CHARLESTON, W.Va. — West Virginia’s state auditor says efforts are under way “to ensure the screw-ups of adults do not mess up the future and education of children.”
Auditor J.B. McCuskey says he and state Treasurer John Perdue have been discussing how to help manage the cash flow of West Virginia’s higher education system after the U.S. Department of Education announced penalties over the state missing deadline for the third year in a row on a financial audit.
“This is a very large financial problem for the state,” McCuskey said today on MetroNews’ “Talkline.”
Last week, West Virginia higher education leaders acknowledged the sanctions from the federal government, including provisional certification and heightened cash monitoring.
The upshot is, the sanctions of five years or more potentially affect cash flow of about $240 million for West Virginia’s higher education system.
Under normal conditions, the U.S. Department of Education would provide institutions money up front to be used for expenditures such as Pell grants and federally-subsidized student loans.
With the sanctions, colleges will have to pay for those expenses first and then ask for reimbursement.
The colleges are supposed to be paid back within a two-week window, but a cash crunch could arise as payday hits at the same time for employees.
“What happens is the federal government is now paying us back instead of paying us before, so we have to find the cash,” McCuskey said this morning. “If you remember the last 8 months of state government, cash isn’t exactly something we’re flush with right now.”
The auditor and treasurer are working to figure out potential relief for the cash flow problem. McCuskey said the two met this morning, and soon hope to discuss the matter with officials from the U.S. Department of Education. He described this morning’s conversation as wide-ranging.
“We have a constitution and laws to ensure that we do things legally and properly, so we have to find solutions within the framework of what our constitution and our legal system allows us to do, and that’s what we’re doing,” McCuskey said.
“What we’re trying to do now is marry what is legal with what is best,” he said.
McCuskey, like others, has questions about how the state missed the deadline again.
West Virginia first missed the federal deadline three years ago. The federal government first threatened sanctions last year but gave the state a reprieve. When it happened again this spring, the U.S. Department of Education said it would finally apply a penalty.
“I couldn’t assign blame because I don’t know who’s at fault. I promise you somebody does. If something goes wrong invariably somebody knows who did it,” McCuskey said.
West Virginia’s higher education system has to submit an annual financial audit to the U.S. Department of Education. It is due every year by March 31.
But the higher education aspect is only a portion of a broader, annual financial audit of all state agencies. The Department of Administration compiles the information for that audit, which is contracted out to Ernst & Young.
The process begins as each fiscal year concludes June 30. Agencies then spend the first quarter of the new fiscal year preparing their information, but that process often slips into the second quarter. Before you know it, deadline is approaching.
West Virginia fell behind on the audits for fiscal 2014 and then 2015 as it transitioned to a new enterprise resources planning system, more commonly called wvOasis.
New pension reporting requirements were also cited as reasons for missing the fiscal 2014 and then 2015 deadlines.
“They can blame Oasis all they want, but the financial system went live five years ago. Anybody who doesn’t know how to use that now, that is not Oasis’ fault,” said McCuskey, whose office provides main oversight of Oasis.
“We have a new financial system. You get one chance at saying I didn’t understand it, and we got that. Three years ago, they said we didn’t get the audit completed because we got a new system. All right, well the Department of Education gave the state a pass. You only get that pass once.”
This year, the higher education institutions said they were slowed up on their own reporting again while gathering pension information. But the higher education portion of the audit was completed by Feb. 7.
Somewhere along the way the full state audit wound up behind again. The Department of Education finally, officially received West Virginia’s higher education audit this past May 22.
The education department announced its sanctions this July 17.
Shortly after that, Gov. Jim Justice sent out a statement with this message: “Heads will roll.”
“When I find out who is responsible heads will roll,” Justice stated. “Our schools and students are being penalized because of a mistake that’s been brewing two years and ten months before I got here. We’ve got to get to the bottom of it because West Virginians deserve better.
Justice added, “There is going to be finger pointing like crazy, but the only way to improve is to admit that something isn’t working. I didn’t break it but I’ll fix it. In the past our federal delegation was able to correct this and I hope they can help me fix it again this year.”
McCuskey says fault lies somewhere, even if it’s not immediately clear where.
“There had to have been. There’s no other reason why you would miss deadlines like that, and I don’t care who screwed it up. It doesn’t make any difference to me,” he said. “It is not my job to assign blame. It is my job to ensure these payments get made to ensure these students’ scholarships, and that’s what we’re gonna do.”
State Delegate Mike Folk, R-Berkeley, called in to “Talkline” to underscore concerns that have arisen over the years with state agencies hitting deadline on their audit information. He said the information is useful to legislators too, but it’s often not available in a timely manner.
“There’s been a systemic problem for at least the last three years,” said Folk, who serves on the House Education Committee and also the committee that oversees pension and retirement issues.
He said the financial report that comes out every year “has been notoriously late — like 9 months to 11 months after the fiscal year ends. A lot of the same reports are probably used for this audit.”
Folk said he has advocated for a bill requiring the financial report be put out by the end of each calendar year.
Knowing the state was down to its last strike on submitting its higher education financial audit on time, Folk said, state officials should have put pressure to bear on whatever agencies were straggling with the necessary information.
Folk referenced a letter written to federal education officials by state higher education Chancellor Paul Hill, warning that the state would again be late with its audit information. In the letter, Hill said the pension liability data was again not available until Dec. 20, 2016
“Paul Hill knew they were having problems getting it done in a timely manner. That was three months before it was due,” Folk said. “The administration should have put the pressure on, should have put the extra resources on to make sure those reports were available to accomplish the audit.”