A former Spring Lake official is accused of using at least $430,112 in town money for her personal use, according to an audit released Thursday by the Office of the State Auditor.
The audit says findings of the investigation are being referred to the FBI and the State Bureau of Investigation “to determine if there is sufficient evidence to pursue criminal charges related to misappropriation of public funds.”
The 56-page report does not name the former accounting technician, but CityView TODAY has learned that Gay Tucker served in that capacity from July 2014 through March 2020, and again from April 2021 until her termination in July 2021. Tucker also served as the interim finance director from March 2020 to September 2020 and as the finance director from September 2020 to April 2021.
The audit also found that:
Mayor Kia Anthony said the board has reviewed the report and discussed its findings.
“From the board’s review, a significant focus of the report was fraudulent conduct related to the town’s former finance director who used her position for personal gain,’’ Anthony said. “The breadth and the seriousness of this misconduct is astonishing. The findings in the report find that those responsible be severely punished for their wrongdoings and the board puts in place measures to prevent its recurrence.”
Employee writes checks for personal use
The audit says that from July 1, 2018, through June 30, 2021, the accounting technician wrote 72 checks for personal use, including 32 checks totaling $166,082 payable to her personal checking account at Bragg Mutual Federal.
The accounting technician wrote another 27 checks totaling $151,015 payable to herself. Of these checks, 24 were deposited into her personal bank account at Bragg Mutual and one was deposited into her husband’s personal account at Bragg Mutual. She also wrote 13 checks totaling $113,015 payable to Heritage Place Senior Living to pay for her husband’s monthly resident bills, according to the audit.
Tucker could not be reached for comment.
The audit says the accounting technician was responsible for processing invoices and writing checks for the town. During that time, the finance director, the mayor, or the town manager was responsible for signing checks. The accounting technician was also responsible for completing monthly bank reconciliations.
The interim finance director and the finance director, the audit says, were responsible for signing checks, which were also signed by the mayor or the town manager.
“The fact that the accounting technician wrote the checks and completed the monthly bank reconciliations did not provide for segregation of duties,” the audit says. “The situation was made worse when she became the finance director and was given the authority to sign checks in addition to writing checks and completing the monthly bank reconciliations.”
According to the audit, the misuse of the money was not detected because the former finance director did not ensure that the accounting technician was completing the bank reconciliations timely and accurately, did not review all checks that she issued from the town’s bank account to ensure that checks were for valid town expenses, and failed to ensure segregation of duties.
In addition, the audit said, the town Board of Aldermen “neither received nor requested financial information on a consistent basis that would have revealed financial issues such as the misuse of town funds.”
The audit did not name the former finance director but said he held the position from March 2015 through March 2020. Claiburn “Butch’’ Watson was the finance director during that time. He could not be reached for comment.
Before going to work in Spring Lake, Watson had worked as the Pender County finance director until he resigned under fire in 2014 for a late audit report, according to a published report.
“Although the finance director told investigators he reviewed all checks before they were issued, it was clear that he did not,” the audit said.
Under North Carolina law, employees who embezzle local government money or use it for their personal use are guilty of a felony. If the value of the money or property is $100,000 or greater, the person found responsible is guilty of a Class C felony, which is punishable by a maximum of more than 19 years in prison.
The audit says the Board of Aldermen should consider seeking legal action against the former accounting technician.
It also recommends that the board ensure that the finance director “has the competencies” for the job as required by state statutes; that the board ensure that it receives financial information on a consistent basis for its review; that the finance director review all checks paid from the town’s bank accounts to ensure the spending is for town purposes; and that the finance director provide for adequate segregation of duties.
According to the audit, when the former finance director resigned in March 2020, the Board of Aldermen appointed the accounting technician as the interim finance director.
“This Accounting Technician lacked the qualifications, knowledge, and experience to complete the duties and responsibilities of the finance director,” the audit said.
The Office of the State Auditor’s Office investigated 17 allegations against Spring Lake. For those it substantiated, numerous recommendations were made for improvements.
This was not the first time Spring Lake has been under a state financial investigation. In 2016, an investigative report showed abuse of the town’s procurement cards and missing revenues. Spring Lake had missed the deadline for every mandatory annual audit report to the Local Government Commission since then, despite new policies put in place in an effort to prevent further issues.
State Auditor Beth Wood said she could not comment on whether her office is also looking into allegations related to the town-controlled nonprofit called Spring Lake Acquisitions Inc. The town created the nonprofit in July 2019. A loan was obtained for $3.5 million for the purpose of acquiring and assembling property for economic development.
Missing money
The audit also found that at least $36,400 collected from the town between July 1, 2019, and June 30, 2021, was not deposited into the town’s bank account. The money was collected from customers in the town’s Revenue and Recreation departments.
“The missing cash was not detected because the Revenue Supervisor did not ensure that all funds collected were included in the daily deposits,” the audit said. “Also, the former Finance Director did not ensure procedures were in place to prevent and detect someone from stealing cash.”
The audit says at least $33,283 in cash payments were collected by the Revenue Department and entered into the town’s accounting system but not deposited into the town’s bank account. Another $3,117 in cash payments collected by the Recreation Department were not deposited into the town’s bank account.
According to the audit, investigators questioned the unnamed collections specialist about her process for preparing the daily “balance sheet.” Initially, the specialist denied she was involved until the investigators showed her a balance sheet with her name on it. The balance sheet differed from the daily spreadsheets, deposit slips and collection reports, the audit said.
“She could not provide any explanation for the differences,” according to the audit. “She stated, ‘this is looking really, really shiesty; and asked on several occasions if she needed a lawyer. She added, ‘I just don’t want to be implicated in anything else…this does not look good at all.’’’
The audit’s findings regarding the Recreation and Revenue departments are also being referred to the FBI and SBI for possible criminal charges.
Questionable credit card purchases
The audit also found that Spring Lake employees spent $102,877 of town money on questionable credit card purchases.
According to auditors, employees used town credit cards to make 602 questionable purchases from Jan. 1, 2019, to Dec. 31, 2020.
“This amount represents 45% of all credit card purchases for that time period, which totaled $228,871,” the audit found.
The audit noted that this issue is not new to the town. A report from the Office of the State Auditor in 2016 found that employees and the Board of Aldermen spent more than $122,000 on questionable purchases.
$9,900 overpayment
The audit also found that the town’s payroll and human resources technician overpaid the former economic development director $9,900. The audit says the technician erroneously entered $10,000 for the director’s $100 monthly cell phone stipend. The audit did not name the former director, but Tonny McNeil was in that position at the time.
“The overpayment occurred due to the lack of review of payroll before it was processed. Also, the Town Board of Aldermen did not review financial information including budgeted amounts to actual expenses,” the audit says. The town recovered $5,623 of the $9,900 from the director in September 2021.
Another finding was that the town failed to safeguard town vehicles, increasing the risk of theft and misuse of the vehicles. The audit says the town did not designate anyone to be responsible for maintaining an inventory of vehicles or monitoring vehicle use. It also called the town’s vehicle policy inadequate.
According to the audit, the town reported having 80 vehicles, while the state Division of Motor Vehicles reported 138 and the financial auditor 92.
The audit said the town also did not maintain vehicle logs for all of its vehicles to account for the mileage and business purpose of employee travel. Instead, the town expected departments and employees to monitor their own vehicle use.
According to the audit, the town’s former economic development director “appeared to have misused Town vehicles based on fuel purchases and lack of documentation to support mileage and business purposes.” The audit says the director purchased fuel 37 times in Lumberton for a total of $789.29 and 16 times in Rowland for a total of $404.62.
The audit didn’t name the former economic development director, but Tonny McNeil held the position at that time. McNeil had been the economic development director in Dillon, South Carolina, before resigning in 2018, according to a published report.
“The Director, who is originally from Dillon, South Carolina, claimed he drove a Town vehicle to South Carolina for economic development purposes because of the industrial development industry in Dillon. He added that he visited the area to understand ‘what the competition [was] doing.’ When asked if most of the Town’s competition was in Dillon, SC, the Director stated, “Yes…it’s right across the [state] line and there’s a lot of industrial development down there, a lot of things going on.”
According to the audit, there is little about Dillon that would compare to Spring Lake.
Closed session minutes not taken
Lastly, the audit found that the town board did not maintain closed session meeting minutes for some of its meetings held during 2019 and 2020.
“The meeting minutes were incomplete and missing due to a lack of oversight by the Board,” the audit found. “As a result…there is no official record of decisions made on important issues such as personnel, economic development projects, acquisition of property, investigations of alleged criminal misconduct, public safety matters, etc. Also, by not documenting the minutes of these meetings, the Board could discuss topics in closed sessions that should be discussed only in open sessions.”
The audit says the former town clerk told investigators that she completed all 2019 meeting minutes prior to her retirement in July 2020.
“She stated that she attempted to present the meeting minutes to the Board for approval, but ‘got shot down’ by the Board.” the audit says.
The town clerk was banned from Town Hall in January 2020 because of an ongoing investigation, the audit said, but she was allowed to work from home and excused from taking minutes. No one took the minutes in her absence, the mayor told investigators.
Spring Lake response to audit
In its response to the audit, Mayor Anthony wrote that the Board of Aldermen accepts the auditor’s findings and recommendations and commits to working with the auditor’s office and the Local Government Commission to address and fix the problems.
Anthony pointed out that all but one of the current board members weren’t on the board when the abuses happened, and she laid a large part of the blame on the former accounting technician/finance director. The town’s own review dating from 2016 to 2021 found that the person in that position took $565,194 for personal use, the town said in its response.
The Office of the State Auditor (OSA) replied that Spring Lake’s response wasn’t good enough. The Local Government Commission, which has taken over the town’s finances, didn’t think so, either.
“In its response, the Town made several statements that tend to obscure an issue, mislead the reader, and minimize the importance of OSA’s findings and recommendations,” the auditor’s response said.
In one example, the auditor’s response points to a part of the mayor’s letter that says the board has carefully reviewed the report with the Local Government Commission.
“This statement is misleading. This statement could lead the reader to believe that the LGC, who are officially in control of the Town’s finances, agree with the Town’s response. They do not,’’ the auditor’s response says.
In another example, the auditor’s office said the town stated that certain employees “systematically circumvented, overrode and inappropriately used [their] position[s] over the Town’s system of internal controls for apparent personal gain.”
“This is misleading,” the auditor’s response said. “For an employee to circumvent or override the system of internal controls, the Town would have had to have a system of internal controls in place. The Town did not have a system of internal controls in place to prevent the issues identified in the findings.”
Correspondent Jami McLaughlin contributed to this report.
Greg Barnes is an investigative reporter for CityView TODAY. He can be reached at gregbarnes401@gmail.com. Have a news tip? Email news@CityViewTODAY.com.
