Audit of ESA administrator shows extra costs; Dept. of Ed provides explanation

DES MOINES, Iowa — In April of 2023, the state of Iowa agreed to a contract with the company Odyssey to administer the educational savings accounts to students and families.

State Auditor Rob Sand and his office released an annual report on Tuesday of recommendations for the Iowa Department of Education. In the audit, the office found that the original contract with Odyssey had been amended in July of 2023. It was also found that the amended contract did not follow it’s own protocol to approve the amended contract.

“The Department of Education has their own specific policies for approving any contract amendments. It’s supposed to go to their accounting department. There’s approvals that are supposed to happen, those approvals did not happen,” said Auditor Sand, (D). “In fact, they only happened just a couple of weeks ago after we had been asking for this documentation for seven months, eight months. We finally got it and they finally went through the approval process close to a year after the amendment was signed. And again, still today, not providing justification for it.”

Sand estimated that the amended contract doubled the amount that the state had to pay to Odyssey, around $2.7 million. The ESA legislation also required Odyssey to have an office in the state, and the company used the State Capitol building’s address for that in the report.

WHO 13 News reached out to the Department of Education for an explanation to the amended contract not following its own procedure.

Processes can always be improved upon and the Department of Education notified the Office of the Auditor of State that it will have documentation of all relevant approvals at the time of execution moving forward, which was also accepted by the Auditor of State.

Heather Doe, Communications Director for the Department of Education

The department further elaborated on why the contract had been amended.

Transaction fees are a common and necessary cost of transferring money through an e-commerce platform. The Department of Education amended its contract with Odyssey to account for transactional fees that would be incurred through the ESA process. Instead of deducting fees from each participating student’s education savings account, and noting that ESA student funding amounts are defined in statute, the department assumed the cost of the fees on behalf of the state.

Heather Doe, Communications Director for the Department of Education

The department explained that the amended contract is still competitive, while adding on the transaction fee clause in the contract that was left out originally. If the amendment had not been added the transaction fees would have fallen on the families using those dollars for private school tuition; but the law was written to have the state eat those costs.

Doe cited that the contract annually for Odyssey would cost $985,000. She compared it to what she said was the only other viable bidder for the ESA contract, Merit, at $3,600,00 annual cost.

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