administration involved payments related to back pay, wages or disputes related to their wages that the employees were owed through the grievance process that were not “apples to apples” comparisons to the “hush money” paid by Branstad administration officials to buy employees silence.

“There was no money at any time in any of those contracts for hush money under the Culver administration,” McCoy said.

On Wednesday, Culver spokesman Pete McRoberts issued a statement saying: “It’s dishonest and laughable for Terry Branstad to try and make any comparison whatsoever between 320 settlements, dozens of which were done in secret, costing Iowa taxpayers more than half a million dollars, and a handful of legal agreements, entered into strictly following the state’s formal grievance process."

Senate File 2342 must now be taken up by the GOP-led Iowa House, where subcommittee co-leader Rep. Ralph Watts, R-Adel, has expressed reservations about the Senate-passed provision.

Sen. Janet Petersen, D-Des Moines, co-leader of the Legislature’s Government Oversight Committee, said details of secret pay settlements to former state employees she received earlier this week indicated a “systematic problem” in hiding the payments.

Peterson said requested documents she received Monday show various funding streams that were tapped by eight state agencies to pay settlements as part of confidential agreements with eight former employees. Responses included operations, discretionary funds and a utility fund in the state Department of Administrative Services as the sources of money for the payouts.

Gazette reporter Rod Boshart contributed to this report.

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