PROVIDENCE, R.I. (WPRI) — Rhode Island's auditor general is sounding the alarm over what he sees as deterioration in the quality of the state's financial reporting, saying unabated, it could have detrimental effects on the state's finances. Auditor General David Bergantino issued the warning as part of the state's annual financial audit that was submitted to lawmakers last week. The 316-page report included 28 "findings" -- issues that his office wants to flag regarding the state's financial reporting during the prior fiscal year, which ended last June. He said the issues his office is seeing are worsening. "I'm definitely trying to point out the fact that there's been a downward trend with the quality, completeness and timeliness, and that needs to be changed," Bergantino told Target 12. "It is getting worse each year." The R.I. Department of Administration, which oversees financial reporting on behalf of Gov. Dan McKee's administration, pushed back at the characterization. Spokesperson Karen Greco said the findings in the most recent report "were consistent with past reports." "However, the volume of transactions has gone up substantially in the last few years due to the pandemic-era funds," Greco said in a statement. "The audit risk increases when transactions increase. As the auditor general noted in his report, much of the state’s finance processes use antiquated systems that don’t integrate, requiring many manual procedures, which are inefficient and prone to human error." Some of the biggest red flags highlighted in the audit included the state's general fund being misstated by $83.6 million, which required more than 50 adjustments to ensure accuracy. Another $10.4 million was misstated in the operations of the Surface Transportation Fund, which pays for state roads and highway infrastructure and construction. The report also showed the state failed to record $93 million in debt for a new high school in Central Falls; understated personal income tax revenue by $43.3 million; and omitted $4.5 million from Medicaid settlements. "When you miss complete transactions and you miss nearly $100 million worth of bonds, and they're not in your financials at all, that's not serious -- that's a complete breakdown," Bergantino said. Additionally, the state failed to record the defunct I-195 westbound bridge as a valueless asset, meaning it had been artificially inflating the value of the state's overall assets. The broken bridge hasn't been open to traffic since December 2023, and it's currently being demolished. "This wasn't an issue that wasn't being widely publicized," Bergantino said. "If you're missing stuff like that, as an auditor, it makes you concerned about what else is being missed." Bergantino acknowledged that the state audit isn't a well-understood aspect of state government. It takes teams of number-crunchers to comb through the state's $14 billion budget and make sense of the esoteric nature of public financing. But Bergantino said the McKee administration needs to take financial reporting more seriously because errors put strain on his office, which he said has limited resources. Mistakes also cause delays because of the time it takes to figure resolve them, which both undermines lawmakers' understanding of the state's current budget position, and creates angst among major rating agencies like Moody's, S&P and Fitch. The "Big Three" rating agencies, as they're known, have became far stricter about even issuing bond ratings for governments that don't get annual audits in on time. The dynamic has already played out at the local level in Rhode Island. Two agencies recently yanked ratings on public bonds issued by Woonsocket and Coventry, jeopardizing the communities' ability to borrow money for major capital projects, such as schools, police stations and infrastructure projects. Contributing to the problem at both levels of government, Bergantino explained, is recent high turnover rates in financial jobs that he said were once positions that people held for their entire careers. He said the loss of institutional knowledge makes it more challenging for financial officials to catch glaring errors when spending or revenue doesn't line up in a significant way. And it's left to his office to figure out what went wrong, which takes time. Bergantino said he's also concerned about a lack of set procedures for financial reporting in some departments, which are required under accounting rules but absent in some cases. Greco said the state is in the process of transitioning its system for finances, human resources, and payroll into a new IT system dubbed Enterprise Resource Planning, which she said would integrate the different systems and "lead to more accurate reporting and proper controls." "The auditor general cites in several places in the report that a transition to ERP would remedy most of the errors," Greco said. "The ERP finance functions will be live in July 2025, just in time for the state’s new fiscal year, so improvements will be reflected in the FY2026 audit, which will be released in Spring 2027." The total cost of the ERP project is currently estimated at $91.3 million, according to a recent Senate Fiscal Office analysis. Bergantino didn't share the optimism that the new ERP system would make things better, especially in the next couple of years. He highlighted that the state doesn't have the best track record when rolling out new technology systems, pointing to the disastrous launch of the UHIP system for social services in 2016. The UHIP system is commonly referred to as RIBridges, and international cybercriminals hacked the system last December. The cyberattack may have compromised the personal information of more than 700,000 Rhode Islanders. FULL COVERAGE: RI Data Breach Bergantino said it could be several years before ERP is operating effectively, and there's no certainty that new always means better. "When the state launches any new system, things don’t always get better – sometimes they get worse," he said. Meanwhile, financial reporting also affects the General Assembly, which is responsible for vetting and approving the annual state budget. The McKee administration also has to defend its spending proposals to the Assembly, which can sometimes become complicated when numbers shift throughout the year. Sharon Reynolds Ferland, who heads the House Fiscal Office, raised the issue at a Feb. 5 House Finance Committee hearing. She outlined how a preliminary closing estimate for the previous budget was almost three weeks late, resulting in some dramatic shifts to final figures. She described the shifts as "fairly significant and quite numerous." "Many of them could be avoidable if there were procedures in place," she said. "If everyone is trying to set expectations, it's always complicated not to have accurate information." Bergantino is scheduled to appear Thursday at a hearing of the House Oversight Subcommittee on Government Efficiency, where he's expected to discuss the annual audit results and talk bout some of his concerns with the quality of the state's financial reporting. "I like to see things trending in a positive direction," he told Target 12. "This is one that in the last several years, it’s just continuing to trend downward and that’s concerning to me and needs to be resolved." Eli Sherman (esherman@wpri.com) is a Target 12 investigative reporter for 12 News. Connect with him on Twitter and on Facebook. Ted Nesi contributed to this report. Download the WPRI 12 and Pinpoint Weather 12 apps to get breaking news and weather alerts. Watch 12 News Now on WPRI.com or with the new 12+ smart TV app. Follow us on social media:                     Close Thanks for signing up! Watch for us in your inbox. Subscribe Now Daily Roundup SIGN UP NOW ...read more read less