In 2019, the Office of the State Auditor (OSA) initiated an investigation of the City of Rocky Mount (City) based on complaints received through its Hotline and other means. After more than a year of investigating, on April 8, 2020 a draft report was provided to the City which contained five (5) key findings. The City thanks State Auditor Beth A. Woods on the way in which the investigation was conducted and knows the findings will help improve internal controls and systems. According to the Auditor’s Transmittal, Woods said “We appreciate the cooperation received from the management and employees of the City of Rocky Mount during our investigation.” Once the OSA has finalized the report, the entire document will be made public.
The City views having an external organization review processes as a win for any municipality or business that strives for excellence. The City prides itself on being a publicly-owned utility, and is committed to advancing community well-being, safety and quality of life by delivering excellent public services and actively collaborating with the community towards a fulfilling and inspired future for its citizens.
The City welcomes this opportunity to share information regarding the draft OSA Report with its citizens and stakeholders.
According to Finding 1, multiple City Officials prevented the Business Services Center from attempting to collect $47,704 in Utility Bills owed by a City council member. In 2013 and 2017, under the tenure of the former City Manager, the Finance Director wrote off $47,704 in outstanding utility bills. The write off amount the City reported did not have supporting documentation in the form of printable billings that verified the total amount. A true or even proximate value could never be reconciled to the amount that was reported to the OSA, and has never been substantiated by City Staff or the OSA but was gleaned from a data dump performed by the City’s Finance Department. The write off in question was conducted by City Finance management officials according to City procedures without interference from the City Council or former City Management.
It is not clear whether the OSA investigated, when informed, that the account in question was subject to possible manipulation by unauthorized City staff for a good portion of the time that the write-offs covered. There was no confirmation from City Finance staff that could confirm the validity of the amount reported other than the data dump. Also, the utility account clearly evidenced high usage of wastewater. The utility customer was never notified by City Finance staff, which is normal City procedure, when there is higher than normal water and wastewater usage. That amount was never reconciled with the customer, nor adjusted by the City.
During the same period, there were several business and residential accounts that were written off. Staff also provided information on over 30 accounts with delinquent balances with continuing active service. City Staff presented other incidents where numerous accounts were managed with customers in similar fashion to the City Council representative. It does not appear these accounts were investigated.
City Manager Rochelle Small-Toney has reorganized the Business Services Center into a single centralized function for utility billing and collections, fees and loan payments and collections, reporting directly to her. Through the statutory responsibilities assigned to the Finance Director (reports to the City Manager) and the additional oversight of the Internal Auditor (reports to the City Manager with quarterly reports to the City Council) and the City Manager, the City will continue to follow its collection policies and practices, and retain all billing information for all debt collected upon and owed to the city.
According to Finding 2, multiple Downtown Development Managers failed to follow program guidelines resulting in $32,452 of uncollected loans associated with the Downtown Roof Replacement Assistance Program (DRRAP) and $28,000 of improperly awarded funds related to the Downtown Building Assistance Program (DBAP) and the DRRAP. The DRRAP provides approved applicants with a loan of up to $10,000 at 3% interest. Loan repayments are set at $50 per month during the first year. Once a Certificate of Occupancy (CO) is received the loan balance is forgiven.
If the CO is not received during the first year the 3% interest payments begin, with principal and interest amortized over the remaining 5-year term of the loan. Once a CO is received the remaining principal balance is forgiven.
According to the City’s records all the properties received a CO during the 5-year term or already had a CO on the grant date except for two properties, one of which had been foreclosed on. The City’s records do not indicate collection effort were undertaken with respect to either of these properties.
300 N. Grace Street which is located on the western side of Grace Street received an $8,000 DRRAP grant. The boundary line for the roof replacement eligible properties runs down Grace Street. The OSA interprets this as making properties on the eastern side of Grace Street as eligible and properties on the western side of Grace as ineligible. The City, however, has consistently interpreted property located on both sides of “boundary streets” as eligible for grants, and that interpretation continues in effect today.
OSA advised the City that the former Downtown Development Manager did not follow DBAP guidelines for 119-121 N. Washington Street and that the owner did not obtain a CO for the property. The City did not have a file on this grant, but from the documents provided by OSA it appears that the work covered by the grant was completed after the application was made. It is not known when the application was approved. The CO was granted on August 19, 2015.
The City has employed a new Community and Business Development Director that reports to the Assistant City Manager. Oversight for the loan programs are now vested in the Director and the Assistant City Manager. The centralization of collection and accountability for all loan collection will include oversight of the Business Services and Collections Director, the Finance Director, the Internal Auditor and the City Manager through monthly compliance reporting.
According to Finding 3, the Engineering Division’s non-compliance with the City’s Code of Ordinances could cost the City $31,000. In 2009, the City’s Engineering Division did not collect on a letter of credit and in 2010 the department allowed the letter of credit to expire. The City Code requires that a developer provide security guaranteeing the completion of all subdivision improvements prior to approval of the final plat. Final plat approval enables the developer to begin selling lots in the subdivision. The Ordinance provides that “Said guarantees shall be for a specific period of time not to exceed two (2) years from the date of planning board approval of the final plat.” It is clear the initial guarantee must be for a specific period of time not to exceed two (2) years. However, the Ordinance does not address the question of whether the two (2) year period can be extended.
The City does not read the Ordinance to require that all improvements must be completed within two (2) years and has routinely extended the time period if the developer continues to maintain adequate security and is working in good faith to get the subdivision completed. In the City’s view this complies with the Ordinance. This practice is consistent with the practices of other local government across the State, particularly during real estate downturns.
However, since the OSA interprets the provision as putting a two (2) year limit on the time for completion of all subdivision improvements, the City will amend this section of the Code to be consistent with the current practice. The problem with the subdivision in question was not the length of time granted for the developer to complete the improvements, but the failure of the City to realize the letter of credit was about to expire.
The work in the subdivision by the new developer has not been completed as of this date. The City anticipates its reimbursement obligation under the contract with the new developer will be approximately $13,000, much less than the $31,000 figure used by the OSA. All work has been completed except one street patch.
The City will amend the Code of Ordinances to specifically state that the time period for subdivision guarantees may be extended beyond the initial two (2) year period. The City has already put in place enhanced procedures to improve tracking of letters of credit to ensure they are either renewed or called prior to expiration if the improvements have not been completed.
According to Finding 4, the City Manager failed to comply with the City’s Travel Policy resulting in $1,575 in unallowable travel expenses from July 2016 through May 2019. Of this amount, $1,416.12 was for dinners purchased by the City Manager for the City Council and City staff at two (2) conferences: National League of Cities, Charlotte ($858.62) in November 2017, and ElectriCities, Asheville ($557.50) in August 2018.
The City Manager was not aware of the remaining $158.88. The City Manager believed that she was covered by a medical exception because she presented documents to the Finance Director that additional meal expenses were required as a reasonable accommodation for her medical condition and the Finance Director never directed her to do anything different. Further, in 2018, the City’s Occupational Health Office documented and placed in the City Manager’s file a statement that additional meal expenses were required for the City Manager as a reasonable accommodation for her medical condition.
The travel policy has not been reviewed since 2012 and will be amended to provide for reimbursement of additional and reasonable travel expenses incurred by any employee on official City business and determined to be necessary as a reasonable accommodation by the City’s ADA Coordinator.
Finally, according to Finding 5, the City did not designate an American with Disabilities Act Coordinator as required by federal law. The City agrees that it should designate at least one employee as an ADA Coordinator and the City Manager has appointed two ADA Coordinators.