Audit questions Washington state agencies’ handling of more than $1 billion in COVID aid funds

A new report from the Washington State Auditor’s Office found a record 86 issues with how 11 state agencies spent federal COVID-19 aid, noting documentation deficiencies and $1.17 billion in questioned costs in the fiscal year 2023.

The audit specifically looked at federal money being spent by the Washington government, which in the last fiscal year totaled over $29 billion.

The nearly $1.2 billion in questioned state spending represents about 4.1% of total federal funds spent by the state in the 2023 fiscal year.

“This is by far our biggest report – it examines whether state agencies spent federal funds in accordance with the federal guidelines for each program,” Washington State Auditor's Office spokesperson Adam Wilson told The Center Square in an email.

Wilson pointed to last year’s audit that showed 34 unresolved findings and just under $1.2 billion in questioned costs in the 2022 fiscal year. While the amount of questioned spending remained the same, the number of findings increased.

The majority of the state agencies tagged in the report have responded that they will take action to resolve the flagged findings by the audit. However there were a number of the findings in which agencies responded that they are unable to resolve the issues due to a lack of resources.

Jim Brownell, assistant director of state audit and special investigations at the Auditor’s Office, pointed to the Washington State Department of Children, Youth & Families, which had over $350 million flagged in the recent audit.

According to Brownell, the flagged spending was due to the issues with the department’s accounting for childcare payment. Auditors could not gather enough evidence to assess whether the payments were made appropriately, were appropriately accounted for, or materially complied with federal requirements.

“So in this particular case, DCYF accounting was not up to standard and we could not trace $350 million back to individual payments,” Brownell said in a phone call. “They do high level accounting adjustments; they move big batches of expenditures from one funding source to another, and we’re just not able to audit them.”

In the 2023 fiscal year, DCYF spent more than $356 million in Child Care Development funds and $107.3 million in Temporary Assistance for Needy Families federal grant funds on child care subsidy payments to providers.

Auditors said t the department did not have adequate internal controls over and did not comply with client eligibility requirements for Child Care Development Fund and Temporary Assistance for Needy Families. During the audit period, DCYF determined 61,140 children were eligible for child care.

Auditors randomly selected and examined 59 of these determinations and found that in three instances, the department made eligibility determinations improperly, or did not verify information before authorizing services.

Brownell said these are repeat issues that have been going on for around 15 years. DCYF’s accounting issues have been going on for three years now. Prior to that, the state Auditor’s Office made significant findings and questioned costs regarding the department.

Childcare providers and services were all paid by DCYF, but auditors are unable to assess whether those payments were adequately supported and properly accounted for.

In regard to the childcare issue, DCYF disagreed with the audit’s findings. When this occurs, it’s up to the federal grantor to decide whether or not it agrees with the Washington state Auditor’s Office’s findings.

Brownell said the federal government has typically agreed with the state audits in the past.

A summary on the record number of findings in the latest audit is expected to be released by the end of June.