LGC Chief Contradicts City On Finances Being Current, Says Current Year’s Books Out Of Balance By $1.3M

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.