Why does city still need outside help with finances?
Julian Eure, The Daily Advance Editor

While City Council’s recent decision to approve the hiring of Durham County’s former chief financial officer to help manage the city’s finances was a good move, it ultimately shouldn’t have been necessary.

Susan Tezai’s hiring as a financial consultant at a cost of $250 an hour — she’ll be paid up to a maximum of $172,000 — may be necessary to ensure city finances continue to stay caught up and that future audits like the one due Oct. 31 get submitted on time. But like state Treasurer Dale Folwell, we question why the city continues to pay for such expensive outside help managing its finances when it already has personnel on the city payroll — City Manager Montre Freeman and city Finance Director Alicia Steward — who are paid by taxpayers to perform this job.

As Staff Writer Paul Nielsen recently reported, the city has already spent close to $500,000 on an outside accounting firm for help completing past-due audits and getting its monthly bank accounts reconciled. The Greg Isley CPA firm was hired at a cost of $100 an hour in October 2021 as part of a corrective action plan the city filed with the state’s Local Government Commission, the state’s financial watchdog agency which is supervised by Folwell’s office. The city had been added to the LGC’s Unit Assistance List in 2020 after failing to file its required annual audits on time.

Isley’s work for the city has paid off. Not only are the city’s bank records now being reconciled monthly, the first past-due audit for 2020-21 was submitted in April and the second, for 2021-22, is supposed to be completed sometime in August. Mayor Kirk Rivers has even claimed the city will submit the city’s 2022-23 audit due in October on time — the first time that’s happened since 2017, he says.

So if that’s the case, why does the city need to hire Tezai?

Rivers claims it’s because the current City Council, which took office 13 months ago, is still “playing catchup” correcting problems it inherited from previous councils, and because it wants to ensure the city is “on solid ground” financially. As explanation for the problems, he continued to cite turnover in the city’s finance director position since 2020 and said Steward has only been finance director for eight months.

While it may be true Steward has been finance director for eight months, she was named interim finance director by Freeman in August 2021 — nearly two years ago — just prior to the end of his first stint as city manager, and she had worked as the city’s assistant finance director before that.

Steward also has received some “enhanced coaching” from the LGC since the city entered an accountability agreement with the agency last October. Writing for the agency at the time, LGC Director Sharon Edmundson said: “An experienced finance officer, who is part of our Coach Team staff, will be available to mentor the Elizabeth City Finance Officer (Alicia Steward) as she works toward creating a foundation upon which both the Finance Officer and the city can build success.”

State Auditor Beth Wood, a member of the LGC board, recently raised doubts about whether that coaching has worked. During the board’s last meeting, she suggested the LGC commence with procedures that could lead to its takeover of Elizabeth City’s finances, indicating that the city’s current finance staff just isn’t up to the task. “People that have been there have said they don’t have a finance officer that can do their job,” Wood said, referring to Elizabeth City. “They have had people come in and try and help, and coach, but (they) just can’t do it.”

Rivers appeared to downplay the expense of hiring Tezai to help manage the city’s finances, noting that funding for her contract is being drawn from monies set aside for the city’s assistant manager position, which has been vacant for two years but still included in the budget.

But of course Tezai isn’t being paid to be an assistant city manager. She’s being paid, essentially, to do the job Steward and Freeman are already paid to do.

Folwell pointed that out in an interview with Nielsen after Tezai’s hiring. “The taxpayers are double or triple paying for these basic services,” he said. “This is not my opinion. Obviously, it is the opinion of the City Council and the mayor. Why would they enter into this contract if they didn’t think that they had problems? … The taxpayers deserve better.”

Indeed they do. How long will city taxpayers have to continue paying for extra help in its finance office? Explanations about “previous councils” and employee turnover only work for so long before they become excuses for failed performance. We’d encourage city voters to remember that when they go to the polls this October.

— The Daily Advance

https://www.dailyadvance.com/opinion/editorials/our-view-why-does-city-still-need-outside-help-with-finances/article_1cf91ff3-6405-5a55-9930-7949a7b033ff.html

EC Council hires consultant to help with city finances; Tezai to be paid up to $172K
By Paul Nielsen The Daily Advance Staff Writer

City Council voted Monday night to hire a financial consultant to assist with managing Elizabeth City’s finances — a move that could cost the city up to $172,000 and one that the state Treasurer said wouldn’t be necessary if the city had more qualified management.

Following a closed session, City Council unanimously approved a contract with retired Durham County Chief Financial Officer Susan Tezai to serve as the city’s financial consultant.

Tezai will be paid $250 an hour to assist the city with its finances and long-term debt management. The maximum she could be paid is $172,000 a year.

Mayor Kirk Rivers said instead of hiring an assistant city manager — a position that has been vacant for two years but that has been budgeted for — the city will use that money to pay Tezai. He said City Manager Montre Freeman made the recommendation to use the money from the vacant assistant city manager position to pay for a financial consultant.

Rivers, who does not cast a vote unless there is a tie among the eight councilors, said City Council discussed the contract with Tezai at length before unanimously voting to hire her.

“The council asked a lot of questions and they were all very concerned to make sure there was no wasteful spending of the taxpayers’ dollars,” Rivers said.

Rivers said Tezai’s expertise is needed because the current council is “playing catchup” trying to correct problems it inherited from previous councils. He noted that the last time the city submitted an annual audit on time was in 2017. He also cited turnover in the city’s finance director position since late 2020 and the fact that current Finance Director Alicia Steward has only been on the job eight months.

Rivers and the current City Council took office 13 months ago.

“We are not excited about having all of this,” Rivers said. “But until we get everything caught up, until we get everything on sound ground, City Council will look at all avenues to make sure we put the city on solid (financial) ground.”

The city has already spent close to $500,000 on an outside accounting firm for help completing past-due audits and getting its monthly bank account reconciled.

The city hired the Greg Isley CPA firm at a cost of $100 an hour in October 2021 on the recommendation of then interim City Manager Eddie Buffaloe, who is now secretary of public safety for the state of North Carolina. The move was part of a corrective action plan the city filed with the state’s Local Government Commission at the time. The city had been added to the LGC’s Unit Assistance List in 2020 after failing to file its required annual audits on time.

State Treasurer Dale Folwell said Friday that he is not worried about the Tezai’s qualifications but is concerned about the qualifications of Freeman and Steward to manage the city’s finances, saying they are the “people the taxpayers are already paying for.”

“That is resulting in this expenditure having to be made,” Folwell said. “The taxpayers are double or triple paying for these basic services. This is not my opinion. Obviously, it is the opinion of the City Council and the mayor. Why would they enter into this contract if they didn’t think that they had problems? It’s like an onion, the more we peel the more we cry. The taxpayers deserve better.”

Tezai recently retired as the Durham chief financial officer after being appointed to the position Jan. 1, 2018. She was previously the assistant CFO in Durham for 16 years and spent more than 30 years with the county’s finance department.

The move to contract with Tezai comes as the city is still on the LGC’s Unit Assistance List. Besides the late audits, the city has encountered other financial bookkeeping problems, including a failure to reconcile its books for many months.

The city completed one of the two most recent past due audits (2020-21) this past April and city officials said Monday that the past-due 2021-22 audit, that was due last Oct. 31, will be finished in the next 30 days.

The city’s 2022-23 audit for the fiscal year that ended June 30 is due Oct. 31 and Rivers is confident that the city will meet that deadline.

“It’s been seven years since the city has submitted a budget on time,” Rivers said. “We are track to do three audits in one year.”

According to her profile on the Government Finance Officers Association’s webpage, Tezai earned a bachelor of science degree in accounting and had minors in mathematics and business administration from Elon University. She also completed the Public Executive Leadership Academy at the University of North Carolina School of Government.

She is a certified public accountant licensed by the states of North Carolina and Virginia and a member of the Government Finance Officers Association, North Carolina Government Finance Officers Association, the American Institute of Certified Public Accountants and the North Carolina Association of Certified Public Accountants.

 

https://www.dailyadvance.com/news/local/ec-council-hires-consultant-to-help-with-city-finances-tezai-to-be-paid-up-to/article_762ce81c-fc2f-5619-b6e6-c5a0f1c3e8ea.html

State auditor urges LGC to start process of possible takeover of city’s finances
By Paul Nielsen The Daily Advance Staff Writer Jul 11, 2023

State Auditor Beth Wood urged the state’s Local Government Commission Tuesday to start the process that could lead to a state takeover of Elizabeth City’s finances.

Wood, a Democrat who plans to seek re-election next year, told the LGC Tuesday afternoon that the state needs to take action before Elizabeth City faces the prospect of a possible bankruptcy. As state Auditor, Wood sits on the LGC

Two other commission members on the nine-member board also indicated it was time for the state to possibly step in but the LGC adjourned its monthly meeting without taking any action.

The LGC does not meet again until Aug. 1.

The city is on the LGC’s Unit Assistance List because of financial concerns, including late audits and not having the city’s financial books reconciled for a period of many months. The city completed its 2020-21 audit this past April but it still has not submitted it 2021-22 audit to the state. That audit was due last October and the city’s audit for the fiscal year 2022-23 that ended June 30 is due Oct. 31.

Mayor Kirk Rivers said at Monday’s City Council meeting that the late 2021-22 audit should be completed in 30 days. City officials said back in May that it would be completed in June.

Wood said the LGC should “assess” the situation in Elizabeth City to determine if state intervention is needed.

“I think an assessment needs to be made,” Wood said. “It’s not an investigation, it’s an assessment.”

Wood also said that because of the late 2021-22 audit that the LGC doesn’t have a “clue where they (city officials) are financially.”

“My concern is that we don’t wait until they are bankrupt to go in and take them over,” Wood said. “We know about the issues now. People that have been there have said they don’t have a finance officer that can do their job. They have had people come in and try and help, and coach, but (they) just can’t do it. Then the leadership is not where it should be, according to those that have been there and working there. It can’t be cleaned up until the leadership changes is my point.’’

State Deputy Treasurer Sharon Edmundson said that the LGC could initiate a takeover process if the city missed debt payments. But she said as far as she knows that has not happened.

“We have not been made aware of any missed debt payments,” Edmundson said. “I think somebody would have called us if they hadn’t been paid.”

Another option for a takeover by the LGC would be violation of state statue G.S. 159-181, Enforcement of Chapter. G.S. 159 is referred to as the “Local Government Finance Act” and it has dozens of sections.

G.S. 159-181 states in part that “if any finance officer, governing board member, or other officer or employee of any local government willfully or negligently fails to follow the provisions of the chapter” that a state takeover could be warranted after notice and warning is given.

“I would tell you that G.S. 159 lays out what a finance officer should be able to do,” Wood said. “Your finance officer there cannot do those things. So, they are already severely non-compliant. The finance officer is the key. It says in there what they are supposed to do. They are already severely non-compliant so I think that hurdle is done. It’s just a matter of what the Local Government Commission does.”

Edmundson told the LGC that the city adopted a 2023-24 fiscal year budget and did not appropriate any fund balance. She said city officials “struggled” putting the budget together and that the city has been “more receptive” to the LGC’s assistance.

“They went to the wire getting that budget in, but they did get it in,” Edmundson said. “Of course, I still have concerns. They still don’t know what their current financial condition is.”

https://www.dailyadvance.com/news/local/state-auditor-urges-lgc-to-start-process-of-possible-takeover-of-citys-finances/article_05a14b64-06a3-5559-ac5e-4d17338b0981.html?fbclid=IwAR1XmEja04aGMLuybSWoFSbUcPJ9G9A9JjpCPHFHJsC9L_yCln75mUDUNbw

In letters, 20+ citizens ask LGC to ‘please take over’ finances
By Paul Nielsen Staff The Daily Advance Writer Jun 22, 2023

The state’s Local Government Commission has received almost two dozen letters from city residents asking for the state agency to take over Elizabeth City’s finances.

Deputy state Treasurer Sharon Edmundson told the LGC at its June 6 meeting that 23 letters from city residents have been sent to the agency with “all basically saying the same thing.”

“They want the LGC to step in and take control of the finances of Elizabeth City,” Edmundson told the LGC at its June 6th meeting.

The 23 letters to the LGC were sent between Dec. 11, 2022, and June 4 of this year, with 18 being sent in May. The Daily Advance received copies of the letters from the state Treasurer’s Office on Tuesday.

State Treasurer Dale Folwell sent a letter to City Council in March asking the city to ask the LGC to step in and assume control of the city’s finances. Folwell said in the letter, which became public about a month after he sent it, that the city was facing a “cash crisis.”

Elizabeth City is currently on the LGC’s Unit Assistance List mainly because the city was late submitting required fiscal year audits of its finances.

The city’s 2020-21 audit that was due Oct. 31, 2021, was delayed because of financial bookkeeping problems dating back to the summer of 2020. But it was submitted to the LGC in April and it showed 12 material weaknesses.

Since the 2020-21 audit was not completed on time the city’s 2021-22 audit that was due last October 31 is also late. City officials have said that its outside auditor PB Mares is currently working on the audit and it should be completed in the next few weeks.

Many of the letters are critical of the leadership and experience of City Manager Montre Freeman and the city’s Finance Department and their ability to manage the city’s finances. Some also criticize the city for having to hire the outside accounting firm Greg Isley to help straighten out the city’s financial statements.

The letters also contain criticisms of the city’s ability to properly address needed infrastructure improvements to its aging water and sewer system.

Gerry Anderson wrote in his letter that he was born and raised on Main Street, graduated from Elizabeth City State University and returned home to the city after retiring following a 40-year work career. He wrote on May 10 that “public confidence in government depends on proper stewardship of public money.”

“Our city’s reconciliations and audits are not up to date,” Anderson wrote. “There are significant unexplained discrepancies reported in our accounts. Our inexperienced city finance staff appears to lack the necessary expertise to make sense of it all. As a result, our city is simply unable to accurately forecast future revenues and expenses and cannot plan and prepare an accurate budget. In the meantime, our proud city is being held together by Band Aids, duct tape and baling wire.”

H. Creighton Foreman said in his June 4 letter to the LGC that he is a retired CPA with 37 years of experience in finances. He asked that the state “please take over the finances of Elizabeth City.”

“The current finance department and management cannot handle the situation,” Foreman wrote. “HR (Human resources) continues to hire personnel that cannot handle basic accounting procedures. We need to quit spending taxpayer funds on expensive additional CPA services to complete the job that the personnel have been hired to do. These employees need to be replaced by personnel that you (LGC) hire.”

Foreman suggested in his letter that Pasquotank County be hired to take over the city’s finances.

“Pasquotank County seems to be able to handle their finances,” Foreman wrote. “We need to merge EC into the county.”

David Harris told the LGC in his letter dated May 11 that he served as Pasquotank county manager for eight years in the 1980s and he understands the importance of local governments maintaining strong and stable finances with public accountability.

“It is more than evident that the city manager does not have the knowledge and experience to manage the city,” Harris wrote. “A majority of the elected officials on City Council do not understand the importance of the financial problems that are going on.”

Harris further wrote that it is time for the city to have sound financial management and accountability and that can only be achieved by the LGC “taking complete control of Elizabeth City’s finances.”

“Enough is enough,” Harris said.

Peter Thomson wrote on May 10 that city residents are torn between two realities of “what the LGC says and what our untrained manager and mayor say.”

“Our downtown is booming, our population is growing and our finances are in a mess,” Thomson wrote. “Please consider taking over here before things get worse.”

 

https://www.dailyadvance.com/news/local/in-letters-20-citizens-ask-lgc-to-please-take-over-finances/article_99d2c424-c255-5f0c-b845-d46ca702369d.html

LGC chief contradicts city on finances being current, says current year’s books out of balance by $1.3M
By Paul Nielsen The Daily Advance Staff Writer May 2, 2023

The city of Elizabeth City’s financial books have not been reconciled despite statements from city officials that the books are current, the head of the N.C. Local Government Commission told the agency Tuesday.

State Deputy Treasurer Sharon Edmundson, who is also the director of the LGC, also told commission members in Raleigh Tuesday that Elizabeth City had cut off outside accounting firm Greg Isley CPA’s access to the city’s financial records. Isley is the firm the city hired to help it with its financial bookkeeping problems.

Edmundson, however, told the LGC that access may have been reinstated after she said Greg Isley met with Mayor Kirk Rivers last Friday.

Asked to respond to Edmundson’s comments, City Manager Montre Freeman said Tuesday evening that Greg Isley’s access to the city financial records was cut off for a time because of a suspected breach of the city’s computer system but that the company’s access has now been restored.

As for Edmundson’s comment that the city’s books are not being reconciled, Freeman said he doesn’t know where the LGC chief got her information. City Finance Director Alicia Steward told The Daily Advance in an Oct. 26, 2022, email that the city’s accounts were up to date.

“We are now reconciled up to September 2022,” Steward said. “There are still a few open items that we’re working on, but the process is nearly complete.”

Freeman said a representative of the auditing firm PB Mares, who just completed the city’s 2020-21 audit, also “made that statement as well” that the city’s finances were up to date.

Edmundson’s comments prompted state Auditor Beth Wood, a member of the LGC, to suggest that the state take over the city’s finances and have the Greg Isley firm act as the city’s finance officer.

Edmundson told the LGC that Freeman also has stated that the city’s bank accounts are reconciled. But she said “that is not the case.”

The city has still not submitted its 2021-22 audit that was due Oct. 31, 2022. The city submitted its late 2020-21 audit last month; PB Mares deemed it a clean audit.

Edmundson told the LGC the city’s “22” (2022) accounts are out of balance by over $128,000 and that 2022-23 accounts “as of last week” were out of balance by $1.3 million.

“I can get an update where we are but I know as of January when I checked, we were current,” Freeman responded Tuesday evening. “The Isley firm is doing our bank reconciliations and those are done a month after. If we are working on February, that is about done, kind of right on time. I don’t know where she (Edmundson) would have got that information from.”

Freeman said that the 2021-22 audit has not been completed and he was not sure what Edmundson was referring to regarding the 2022 accounts being $128,000 out of balance.

“We have multiple accounts so I am unsure what account she is responding to in terms of the $128,000,” Freeman said. “That is the first I have ever heard of that. However, we are preparing to move into 2022 (audit) and if there are some things that need to reconciled I have full faith in the PB Mares firm that we will be reconciled and ready to go once they put their stamp on it. They are very thorough and that firm (PB Mares) has done great work.”

Edmundson said based on “how the city operates” it is possible that Freeman was told that the books had been reconciled when they had not been.

Wood asked Edmundson if there are any concerns that “cash has gone missing” because of the discrepancies. She also asked if there is a need for an investigation.

“I asked Greg (Isley) that and they said they don’t think so,” Edmundson responded. “There is no internal control, basically. Working in 2021 they did not find any evidence (of missing money). I don’t know what they will find in ‘22, ‘23 — that remains to be seen.”

Edmundson told the LGC that the Greg Isley firm was attempting to work on the financial statements needed for the past-due 2021-22 audit but that as of April 27 they “had been denied access to the city’s accounting records except by requesting very specific items from the finance officer.”

“They (Isley) no longer have access to the financial system,” Edmundson said. “I don’t know that for sure. That is what he (Isley) said.”

State Treasurer Dale Folwell asked Edmundson if the city gave a reason for denying Greg Isley access to its accounts.

“They acknowledged it happened but it may have been reversed at this point,” Edmundson said. “I know Mr. Isley had a conversation with the mayor (Rivers) on Friday.”

Freeman said Isley’s access to accounting records was reduced because the city suspected a log-in by someone that Isley had not approved.

“We have to protect our platform so we can protect the city tax dollars and financials,” Freeman said. “When we saw that, we saw it as a red flag. I had a conversation with our IT (information technology) director and he agreed it looked like a potential breach. We had to work through that process and I got an email from Mr. Isley thanking us for ‘taking care of our access.’ That working relationship is good.”

State Secretary of Revenue Ronald Penny reminded the LGC that the current City Council, Rivers and Freeman inherited the city’s current financial difficulties. Penny suggested that he and Folwell meet with city officials “to have a conversation.”

“We can figure out what is going on, what the steps are that they will take and what we (LGC) can do to help them,” Penny said.

But Wood asked Penny what he was going to do “when the city manager sits in front of you and tells you that the books are up to date and the bank recons (reconciliations) are done.”

“We can push back based on the records,” Penny said.

“I think you have a problem when he (Freeman) sits there and tells you a lie,” Wood quickly responded. “That is what he said in an open meeting. That is not true and I don’t know why he would mislead his council. Then you have the spreadsheets and the books and I don’t why you cut off their (Isley’s) access.”

Wood said “something is wrong.” She said a state takeover of the city’s finances and having the Greg Isley firm act as the finance officer would end this “silliness.”

“That is certainly an option,” Edmundson said.

 

https://www.dailyadvance.com/news/local/updated-lgc-chief-contradicts-city-on-finances-being-current-says-current-years-books-out-of/article_f29d4c36-7736-5548-89d9-ebec993f285e.html

Folwell: EC should seek LGC takeover of finances
By Paul Nielsen, The Daily Advance Staff Writer Apr 8, 2023

State Treasurer Dale Folwell said in a letter sent to City Council last month that Elizabeth City is at risk of a “cash crisis” and he wants the city to ask the state’s Local Government Commission to step in and assume control of the city’s finances.

“Based on what we do know about the city’s finances, we have real concerns about cash flow,” Folwell said, according to a copy of the March 14 letter obtained by The Daily Advance. “ANY financial decisions the city board or staff are making based on incomplete or missing financial data are subject to potentially significant error.”

Elizabeth City entered into a financial accountability agreement with the LGC last fall in an effort to get off the agency’s Unit Assistance List. The city has been on the UAL because of a variety of financial issues and concerns, and as part of that agreement LGC staff spent considerable time in the city working with staff.

Folwell sent the four-page letter March 14 and said as far as he knows the city has not responded to the letter. The letter was addressed to Mayor Kirk Rivers, City Manager Montre Freeman and members of City Council.

City Council is scheduled to discuss Folwell’s letter at Monday’s council meeting. The agenda item states there will be a discussion about a letter from the LGC. But Folwell said the letter came from him individually as state Treasurer and not from the LGC.

“Basically, it outlined what Elizabeth City needed to do and asking them to ask us to take them over,” Folwell said in a phone interview. “I want them to ask us to take them over.”

Folwell listed several concerns in his letter that he has with the city’s finances, including that the city’s financial books are not complete. He specifically said that grant budgets and related expenditures are in question, bank account reconciliations are not completed, adjustments are not posted timely, and utility account receivables are not maintained in a timely manner.

“Overall, the financial records are inadequate leaving the governing board with no reliable information for financial decision making,” Folwell wrote. “This is concerning as the board continues to make new expenditure decisions for hundreds of thousands of dollars.”

Folwell said the physical condition of city assets, particularly those part of its utility systems, “is concerning” to his staff.

“There is no capital plan in place, and the city does not know what utility rates need to be over the long term sufficient to support a long-term capital plan,” his letter states. “Just as concerning, there is no organized capital maintenance or improvement plan for the city’s buildings and infrastructure.”

Folwell also questioned the competence of city finance staff to to carry out a capital plan.

“If the city did have current fiscal data to develop a capital plan, existing Finance leadership and staff do not understand how to implement or manage capital budgets,” he said.

Folwell said most of the city’s finance staff “are not appropriately trained and have little or no documentation of work processes to guide them.” He also questioned personnel decisions in the city’s finance office.

“Recently, some of the more experienced finance staff have been reassigned to positions that do not take advantage of their skillsets,” he said. “They have been replaced with staff that do not have the experience or training to adequately perform the tasks they have been assigned. This practice will not help the city move forward in getting its financial house in order.”

Folwell’s letter also notes that the city still hasn’t provided the LGC with a revised, ready-to-be-adopted customer service policy nearly four months after LGC officials first requested one. He said the city was given a deadline of Feb. 15 to submit the policy after the deadline had been extended from Jan. 31. But neither the revised policy nor “various reports and data” the LGC had requested from the city on Jan. 20 have been sent, he said.

 

https://www.dailyadvance.com/news/local/folwell-ec-should-seek-lgc-takeover-of-finances/article_27f7d118-c01a-5b53-a6f4-59d30fd90da8.html

Folwell, Penny spar over EC at LGC meeting
By Paul Nielsen Staff The Daily Advance Writer Mar 10, 2023

State Treasurer Dale Folwell and state Secretary of Revenue Ronald Penny had a spirited discussion about the state of Elizabeth City’s finances at a meeting of the Local Government Commission’s Board of Directors earlier this week.

Folwell, who has been critical of the city’s cooperation with the LGC on addressing its financial problems, told the nine-person board Tuesday that it is a “very disturbing situation.”

“The reason I want to bring this up is that you all need to know it is disturbing,” Folwell said. “This doesn’t need to jump up on the table one day and you ask, ‘Where did this come from?’”

But Penny pushed back, saying the current City Council in Elizabeth City inherited many of the city’s ongoing financial problems. He also said the city took a financial hit in the aftermath of the fatal shooting of Andrew Brown Jr. in April 2021. He said that he would be willing to sit down with city leaders to discuss the situation.

Tuesday’s discussion was the first time that Folwell and the LGC staff have talked about the city’s financial problems publicly with the full board.

Elizabeth City is on the LGC’s Unit Assistance List mainly because the city still has not filed with the state its required audits for the fiscal years 2020-21 and 2021-22. The city and the LGC entered into a financial accountability agreement last October.

“The transparency, competency and governance needed to pull Elizabeth City out of the ditch, I’m not seeing any of it,” Folwell told the board. “It’s a serious, serious situation.”

Penny told the LGC board that the city has faced a set of unusual situations over the past several years that have put stress on the city’s finances.

Penny has been the Secretary of Revenue since 2017 and owns a home in Pasquotank County that is serviced by the city’s electric department. He has also in the past provided legal advice to the local NAACP chapter in its effort to restructure the county’s Board of Commissioners.

“Let’s be fair to the (current) elected leaders, some of them were not the elected leaders five years ago,” Penny said. “The mayor (Kirk Rivers) was just elected, he hasn’t been (mayor) five, six years. In all honesty, they have inherited some of this.”

Penny mentioned COVID and problems with a billing software conversion as two issues the city has faced the last several years. But he specifically talked about the financial impact that the deadly shooting of Brown had on the city.

Brown, who was unarmed, was shot and killed by three Pasquotank sheriff’s deputies on April 21, 2021. Former District Attorney Andrew Womble later ruled the shooting was justified. The county agreed last June to pay Brown’s family $3 million to settle a $30 million civil lawsuit against the Pasquotank County sheriff and the three deputies.

Penny said the city had over $1.5 million in police costs associated with months of daily protests following the shooting. He said no small city is able to incur such costs without it having an impact on its finances.

“While the city was not involved with the shooting the city bore the brunt of some 100 days of demonstrations with policemen having to get out and basically keep the factions apart and keep the people safe,” Penny said. “They should have billed the county for it because they got them into the trouble.”

Folwell responded by saying: “I don’t see that we would be in any different place today than we were if that had not occurred.”

Penny also said that until both of the past-due audits are completed it is impossible to “know what is going on” in Elizabeth City.

“I would be more than happy to sit down with those leaders and have some discussions,” Penny said.

Folwell said the state’s efforts to help the city are not racially or politically motivated. Folwell, who is a Republican, is considering running for governor next year.

“Every suggestion we make (to the city) is, ‘Oh, that is racial, that is political,’” Folwell said. “That shows there is no interest in figuring out what is right, getting it right and keeping it right. If they want to label everything as being racial and political they can have it because I am not going to tolerate it.

“You can’t look at the color of my skin, or my political party or my gender and know anything about my background,” Folwell continued. “I’m not going to let anybody on this board or in Elizabeth City paint my barn about who I am and how I feel about this. Period.”

Interviewed after Tuesday’s meeting, Rivers said the city has been cooperative with the LGC, claiming, “we have not thrown stones at anybody.” He said some of the requests made by the LGC, like changing the city’s utility billing policy, can’t be completed “overnight.”

“This City Council and mayor, we are not about trying to settle this in the newspaper,” Rivers said. “Our goal from day one has been to meet with (Folwell), and we have had meetings with him and his staff to work this out together. We will not and have not disrespected the office of the treasurer by feuding. We will continue to work together in the spirit of cooperation to better Elizabeth City.”

At one point Tuesday, Penny responded to Folwell by saying “let’s calm this down.”

“Just as you feel you have been imputed by them, your statements make them feel imputed,” Penny said. “If this was going to be this important of an issue it should have been on the agenda. Let’s get the facts. If we are going to talk about their finances let’s make sure they get their finances in.”

LGC Staff Director Sharon Edmundson also told the board that some city leaders are more interested in working on economic development than on the city’s finances.

“I understand that, they are a hub for that part of the state,” Edmundson said. “But you can’t move forward without a solid foundation and they do not have one.’’

 

https://www.dailyadvance.com/news/local/folwell-penny-spar-over-ec-at-lgc-meeting/article_98425ab8-62ee-50e9-be56-f86f5472c0de.html

LGC: EC draft audit finds 12 ‘material weaknesses’
By Paul Nielsen The Daily Advance Staff Writer Mar 10, 2023

Preliminary findings from one of Elizabeth City’s two past-due audits found a dozen “material weaknesses” in the city’s financial operations, a state official said this week.

Deputy state Treasurer Sharon Edmundson told the nine-member Local Government Commission board at its meeting on Tuesday in Raleigh that a draft audit sent to the state by the city’s outside auditing firm for the fiscal year 2020-21 found 12 material weaknesses.

The state Auditor’s Office website describes a material weakness as an “significant deficiency or a combination of significant deficiencies.”

In an email to The Daily Advance Thursday afternoon, the LGC staff said 12 material weaknesses is a significant number and a “higher number than we normally see.” A material weakness may result in an adjustment to a local government’s financial records, the LGC staff said in the email.

“These were not all accounting errors,” the LGC staff also wrote.

The LGC staff said the 12 material weaknesses in the draft audit can be described as breakdowns in business processes, management oversight and other internal control practices due to the lack of proper training and the lack of a finance staff with sufficient skills, knowledge and experience in governmental accounting, Governmental Accounting Standards Board requirements and state laws.

“Several findings did result in adjustments to the (city’s) accounting records but the report has not yet been finalized,” the LGC staff wrote.

Elizabeth City is on the LGC’s Unit Assistance List mainly because the city still has not filed with the state its required audits for the fiscal years 2020-21 and 2021-22. The city and the LGC entered into a financial accountability agreement last October that has the agency providing assistance to help the city improve its finances.

Edmundson, who is also the director of the LGC staff, revealed the draft audit’s findings during a discussion by the LGC board about the city’s finances. She did not provide details about the dozen material weaknesses found in the audit to the LGC board.

Mayor Kirk Rivers said Thursday he has seen a copy of the draft audit and it details “no misplaced money, no missing police cars.”

“We are not in trouble,” Rivers said.

Rivers vowed that City Council will take corrective action once the final audit is received and that future audits will be submitted to the state on time. He said the draft audit notes that the city has not submitted its audit on time since the 2016-17 fiscal year.

“We will address all findings, improve our ways of doing things,” Rivers said. “Once you get a copy of the 12 findings you will see it’s because of high (employee) turnover in the Finance Department. The finance director that is there now (Alicia Steward) did not take over until October.’’

Edmundson did say in Tuesday’s meeting, however, that LGC staff is still “extremely concerned” about Elizabeth City. She indicated that suggestions made to city leaders by LGC staff since the financial accountability agreement was signed have largely been ignored.

“A lot of the material weaknesses were the same things we had been telling the town’s administration and elected leaders for the last five or six months in open and closed sessions,” Edmundson said. “They have taken very little to what we have suggested to them to heart. They keep insisting that everything is fine.”

State Treasurer Dale Folwell again also expressed disappointment with the city’s cooperation, telling the LGC board the state has spent considerable resources trying to help the city.

“There is no movement forward from our perspective,” Folwell added.

Rivers disputed those interpretations of the city’s cooperation.

“We are working in a spirit of cooperation with the LGC and we will continue to work with our state treasurer,” Rivers said. “We are all on the same team to make Elizabeth City better. We will continue to work with everyone because our city is on the move and we have great things happening. This council is committed to making sure our foundation is solid.”

A retired certified public accountant with past experience in auditing governmental entities, who asked to remain anonymous, said an audit with a material weakness is a “very serious thing.”

“One is a lot,” the person said. “One material weakness is a very serious thing.”

 

https://www.dailyadvance.com/news/local/lgc-ec-draft-audit-finds-12-material-weaknesses/article_8a6b5145-e391-5c59-862d-a62236385b41.html

Folwell: City not cooperating with LGC
By Paul Nielsen The Daily Advance Staff Writer Mar 2, 2023

State Treasurer Dale Folwell said this week that Gov. Roy Cooper needs to get involved in the state’s effort to get Elizabeth City’s financial matters in order.

Folwell also said the state’s Local Government Commission is disappointed with the city’s cooperation in complying with a financial accountability agreement the LGC and the city agreed to last October. The LGC is part of the state Treasurer’s Office.

Folwell, a Republican who plans to run for governor in 2024, made his remarks via Zoom at a meeting of the conservative Pasquotank Political Action Committee Tuesday night.

Elizabeth City is on the LGC’s Unit Assistance List mainly because the city still has not filed with the state its required audits for the fiscal years 2020-21 and 2021-22. City officials said last week that they have submitted the city’s financial data for the first past-due audit to outside auditor PB Mares and are awaiting the results.

After the financial agreement was signed LGC staff directed the city to update a water and sewer rate study and revamp its utility billing policy. City Council has taken no official action on either item.

“This is a serious issue and I think that the governor needs to get involved,” Folwell said. “You can’t have this happen to a regional hub that is as important as Elizabeth City.”

Asked how Cooper could get involved, Folwell responded by saying, “stay tuned.”

Folwell said the city is making financial decisions that “don’t make mathematical sense” while ignoring advice offered by the LGC. Folwell has previously stated that one option the state has is to take over the city’s finances.

“I am as highly concerned about Elizabeth City as I am any city in North Carolina right now,” Folwell said. “We don’t want to take over anything. So far, all the suggestions we have made, specific suggestions with specific deadlines, they have had no interest in putting any of those in place.”

In attempt to speed up completion of the past-due audits and get the city’s books reconciled, City Council hired the outside accounting firm Greg Isley to help with the process. The firm was hired in October 2021 as part of a corrective action plan the city filed with the LGC after being placed on the Unit Assistance List.

When Isley was hired the city had not reconciled its books for 16 months, dating back to June 2020.

There have been discussions by city officials of reducing or ending its contract with Greg Isley and Folwell said that would be a mistake.

“It’s a terrible idea and I think it would accelerate the downward spiral of Elizabeth City,” Folwell said. “The only reason Greg Isley is there is because they (city officials) couldn’t do it themselves. It’s important that the elected leaders of Elizabeth City be willing to have the discipline and the strategy to do what it takes to get Elizabeth City out of the financial situation they are in, both budgetarily and in terms of their water and sewer division.”

Folwell said considerable state resources have been spent trying to help the city.

“We have been stepping in for months,” Folwell said. “We have committed more people hours to try and rescue Elizabeth City than any community in the 70 years of the Local Government Commission.”

First Ward Councilor Johnson Biggs watched Folwell’s remarks to the PAC remotely and said Wednesday that he appreciates the help the LGC has provided in the past and looks forward to the agency’s continued support in the future.

“The LGC staff has provided a lot of great guidance that for myself as a newly elected council member has been extremely valuable,” Biggs said. “The treasurer and LGC staff have committed a wealth of resources to Elizabeth City in the last several months. I hope as a governing board that we follow their recommendations.”

A message sent to Governor Cooper’s office was not immediately returned Thursday. Mayor Kirk Rivers and City Manager Montre Freeman also didn’t immediately respond to requests for comment.

While the LGC board has not discussed the situation in the city at one of its monthly meetings Folwell said the nine-person board is aware of the situation.

The board is comprised of Folwell, Secretary of State Elaine Marshall, State Auditor Beth Wood, state Secretary of Revenue Ronald Penny — a former Elizabeth City resident — and five other appointees, three by Governor Cooper and two by the General Assembly. Folwell is the chairman.

“Everybody on the board is familiar with the stress that is going on in Elizabeth City,” Folwell said. “We can’t care more about Elizabeth City than the city leaders do.’’

Folwell spokesperson Dan Way said in an email Wednesday that the nine-member Local Government Commission is the authority that votes to assume financial control of a local government unit.

“A simple majority vote is all that is required,” Way said.

 

https://www.dailyadvance.com/news/local/folwell-city-not-cooperating-with-lgc/article_1c32bd4d-22a6-59ce-8504-fcb6edee6af3.html

EC police officers to get $6.5K pay hike after chief calls vacancy rate ‘perilous’
By Paul Nielsen The Daily Advance Staff Writer Jan 24, 2023

Elizabeth City police officers were given a $6,500 pay raise Monday night after the interim police chief described his department’s vacancy rate as “perilous” and warned the city might be forced to contract with outside law enforcement agencies to provide police protection in the city.

Interim police Chief Phil Webster told city officials that the vacancy rate for sworn officers is getting close to 50% of the force. He noted that most of the officers leaving are doing so for better pay with other law enforcement agencies.

The current city budget has funding for 64 sworn officers while two others are funded by a 2020 Community Oriented Policing Services, or COPS, grant.

Webster said that of 29 law enforcement agencies he surveyed around the state, including several local jurisdictions, the city’s pay for police officers was the lowest.

Following Webster’s presentation, City Council voted unanimously to raise the salaries of all sworn officers up to deputy chief by $6,500 a year. Webster will not receive the salary increase.

Prior to the vote, Webster warned councilors that if the attrition rate continued to increase the city would have to engage the Pasquotank Sheriff’s Office about “providing law enforcement coverage for the city in the future.” He said the city recently has requested assistance from the Pasquotank, Camden and Perquimans sheriff’s departments to help “manage” calls in the city.

“In my 29 years of law enforcement experience, I’ve never seen a department in such a perilous situation,” Webster said.

The pay increase will be funded by the around $620,000 in unused police salaries because of the high number of vacancies in the department. Webster also proposed to freeze six positions in the city’s next fiscal budget to fund the pay raise in the 2023-24 fiscal year that begins July 1.

 

https://www.dailyadvance.com/news/local/ec-police-officers-to-get-6-5k-pay-hike-after-chief-calls-vacancy-rate-perilous/article_98478a7b-8277-5319-b82d-166620d7f6f8.html