State auditor slows pace of investigations

Compared to those of her predecessor, investigations are down by more than half.

Staff writerMarch 17, 2010 

  • A comparison of audits conducted during the first 15 months in office by Les Merritt, a Republican, and Beth Wood, a Democrat.

    Audit type



    Financial audits



    Grantee/agency review



    Information systems audits



    Federal stimulus audits



    Investigative audits



    SmartStart audits



    Performance audits







    Financial audits: Reviews of accounting or accounting procedures. Simply put, are the books balanced?

    Information systems: A look at the security and integrity of the state's computer networks.

    Investigative: An investigation into an allegation of misconduct.

    SmartStart: A review of the nonprofits that administer the SmartStart early childhood program.

    Performance: A look at how well time and money are used. Auditors are looking for ways to save money.

    Recovery Act: A review of how federal stimulus dollars are spent.

    Grantee/agency review: A look at how nonprofit agencies are spending state dollars.

    Source: Office of the State Auditor

— State Auditor Beth Wood has halved her office's production of investigative reports, saying she wants to ensure that they are unimpeachable.

In her first 15 months in office, Wood, a Democrat, has issued 10 investigative audits. Those reports focus less on accounting and more on complaints about fraud, waste and abuse.

Her predecessor, Republican Les Merritt, released 23 investigative audit reports in the first 15 months of his term that began in 2004. Wood and Merritt have similar totals for the other types of reports published by the agency such as routine audits of financial statements.

Wood campaigned on increasing the office's credibility, and she said she has pushed her auditors and investigators to produce work that cannot be challenged.

"I want to make sure their findings, when it could prove embarrassing or not so nice to another state agency or an agency head or university chancellor or community college, bottom line is, when I put something out that may not be so complimentary to them, I want to make sure that we are dead on with our information," Wood said in an interview.

Wood's time in office has had its rocky points. She was widely criticized for not wanting to release an audit of the salary N.C. State University paid to former Democratic Gov. Mike Easley's wife. Last month, Wood raised eyebrows when it was reported that she was delinquent on her Wake County property taxes. And at a time when a federal grand jury has indicted a senior official in Easley's administration on corruption charges, some in state government say now is the time for more, not fewer probes.

The auditor, an official elected statewide, operates in relative obscurity but has significant power to shine a spotlight on bad government. The auditor is in charge of investigating and reviewing state government agencies and officials, as well as community colleges and universities.

Senate Republican leader Phil Berger said the office since Wood was sworn in has not been at the forefront of exposing corruption or waste.

"It's probably not a bad thing to have the auditor be of a different political persuasion than the vast majority of the other folks in state government," Berger said in an interview. "I don't know that there's been all that much that she's done to change my mind about that."

Emphasis on evidence

Wood campaigned on a platform of increasing the office's credibility. She said she has made a deliberate effort to ensure that the conclusions her auditors reach are bulletproof. She said she won't sign audits unless the findings are backed by irrefutable evidence.

"Do you want to put out a bunch of audits? Or audits that can change the way state government does business?" Wood said in an interview. "We've spent a lot of time in this first year looking at the findings that come to my desk. I go through them, and I ask them questions. 'Do you have evidence for this? Tell me how you can back this up. What if somebody comes back and asks this? Where's your evidence?"

Some audit reports from Wood's office have made a splash. One concluded that the state isn't negotiating good deals for itself on certain contracts, such as an online purchasing system. Wood's office found that the state prison system had no reliable way to account for $25 million worth of over-the-counter medicines. A review of inmate medical costs showed that the state has allowed hospitals to charge the highest rates to care for inmates.

In November, an audit rebuked the Golden LEAF Foundation, which gives economic development grants. Wood's office found a lack of oversight of the money.

Dan Gerlach, who became Golden LEAF's president in 2008 disputed that finding.

"She was very thorough in making sure that the audit was done correctly in her opinion," said Gerlach, who was a key budget adviser to Easley. "I think she clearly respected the professionals in her agency and I think she listened to what we had to say."

Gerlach said the foundation is taking steps to address the findings of the audit.

Wood said she believes reports from her office give the legislature enough information to address serious reforms on how the state negotiates its contracts.

"This is systemic, and it's tens of millions if not hundreds of millions of dollars," Wood said.

GOP auditor's legacy

In Merritt's four years as state auditor, some of his audits had impact. Others were dismissed by Democrats.

In 2008, he found that then-Treasurer Richard Moore and then-Lt. Gov. Bev Perdue were improperly using their state office resources to run for governor. Later that year, his office reported that the state failed to shut down a Cary adult care home that was putting residents at a high risk of injury or death. Merritt also got the office entangled in a bitter jurisdictional fight with the State Ethics Commission.

Wood had stumbles in her first year in elected office. One of the most notable audits she released was a review of the salary N.C. State University paid to Mary Easley. Wood, who was being accused of sitting on the audit to protect Democrats, released the report, which was initiated by Merritt, to explain why she didn't think it was ready for release.

Wood said last week that the review was a worthwhile project but needed more work.

Last month, she defended the fact that she had not paid her Wake County property taxes. Wood explained that she was late because she was living on a budget and trying to repay $90,000 worth of campaign debt.

That excuse sends the wrong message to the state's taxpayers, said state Rep. Thom Tillis, a Cornelius Republican.

"It was an ill-advised comment from an official who you would expect to have the highest degree of professionalism," Tillis said.

Wood paid her tax bill, including $33 in interest, in late February.

"I work from a budget," Wood said last week. "It is a choice that I made to pay the taxes late and pay the interest charge that goes with it."

Big tasks, smaller staff

In her first year in office, the legislature cut nine positions from the auditor's office as part of sweeping budget cuts to deal with a deficit caused by the recession. Wood said that in his first year, Merritt moved auditors from other departments within the agency to help with investigations.

Rep. Jim Crawford, an Oxford Democrat and budget writer, said Wood has a lot of territory to cover.

"The department hasn't grown as much as the rest of state government," Crawford said.

Frank Perry, a former FBI agent who worked for both Merritt and Wood, said the auditor's office should play a more important role in ferreting out corruption. The FBI is diverting more resources to terrorism, cyber crime and espionage, leaving fewer resources for public corruption cases.

"Those cases are important, and it's unfortunate that those numbers are lacking," Perry said.

Wood said it's early in her term and she has plenty of reports in the works.

"Give us another year, and we'll see what happens," Wood said. or 919-829-4521

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