The Office of the State Auditor has released its final report into allegations of the misuse of funds in Spring Lake.

The state auditor found that Spring Lake’s former accounting technician used at least $430,112 of town funds for personal use, at least $36,400 in cash was found to be missing from daily deposits, town employees spent $102,877 of town funds on questionable credit card purchases, the town overpaid the former economic development director $9,900, town officials failed to safeguard town vehicles and the town board did not maintain closed session meeting minutes for some meetings held during 2019 and 2020.

Findings from this investigation are being referred to the Federal Bureau of Investigation and the State Bureau of Investigation to determine if there is sufficient evidence to pursue criminal charges related to the misappropriation of public funds.

The state auditor’s key recommendations include the recommendation that the board consider seeking legal action against the former accounting technician, the board should ensure adherence to procedures governing financial operations designed to prevent and detect missing cash in the daily cash collection process, the current finance director should ensure that the procedures to prevent and detect missing cash in the daily cash collection process are being followed, the finance director should ensure monthly bank reconciliations are completed timely and accurately, the revenue supervisor should reconcile the collections reports to the deposit slips to ensure all monies collected are deposited into the town’s bank account, the board should establish a comprehensive policy for credit card usage that includes requirements such as itemized receipts for purchases, a documented town purpose for purchases, validation that the purchases were included in the town’s budget, review of all credit card documentation (including receipts and the documented business purpose) before approval of payment and finally the town should seek reimbursement for any amount of the overpayment not yet repaid by the former economic development director.

In a response from Spring Lake Mayor, Kia Anthony, to the state auditor, Anthony states that the Board of Alderman accepts the findings and recommendations contained in the report and will commit to working with the North Carolina Local Government Commission as well as the Office of State Auditor’s to address the underlying basis for each finding.

“We have carefully reviewed the report and discussed the same with representatives of the NC Local Government Commission. From the board’s review of the report, we have concluded that a significant focus of the report involves (1) fraudulent conduct relating to the town’s former finance director/accounting technician who used her position to override the town’s systems of internal control for personal gain and (2) other internal control and compliance breakdowns,” Anthony’s letter stated.

However, the state auditor said that Spring Lake has made several statements that “obscure an issue, mislead the reader and minimize the importance of the Office of State Auditor’s findings and recommendations.”

The state auditor required Spring Lake to explain the corrective action it plans to take. The report states that while the town agreed with the findings in the report, the town's response did not include the required details. Without those details, the auditor states it will be difficult for the town and other stakeholders to monitor if corrective actions are being implemented and to ensure those responsible are held accountable.

The Local Government Commission’s Director, State and Local Government Finance Division Sharon Edmuson wrote to the state auditor agreeing that the town’s response was not detailed enough.

“It does not include target completion dates for corrective action, nor does it include enough specifics about necessary changes in processes, procedures and policies. The submitted response does not indicate which town staff position is specifically for each corrective action and refers to a town audit committee that currently has no members.” Edmundson said in her letter. “We do not believe the submitted response meets your requirements for a complete response.”
The state auditor also states in her report that if the town had followed their recommendations from the 2016 Investigative Report about questionable purchases, the issues found in the current investigation may not have occurred.

Following an emergency board meeting Thursday morning that was an entirely closed session due to personnel matters, Anthony held a press release regarding the findings.

“The breadth and seriousness of the misconduct discovered is astonishing. This misconduct is particularly troubling because of the unique position of trust that finance and accounting professionals and senior personnel hold within local government,” Anthony said. “The findings in the report demand that those responsible be severely punished for their wrongdoing and that the board puts in place measures designed to prevent its recurrence. The board expects that everyone involved in misappropriating the town’s resources will be prosecuted to the fullest extent of the law.”

Anthony goes on to say she is disappointed and surprised by the response of the state auditor and Local Government Commission contained in the report.
Anthony also points out that members have been appointed to serve on the Audit Committee earlier this week and former Wake County Manager to assist the board in identifying strong candidates for the roles of town manager and finance director.

Spring Lake’s finances were seized by state authorities in Oct. 2021 after the town had a $1 million loan that had not been reported to state officials. The majority of the Board of Alderman serving at that time are no longer on the board.