WILMINGTON, N.C. (WECT) – In its annual audit of the USS North Carolina Battleship Commission, the Office of State Auditor Dave Boliek identified more than $2 million worth of financial reporting errors during the Commission’s 2024 fiscal year, and found its management “did not have adequate internal controls, including review procedures, to ensure accurate financial reporting”.
Dave Boliek, the North Carolina State Auditor, said these mistakes are not common or uncommon, but it’s why the office does these annual reports.
“It just depends on the situation, and it depends on the agency,” Boliek said. “The battleship here is unique in that it is part of a state agency – the battleship itself is owned by the state, but it’s its own enterprise.”
According to its website, the Battleship Commission “adopts rules and regulations for proper maintenance and operation of the ship as a permanent memorial and exhibit”. The governor appoints 16 of the 18 members, who serve four-year terms.
The audit done by the Office of the State Auditor found the Commission did not:
- Complete and review the reconciliations for three out of six bank accounts between October 1, 2023 and September 30, 2024. As of September 30, 2024, these three bank accounts held $5.1 million (67%) of the Commission’s $7.6 million total cash balance.
- Perform the annual review of user access to the financial system to ensure access level aligned with job responsibilities.
- Provide evidence of an independent review and approval of journal entries. Specifically, auditors tested 182 out of 301 journal entries recorded during the period and found that 17 (9%) journal entries had no evidence of an independent review and approval.
Findings listed by the Office of State Auditor also found what it called “inadequate internal controls over financial reporting resulted in several misstatements”. They included:
- Transactions associated with the pension and other post-employment benefits plans were not recorded correctly. As a result:
– Deferred outflows related to pensions were overstated by $430 thousand.
-Deferred outflows related to other postemployment benefits were overstated by $191 thousand.
-Beginning net position was overstated by $248 thousand.
-Noncapital contributions were overstated by $169 thousand.
-Other operating expenses were understated by $168 thousand.
-Salaries and benefits were understated by $36 thousand.
- Current unrestricted cash was understated by $41 thousand because the wrong cash account was used to record a payment, which also overstated current restricted cash by the same amount.
- Noncapital contributions were overstated by $81 thousand because a receivable was incorrectly recorded for a transaction that had not taken place, which also overstated receivables by the same amount.
- Net investment in capital assets was overstated by $96 thousand, restricted expendable net position was understated by $378 thousand, and unrestricted net position was overstated by $282 thousand because of errors in the calculations.
- Additional audit adjustments were required to correct misstatements in the financial statements and note to the financial statements.
These mistakes, according to Boliek, can also increase the risk of fraud.
“The battleship is really an anchor to the city of Wilmington, and it helps define the city,” Boliek said. “An institution like the battleship needs to be accurate.”
The OSA audit recommended “Commission management should strengthen internal controls by reallocating key accounting and financial reporting responsibilities to reduce reliance on a single individual and ensure proper segregation of duties. In addition, Commission management should implement a formal review and approval process to increase internal oversight”.
In a letter to State Auditor Dave Boliek on August 19, Jay Martin, the Executive Director of the USS North Carolina Battleship Memorial and Battleship Commission, wrote the Commission agreed with the findings and recommendations made by the audit, and “is taking prompt corrective action to strengthen internal controls”. Martin also said the board is working with state auditors to correct the financial statements, and plans to work with an accounting firm to strengthen internal controls and to implement a formal review process by the end of 2025.
Martin’s letter also said as Executive Director, he would be responsible for ensuring the corrections are completed.
The battleship falls under the state department of Natural and Human resources.
Pamela Cashwell, Secretary of the North Carolina Department of Cultural and Natural Resources that oversees the Battleship Memorial, addressed the audit in a statement to WECT News which said: “We are confident that the Battleship’s current leadership is committed to achieving a high standard of financial reporting and internal controls”.
Copyright 2025 WECT. All rights reserved.
link