Auditor General reports financial-reporting weaknesses, $83.6M in draft adjustments; urges legislative follow-up

PROVIDENCE — At the first meeting of the House Oversight Subcommittee on Government Efficiency on April 3, Auditor General David Bergantino briefed legislators on the Office of the Auditor General’s role and the results of recent audits, saying the office issued a clean (unmodified) opinion on the State of Rhode Island’s 2024 financial statements while documenting multiple significant deficiencies that warrant legislative attention.

Bergantino told the subcommittee the 2024 state financial audit produced an unmodified opinion but included 28 findings across the state reporting entity and required extensive draft adjustments. “The good news is it did result in an unmodified audit opinion,” Bergantino said. He said the draft statements initially showed the general fund’s operating results understated by about $83,600,000, the Intermodal Surface Transportation (ICT) Fund draft operating loss was misstated by about $10,400,000, and the state initially failed to record roughly $93,000,000 in debt related to the City of Central Falls’ new high school.

Why this matters: those draft misstatements complicate the overlapping timelines of audit close and legislative budget work. Bergantino told legislators that, although the issued financial statements were corrected before final release, the audit adjustments create additional work for House and Senate fiscal staff and can introduce risk or inefficiency into the budget process.

Key findings and examples

- Draft adjustments and reporting errors: Bergantino said audit work uncovered about 50 audit adjustments in the general fund draft close procedures, including the $83.6 million operating‑results adjustment and the $10.4 million ICT Fund correction. He described several causes, including reversed journal entries and incomplete preliminary closing processes.

- Omitted or misstated liabilities and asset impairments: the audit found the state had not recorded impairment for the I‑195 westbound bridge and had failed to report a $93 million debt tied to Central Falls’ new high school. Bergantino described those as examples of coordination gaps that leave management responsible for accurate financial disclosure.

- Internal control and documentation gaps: Bergantino said most agencies lack formal, documented internal control frameworks that identify risks to financial reporting and the controls that mitigate them. He testified this gap, together with retirement and turnover of experienced CFOs, has reduced institutional knowledge and contributed to weaknesses in the draft statements.

- Federal single audit and program compliance: the office’s single audit (covering roughly $6.8 billion in federal awards in 2024) reported material noncompliance in eight of 21 audited programs. Notable issues included weak subrecipient monitoring and eligibility or interface problems that led to payment of Medicaid premiums for people no longer residing in Rhode Island. A joint performance audit with the U.S. Department of Health and Human Services earlier found about $38.4 million in Medicaid premiums paid over a three‑year period for individuals who were not residing in Rhode Island.

- Municipal oversight and trend reporting: Bergantino described municipal challenges, including late audits, school fund deficits, and inconsistent OPEB funding. The auditor’s office has produced a five‑year financial trend analysis for each municipality to highlight positive and negative fiscal trends and encourage earlier corrective action.

Office capacity, tools and reforms

Bergantino said the auditor’s office has 35 audit professionals with credentials (CPAs, CFE, CISA) and has prioritized performance audits, data analytics, IT security review, and statewide auditor training. He described new investments in data mining and analytics to match entire data sets rather than relying solely on sampling.

The auditor noted the state is implementing a new enterprise resource planning (ERP) system that is intended to integrate payroll, cost management and grants and, over time, improve reporting. He cautioned that major IT implementations carry risk and that some of the state’s best financial staff have been temporarily dedicated to ERP implementation, which has reduced capacity for financial reporting work in the near term.

Recommendations and legislative role

Bergantino recommended procedural changes to reduce recurring errors, including sharing preliminary fiscal‑close results with agency CFOs and the Office of Management and Budget before the legislature finalizes budget estimates so agencies can validate program‑level numbers. He also urged legislative follow‑up and offered to brief the full General Assembly on significant audits and to present corrective‑action plans on the record so the legislature can track remediation.

Leader Chippendale, expressing concern about scale, urged larger performance audits for issues Bergantino described: “These aren’t decimal errors. These are substantial percentages of our overall annual budget,” Chippendale said, asking whether broader performance work and heightened oversight could ensure taxpayer dollars are properly managed.

Questions from members focused on whether the auditor’s office encountered resistance (Bergantino said agencies cooperated and delays were typically a matter of bandwidth), the state’s ability to recover federal funds when noncompliance is found (federal responses vary by agency and case), and requests for more specific Medicaid and SNAP data on ineligible payments (Bergantino said he would provide further detail comparing Rhode Island to states that have completed similar audits).

Votes and formal actions

The subcommittee had no legislative votes tied to bills or budgets at this meeting. The only formal motion recorded on the transcript was a procedural motion to adjourn, which passed.

What the auditor did not say

Bergantino emphasized that the audit opinion was unmodified and that management corrected the items identified during fieldwork before issuance. He also repeatedly stressed that auditors report findings but management is responsible for financial statements and corrective action; the legislative branch plays an oversight role in ensuring follow‑through.

Next steps and outlook

Bergantino offered to provide follow‑up detail at members’ requests and to brief the full legislature on findings. He said the office will continue to prioritize performance audits where the office can add the most value, expand data analytics work, and press agencies to document internal controls. The subcommittee indicated interest in scheduling broader briefings so members can decide where to add oversight or seek corrective action.