Independent auditors report clean opinions but identify material weakness, accounting adjustments and staffing delays

Grant Thornton told the Connecticut State Colleges and Universities Audit Committee on May 29, 2024, that it will issue unmodified (clean) opinions for the fiscal‑year audits of the system's entities but is reporting a material weakness relating to how fringe‑benefit payments and related state appropriation revenue were recorded for the state universities and Connecticut State (CT State).

The auditors said the system reversed state appropriation revenue and related fringe expense in the university and CT State financial statements after determining the prior accounting approach was not appropriate given a new state law governing fringe‑benefit allocations. Claire Esten, managing partner at Grant Thornton, said, “these are still unmodified opinions,” while explaining the firm would include an emphasis‑of‑matter paragraph to call attention to the change in accounting treatment and comparability to prior years.

Why it matters: the adjustment was large enough that, had it not been detected and corrected, the financial statements could have been materially misstated. Grant Thornton classified the issue as a material weakness in internal control over financial reporting and said the root causes included a change in law, the consolidation of the community colleges into Connecticut State Community College, and staff turnover in key accounting roles.

What auditors found and management response Grant Thornton and system management outlined three related problems that complicated the audit work: (1) a change in state law on fringe‑benefit allocations that altered how the payments should be recorded; (2) the July 2023 merger that converted 12 community colleges into a single community college and required system reconfiguration of financial reporting; and (3) staff turnover, notably the system controller vacancy that was filled in January 2024.

Auditors identified a material audit adjustment reversing state appropriation revenue and associated fringe expense for the university and CT State financial statements; Charter Oak State College had recorded the change differently and was not adjusted. A separate, smaller misstatement related to fringe accruals for FY23 was deemed immaterial and not corrected, and was included in Grant Thornton’s management representation letter.

Grant Thornton also noted a disclosure issue involving the classification of $16,700,000 of capitalized interest in the footnotes; auditors treated that as a disclosure presentation matter rather than a required booked adjustment.

System office staff said they will take steps to reduce risk going forward, including recommending hiring two additional senior accountants to strengthen reporting capacity. Lloyd (System Office presenter) and Michael Moriarty (Charter Oak CFO) explained missing customized reports and workarounds during the ERP changes contributed to delays. Michael Mondrain, the system CIO, said an updated IT security policy will be circulated to stakeholders and that disaster‑recovery planning is on his to‑do list with a plan to report back to the audit committee at its next meeting.

Background and next steps Grant Thornton indicated it is ready to issue the reports for the universities and Charter Oak immediately upon committee approval and expects to finish CT State’s audit procedures later in the week. Management said it will continue remediation work, publish audit schedules and internal reviews, and that regular, published internal audits and committee updates will be part of the corrective action plan.

The audit committee heard that delays in completing the audit were attributable to the combined effects of the organizational change, the new fringe allocation law, lost custom reporting during the ERP transition, and staff turnover. Committee members pressed for a clearer governance structure to prevent inconsistent accounting treatments between entities in a consolidated system.

Ending Auditors and management said they will return with follow‑up information at the next audit committee meeting and that documented, regular internal audits and stronger controller staffing are priority remediation items.