State Auditor Urges LGC To Start Process Of Possible Takeover Of City’s Finances

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.”