While state auditor Beth A. Wood noted that the college's financial statements were presented fairly in all material aspects, the audit disclosed a deficiency that is detailed in the Audit Findings and Responses section of the report.
“In our opinion, the financial statements referred … present fairly, in all material respects, the financial position of Halifax Community College, as of June 30, 2013, and the changes in financial and cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.”
(The full audit may be found by following this link)
While the aim of the audit is to give a snapshot of where the finances of the college stood at the end of last fiscal year, the state auditor did identify “certain deficiencies in internal control that we consider to be material weaknesses.”
The state auditor found deficiencies in the college's financial reporting. “These misstatements indicate the college's internal control over financial reporting was not effective, and without the corrections, the financial statements have been misleading to readers.”
The deficiencies are:
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The college did not make the appropriate year-end entries to adjust the negative cash balances in restricted funds. In addition, there were various misclassifications of cash between restricted, unrestricted, current and non-current categories. After adjustments were made to properly classify cash, current restricted cash decreased by more than $1.2 million and non-current cash decreased by more than $309,000.
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The college did not record a current-year grant award. As a result, non-current restricted cash and capital grants were understated by $150,000.
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The college did not properly record a grant in the prior year. That made current-year non-capital grant revenues overstated by $310,985 and the beginning net position understated.
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The college made an incorrect entry when adding back student receivables that were previously written off. That made receivables and student tuition and fees overstated by $120,123.
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The college did not properly classify restricted investments between current and non-current. It also made a misclassification between cash and investments. That made non-current, restricted investments understated by $317,826.
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The college improperly capitalized a repair project, making capital assets overstated by $229,683 and current-year expenses understated by the same amount.
“As a result of our audit, other reclassifications entries were made, as well as multiple changes to financial statement note disclosures, the statement of cash flows of the management discussion and analysis,” the audit says.
Explaining the problems, the audit notes, “The college has experienced significant turnover in the past two years. For the year under audit, the college had one staff member involved in the preparation and review of the year-end financial statements. This staff member did not have sufficient training or experience in government accounting and the year-end financial reporting process. In addition, no knowledgeable staff member was available to perform a comprehensive review of the statements and related disclosures.”
In response to the audit, Griffin said, “We are not satisfied with the results of the audit and are working diligently to have no future findings as in previous audits.”
The college now, the president said, has sufficient staff to properly prepare and review the journal entries, financial statements and disclosures to assure they are free from material misstatements. “The financial staff will also be attending training in October on Governmental Accounting Standards Board financial reporting procedures. The college also plans to have someone knowledgeable at the North Carolina Community College System review the final reports before they are submitted for fiscal year 2013-2014.”
Griffin said the college has been in contact with the state system on the matter. “We will place greater emphasis on the year-end financial reporting process. Procedures will be implemented to ensure the completeness and accuracy of the financial statements and related note disclosures.”
Griffin said a detailed review by knowledgeable staff, other than the preparer, will be performed to make sure journal entries, financial statements and disclosures are free from material misstatements. “We are in touch with the system to provide us with consultants who have experience in these matters that will enable us to have a clean year-end financial reporting process.”
The president said he does not see the audit affecting day-to-day operations of the school. “Vice President of Administrative Services Debra Smith said, 'These are deficiencies in financial reporting, which is a summarization of the year’s financial activities.' Again, we will be transparent in all activities related to HCC.”
