NC town with missing money and cars accused of violating public meetings law

The North Carolina treasurer’s office says the financially troubled town of Spring Lake failed to follow open-government laws in hiring and firing its town managers without a public vote.

The agency chastised the town on Tuesday, weeks after a report from the state auditor’s office accused Spring Lake’s former finance director of taking more than $430,000 in town funds for personal use, and said the town could find no record of dozens of cars it apparently bought.

Treasurer Dale Folwell and the Local Government Commission he chairs have been digging into the town’s finances seeking potential corruption and waste since taking over the town outside Fayetteville last year.

“The more we peel the onion,” Folwell said Tuesday, “the more we cry.”

The goal is “saving Spring Lake,” Folwell said. But as the investigation continues, the commission outlined some immediate concerns with Mayor Kia Anthony and the town’s board.

Replacing the town manager

In the last two weeks, Spring Lake has dismissed its interim town manager and sworn in former Wake County Deputy Manager Joe Durham to take the job, according to a letter the commission approved at its meeting Tuesday.

Neither decision came with a public vote, the letter said, and Durham was hired without a contract. Spring Lake’s new manager cannot legally be paid without a pre-audited contract in place.

“The town is committed to working with the LGC in an open and transparent manner, and we’ll continue to do so,” Durham said after the commission’s meeting.

Anthony, the newly elected mayor, said she and the town’s board also want to get to the bottom of what went wrong and fix it. But she said she disputes the letter.

She said the former interim town manager, Samantha Wullenwaber, resigned and wasn’t dismissed by the town. The Fayetteville Observer reported the resignation in November, with Wullenwaber saying she had taken a new job with the Mid-Carolina Council of Governments. The council worked with the commission to have Wullenwaber continue working for the town on a contract basis, but then the council canceled that contract, Anthony said.

Anthony also said the town hasn’t approved a contract for the new interim town manager, Durham, because the commission would have to approve how much he would be paid. The commission has control of the town’s purse strings because of its dire financial situation.

”The LGC was thrilled about hiring Mr. Durham,” she said in an interview Wednesday. “He has expressed that he wanted to go ahead and get started, so we went ahead with the process. So there was no violation of the law because the contract isn’t completed yet.”

Attorney’s fees

The commission’s letter said Spring Lake’s attorney, Jonathan Charleston, resigned but town officials made no mention of the resignation at their meeting March 28. The commission has been seeking documentation from Charleston showing what work he did and how much he was paid for the current fiscal year, Folwell said.

Charleston, who began working for the board in mid-2020, directed questions to the mayor. Anthony confirmed that Charleston has not submitted the invoices, but he has talked about not charging the board for his services during that time because the town is in a deep financial hole.

“I can’t speak for Mr. Charleston and how he runs his business, but I am grateful that he has the ability to not invoice the town while he knows — especially last year before things just barely began to turn around — that he has the ability to assist us without charging us,” Anthony said.

She said the board hasn’t accepted his resignation because hiring a new attorney and getting that person up to speed would likely slow the town’s progress in fixing its problems. She said the town hasn’t made a decision yet as to how to move forward.

Loan, furloughs at issue

The commission also said the town obtained a $1 million loan in October 2020 from the South River Electric Membership Corporation, a cooperative that provides power to Spring Lake and other communities in the area, without getting commission approval, to build a new fire station. The co-op got the money from the U.S. Department of Agriculture.

State law requires the commission’s approval, and the lack of it voids the agreement, said State Auditor Beth Wood, who is a member of the commission. But commission staff said they are trying to work out a way for the town to pay back the loan.

Anthony said that since the new station also covers part of Cumberland County outside of the town’s borders, the county is helping to pay for its construction.

In addition, at an earlier meeting, the board talked of ending furloughs for its employees though the Local Government Commission had put them in place to save money. Anthony said the board should have the prerogative to talk about the furloughs without taking action.

“There was no action taken, there were no votes,” she said. “We wanted to discuss because that’s what we’re supposed to do, correct?”

Anthony said the town is making process in tackling the problems identified in the audit. She said the town has recently found “a stack of license plates” that suggest the issue of missing cars is more a problem of a lack of tracking than theft or misuse. Those plates have been turned into the state Division of Motor Vehicles, she said.

She asked for patience as the board works its way through the myriad of financial problems. She and most of the board members joined the board in December.

“We’ve just really got to keep in mind that we are all brand new,” she said. “We are not only trying to understand the roles and the responsibilities of the position, we are also going through a massive pile of chaos at the exact same time — chaos that we didn’t do.”

Money problems and audits

Spring Lake hired a financial director in 2020 without conducting interviews or looking at a resume, though her background included multiple bankruptcies, tax liens, unpaid credit card bills and failed businesses, The News & Observer learned in March.

At the time, the town was already mired in money problems, found by state auditors in 2016 to have spent nearly $500,000 on purchases that were either questionable or in violation of its own policies.

Then a second state audit in March reported that the same financial director spent at least $430,112 for personal use, driving the town deeper into its financial hole.

Folwell’s office met with Spring Lake’s board in 2016 to help the town through these troubles, looking over its purchasing cards and other transactions.

Asked Tuesday if the Local Government Commission should have caught those problems after the first audit, Folwell said he did not know because he had not yet taken office.

“This is the second time this has occurred in less than a decade,” he said Tuesday. “This is incredible. There’s no reason that community, nestled between Fayetteville, Fort Bragg and Pinehurst, there’s no geographical reason why it can’t be successful.”

At Tuesday’s commission meeting, members talked about proposing legislation and other measures to increase accountability in local governments. They said district attorneys are not devoting enough attention to corruption, and state laws need to be reformed to make it easier to go after town officials who aren’t showing fiscal responsibility.

“You all can’t make these towns do what they need to be doing without some teeth,” Wood said.

This story was originally published April 5, 2022 at 5:44 PM.