Elizabeth City Enters Into Financial Accountability Agreement With LGC

City enters into financial accountability agreement with LGC
By Paul Nielsen The Daily Advance Staff Writer Oct 6, 2022

Elizabeth City has entered into a fiscal accountability agreement with the state’s Local Government Commission in an effort to get off the agency’s Unit Assistance List.

The city has been on the LGC’s Unit Assistance List since 2020 due to internal financial control issues and concerns about the financial condition of the city’s general fund.

The city has still not submitted its audit for the 2020-21 fiscal year that was due last Oct. 31. The city will also miss this year’s Oct. 31 deadline for submitting its audit for the 2021-22 fiscal year. That’s because work on it has yet to start because the 2020-21 audit isn’t complete.

Last October, the city was also 16 months behind in reconciling its bank statements but that process is now up to date.

The agreement with the LGC, however, differs from other fiscal accountability agreements the LGC has entered into with other local governments on its watch list, N.C. Deputy Treasurer Sharon Edmundson wrote in a letter to city leaders.

Edmundson wrote that the LGC will provide the city with “enhanced coaching” that has not previously been made available to other units. The state will not bill the city for its services.

“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,” Edmundson wrote.

Edmundson also wrote in her letter that the agreement provides the city the opportunity to make a commitment to improving its financial bookkeeping.

“It must be emphasized that for Elizabeth City to regain financial stability a long-term, unified commitment by the council, city manager and finance officer is required,” Edmundson wrote. “This FAA provides the opportunity to show that commitment.”

City Council Finance Committee Chairman Johnson Biggs told council last week that the LGC will provide financial expertise to the city for between one to three months. He said an LGC staff member with work experience in local government finance would most likely spend a week in the city at the onset of the agreement, looking at processes in the finance department.

“It will be another resource to have,” Biggs said. “This is very timely and it is something the LGC has not done before to this extent. It will be interesting to have that support and they (LGC) are excited about this process.’’

Six councilors — Biggs, Joe Peel, Rose Whitehurst, Javis Gibbs, Katherine Felton and Barbara Baxter — and Mayor Kirk Rivers signed the agreement. But councilors Johnnie Walton and Kem Spence did not sign it.

Walton expressed concerns that the city needs to find out where the problem with the city’s accounting practices first started before moving forward.

“I’m not agreeing with anything until they show me what caused the problem with the audit,” Walton said. “It didn’t start this year or last year. It started before then. Somebody ought to be able to show us who started the problem.’’

Biggs said the LGC will help the finance department improve so the city doesn’t get back “into the position we were in.”

“I imagine they will look at the processes in that department which led to the bank reconciliation not being completed in a timely fashion,” Biggs said. “Hopefully, they will uncover some things that we need to work on.’’

Walton suggested hiring a firm to explore the city’s late audits and other accounting practices.

“We have not yet identified an agency to go back and tell us how we got off track,” Rivers responded. “Once we get the audits you will be able to go back and start seeing, but we haven’t hired one yet.”

Walton responded by saying, “Let’s hire one.”

“I want to know what happened in the past before I go forward, so mistakes are not repeated,” Walton said.

Part of the fiscal accountability agreement, which was also signed by Steward and interim City Manager Montique McClary, requires the city to provide “complete transparency and a commitment to focus” when dealing with the LGC.

It also will require the city to present a draft of its next budget to the LGC by May 16, 2023. The city must approve its next fiscal budget by June 30, 2023. The last two years, the city has brushed up against that June 30 deadline.

The agreement also lists consequences for non-compliance by the city. Those include requiring the city to hire “outside entities” to fulfill the duties of the finance officer or having the LGC assume control of the financial affairs of the city.