In the shadow of an ongoing federal investigation into former Buncombe County Manager Wanda Greene, the county received good news this week: a clean audit for fiscal year 2017.
During a special meeting of the Buncombe County audit committee on Dec. 12, the firm in charge of the county’s external audit, the Gould Killian CPA Group, delivered a summary of its findings. It issued clean opinions and reported no material weaknesses in internal control and no material noncompliance with laws and regulations.
Buncombe County Controller Jennifer Durrett told Xpress a clean opinion means the auditor has sampled, assessed and tested county financial records and has found nothing that would result in a misstatement of the county’s financial situation.
During the meeting, county Finance Director Tim Flora said the county is pleased with the results of this year’s audit. “Always good to get another audit under the belt,” he said.
Audit amid scandal
Xpress first reported in August that the FBI had opened an investigation into Greene, who retired from her position with the county on June 30. In September, the county audit committee unanimously approved a measure that gave the internal auditor more freedom by reporting to the committee rather than county management. At the time, new County Manager Mandy Stone said the changes were not related to the federal investigation into Greene. (See “County Moves to Give Internal Auditor Autonomy,” Sept. 19, Xpress)
The issue of oversight of the county’s internal control mechanisms cropped up several times during the audit committee meeting on Tuesday.
Flora reported that after submitting the county’s comprehensive annual financial report to the state, he received a call from Sharon Edmundson, the director of the fiscal management section of the N.C. Department of the State Treasurer. “She and I had a conversation, because one of the things that we did not put in financial statements was a note about the ongoing investigation into the former county manager,” Flora said. “It was not an oversight that we did not put a note in the financial statements. That was something that during the last several months we had back-and-forths with the auditors, and we all felt that because of the materiality and the actual impact on the financial statements themselves that there was no reason to put a note.”
Flora said Buncombe County will seek a debt issue in the spring, which means the county will have to go in front of the Local Government Commission, an arm of state treasurer’s office, to receive approval for its debt application. “Because of the sort of touchy nature of this, … Sharon felt that the state auditor and the state treasurer would push back if we didn’t have this note,” Flora said.
The county added a note that says that after Greene’s retirement, the county noticed some irregularities in spending. The note also mentions the federal investigation into Greene and states that the county is not aware of any material impact on its financial situation stemming from the investigation.
Efficacy of an internal auditor
In connection with the issue, some members of the audit committee were skeptical of the notion that the auditors did not find material weaknesses in internal control.
Tonya Marshall, an auditor with Gould Killian, said that taken together, the county’s system constituted a good overall form of internal control. “I’ve had personal experience auditing 10, 12 counties,” she said. “None of them had an internal auditor or an audit committee, so I think having an internal audit function is great, having an audit committee is great, but saying that a weakness in that structure would have risen to a material weakness, I think would be drastically overstating the impact of that, given that most of the counties in North Carolina don’t even have an internal auditor.”
County Commissioner Al Whitesides, one of two commissioners on the county audit committee, was still skeptical. “Sure, they don’t have an internal auditor, they don’t have what we have,” he said. “But when I look at what we have and what we had in the past, we have a federal investigation going on. I mean, that in itself tells me something’s not right.”
Flora argued that having the internal auditor worked because the county got the internal auditor involved as soon as the county started noticing financial irregularities.
Whitesides countered by referring to reports that Greene authorized the use of public gift cards for personal purchases. “Why didn’t it work three years before? Why didn’t it work when all of this started with the gift cards?” he said. “If we had the structure right, we should’ve caught it.”
Marshall maintained that no system of internal control is perfect. “You can only get a reasonable assurance that whatever controls that you have in place are going to catch things,” Marshall said. “Two areas that are almost impossible to prevent are those management overrides of controls and collusion where you have more than one person involved.”