Editor's note: This story has been updated to clarify that the Mid-Carolina of Governments terminated its contract with Spring Lake for interim town manager services.
SPRING LAKE - Residents, former staff and members of the Board of Aldermen had varied reactions to the audit released Thursday by the Office of the State Auditor.
Some said they were not surprised by the report, but others said they were blindsided by the findings. The audit found that a former accounting technician used more than $400,000 in town funds for personal use and that Spring Lake employees spent around $100,000 in town funds on questionable credit card purchases.
This was the second time since 2016 that the State Auditor’s Office has investigated the town, and one of the issues cited previously was also mentioned in the 56-page report released Thursday. That was the issue related to credit card purchases made by town employees without proper documentation.
A couple of former aldermen said they felt vindicated by the audit. They said it confirmed why they could not make sense of reports given to them by the Finance Department in recent years.
The Local Government Commission voted in July 2021 to take control of the town’s finances, including impounding the books and records of the town, and overseeing and directing all of its financial affairs. The investigation into missing money by state auditors began a few weeks prior to the financial takeover, and they have been working through the past year to piece together a picture of the town’s financial state.
The town had called a news conference Thursday morning to discuss the audit. The Board of Aldermen appeared to meet in violation of the state’s open meetings law before moving into the news conference.
Varied reactions
Former Alderwoman Fredricka Sutherland, who was on the board from 2005 to 2021 and worked in finance for over 30 years, said she was not surprised that part of the missing money happened under the previous finance director.
“I voted against her getting the finance director position because she was not qualified,” Sutherland said.
Sutherland said she asked for a forensic audit in 2019 after not receiving documentation for several things she requested.
“I had concerns about record-keeping because we had a previous investigation that outlined policies and proper documentation,” Sutherland said. “Nothing was being enforced.”
She said she will continue to watch the town closely.
“I’m watching now as a former alderwoman and as a citizen to make sure our policies, procedures and general statutes are being followed,” she said.
Sutherland also mentioned that the current mayor had referenced appointing two aldermen to the town Audit Committee, but the board did not actually vote Monday night to accept the appointments. A review of the meeting by CityView TODAY confirmed a vote was not taken.
Former Alderman James Christian, who served from 2009 to 2019, said he was not surprised by the audit. But he said he was surprised that some board members did not take it seriously when these concerns were raised previously.
“Both Sutherland and (Alderwoman Sona) Cooper shared my concerns and we first got rid of the town manager in 2019, but he was hired right back with the next election,” Christian said. “There’s not just one person to blame though. Why didn’t anyone not notice that the economic development director was overpaid by over $9,900 for instance? If people had done their jobs, it would have been caught. If they followed protocol with the audits, this could have been caught sooner.”
One of the findings in the audit was that the town overpaid the former economic development director $9,900.
Christian said the board put controls in place in 2016 and they were largely ignored by staff. He said town management failed to file the audits. There were checks in place, but no one was checking, and the board didn’t have the right information.
“You work so hard to make Spring Lake a better place and people choose their personal agendas over the town,” he said. “It’s a sad state of affairs.”
Former Alderman James O’Garra, who served on the board for 20 years until 2021, attended the news conference and said he was surprised by the report.
“I didn’t know anything about mismanagement of funds. I still can’t believe what I’m reading,” O’Garra said. “Our interim town manager (Adam Lindsay) did not allow us to communicate with the staff in the Finance Department and that information was off-limits to us.”
He said he checked former Economic Development Director Tonny McNeil’s account personally and did not see anything for $9,900 for the overpayment cited in the audit.
McNeil could not be reached for comment Thursday, but State Auditor Beth Wood said her office verified that check was written and received.
The audit also found that the town board did not maintain closed session meeting minutes for some of its meetings held during 2019 and 2020.
Former Town Clerk Rhonda Webb on Thursday repeated what she told the auditors: “All the work was completed” regarding the minutes from the closed sessions.
Former Town Manager Daniel Gerald said he had not seen the report. When he was told about its findings, he said the State Auditor’s Office had reached out to him to talk about economic development. He said the Finance Department reported directly to the Board of Aldermen and that the town had a third-party auditor who should have caught or at least questioned some of the findings in the report before it got to the state auditor level.
“The Finance Department did not come under the town manager so I can’t comment,” Gerald said.
Former Mayor Larry Dobbins also said the State Auditor’s Office had contacted him as part of the investigation. He said he had not heard anything since the election and had not yet read the report.
Resident Rita Perry forwarded emails to CityView TODAY where she requested intervention by the Local Government Commission in December 2019 regarding the town’s failure to comply with an annual audit. Another alerted the State Auditor’s Office in March 2020 about the hiring of the accounts payable clerk as the interim finance director after both the finance director and the town attorney resigned.
“I’m not surprised by the report, but I do have faith in our new board to now do their due diligence,” Perry said.
Cooper, who was the only returning board member after the 2021 election, deferred comments to Mayor Kia Anthony, who did not take questions after the news conference. Mayor Pro Tem Robyn Chadwick said briefly that Thursday had been a learning curve and that Town Attorney Jonathan Charleston had cautioned board members not to answer questions.
Alderman Marvin Lackman said after the meeting that as a newly-elected official, the board knew the town was under investigation by the state auditor and since being sworn in, the board has worked hard to improve the town. The challenges met included the pending results of the audit and Mid-Carolina Council of Governments terminating the contract with the town for interim town manager services.
“We accepted all six findings that the state auditor reported and laid out our plan to address and fix the findings. We are in the process of hiring a town manager and will be able to address timelines. I’m here to do the right thing for Spring Lake,” Lackman said.
Violation of Open Meetings Law
Reporters were in a conference room at town hall for the news conference as the entire board filed out of the mayor’s office, took their seats and immediately voted to go into closed session for an emergency meeting under the general statute for personnel.
Town Clerk Melissa Pereira, who had entered the conference room a few minutes after the mayor apologized for a delay, announced that the board would be going into an emergency meeting and sent a notice at 10 a.m. to the town sunshine list, a town information alert service that goes to news organizations and others who ask to be notified of town meetings. The emailed notice stated that the emergency meeting was to take place at the same time as the scheduled 9:30 a.m. news conference.
A short time later, Lackman returned to his seat in the conference room from the closed session.
As other board members returned minutes later, Anthony addressed the room saying they had made a mistake and they had not given enough notice to hold an emergency meeting. The board also had not notified the public of a possible quorum for the news conference. The board immediately broke up quorum leaving Lackman and Chadwick seated. Intermin Town Manager Samantha Wullenwaber took a seat in the audience and aldermen Cooper, Raul Palacios and Adrian Thompson as well as Pereira left the room.
Attorney Amanda Martin with the N.C. Press Association said it is a clear-cut violation of the Open Meetings Law when a public body decides to hold an impromptu meeting without notice or the opportunity for the public to be present for a specifically called reason.
“An example of a true emergency is a town facing a tornado that is intensifying and where the board needs to look at an immediate evacuation,” Martin said. “Also, when you go into closed session for personnel, board members cannot talk about themselves or issues for themselves although they can discuss actual employees.”
She further referenced one of the findings in the auditor’s report dealing with closed session meeting minutes not being maintained, saying that was another reason not to violate the Open Meetings Law.
Auditor and Local Government Commission respond
During the news conference, Anthony outlined the findings from the audit report. She said “the state auditor and the LGC (Local Government Commission) is well aware of the work the town is doing and has done in response to the state auditor’s investigation.”
“We are surprised and disappointed in the response by the state auditor and the LGC contained in the report,” she said.
State Auditor Wood responded Thursday that her office had received a report written by interim Town Manager Wullenwaber that was thorough and in alignment with what is required from the town; however, it had been rejected by the Board of Aldermen in lieu of another sent by Town Attorney Charleston.
“The issue is we required a response that explains the corrective action for each of the findings, an estimated date for implementing those corrective actions and identifying who by title will be responsible for the implementation,” Wood said. “The second response left off dates and who would be responsible for the actions.”
Wullenwaber and Anthony would not answer questions. Wood said she didn’t know why the town board rejected the first response submitted by Wullenwaber.
She said the investigative report from her office in 2016 also had a response from the town promising corrective actions, but it still had not been fixed.
“We need to know how, when and who will be making the correction actions. As it is, no one can track what needs to be done,” Wood said. “I don’t know why they changed it from the first response. One of their suggested corrective actions was a robust bank reconciliation, but why don’t they just do one?”
Wood said Wullenwaber had possibly found even more unverified missing money; however, it went beyond the scope of this investigation.
“You have to wonder how long this has been happening, but for us, we had enough for the SBI and the FBI so there was not a need to go further,” she said. “What we have took hours and hours and cost around $90,000 to figure out what we did. It is a very manual process.”
Findings from the investigation have been referred to the FBI and State Bureau of Investigation to determine if there is sufficient evidence to pursue criminal charges.
Jami McLaughlin covers Spring Lake for CityView TODAY. She can be reached at jmclaughlin@cityviewnc.com. Have a news tip? Email news@CityViewTODAY.com.
