Goldsboro Mayor David Ham receives official notice of impending state audit

Two months after State Treasurer Dale Folwell instructed State Auditor Beth Wood to conduct a “thorough audit” of Goldsboro’s books amid concerns that “its finances might be in disarray and therefore vulnerable to mismanagement or misappropriation,” Mayor David Ham has been officially notified that the “performance audit” is happening.

According to a letter dated March 22, 2022, signed by Deputy State Auditor Katie Gleason and obtained by the New Old North, the objective of the audit is to “determine whether the City of Goldsboro implemented controls to detect and prevent fraud, waste, and abuse according to applicable laws, rules, and best practices, and identify the effects and causes of any lack of controls.”

The state audit is the latest financial black eye for the city, which has been experiencing woes for years — dating back to Oct. 29, 2020, when Folwell’s office sent a letter to members of the City Council, warning that the city’s credit rating and ability to borrow money were in jeopardy.

Here’s a timeline of what has happened since:

• Fall 2020 — One of the nation’s leading bond credit rating agencies, an organization that ranks the creditworthiness of borrowers, including municipalities, withdrew its rating on Goldsboro’s General Obligation Bonds and General Obligation Street Improvement Bonds, due to “insufficient information,” a deficiency characterized by Folwell as a “serious matter” that is “a reflection on the quality of both governing board oversight and management practices of the city.”

• Fall 2020 — The North Carolina Housing Finance Agency notified City Manager Tim Salmon that it was freezing funds that would typically find their way into Goldsboro coffers. In a letter obtained by the New Old North, Michael Handley, the manager of housing rehabilitation and compliance, told Salmon that funding was suspended “due to not submitting your audited financial statements for the 2019 fiscal year.”

• Fall 2020 — Finance Director Catherine Gwynn said staffing changes and natural disasters — including Hurricane Matthew, which hit Goldsboro in 2016, and Hurricane Florence, which hit the city in 2018 — contributed to the missed 2019 audit deadline. Gwynn also said when she took on her role, she “couldn’t find” records and that when former Finance Department staff, including her predecessor, Kaye Scott, left the city, it crippled the department.

• Winter 2020 — 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 did not hand 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.”

• Winter 2020 — Salmon 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 communications from the state 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.

• Winter 2020 — Salmon told key city staff and members of the City Council that funding from the U.S Department of Housing and Urban Development would likely be suspended. “Goldsboro will receive a HUD non-compliance finding in the near future because the City missed federal deadlines for submission of the FY19 Audit financial statements due Mar 31, 2020 extended to Sep 30, 2020,” he wrote in an email obtained by the New Old North. “The likely impact will be a suspension of the funds.” He added that an additional consequence could include “federal monitoring of the financial management of the City’s HUD programs for one to five years.”

• January 2022 — City officials are notified by the Local Government Commission that should Goldsboro fail to comply with the terms of a Fiscal Accountability Agreement sent to Ham, Salmon and Gwynn Jan. 7, the LGC could take control of the city’s finances.

• January 2022 — Folwell instructed the state Auditor to conduct a “thorough audit” of Goldsboro’s books amid concerns that “its finances might be in disarray and therefore vulnerable to mismanagement or misappropriation.” The decision, which was announced via a press release, came after the city failed to submit a required annual audit the past two years. “It is troubling that the state’s 30^th largest city, the county seat and home to Seymour Johnson Air Force Base, no less, has been unable to get its act together to conduct a basic but critical oversight function. Audits are necessary to assess financial well-being, to ensure bills are being paid and money is not missing,” Folwell said, adding that Goldsboro has not only failed to submit audits for 2020 and 2021, but its 2019 audit contained multiple bookkeeping adjustments to capital assets and notes receivable — a potential sign of “major weaknesses” in day-to-day operations.