CHARLESTON, W.Va. — State agencies required to complete annual financial audits may be under increased deadlines and greater penalties if they don’t meet them.
The state Legislature is likely to consider changes to the Comprehensive Annual Financial Report. Legislators attending interim meetings on Sunday got a preview of draft legislation.
Greater penalties for missing deadline have been discussed for a couple of years, but the topic got hotter this past year when the federal Department of Education imposed penalties that affected the state’s higher education system after audit deadlines were missed for the third year in a row.
Under the proposed legislation, which is still taking shape, representatives of agencies that are required to complete the Comprehensive Annual Financial Report would have to take part in annual training.
The agencies would have to complete drafts of their reports by each September, full reports by October and closing book reports by the end of October.
Each Friday after October 31, the Financial Accounting and Reporting Section of the state Department of Administration Finance Division would report on who still hasn’t complied.
A $100 a day fine may be levied against the heads of agencies that run late, deposited into the general revenue fund. There’s a stipulation that the fine not be paid with federal funds.
“That’s something new in the bill, is these penalties are much greater than what they were,” said Gary Howell, co-chairman of the Joint Standing Committee on Government Organization, which heard about the draft legislation during interim meetings on Sunday.
“I think that’s going to help a lot because we had the problem with higher education and their funding. That’s part of the CAFR report that was missing. Had these fines been in place, these agency heads would have been doing a better job ensuring that got out.”
Howell said there are problems throughout state code with agencies that are supposed to meet expectations — but no specific penalties if they don’t.
“This is probably one of the first bills where we’ve said ‘If you don’t do this, this is going to happen and you’re going to be financially responsible,'” Howell said.
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 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.”
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.
State agencies appear to be doing much better with the audit deadline this year.
Almost all state agencies that are required to submit the audits met a final deadline earlier this month.
Then the state’s higher education institutions met their own final deadline on Oct. 31.
“The Department is pleased with the response from the state agencies this year and is working to finalize the Comprehensive Annual Financial Report in a timely manner,” said Diane Holley-Brown, spokeswoman for the state Department of Administration, which has to compile the audits.