City misses audit deadline … again

Despite assuring the Office of the State Treasurer that its long overdue 2018-19 audit would be submitted by November 30, the city of Goldsboro has still not handed over the financial documents to state officials.

Officials at City Hall also failed to submit an audit contract amendment to the Local Government Commission, which, according to the state, “would be the process for the city to notify the LGC of an expected submission date beyond the due date.”

“The LGC has received neither the 2019 annual audit for the City of Goldsboro nor an audit contract amendment describing a cause of delay or new completion date,” said Dan Way, the Office of the State Treasurer’s communications manager. “No specific extension has been granted.”

As a result, the city remains in violation of N.C. General Statute 159-34(a), its bond rating remains withdrawn, it remains unable to borrow funds and more than $600,000 in grant money remains frozen.

The city was notified by the North Carolina Housing Finance Agency in September that because its audit had not been submitted, funding was being suspended.

In a letter dated Sept. 17, Michael Handley, the manager of housing rehabilitation and compliance, told City Manager Tim Salmon that the city “will be suspended from receiving funds from the Agency until the Agency receives the required audited financial statement. Specifically, the Agency will not accept reservation requests or disburse funds under the City’s open 2017 Essential Single-Family Rehabilitation Loan Pool — Disaster Recovery project … or the 2019 Urgent Repair Program project.”

More than a month later, another letter was sent — this time, to members of the City Council — warning that the city’s credit rating and its ability to borrow money were in jeopardy.

The letter also revealed that one of the nation’s leading bond credit rating agencies, an organization that ranks the creditworthiness of borrowers, including municipalities, had withdrawn its rating on Goldsboro’s General Obligation Bonds and General Obligation Street Improvement Bonds.

Moody’s Investors Service Inc. made the move due to “insufficient information” — a deficiency characterized by the Office of State Treasurer as a “serious matter” that is “a reflection on the quality of both governing board oversight and management practices of the city.”

In the letter, which was dated Oct. 29, the state said the withdrawal of the rating “has potentially serious consequences including the inability of certain investors to hold these bonds and for potentially higher interest costs in future debt issuances.”

“It is the governing board’s responsibility to ensure that audited financial statements are issued timely,” the letter continues. “Until the city complies with the legal obligations associated with existing outstanding bonds and reports financial information timely, we will not recommend approval of any additional debt to the Local Government Commission for the city.”

But Salmon, during an interview last month, said he wasn’t concerned about the city’s inability to borrow money because “we’re not asking for any new debt right now,” and added he interpreted the letter as a warning about ensuring future audits were submitted on time — not the fact that the 2018-19 audit was more than a year late.

And at the council’s Nov. 16 meeting, Finance Director Catherine Gwynn blamed staffing changes and natural disasters — including Hurricane Matthew, which hit Goldsboro in 2016, and Hurricane Floyd, which hit the city in 2018 — for the missed audit deadline last fall.

Gwynn said she “couldn’t find” records and that when former Finance Department staff, including her predecessor, Kaye Scott, left the city, it crippled the department.

“I think the transition was very big because you had two high-level individuals who had been here a very long time … and when that knowledge left … all of that is lost,” she said.

And the remaining staff, she added, was unable to assist when the audit firm called with questions.

“A lot of those answers, they did not know,” Gwynn said. “And we just could not find the records.”

Community Relations Director Shycole Simpson-Carter, whose department was hit hard by the suspension of $675,000 in NCFHA funding, however, said Salmon was to blame.

In a scathing resignation letter submitted before the Nov. 16 meeting, she accused Salmon of having a leading role in the financial woes associated with the city not submitting its 2019 audit in a timely fashion — and said he made “egregious errors” that led to the financial crisis and criticized what she called “detrimental” and “deceitful” behavior inside City Hall.

And council member Antonio Williams, who will no longer serve the city after he is sworn in as a Wayne County commissioner later this month, said during his final council meeting that he spoke to an official at the NCFHA who said the issue is more alarming than Salmon and Gwynn are admitting.

“He stated that the NCHFA bent over backwards, giving the city of Goldsboro extension after extension, warning after warning. … He stated it is uncommon for cities to not be compliant. He stated that one of the last things they do is suspend,” Williams said. “He suspects things are not perfect. He also stated there would be no funds dispersed to Goldsboro. It’s ridiculous at this point that we don’t have the fiscal year ’19 financials. If an audit is this late, there is reason for it. This conversation should be alarming to everyone.”