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Washington State News

Washington State Auditor Finds 61 Areas of Concern in $37B of Federal Funding

(The Center Square) – The Office of the Washington State Auditor released its annual “Financial Statement and Federal Single Audit Report,” Monday finding 61 areas of concern across 21 federal programs administered by the state, including several dealing with federal COVID-19 relief funds.

The 1,083-page report covers the time period from July 1, 2020 through June 30, 2021.

“While state programs shouldered an enormous burden in the midst of the pandemic, the public expects them to account for how they spent federal tax dollars,” State Auditor Pat McCarthy said in a same-day press release. “Our extensive review offers state agencies insights into where they missed the mark, and recommendations for how to fix it.” 

That enormous burden included the state spending more federal money than ever before. In fiscal year 2021, state agencies spent nearly $37 billion in federal funds, a 42% increase from the previous year, according to the Auditor’s Office.

The report said there are significant problems with how state agencies monitored COVID-19 relief funding and other federal money awarded to other organizations. Eleven of the 61 areas of concern were related to federal COVID-19 funding.

“We issued an adverse opinion on the State’s compliance with requirements applicable to the 21.019 Coronavirus Relief Fund, 21.027 Coronavirus State and Local Fiscal Recovery Funds, and 93.558 Temporary Assistance for Needy Families programs,” the audit stated.

The figures – 21.019, 21.027, and 93.558 – refer to the Catalog of Federal Domestic Assistance numbers assigned to various funding programs.

There were some other notable findings in the audit, including one having to do with insurance fraud during the pandemic.

“The Employment Security Department did not have adequate internal controls over and did not comply with requirements to ensure only eligible recipients received Unemployment Insurance benefits,” the audit stated.

The audit went on to say, “The attack on the state’s unemployment system resulted in more than $600 million paid on claims that initially appeared legitimate but were later discovered to be fraudulent.”

The audit did note, however, more than half of those funds had been recovered.

“The Department transparently shared information about the imposter fraud and its response,” the audit said. “By prompt and extensive effort, the Department had recovered a total of $356.4 million as of November 2020. The Department continues to conduct investigations into suspected fraudulent claims and work with federal law enforcement and the banking industry to recover additional fraudulent payments.”

In another case, an entire state program could not be audited due to insufficient records, resulting in auditors questioning at least $271 million in childcare provider payments. That opens up the possibility the federal government could ask for a partial or full repayment of that money.

The audit came out the day after the U.S. Senate passed the Inflation Reduction Act of 2022, with one of its provisions being about $80 billion to the Internal Revenue Service to increase enforcement, operational outreach, customer service, and systems modernization – including the hiring of 87,000 additional IRS agents.

“Reading this report made me think of the billions just approved for enhanced IRS enforcement,” quipped Jason Mercier, director of the Center for Government Reform at the free market Washington Policy Center think tank. “Were these audit violations cheating or simply honest mistakes by agencies with loads of budget staff to help with complicated compliance? Will taxpayers get the benefit of the doubt from the IRS?”