Audit shows Gaston officials borrowed public funds without approval

(The Center Square) – Gaston town officials used their positions to abuse and misuse public funds, a recent North Carolina state audit found.

The town clerk lent herself and two other employees $39,072 from the town’s coffers, a state audit report said. Auditors also found a town commissioner used his position to purchase equipment for thousands of dollars below market value.

The North Carolina Office of the State Auditor launched the probe into Gaston’s finances after receiving nine misconduct allegations through its hotline. The town, located in the coastal plains area of eastern North Carolina, had an annual budget of $663,000 in fiscal year 2019.

The town clerk, who is part of the administrative office that oversees the town’s finances, issued the unapproved funds to herself, a former police sergeant and a former part-time officer from 2014 to 2017 as loans and payday advances. A part-time assistant town clerk discovered the discrepancies and notified the town’s board of commissioners in 2017.

The clerk and the sergeant used some of their leave of absence hours to repay the funds and made direct payments for the rest. However, $9,307 worth of the sergeant’s leave time exceeded the town’s limit on paid leave. He borrowed $11,244 from the town.

The officer made a weekly payment arrangement for $800 and painted the police department’s interior and the town’s baseball field restrooms to satisfy the remaining $1,120.

The clerk lent herself $11,244 of the town’s money. Auditors found she also received $4,410 in vacation pay while she was still working. The report shows the clerk mixed her personal money with the town’s money and did not obtain the required secondary signature on all town checks.

In its report, which was released last week, the auditor’s office recommended disciplinary action, including firing the clerk. Town Attorney Geoffrey Davis said the clerk is “no longer with the town.” Gaston swore in a new town clerk Aug. 9. The commission also enacted a policy that prohibits the clerk from signing checks alone.

Auditors also are calling on the town to seek reimbursement from the clerk for the vacation pay. She also still owes Gaston $5,666 in unapproved loans. Davis said he received approval from the commission to retrieve the funds.

The town also lost $2,700 from the sale of a lawnmower to a town commissioner. Auditors said the commissioner, also a public works employee, used “first-hand knowledge” about the lawnmower to purchase it for $800. The fair market value of the lawnmower was $3,500. At the time of the transaction, the commissioner told other commissioners the lawnmower required $5,000 in repairs. However, he told investigators he uses the lawnmower regularly and has not paid for repairs or parts.

The state auditor’s office is calling on the commission to increase oversight and review current policies. Auditors found no measures were in place to deter or detect misuse of the Public Works Department’s vehicles and fuel cards. Davis said new policies were “forthcoming.”

On average, the town’s annual audits for four fiscal years, 2016 through 2019, were submitted 183 days late. The current annual audit for fiscal year 2020 is more than six months overdue. Auditors said Gaston also should consider hiring a specialized certified public accountant to perform a forensic audit.

“A significant risk remains that fraud, accounting errors, and inaccurate financial reporting could go undetected due to the town’s lack of internal controls, the lack of accounting records, and the delinquent annual financial statement audits,” auditors wrote.

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