CHARLESTON, W.Va. — Gov. Jim Justice said “heads will roll” after a third consecutive missed statewide audit deadline led to sanctions from the U.S. Department of Education.
Heads may not need to roll if the Legislature passes a bill meant to enforce deadlines for the annual audits.
Instead, agency heads may have to kick in a $100 a day after missing what’s meant to be a final deadline for their audit information. Alternatively, they can try to offer a valid reason why their agency has missed the deadline. The fines would go to the general fund.
The possible fines and clearer deadlines for the for the Comprehensive Annual Financial Report are pieces of a bill recommended Tuesday by the Joint Committee on Government Operations. The bill is likely to be introduced during the legislative session that begins Wednesday.
Committee co-chairman Gary Howell said the bill envisions penalties for agency heads who can’t meet deadline. But it provides recourse for extenuating circumstances.
“We had to do that because if the agency before them is required to do their report so they can finish theirs, that’s obviously not their fault. We don’t want someone punished for what somebody else failed to do,” said Howell, R-Mineral.
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.
“That was a section of the CAFR report that wasn’t done that caused that whole problem,” Howell said.
He said legislators could also benefit from the detailed financial information as they try to piece together budgets.
“The CAFR report was coming out after the Legislature had met,” he said of practice in recent years. “So our Finance staffs didn’t have the opportunity to have that information when crafting the state budget. We may have been able to save more money for the state had we had that information in advance.”
Under the proposed legislation, 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 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 last year.
On July 17, the U.S. Department sent 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.
Governor Justice, when the consequences first became apparent, sent out a news release promising that heads would roll over the missed deadlines.
The state never specified whether any jobs were lost over the missed deadline. Such personnel matters are typically kept private, though.
By and large, state agencies met their deadlines this past fall.
Once the information is available from all the applicable agencies, the state still has to prepare and file an annual single audit with the help of private auditors.