CHARLESTON, W.Va. — A bill that would have more strictly enforced deadlines for state financial audits may move to the top of the priority pile for lawmakers after West Virginia missed deadline three years straight and the U.S. Department of Education imposed sanctions on state colleges.
“I’m sure the bill will be reintroduced and I expect it to pass in even bigger numbers,” said Gary Howell, chairman of the House Government Organization Committee. “It wouldn’t surprise me if there’s a call to make the penalties even harsher. I think people have had enough.
“It took a wakeup call for people to realize how important it is for government to function.”
A bill that Howell sponsored during the last regular session — carrying the poetic name “Relating to the preparation of a comprehensive annual financial report” — was passed 99-0 by the House of Delegates.
The bill was introduced in Senate Government Organization on March 18 but stalled there.
In telling the U.S. Department of Education why West Virginia would be late with its audit again this past year, the state Department of Administration noted that, at the time, legislation was being considered to push for improvement.
The letter referred to the annual financial audit of an array of state agencies known as the Comprehensive Annual Financial Report.
“The West Virginia Legislature has proposed legislation requiring all state agencies to submit financial information for inclusion in the CAFR annually by Oct. 31st,” according to a letter written March 27, 2017.
“Should this legislation be implemented, non-compliant agencies will be assessed penalties. We are hopeful that in the future, this legislation will prevent delays in completing the Single Audit.”
The bill would have put deadlines for annual financial audits into state code and established penalties for failing to meet the deadlines.
Under the bill, by July 31 of each year, the state’s Finance Division would have to let state agencies know what information is required to be submitted, the deadlines for submission and the penalties for failure to comply.
By Sept. 15 each year, draft reports would be due. By Oct. 15 each year, the financial reports are due. By Oct. 31, any other materials related to the report are due, such as closing book forms.
Every week after that, the Finance Division would have to prepare a report for the Administration Secretary outlining what agencies still haven’t met deadline and how many days have passed.
The Administration Secretary is authorized to impose a $100 daily administrative fine for late agencies, with the money directed to the General Fund.
“One of the things we did was put in penalties – we put fines in for the heads of the agencies,” said Howell, R-Keyser.
“If you don’t do your job, there’s going to be a penalty. Everything else I life you don’t do your job you could be fired. You speed, you get a ticket. The idea of this update on the CAFR was to do consequences so they’re more apt to do what they’re supposed to do.
“It said, ‘Look everybody who is involved in making this report, you have to get it done. Your failure to do your job is going to create problems for someone down the line who may be doing their job correctly but they’re waiting on you.'”
State accountants wound up filing the big audit on May 22 this year.
On July 17, the U.S. Department sent a letters to West Virginia college presidents, saying West Virginia would be punished for being late for the third year in a row.
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 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.
This year, state government stepped up to front the money for colleges experiencing potential cash flow problems. But government officials would prefer not to have to do that in coming years.
Initially affected were about $240 million in federal funds flowing through West Virginia colleges, just for the fall semester alone.
If West Virginia continues to miss deadline, the federal government could determine even more rigorous punishment, potentially creating a greater cash flow problem for colleges.
Gov. Jim Justice, when the consequences first became apparent, sent out a news release promising that heads would roll over the missed deadlines.
Justice’s chief of staff, Nick Casey, was put in charge of figuring out what has gone wrong in the past and making sure a new course is set.
But Casey was fired this past week, following Justice’s party switch from Democrat to Republican.
Delegate Howell is hoping the Legislature can take the lead on its end to strengthen the law to provide more leverage for the Department of Administration to college the audit information.
“My staff and I are expecting to work on this over interims,” Howell said. “We keep hearing rumors the governor will call a special session, and if he does, especially with the embarrassment of not getting this in on time, we want to be prepared for it.”
Delegate Mike Folk also believes stricter deadlines should be imposed for state financial audits. Folk also sponsored a bill meant to address the issue, although Howell’s was the one that wound up moving forward.
Folk says the information would be useful to lawmakers who are trying to assess whether government is efficient and properly carrying out its duties.
“The whole time Tomblin was down there that I was down there he never got the CAFR out prior to the end of the legislative session,” Folk said, referring to previous Gov. Earl Ray Tomblin. “You had the previous year’s numbers when you were doing the next year’s budget.”
He added, “You’ve got to have recent numbers if you want to do a good job on budgeting. The more accurate numbers you have the better.”
Folk, a Republican from Berkeley County, said the issue comes down to accountability.
“Every private business has their annual report out within three months of the end of the fiscal year. Why does it take us about a year? No one in the private sector would put up with that,” he said.
“All these things are not good for our transparency to the public. That’s the main thing. If you’re not getting your audits in one time, you’re going to find out about malfeasance a lot later.”
In the Senate, Government Organization Committee Chairman Craig Blair says he would be interested in running a bill imposing tighter deadlines on the state’s required financial audits.
“From my standpoint, we’re always looking to make it so that we’ve got accountable, effective, efficient government in the state of West Virginia,” said Blair, R-Berkeley.
Blair, interviewed by telephone this past week, wasn’t immediately clear on why the financial audits bill that passed the House then made no progress in Senate Government Organization.
“I try to run every bill I can unless I know it doesn’t have a chance,” Blair said. “We did run out of time this year in Gov. Org. I didn’t get everything run out that I wanted run out.”
Blair would like the state’s financial audit information to be available to lawmakers well in advance of the start of the legislative session, which is in January unless a new governor is being inaugurated.
He said lawmakers need to be able to absorb the information well in advance of the crush of the legislative session.
“All information is useful. Where it ends up in the stack is a different story as the data is coming through,” Blair said.
“This information needs to be available to the legislative body three and four months in advance so we can go through and determine how to use the data.”