NEWPORT — The town of Newport hasn’t submitted annual audit reports to the state on its financial accounts for the two previous fiscal years, but staff told the News-Times they are working to get caught up.
The N.C. Department of the State Treasure confirmed Aug. 20 by email the town had last submitted an audit report —provided annually to the N.C. Local Government Commission, as its required by state statutes — for 2018, meaning the 2019 and 2020 reports were still pending.
According to the department, the reports provide information on the financial condition of a given local government to its officers, governing body, creditors, grantors and residents.
Office of the State Treasurer communications manager Dan Way said in the Aug. 20 email Newport officials have attributed the delay to a series of turnovers with the town’s finance officer position.
“Late audit reports should be submitted as soon as possible,” Mr. Way said. “Failure to submit a timely audit report is a violation of the Local Government Budget and Fiscal Control Act and should be noted as a finding by the independent auditor in the audit report.
“Further, the LGC would be unlikely to approve a request to approve debt for units of local government that haven’t submitted audit reports timely,” he continued.
When asked, the NCDST didn’t say there was a set deadline for town officials to submit an overdue audit report.
While the reports may be delayed, town officials reportedly haven’t been sitting idle. Mr. Way said in a follow-up email Monday Newport officials informed the LGC they’ve contracted Martin Starnes & Associates, a certified public accounting firm, and hope to have the 2019 report submitted by late September.
“The 2020 and 2021 audits are expected to be completed soon after that,” he said. Martin Starnes was the firm initially contracted to perform the audits.
Town manager Bryan Chadwick said in an email Tuesday to the News-Times staff has been delayed submitting their 2019 and 2020 audits to the state due to natural disasters, such as Hurricane Florence in 2018, and the COVID-19 pandemic in 2020. Additional delays resulted from new financial software being implemented in 2018, as well as a change in the town’s financial staff.
“During the 2018 period, key finance staff handling the implementation of the software left town employment,” Mr. Chadwick said, “rendering our financial software implementation incomplete. There after, the COVID-19 pandemic further delayed our contracted auditors and staff, who were working remotely to complete our fiscal audit.”
Mr. Chadwick said they’ve kept the state informed of their progress on filing the two missing reports.
“We’ve communicated our progress and position proactively with the NCLGC and will continue to maintain that dialogue through the completion of our fiscal audit process,” he said. “Our fiscal reporting and audit health is an absolute priority to my office, as well as Mayor (Dennis) Barber’s office. I’m confident we’ve achieved a clean bill of fiscal health and will complete our delayed audit reports to both our satisfaction and that of the NCLGC.”
Mr. Chadwick began his tenure as town manager in March 2020, before the end of that fiscal year. Prior to Mr. Chadwick, interim town manager Chris Turner held the post and before him, Angela Christian, who left in September 2019.
Mayor Dennis Barber told the News-Times Friday staff and officials are “very strong in our finances” and staff has completed an audit report, which is under review by Martin Starnes.
“They can only work on one at a time,” Mayor Barber said. “We’ve put a lot of funds into our general fund.”
N.C. Treasurer Dale Folwell said in an interview Monday with the News-Times Newport’s situation isn’t an uncommon one. However, he said state treasury staff reports Newport has “no cash flow issues.”
“Unfortunately, we have communities that get behind (with audit reports),” Mr. Folwell said. “These audits being late is something we see all across North Carolina.”
For example, Mr. Folwell said Goldsboro and Wilkesborro are both three years behind with their respective audit reports. He said local governments submitting the reports need to show “the right level of governance and transparency” to ensure essential services are provided, especially for fixed-income and lower-income communities.
The News-Times also contacted the N.C. Office of the State Auditor Thursday to inquire if any complaints had been filed against Newport officials or if any investigations were underway. NCOSA legislative liaison Tonya Horton said the office couldn’t comment on any pending complaints or investigations, which included confirming if there were any complaints or investigations.
Violating the state statutes that require filing audit reports may carry more consequences in the near future.
N.C. Senate Bill 314, known as the Local Government Commission Assistance Toolkit, was presented to Gov. Roy Cooper Tuesday.
Mr. Way said the bill is “tool kit legislation that would strengthen the enforcement ability related to local government units that violate statutes.”
According to the ratified bill’s language, it provides additional tools for the LGC to assist local governments to avoid and correct fiscal distress. The bill, if made law by Gov. Cooper, would include creating a process to allow the LGC to dissolve municipalities in financial distress and transfer the assets, liabilities and other obligations.
The bill also includes the following legislative actions:
- Mandate a statement from the LGC be included in a petition to the General Assembly when a new municipality is proposed.
- Add optional sources for training for finance officers.
- Allow the LGC to mandate specialized training for city and county managers when a municipality is exhibiting fiscal distress.
- Establish a process for a municipality to initiative a transition to recover from financial distress.
Reporter's note: This article was updated at 10:16 a.m. Saturday, Aug. 28, 2021, to correct a typo.
Contact Mike Shutak at 252-723-7353, email firstname.lastname@example.org; or follow on Twitter at @mikesccnt.