CHARLESTON, W.Va. — Over the past three years, as West Virginia missed deadline after deadline after deadline for a federally-mandated audit of its higher education system, communications between the state and federal officials grew more and more urgent.
West Virginia financial officers and officials with the U.S. Department of Education were in frequent contact over the issue between 2015 and now, according to documents obtained through a Freedom of Information request.
The initial correspondence was marked by a relatively brief explanation by West Virginia officials — casting most blame on switchover to the new wvOasis computer system — and acceptance by federal officials, accompanied by a warning about what would happen if coming deadlines were not met.
Over the next two years, as West Virginia continued to miss deadlines, responses by federal officials grew more terse, leading to the sanctions that were announced last month.
The Justice administration has promised to get the problem under control, and chief of staff Nick Casey has announced an update at 3 p.m. today.
Last Friday, Casey said his initial review indicated multiple agencies missed deadlines that held up submission of the higher education audit.
“It’s become obvious that there is a systemic bottleneck that got in the way of a timely audit being filed for 2014, 2015 and 2016. The Justice Administration intends to break that log jam so this never happens again,” Casey wrote.
Last month, the U.S. Department of Education announced at least five years of sanctions to West Virginia’s higher education system over the missed deadlines.
The sanctions affect the payment of Pell grants and federal student loans. Usually the federal government provides that funding up front for colleges to distribute to students.
Under the sanctions, colleges will have to come up with the money first and then receive federal reimbursement within a two-week window when other expenses — notably payroll — must also be paid.
Initially affected might be about $240 million in federal funds flowing through West Virginia colleges, just for the fall semester alone.
One of the big problems is that the higher education audit — which requires its own feat of pulling together financial information for each of West Virginia’s colleges and universities — is merely a portion of a broader audit of state agencies.
So federal punishment for the state’s higher education system may be of little concern to a completely unrelated agency holding up the works.
The Department of Administration compiles the information for that audit, which is contracted out to Ernst & Young. The Administration department also has the role of nagging agencies for their stuff.
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.
And West Virginia let the deadline slide three years ago for the first time.
2015
State financial officials realized in early March, 2015, just weeks prior to the March 31 deadline, that progress was off track.
In the end, they weren’t really all that late. The audit was submitted June 5.
The first, one-page explanation was written on June 10, 2015, by Ross Taylor, West Virginia state comptroller and director of finance.
Taylor explained that the state had been converting to a new financial accounting system, Oasis — the switchover for all state agencies in 20 years. That complicated efforts to get the audit under control for fiscal 2014.
“The accounting portion of the conversion went live on July 1, 2014, which meant agency personnel were required to learn new day-to-day operations while continuing their existing daily responsibilities,” Taylor wrote.
That led to delays in the preparation of the one big state audit, known as the Comprehensive Annual Financial Report, and the higher education audit required by the federal government, known as the Single Audit.
“This also caused delays in agency personnel providing external auditors with supporting documentation,” Taylor wrote. “Furthermore, auditors were required to perform additional procedures to gain reliance on the wvOasis system. These delays all led to a late CAFR and, subsequently, a late Single Audit.”
A compliance manager for the U.S. Department of Education, Sherrie Bell, provided a response — essentially, that West Virginia can slide this time but never let it happen again.
“This was the first annual submission to be late,” Bell noted.
She acknowledged understanding the reasons for the late submission but also spelled out how the state could be punished for a repeated miss.
In this case, though, West Virginia would be off the hook.
“However,” Bell’s letter concluded, “please be advised that failure to submit a timely annual audit is a serious matter and the Department under normal circumstances would have cited all Title IV participating schools covered under the West Virginia statewide audit.”
2016
By early March, 2016, West Virginia financial officers again realized they were going to be late.
This time, on March 8, Susannah Carpenter, chief financial officer in the Department of Administration, wrote a letter to explain why West Virginia had fallen behind.
Carpenter began by emphasizing the state is aware of the annual March 31 deadline.
But again, she wrote, Oasis made complying more complicated than intended.
“The State has applied all available resources to meet the deadline,” Carpenter wrote. “Unfortunately the State has encountered unexpected complications associated with a new accounting system.
“Therefore, completion of the FY 2015 Single Audit is not possible by the March 31, 2016, deadline. The State is working to resolve these issues and has made this the highest priority.”
Carpenter went into greater detail about how Oasis had contributed to the delay. “This is a sweeping change, affecting accounting functions throughout State government,” she wrote.
Oasis was an upgrade with better availability of accounting information, Carpenter wrote, but it required extensive training of state personnel. Data entry was labor-intensive and time-consuming. And the state’s available resources were strained.
“Despite significant progress with data entry, retrieving 2015 information has been a substantial challenge,” Carpenter wrote. “The State’s external auditors have also had to adjust to the new system, and this has contributed to the current delay.”
This second year, the delay was much worse.
The U.S. Department of Education finally got West Virginia’s higher education audit information July 25.
College presidents around West Virginia received letters from the education department, again written by compliance officer Sherrie Bell. All of the letters made reference to Bluefield State College, an oddity that simply has to do with Bluefield being first among West Virginia’s colleges in alphabetical order.
“This letter advises you that this untimely audit submission constitutes a failure of financial responsibility under the Department’s regulations,” Bell wrote in her August 22 letters to college presidents.
Bell again delineated the consequences.
“Please note that additional administrative actions are pending against your institution based upon this issue,” Bell wrote to the college presidents.
That letter provided no language indicating sanctions could be lifted.
A letter of appeal was sent August 26 by West Virginia higher education Chancellor Paul Hill and Sarah Armstrong Tucker, chancellor of the state community and technical college system.
They said the higher education system itself was not responsible for the delayed submission. They warned of significant consequences to West Virginia’s colleges and universities — and to students who rely on federal dollars — if the sanctions were to be imposed.
“In seeking this appeal, we wish to reiterate that the delayed release of the single audit was not caused by our higher education institutions, and we respectfully request that your agency reconsider its citation for failure to submit a timely audit this year,” Hill and Tucker wrote.
Three days later, a letter followed from Dave Mullins, finance director for the state.
Mullins again cited Oasis as the problem.
By last Oct. 13, Bell again responded for the U.S. Department of Education. In this instance, she wrote, the department had considered the appeal and decided again not to impose any penalties.
“However, the Department is providing notice to all schools that failure to submit its annual compliance and financial statements timely to the Departments eZ-Audit system is a serious violation and untimely submissions in the future will result in such restrictions,” Bell warned.
2017
With two years of warnings clearly communicated, West Virginia again was late.
On March 27, just days before this year’s March 31 deadline, a letter on behalf of the state was again sent by Carpenter, the chief financial officer in the Department of Administration.
“The State of West Virginia has tried diligently to comply with all requirements for the submission of its Fiscal Year 2016 Single Audit to your agency,” Carpenter wrote. “However, the State will not be able to meet the federal government’s March 31, 2017, Single Audit filing deadline.”
This time, she wrote, changes to generally-accepted accounting procedures had held up the works.
She noted that the higher education audit is a part of a broader audit of state agencies, which complicates the process.
“The financial statements of 155 State agencies are combined to create the CAFR,” Carpenter wrote. “A number of these agencies experienced delays in completing their audits.
“The final agency audit for inclusion in the CAFR was submitted on March 20, 2017. The State has now received all necessary components to complete the CAFR.”
But that milestone, already delayed, meant external auditors hired by the state still had to go through their own process of assessing the information.
“The State will submit these reports to your agency immediately upon their completion at the earliest possible date.”
West Virginia finally got its information to the U.S. Department of Education on May 22.
On July 17, yet another letter came from Sherrie Bell, the compliance officer.
She expressed comprehension of the reasons spelled out again by West Virginia officials.
“However, the failure to submit an acceptable complete audit and audited financial statements by the due date is a serious violation,” Bell wrote. “This is the third annual submission that is late.”
So, she concluded, the “request for reconsideration of its provisional status and heightened cash monitoring is denied.”