The federal investigation into former County Manager Wanda Greene threw a wrench into what is typically a pretty undramatic affair: the county audit.
“Under normal circumstances, I would highlight our unmodified opinion and speak about how our financial position is sound and stable, which it is,” Finance Director Tim Flora told the Buncombe County Board of Commissioners during a presentation of the fiscal year 2017 audit on Jan. 16. “However, as is well-known, there is currently an investigation of our former county manager, and the nature of this investigation is related to potential fraud.”
Tightening internal controls against impropriety became an overarching theme at the meeting. During the audit presentation, Flora outlined a broad timeline detailing how the county first became aware of financial irregularities tied to the former county manager, and commissioners took time to highlight controls they have developed to ensure something like this doesn’t happen again.
What the county knew and when
The early signs began in fall 2016.
“There were some peculiar decisions and directions provided by the former county manager that came across as odd,” Flora said. “Nothing concrete, mind you — just things that made me scratch my head and wonder, ‘What’s going on?’”
In spring 2017, Flora said, Greene took some questionable actions that raised red flags among staff in the county Finance Department. “Not much detail can be provided at this time, but these actions led to an increased level of scrutiny regarding specific financial events,” he said. “It is likely you the board and the public are unaware of these actions, because ultimately they were prevented from occurring because of our internal controls.”
On May 30, Greene announced her retirement after 23 years of employment with the county, effective July 1.
Flora said that over a four-day period in June, the Finance Department noticed several irregularities tied to Greene. Internal controls caught these events, too, but not until after they had already occurred. Staff determined that some of these irregularities were inappropriate. The county started an internal review, and the internal auditor and the human resources director were notified. County staff documented these irregularities the weekend after the discovery and delivered them to the county’s senior attorney on the following Monday.
“Based on this, it was determined that a potential breach had occurred,” Flora said. “While the senior attorney immediately notified the proper legal authorities, finance, HR and IT began the process of restricting county manager access to our systems as well the administration building.”
Flora said county staff notified Greene of the restrictions placed on her access and the county began preserving evidence. In July, as Mandy Stone was assuming the role of county manager following Greene’s retirement, the Finance Department broadened its internal review to determine the financial impact of the events and worked with authorities as they began their investigation, according to Flora.
In the same month, Flora said the county notified its external auditor, the Gould Killian CPA Group, which had already started working on the audit, of the findings uncovered by the internal review and the existence of an investigation. The county then notified its state oversight agency, the Local Government Commission, as well as the state treasurer and state auditor.
In August, the U.S. Attorney’s Office confirmed that there was a federal investigation involving Greene and others.
Auditing the audit
Within the framework of the criteria the financial auditors evaluated, the results of the county’s FY 2017 audit are good. The Gould Killian CPA Group delivered a clean (or unmodified) opinion to the county, meaning that the auditor sampled, assessed and tested county financial records and found nothing that would result in a misstatement of the county’s financial situation.
However, in anticipation of questions from the public about how the county could receive a clean audit amid an ongoing federal investigation, Flora and Ed Towson, a principal at the Gould Killian CPA Group, took time during the meeting to explain the reasoning behind this decision.
“The scope of the audit — what we hired our external auditors to do — was to audit the accuracy of our financial statements,” Flora said. “These are accurate and have always been accurate to the best of our knowledge. The auditor does not make a determination of whether fraud has occurred — rather, whether there have been unreasonable misstatements in the financial statements. There are none. That’s all a clean audit means.”
Flora also clarified that a clean audit does not mean that there has been a total absence of wrongdoing. He divided Greene’s questionable actions into two categories: actions that were inappropriate and actions that were technically in her authority but were questionable because of other factors.
“The dollar value of the first category, those that are inappropriate, as far as I currently am aware, are not large enough to affect county operations, and we remain in a stable financial position despite these events,” Flora said. “All other questioned events as discovered through our internal reviews happened through budgeted expenditures and also do not affect our financial position in any new ways.”
Flora also clarified that the county is not missing any money. “Every dollar in our financial system is accounted for in these statements we present to you tonight,” he said.
Towson said Buncombe County does have a functioning system of internal control, with the detection part of the system being instrumental in flagging some of the irregularities tied to Greene. “The system itself is designed in a way that is reliable, and therefore it is not deficient,” he said “Can it be improved? Any system can be improved, but it was reliable and … it did detect the problem.”
One recommendation the firm has for strengthening the county’s system of internal control involves adjusting “the tone at the top” — making sure every employee realizes they have a duty and responsibility to report anything they think is inappropriate.
“There was an old saying, I think in World War II: ‘See something, say something,’” Towson said. “That should be the encouragement for the educational processes, the systems to allow people to report to supervisors or on the whistleblower line or any other mechanism. We agree that that is important to strengthening the system.”
Before the audit presentation, commissioners presented a list of internal reforms the board has undertaken that build on reforms implemented since last July 1:
1) “If it is determined that public funds have been used for illegal or unethical purposes, the Board of Commissioners instruct the county manager to continue efforts to recover funds, as legally permissible.”
2) “The Board of Commissioners shall provide a performance review of all appointed staff (county manager, chief financial officer, county clerk, Board of Commissioners attorney) in July of each year. Due to the special circumstances of FY 2018, the BOC will also conduct a mid-year goal-setting session and review with appointed staff, to take place no later than February 2018.”
3) “The budget director will provide budget to actual reports, and the chief financial officer will provide financial updates on a monthly basis.”
4) “On a quarterly basis, the internal auditor will report to the Board of Commissioners on the current priorities of the internal audit committee.”
Commissioner Mike Fryar said Stone and county staff have already started following through with several of these directives, specifically Nos. 1, 3 and 4, and suggested that the items were merely formalizing steps that Stone had already taken. “I didn’t know it was going to be put in the paper and brought forward, so I think it needs to be relooked at, because three of the things here are already part of what she [Mandy Stone] has put in place herself without instructions from us,” he said.
Commissioner Jasmine Beach-Ferrara told Xpress via email that these reforms do build on work that’s been performed under Stone’s leadership, which is exactly the point. “In regards to #1, #3, and #4, the instructions provide new specific guidelines that, in my view, it’s critical to be clear and precise about so we are communicating clearly with staff and so that community members are as informed as possible,” she stated.
Commissioners also discussed other changes the county could implement in the near future. Commissioner Joe Belcher said one item the board should consider is a one-cent reduction in the property tax rate in the 2018 budget to return money to the taxpayers, a move that Commissioner Robert Pressley said he supported.
Belcher also noted that the county could benefit from adding a watchdog function to the county system. “If something does not fall exactly within policy in a gatekeeper or watchdog function, it immediately kicks it out. … It’s a part of the private sector, and it is a good policy for us to explore,” he said.
Belcher said he was glad the commissioners were taking the opportunity to have this conversation in front of the public — something Commissioner Ellen Frost also appreciated. “Too often in the past, commissioners have been the last to know things, and it’s hard to lead when you’re in a position of not knowing things, so going forward I look forward to greater transparency not just with the public but on us too,” she said.
Frost said she remembers being told during her training not to micromanage the county manager. “Well, that has burned all of us, so I think we’re all ready to move on from that strategy,” she said.