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A state audit published last month found evidence that taxpayer funds in Spring Lake have been misused, including over $430,000 used for personal purposes by the town’s former accounting technician.
N.C. Auditor Beth Wood’s office conducted the audit and issued it in response to 17 allegations regarding Spring Lake’s finances, according to the report. Spring Lake, a town of about 11,000 people, is located north of Fort Bragg in Cumberland County.
Last summer, the Local Government Commission voted to warn Spring Lake of a possible state takeover of finances due to concerns over questionable financial activities amid the investigation. A few months later in October, the commission officially assumed control and has continued since.
The audit alleges that a former accounting technician and finance director used at least $430,112 for personal use.
The person in question served as accounting technician from July 2014 to March 2020 and again from April to July last year, according to the report. She served as finance director from March 2020 until April 2021.
The report does not name the person, but according to minutes of town meetings, Gay Tucker was appointed interim finance director in March 2020. According to minutes from February of last year, she was serving as the permanent finance director.
The alleged personal use, from July 1, 2018, to the end of June last year, includes 32 checks worth a total of $166,082 made payable to a personal bank account at Bragg Federal Credit Union, as well as 27 checks totaling $151,015 made payable to the accounting technician described in the report.
Another $113,015 was paid to Heritage Place Senior Living. According to the report, this money was used to pay her husband’s monthly resident bills.
The audit alleges that this misuse of funds was caused by a lack of oversight from the Spring Lake Board of Alderman and the town’s finance director, to whom the accounting technician reports.
The findings from the investigation are being referred to the FBI and the N.C. State Bureau of Investigation to determine whether enough evidence exists to pursue criminal charges for misappropriation of public funds, according to the report.
From July 1, 2019, to the end of June last year, at least $36,400 in town funds went missing, as they were never deposited into the town’s bank account, according to the audit.
Employees also spent $102,877 of town funds, from Jan. 1, 2019, to Dec. 31, 2020, on credit card purchases that either lacked an itemized receipt, documentation to verify a valid purpose or both.
In April 2020, Spring Lake overpaid a former economic development director $9,900 on his monthly cellphone stipend due to an error by the payroll technician.
According to the audit, the former director didn’t realize the error because he was already expecting a tax return and didn’t investigate further.
The overpayment wasn’t found until the town’s financial audit in March of last year, according to the report.
In a letter signed by Spring Lake Mayor Kia Anthony last month responding to the audit, the mayor said the town is committed to “working with the LGC and the (state auditor) to appropriately address the underlying basis for each finding.”
In the enclosed attachment to the letter that responded to each finding from the audit, the town agreed with the conclusions of the investigation, stating that the former accounting technician, along with other former employees, “systematically circumvented, overrode and inappropriately used their positions over the town’s system of internal controls for apparent personal gain.”
To address this alleged fraud, the town will “place enhanced emphasis on oversight,” according to the letter.
This includes oversight of various budget processes and use of town credit cards.
In a response to the town’s letter, Wood’s office found Spring Lake’s response unclear. It said the town did not include specific details that were requested, such as explaining specific corrective actions, estimating dates to complete those actions and identifying who will implement the actions.
The LGC, the state agency that has taken over Spring Lake’s finances, responded to the town’s letter in agreement with Wood’s office.
“It does not include target completion dates for corrective action, nor does it include enough specifics about necessary changes in processes, procedures and policies,” said LGC Secretary Sharon Edmundson, who signed the commission’s response to the town’s letter.
“The submitted response does not indicate which town staff position is specifically responsible for each corrective action and refers to a town audit committee that currently has no members.”
According to the LGC letter, the commission helped draft a response to the audit that included more detail.
But the Spring Lake Board of Aldermen opted for a different response, according to the LGC letter.
“LGC staff made our concerns known to the town during the discussion on March 7, and the town opted to not make substantial changes to what was submitted as the final response,” Edmundson wrote in the letter.
State Treasurer Dale Folwell, who is also LGC chairman, said in an interview with Carolina Public Press that the Spring Lake Board of Aldermen needs to better address the audit.
“The spirit at the treasurer’s office is we’re trying to save Spring Lake, but we can’t be more interested in saving Spring Lake than the governing board has been in saving it itself,” Folwell said. “The current government of Spring Lake needs to understand that this is a serious matter, and we’re there to help them as we have the whole entire time.”