RALEIGH — An investigative audit report found the Elizabeth City had “noncompliant” spending items such as flounder dinners priced at $32.99 each.
“The State Auditor’s Office is committed to responding to the public’s concerns, and our work in Elizabeth City is an example of that response,” State Auditor Dave Boliek said in a press release.
“Our investigation shows that tighter controls are needed on the use of government credit cards in Elizabeth City,” said Boliek. “We’ve delivered that recommendation to the city’s management, and will remain active in our mission to bring accountability to government in North Carolina.”
A press release by the Office of the State Auditor (OSA) says the report was prompted by an allegation that came through the OSA Tipline that involved Procurement Cards (P-Card) used by city officials.
The OSA reviewed P-Card purchases of almost $94,000 — $79,166 in P-Card purchases by city employees and $14,640 of P-Card purchases by the former city manager.
According to the audit report, the flounder team dinner outing at Waterman’s Grill totaled $505 and included eight orders of the $32.99 stuffed flounder.
Other high-dollar figure food purchases included $705 at Sugarcane Grill and Lounge for brunch for the American Defense Team, $447 at Jersey Mike’s for the Capital Budget Retreat, and $318 at Sagos on the River for a finance team lunch as a reward for a successful audit.
The audit report says that while purchases of food are not explicitly prohibited, the P-Card purchases violated Elizabeth City’s Purchasing Manual.
Specific violations mentioned were exceeding a $500 limit, failure to provide itemized receipts, no evidence of a supervisor approval, employee failure to submit purchasing logs, and no supervisor signature on purchasing logs.
Elizabeth City has had five finance directors since August 2022, according to the OSA press release. Additionally, as of September, the city has no permanent director and “has spent over half a million dollars on contractors to assist the Finance Department over the past two years.”
The audit report contains 11 recommendations addressing misuse of P-Cards that include review of all P-Card transactions by the former city manager and other employees since January 2024 to identify and recoup personal or inappropriate purchases, such as food for staff.
Other recommendations included updating the City’s Purchasing Manual on appropriate P-Card processes, spending limits, supervisory approvals, itemized receipts and what food purchases are allowed.
Additionally, the audit suggests limiting P-Card use to essential employees only, mandating P-Card training and making sure charges line up with budget codes. The audit also recommends hiring a permanent full-time finance director who can train staff and help end use of costly external contractors, which the report says has cost the city at least $700,000 over a two-year period.
Elizabeth City Manager Reginald Goodson responded to the audit’s findings and recommendations, concurring with most of the findings. Goodson’s response emphasizes funds were not used for personal gain and the former city manager’s actions were not fraudulent but rather reflective of outdated policies.
In its response, the city disputes the characterization of certain food purchases as “excessive or inappropriate,” arguing purchases for work-related gatherings, such as team dinners and employee appreciation events, are “common” and reasonable practices, and that the report’s examples are isolated, justified uses of funds and not a sign of systemic abuse.
The city’s response also requests the removal of certain items it disagreed with prior to the audit being finalized.
