The former mayor and former town administrator for the Town of Fremont, Wayne County, are accused of allegedly allowing two people and their pets to live in the town hall for six months. That is just one of the findings in an audit released this week by North Carolina State Auditor Jessica Holmes.

There were eight findings in the report that spanned a period from 2014-2021.

Auditors say the former mayor allowed the individuals to live in the town hall as an incentive for bringing a new business to the town. The former town administrator also approved installing a shower and hot water heater for the individuals, costing $3,450. An additional $293 was spent on utilities for the individuals during that time.

Employees had seen the individuals, including in areas of restricted public access, during business hours. Finally, a citizen saw them leaving the building at night with their pets and reported the incident to a Board of Aldermen member. The board was unaware of the individuals living in the town hall until three months after they moved in. 

In addition, the occupants lived in an area of the town hall with unrestricted access to documents containing personally identifiable information, including personnel files, bank statements, credit card statements, and other sensitive documents. 

The report said that during the March 17, 2020, Board of Aldermen meeting, a board member questioned the mayor if it was an appropriate business incentive to allow people to live in town hall. The former mayor replied that he did not care, as he was going to start taking certain liberties granted to him as mayor. However, the former mayor did not have the power to direct the use of town property without board approval. 

Auditors recommended that the Board of Aldermen should ensure that town property is used only for business purposes, and the mayor should only act within his authority as described in the town ordinance.

The town also did not report to the Internal Revenue Service (IRS) $235,013 of compensation paid to the former town administrator and former payroll clerk for services performed from 2014 through 2021. 

Both employees were paid through the payroll process and also via check as contractors.

Payments made to the employees through payroll should have been reported on a Form W-2 (Wage and Tax Statements), and payments made via check for contracted services should have been reported on Form 1099.

As a result, the town may be assessed penalties and fees for not properly reporting the compensation. The compensation was not reported because the town did not have procedures in place to ensure that the appropriate tax forms were issued to those receiving the payments.

According to the previous finance officer, from July 2021 to June 2023, the town only issued 1099 forms to one or two people during her tenure. The process of issuing 1099 forms was manual. The former finance officer prior to July 2021 could not be located to interview about her process for distributing tax forms.

Recommendations include that the town should provide individuals with the corrected Form W-2 and/or Form W-2 or 1099 not provided as applicable for tax years 2014-2021 for services performed. They should also submit all corrected Form W-2 and unfiled Form W-2 or Form 1099 to the IRS for tax years 2014-2021. Finally, the town should implement procedures to ensure Form W-2s and Form 1099s are issued annually to individuals who provide services and are paid greater than $600 in a calendar year.  Auditors noted that the finding is being referred to the IRS and the North Carolina Department of Revenue.

The audit’s third finding revealed that the former payroll clerk falsified town payroll records to profit herself and two other employees. Specifically, the former Payroll Clerk paid herself, the former public works director, and the former town administrator for more holiday hours than could be earned by manually adding additional time to the payroll records.

The clerk told auditors she added the hours because this was how it had always been done for these positions.

Each full-time town employee is paid eight hours for each approved holiday at their hourly rate. The former public works director and the former town administrator were full-time employees. The former payroll clerk was a part-time employee. 

Investigators reviewed payroll records and found that these three employees were paid $14,268 for more holiday hours than could be earned from January 2014 to December 2021. Specifically:

  • The former payroll clerk received $4,710 more than earned. 
  • The former public works director received $9,174 more than earned.
  • The former town administrator received $384 more than earned. 

When the former town administrator discovered he was being overpaid, he notified the former payroll clerk to stop the payments and repaid the entire amount. 

Auditors say it was also clear that the former town administrator didn’t review payroll, which became one of her job responsibilities from March 2021.

Holmes’ office recommended that the town seek reimbursement of the amounts overpaid to the former town employees and that the Board of Alderman ensure all staff follows the established processes to safeguard the town’s assets, including reviewing supporting documentation for payroll disbursements.

Other findings include:

  • The town paid $32,424 to the former town administrator for vacation hours that she did not earn.
  • The town also didn’t ensure that charges made to the town’s credit cards were for a valid Town purpose. As a result, there were over $37,000 in credit card charges with no documented business purpose. There were charges, however, for $5,376 in purchases for food, a $354 purchase to a vacation rental home company on the card assigned to the former town administrator, $454 in purchases shipped to the former finance officer’s home that included an air mattress, Roku smart TV device, popcorn maker, mini fridge, table lamp, iPhone case, seven YETI tumbler cups, and other items. The former town administrator said the items were for the town’s Christmas party.
  • The Board of Aldermen reduced the utility payment for a relative of a board member, which violated the town’s public works ordinance. As a result, $876 of uncollected funds were unavailable for a valid town purpose.

Auditors say the town has either taken corrective action or is in the process of doing so on all of the findings.

In addition, Jonathan Allen, the current town administrator, notified Holmes’ office that all board members recently completed two hours of ethics training. All board members, as well as key staff members, will attend a municipal finance training session hosted by the North Carolina League of Municipalities on June 4.