Officials from the Town of Farmville in Pitt County have come under fire in a recent audit by North Carolina State Auditor Beth Wood’s office for allegations, including that the town lost thousands of dollars while conducting town business.
The first finding surrounds a property exchange for the town’s fire station. In June 2019, the town’s board of commissioners exchanged its existing fire station for a property to build a new one. The existing fire station was appraised for $485,000 during the exchange. However, it was exchanged with a value of $325,000 based on a valuation by the town manager, who Wood’s office said didn’t have a background in real estate or property appraisals.
A May 2023 retrospective appraisal valued the existing fire station property at $332,000. The new property was not appraised, but the town manager estimated its value at $250,000. To equal the $325,000 value estimated by the town manager for the existing fire station, an additional $75,000 in cash was to be paid to the town by the seller of the new property.
A retrospective appraisal valued the property at $142,000 at the time of the exchange. Based on the original and retrospective appraisals, the town is estimated to have an economic loss between $108,000 and $268,000.
Also, according to the audit, board minutes do not reflect that they reviewed any documentation supporting either property’s value before approving the resolution authorizing the exchange.
Wood’s office recommended that the town manager ensure that financial decision-making is supported by documentation or evidence, and they should provide all relevant information to the board to ensure it makes decisions in the town’s best interest, including but not limited to property transactions.
The audit says the board should also perform its due diligence for property exchanges, including, but not limited to, completing and reviewing appraisals and other relevant documentation for purchases, sales, or exchanges to ensure the town receives full and fair consideration.
The audit’s second finding regards the board’s approval of a rental agreement for the use of a portion of a building as a temporary space for the town’s library in exchange for the paving of a parking lot at the same building.
In June 2019, the board approved an agreement for the town to rent a portion of a former railroad depot to use as a temporary library during the construction of a new library. Instead of paying monthly rent, the town agreed to construct a parking lot at the depot for the private owner at a cost of $330,585, the equivalent of more than $18,000 per month in rent for the temporary library. The audit said the town manager stated that the parking lot would have public parking unless the owner had a private event. They said the town was interested in creating more parking, and this allowed them to do so without acquiring any land.
But the public would have no idea the lot could be used for public parking, as the audit states there are no signs indicating it.
The town rented the space from January 2020 through June 2021. However, the town manager stated that the rental rate for a building similar to the depot would likely be around $5,000 to $6,000 per month on the open market. But they didn’t analyze the paving cost compared to a reasonable monthly rental rate for the building and didn’t provide any documentation supporting the amount.
Further details reveal that even though the board approved the lease agreement in June 2019, the contract for the construction of the parking lot was not signed until March 2020, which meant that neither the town manager nor the board knew that the parking lot would cost $330,585 when the town manager asked the board to vote on the lease agreement.
Auditors concluded that the town could have saved approximately $12,000 per month, or up to $222,585, for space for the temporary library.
Wood’s office recommended that the town manager obtain and provide relevant information to the board to ensure the board makes decisions in the town’s best interest, including but not limited to rental transactions. The board should perform its due diligence on rental transactions.
The town also improperly administered $520,000 in Community Development Block Grant (CDBG) Neighborhood Revitalization funds, according to the audit’s third finding, by not following the selection process outlined in the town’s application to the North Carolina Department of Commerce for the funding.
The board also acted as the selection committee instead of forming one that included the public, as required by the grant agreement.
While the town held two public hearings to receive input on applying for the grant funds, they did not solicit applicants to be considered for housing improvements.
Instead, according to the town manager, the board provided potential recipient names to the program manager to evaluate. The program manager stated that, to come up with an applicant pool, every board member and the mayor were asked for the names of residents they knew may qualify. Those names were used to develop the list of candidates.
The program manager admitted that the public did not know to contact board members to be considered for the grant funds. He selected six homeowners to receive funding from a list of 16 properties derived from homeowners submitted by board members and homeowners who had previously contacted the program manager seeking assistance. The program manager admitted to not asking for the Department of Commerce’s approval for changing the selection process as required.
As a result, homeowners did not have an equal opportunity to be selected for these grant funds, which the town could be required to repay as they were not spent in accordance with the grant agreement.
Auditors recommended that the board and the town manager should be familiar with and comply with all requirements of approved grant agreements.
Finally, the town’s finance director admitted transferring $359,122 from the electric fund to the general fund, which was $54,794 more than allowed for the fiscal year ending June 30, 2021.
The finance director told investigators she transferred more funds than allowed because she was unaware of the state law requirement.
As a result, those funds were not available for the town to make improvements to the electric system, make payments on bonds and other related debt, and/or provide lower electric service rates for its residents.
Wood’s office recommended that the town manager ensure the finance director calculates the correct amount to be transferred from the electric fund.
Auditors said town officials didn’t agree with the findings, defending the site for the new fire station or temporary library as the best location for the properties versus the loss of thousands of dollars. They also said they were unaware of new guidance from the Local Government Commission (LGC) regarding the transfer of funds in the fourth finding.