Folwell: EC Should Seek LGC Takeover Of Finances

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.