(The Center Square) – A North Carolina commission has voted to withhold sales tax revenue from 11 towns and cities which are late submitting financial audit reports.
Under the Tuesday vote by the Local Government Commission, the state will hold sales tax payments of from $10,500 to $64,500 from the cities, depending on the government’s budget.
The Local Government Commission, however, granted appeals from 15 other governments to give them more time to complete the audits.
In a lengthy meeting Tuesday, officials from small towns relayed stories of the challenges they face in keeping audits up to date, with some two or more years behind. Software problems, overworked accountants and even embezzlement were cited as contributing to the delays.
One of the most dramatic was the town of Chocwinity in Beaufort County, which experienced embezzlement of about $600,000 over seven years by the former finance officer who was eventually prosectuted.
“The embezzlement was multiple years and there was a lot of work trying to bring up the evidence to file charges,” Beth Wood, partner in an accounting firm hired by the town, told the Local Government Commission. “The bigger event was the substandard audits that were performed in prior years.”
Numerous financial items were not reported or reported incorrectly on those audits, Wood said.
“We had to go back to 2016 to unravel all the financial statements,” she told the commission. “On the bank statements, there are checks that have cleared on the bank statement, with no check number and no cancelled check.”
The auditors had to validate with the banks whether the checks were valid or an embezzlement.
There were also certificates of deposit recorded as cash in the town records, “but there were no bank statements to support any of them,” said Wood, the former state auditor.
She began working on Chocwinity’s audits in 2024 and has just now submitted a completed audit for 2022.
“I can tell you that the 2022 numbers are solid,” she said.
Audits for 2023 and 2024 should be completed by June of 2026, she said.
The audits have been expensive for the town, however, Wood noted. A normal audit might cost $7,500 but the more complicated audits involving fraud can cost as much as $45,000, Wood said.
“Think about three audits in one fiscal year,” she said. “That’s expensive. The appeal to you is to waive the upholding of the sales tax monies so that they can pay for, at the very least, two audits, if not three.”
Chocwinity’s appeal was among the 15 approved by the Local Government Commission on Tuesday, meaning no sales tax dollars will be withheld at this time.
