State financial audit of Rowan-Cabarrus Community College finds significant shortcomings, RCCC pledges to “rebuild Business Office”

The school has responded with that it would follow the state's recommendations.
The school has responded with that it would follow the state's recommendations.(WBTV File)
Updated: Jun. 8, 2021 at 6:39 AM EDT
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SALISBURY, N.C. (WBTV) - Rowan-Cabarrus Community College (RCCC) is pledging to fix deficiencies in the Business Office after the state’s audit of finances found significant shortcomings and made several recommendations that it says the school should put in place.

The Financial Statement Audit Report from the Office of the State Auditor covered the year ending June 30, 2020.

The summary of the report noted the following:

-College management did not monitor the components of internal control over financial reporting to ensure they were present and functioning throughout the period. Auditors found:

-The College’s financial statements submitted for audit contained significant misstatements and were not reviewed by an individual independent from the preparer.

-Reconciliations of the capital asset subsidiary ledger to the general ledger were not completed since June 30, 2018.

-Reconciliations of the student accounts receivable subsidiary ledger to the general ledger were not completed since June 30, 2018.

In response to an inquiry from WBTV, Sarah Devlin, Chief Officer of Governance, Advancement & Community Relations for RCCC said “The College has a strong history of excellent state audits and this is an isolated, one-time occurrence based on unfilled personnel vacancies which are always a challenge to any organization. These issues did not impact our service to students or the College’s mission and overall operations.”

A response from Rowan-Cabarrus Community to the State Auditor pointed out that there had been a good deal of turnover in the Business Office.

“It is unfortunate the Business Office has been subject to significant turnover in the past few years and has impacted the staffing level necessary to ensure adequate controls to ensure the financial statements are free of any material misstatements,” the response from RCCC said.

The audit also pointed out other issues caused by the lack of staffing in the Business Office:

-The Chief Financial Officer position was vacant between December 2018 and September 2019.

-The Senior Accounting Technician responsible for capital assets was vacant between September 2018 and April 2019.

-The Executive Director of Budgets and Financial Reporting was vacant between June 2020 and February 2021.

-Additional turnover in recent years affected the development of and competencies held by the following positions: Accounts Receivable Technicians, Equipment Coordinator, Payroll Analysts, Controller, Assistant Controller, Associate Chief Financial Officer, Director of Business Services, and Manager of Contracts and Procurement.

The audit concluded that the lack of adequate internal controls resulted in:

-The College omitting $14.6 million in county capital aid and related capital asset additions that occurred in the prior period.

- The College misclassifying $16.2 million of completed buildings as construction in progress.

-The College understating supplies and services expense by $2.0 million for amounts that should have been capitalized to construction in progress in the prior period.

-The College requiring use of external consultants to reconcile the student accounts receivable subsidiary ledger, which identified a $1.0 million overstatement of the current period beginning balance.

-Additional audit adjustments to correct misstatements in the financial statements, as well as corrections to the majority of the notes to the financial statements, the statement of cash flows, and required supplementary information.

The audit found that the lack of control over finances could have resulted in fraud occurring and going undetected, and leading to the College’s Board of Trustees making financial decisions based on unreliable or incomplete information.

In its response, RCCC agreed with the “audit finding and recommendations provided by the Office of the State Auditor.” Those recommendations include:

-Staff are adequately trained to perform year-end financial reporting

-Monitoring activities are designed and implemented to evaluate whether the components of internal control are present and functioning

-A year-end plan is designed and implemented that would allow for a thorough review of the financial statements and related information to ensure accurate and complete year-end financial reporting

-Contingency plans are implemented to meet financial reporting objectives during periods impacted by staff turnover

In its response, RCCC President Carol Spalding wrote that “the College takes the audit very seriously and has started to rebuild the Business Office in a manner to ensure adequate controls are in place.”

Spalding added that the school has posted to fill two positions that would replace the prior Controller, recently hired an experienced AR Coordinator to oversee the impact of tuition, fees, and financial aid on financial statements.

“We have addressed the items that were brought to our attention during the audit period and the auditors are satisfied with our resolution of those issues,” Devlin said. “The items outlined in the audit summary are common findings and the financial statements are correct as presented. We take our financial processes very seriously and are currently hiring to fill the Chief Financial Officer role. The College remains well-positioned to serve students and the community as we move forward.”

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