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Spring Lake response to report on investigation concerns state officials

Spring Lake response to report on investigation concerns state officials

State officials are worried that Spring Lake might repeat a mistake the town made six years ago when it received a report detailing financial wrongdoing but failed to take steps needed to correct it.

Spring Lake’s mayor says the town’s Board of Aldermen is committed to working with the state auditor and the Local Government Commission to address issues in the town.

“The Board will continue to evaluate appropriate systems of internal control to prevent and detect fraud, waste and abuse,” Mayor Kia Anthony said in a written response to questions from The Fayetteville Observer about how the town will deal with the situation.

State Auditor Beth Wood’s office released a report on Thursday about an investigation that found evidence of financial wrongdoing in Spring Lake, including that a former town employee who served as finance director and accounting technician used more than $430,000 of town money for personal use.

Spring Lake municipal building on Ruth Street.

Spring Lake municipal building on Ruth Street.

The report also found that Spring Lake employees spent more than $100,000 of the town’s money on questionable credit card purchases; at least $36,400 collected by the town was not deposited into Spring Lake’s bank account; the town erroneously overpaid its former economic development director $9,900 for his monthly cellphone stipend; Spring Lake officials did not safeguard town vehicles; and the town’s Board of Aldermen did not keep minutes of some closed meetings in 2019 and 2020.

More: NC auditor’s report on Spring Lake: Evidence of financial wrongdoing, including embezzlement

The state auditor’s office released an investigative report in 2016 that said Spring Lake employees and three members of the board spent more than $122,000 on 1,448 credit card purchases over five years that appeared to be unrelated to town business.

The report released Thursday included a response from the town as an appendix. A cover letter written by Anthony is dated March 9.

Anthony said in the letter that most of the board members were recently elected to their positions and were not on the board when the incidents covered by the report happened.

Anthony says the board is committed to working with the auditor’s office and the Local Government Commission to address the findings and recommendations in the report.

The town’s response addresses each finding. It says the board will increase oversight, including adding a hotline, a code of conduct, compliance measures, and monitoring credit cards and vehicles.

The auditor responded in a separate appendix, saying the town’s response was incomplete and that some parts of it tend to obscure an issue, mislead the reader, and minimize the importance of the report’s findings and recommendations.

“If the Town had followed the recommendations from the 2016 report, developed a detailed corrective action plan, including an estimated date for implementation and who was responsible for the corrective action, and ensured the plan was put in place and followed by Town employees, the issues found in this investigation, especially those that are repeated from the 2016 investigation, may not have occurred,” the auditor said in response to the town.

More: Spring Lake board gets optimistic financial update from interim town manager

The state Local Government Commission, which took control of the town’s finances in October, said in an appendix to the report that commission members do not agree with the town’s response.

“The response submitted by the Town does not include, in our opinion, sufficient detail about the actions that have been taken and will be taken by the Town regarding the findings identified in the report,” it said.

Anthony said in a statement available on the town’s YouTube channel that the town Board of Alderman accepts the report’s findings and recommendations. She said the auditor and the commission are well aware of the work the town has done and is doing in response to the auditor’s investigation.

“Therefore, we are surprised and disappointed in the response of the state auditor and the LGC contained in the report,” Anthony said. “As mayor, I want to assure you that the town of Spring Lake is stabilizing and moving in the right direction.”

Anthony said in her statement to the Observer that the town wants to hire a qualified town manager. The search is being managed by Joe Durham, a very experienced former municipal and county executive and former Wake County manager, she said.

“In addition, the Board intends to work collaboratively with the Local Government Commission to identify a well-qualified municipal finance professional to serve as Town Finance Director,” she said. “Through the Audit Committee of the Board, the Town will monitor the progress of all financial reporting and review on a monthly basis “red flag” or suspicious activity reports.”

State Treasurer Dale R. Folwell, who serves as chairman of the Local Government Commission, said in an interview Friday that he was disappointed by the town’s response to the report.

“We can’t save Spring Lake if they’re not interested in saving themselves,” he said.

Folwell said state officials will meet to determine what to do about the town.

“Generally speaking, we’re in communities that appreciate what we’re doing and are glad we’re there,” he said. “Obviously, we’re in a situation where that doesn’t seem to be the case.”

Anthony thanked the auditor and her office for their work in the cover letter that accompanies the town’s response to the report. She said that with help from the auditor’s office and the commission, the board believes the town will emerge from the current situation stronger.

The commission’s response to the town said Spring Lake’s interim town manager had prepared a response to the report that was clear about the actions that the town would take and included a detailed action plan for what needs to be done. The town board decided to adopt an alternative response prepared by the town attorney as the basis for the town’s response, the commission said.

The report doesn’t include names, but according to town documents, Samantha Wullenwaber serves as interim town manager, and Jonathan Charleston is town attorney.

Anthony said in response to a question about the two responses that they were similar in many ways, but “stylistically dissimilar.”

“The draft circulated by the former interim town manager contained, among other things, information about corrective action already taken and specific dates for completion of certain other corrective tasks,” she said. “Because the Town has not yet hired an interim or permanent Town Manager and has yet to determine when a manager will be hired, the Board was reluctant to publish specific dates for completion of corrective tasks which will be a responsibility of the new Town Manager. However, the Board intends to work with the Local Government Commission in an effort to meet the target dates.”

Folwell said the Local Government Commission wants to serve Spring Lake.

“I can assure the citizens of that community that we’re not going to back down in terms of finding out what happened and ridding the community of fraud, waste and abuse,” he said.

Local news editor Steve DeVane can be reached at [email protected] or 910-486-3572.

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This article originally appeared on The Fayetteville Observer: Spring Lake response to investigation report concerns state officials