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Steak, lobster, credit and free utilities: Audit says Rocky Mount misused taxpayer funds

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The city of Rocky Mount's administrative offices building houses the city council chambers. State Auditor Beth Wood released a Friday report revealing city officials' systemic accounting and financial management failures.
The city of Rocky Mount's administrative offices building houses the city council chambers. State Auditor Beth Wood released a Friday report revealing city officials' systemic accounting and financial management failures.
Contributed photo

ROCKY MOUNT — A scathing state audit report released Friday paints a picture of officials who used City Hall as their personal ATM while bilking taxpayers of thousands of dollars.

The report issued by N.C. State Auditor Beth Wood includes information on a councilman with nearly $50,000 in unpaid utility bills, a city manager who ate lobster and steak on the city’s dime, a former mayor who owes $30,000 in subdivision engineering costs and another councilman’s organization that received inappropriate grant funding and didn’t repay loans.

Rocky Mount City Manager Rochelle Small-Toney failed to comply with city travel policies. Unallowable expenses included meals for city council members’ spouses with the costs for each meal far exceeding the allowable per diem rate. Specifically, Small-Toney used the city’s credit card to charge an average of $95.40 per person for one meal and $50.69 per person for the other meal instead of the allowable $21 per diem dinner rate. 

“These amounts clearly did not represent a prudent use of taxpayer funds,” Wood said in her report.

In a press release issued Thursday, city officials argued that Small-Toney was allowed to exceed the per diem rate as a reasonable accommodation for a medical condition. However, city policies include no medical exceptions to the per diem rate. 

In addition, a review of the city manager’s meal expenses included extravagant items such as lobster and steak dinners, a total cost of $87.30 at one meal and $74.06 on another occasion, and an individual steamed seafood bucket that cost $56.95. 

Newly elected Mayor Sandy Roberson said city leaders should be held to a higher standard of ethics and integrity.

Roberson said the audit report shows a large segment of Rocky Mount’s population mistrusts city government. 

“The city has failed to provide adequate internal audit processes that would allow it to defend its position with confidence and factual evidence,” Roberson said. “Governance in Rocky Mount has for far too long dealt in a perceived secrecy and behind-closed-doors process.”

Roberson said the city council should televise its meetings; provide internal audits that are disclosed to the public; sign an ethics contract and provide a statement of economic interest; post an explanation of all perceived conflicts of interest; and commission an independent forensic audit to be completed every year.

Roberson said he doesn’t know who authorized the city press release that went out Thursday. In an unusual move, the city released its response a day ahead of the report.

“In its response to this investigative report, the city of Rocky Mount made several statements that attempted to obscure issues, mislead the reader and minimize the importance of OSA’s findings and recommendations,” Wood states in an addendum to her report. OSA refers to the Office of the State Auditor. 

The report states that several city officials gave Councilman Andre Knight preferential treatment in writing off utility bills totalling $47,407 and never disconnecting his service, according to the report.

Knight isn’t named in the report or press release, but this newspaper has confirmed via numerous interviews with city employees that he’s the subject of the state’s investigative audit report.

“Instead of disconnecting the council member’s services, both the prior city manager and the former city manager allowed the council member to receive utility services while his delinquent balance continued to accumulate,” according to the report. “In 2013 and 2017, under the tenure of the former city manager, the finance director wrote off $47,704 in outstanding utility bills for the council member. In May 2013, $11,096, which covered utility usage at the council member’s property from 1999 to 2010, was written off. In March 2017, $36,608, which covered utility usage at the council member’s property from 1999 to 2013, was written off. Although the policy required disconnection after 60 days, the council member had outstanding balances that dated back to September 1999. As of Jan. 29, 2020, the council member owed $2,989 that exceeded 60 days.”

The city’s press release states the total of $47,704 has never been substantiated by city staff or state auditors, but was gleaned from a data dump performed by the city’s finance department.

Wood said the city’s finance department and state auditors both substantiated the $47,704 write-off amount.

“Investigators obtained the underlying account detail for each of the two write-offs, totaling $47,704, for the council member’s utility account,” the audit report states. 

The city’s response referred to a data dump that consisted of detailed records of billings, payments, interest and penalties for Knight’s utility account dating back as far as October 1999. Additional supporting documentation of the $47,704 included notes to Knight’s account dating back to January 2001. 

Of the 234 notes for that utility account, at least 125 are communications with Knight regarding late payments, broken payment arrangements, returned checks and balance inquiries, according to the report.

The city’s press release states Knight’s account may have been subject to manipulation without providing any evidence to support that claim. A review of the utility account notes revealed no references or claims by Knight of any manipulation to his account or challenges to the amounts owed, according to the report.

The city blamed the high write-off amount on high wastewater usage over a sustained time. However, according to the account details, only $3,066, or 6.4%, of the $47,704 is attributable to wastewater usage.

The city’s press release attempted to justify the preferential treatment given to Knight regarding his delinquent utility account balances by stating that other customers were treated in a similar fashion. 

Wood’s report notes that, “The former city manager then instructed the finance director to handle the council member’s account.”

The city provided no evidence that any other customer had his or her outstanding utilities accounts handled in this manner, according to the report.

Rocky Mount’s proposed corrective action to restructure the Business Services Center by removing the finance director from direct oversight didn’t address the problem of preferential treatment, the audit explains. 

Wood said the city’s assertion that it “will continue to follow our collection policies and practices…” demonstrates an unwillingness to acknowledge that the city failed to follow its collection policies in the past. 

The city’s response noted planned corrective action of providing training on best practices. However, the audit states, best practices training would not prevent the city from giving preferential treatment to elected officials.

The report refutes statements in the city’s press release as to the validity of roof and improvement grants given to properties owned by Knight, city employee Garland Clark and the Opportunities Industrialization Center of Rocky Mount, of which Councilman Reuben Blackwell serves as CEO.

The city also failed to acknowledge that $31,000 in lost funds could have been collected if a letter of credit had not been allowed to expire on a subdivision owned by former Mayor David Combs.

Attempts to reach Knight, Blackwell and Combs for comment were unsuccessful. 

Roberson said he’s embarrassed by the audit’s allegations against Rocky Mount. 

“The majority of the city council have responded that they question the validity of these numbers and do not believe this audit was performed to the highest standards by the N.C. state auditor,” Roberson said. “Furthermore, they believe that this was a targeted audit aimed at black leadership of our community.”

Roberson said he’s thankful the total amount in question of $151,000 represents a small fraction of money relative to the city’s annual budget and that some of the items extend well back in time.

“It’s still a lot of money in a poor city where the median household income is only $37,400 and a third of our citizens are living in poverty,” Roberson said. “Choosing between paying their bills or eating is a problem that real people here face.”