Auditor: State made $2.4 million settlement payments to 38 ex-employees

Federal funds not used, report says

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August 28, 2014 | 4:06 pm

DES MOINES – State officials entered into 42 settlement agreements with former employees that included confidentiality clauses during a four-year period that ended last June, but only one included an additional payment for a secrecy provision, according to a report issued Thursday by State Auditor Mary Mosiman.

Mosiman concluded that none of the confidentiality clauses contradicted Iowa’s open-records law, which states that settlement agreements are public records. It appeared the confidentiality clauses were intended to govern the behavior of the parties to the settlement agreements without altering the public’s access to the settlement agreements, she noted.

State payments were made in 38 settlement agreements with former employees which did not relate to back-pay issues totaled about $2.4 million – including about $541,000 settled through the grievance process and another $1,853,000 resulting from court proceedings between July 1, 2010, and June 30, 2014, the auditor reported.

Payments for 32 of the settlement agreements were paid entirely from the state’s general fund, while five were paid entirely by internal service funds and another was paid partially by the general fund and partially by an internal service fund. Federal funds were not used for any of the settlement agreement payments, according to the auditor’s report.

Sen. Janet Petersen, D-Des Moines, chairwoman of the Senate Government Oversight Committee which has been investigating various management concerns within state government, said the report demonstrates the need for the Legislature and governor to make changes that will improve openness within state agencies and accountability to the taxpayers.

“Today’s report by the state auditor is another wake-up call for Iowans concerned about secret settlements, hush money and misuse of our tax dollars,” Petersen said in a statement. “We need a long-term solution -- not Band-Aids -- to fix this serious problem in the management of state government.”

Mosiman said the review by her office identified 2,679 grievances filed during the four-year period which were resolved through established grievance processes. A total of 1,999 were denied, closed without action, withdrawn or resolved through the arbitration process established by the collective bargaining agreement, she said.

Of the 680 grievances which were settled, 514 resulted in payment of back-pay to an employee or resulted in an agreement which did not require a state payment, 151 were combined with other settled grievances and 15 resulted in payments to former employees, according to the auditor’s findings.

A settlement agreement related to a fiscal year 2009 grievance which resulted in settlement payments during fiscal year 2011 was also identified, the auditor found. In addition, 22 settlement agreements during the four-year period resulted from court proceedings rather than established grievance processes.

Of the 38 settlement agreements with payments that were identified, nine were entered into by the Iowa Department of Human Services and its Institutions totaling $708,000 and were the most of any state agency.

Except for e-mails between legal counsel for the Iowa Department of Administrative Services and the attorney for a former employee specifying an additional $6,500 would be paid by the state for inclusion of a confidentiality clause in a settlement agreement, no payments by the state in exchange for inclusion of the confidentiality clauses were identified, according to Mosiman.

Sen. Matt McCoy, D-Des Moines, a member of the Senate Government Oversight Committee, called the auditor’s findings a “comprehensive and accurate” review of the state settlement process. He said federal funds initially were used for payments to state employees, but repayments were made when it was determined they violated federal law.

“The state did in fact pay for confidentiality in the case of Carol Frank. Frank proved she was paid $6,500 in addition to $70,826.25 for her settlement,” McCoy said in an email response. “Two of Frank’s co-workers testified they were offered this same type of funding and refused these funds they viewed as hush money.”

Gov. Terry Branstad fired Mike Carroll as DAS director last April just hours after evidence surfaced contradicting statements Carroll made to state lawmakers that no “hush money” was paid to ex-state workers.

Frank, a DAS senior construction design engineer who was laid off, provided documents to state legislators from her attorney as proof she was offered $6,500 if she would sign a non-disclosure clause.

Branstad spokesman Jimmy Centers issued a statement Thursday afternoon saying the governor was “pleased the independent review confirms that Executive Order 85, signed by Gov. Branstad to end the ill-advised use of confidentiality provisions in personnel settlements and increase openness, transparency and accountability in state government, is working.”

Current DAS Director Janet Phipps issued a statement thanking Mosiman for her independent review and noted that DAS officials are undertaking steps to assure department transparency and accountability.

“I committed to Auditor Mosiman that with her office’s assistance, DAS will develop a process that meets the high standards I hold for this agency and that the public deserves from their government,”

Phipps said. The process will include “measures and controls to ensure ongoing accountability and transparency to the extent allowed by Iowa law in the implementation and execution of the legal responsibilities of DAS with regard to grievance processing,” she said.

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