Audit raises funding questions

A state agency is conducting an investigation into a regional non-profit group that is responsible for helping low-income people with housing and other needs.

The Office of Economic Opportunity (OEO) should complete its review by mid-August, said Zack Hamlett, its director. OEO administers the Community Action Partnership Program as well as programs that deal with weatherization and emergency shelter.

The probe is in response to a state audit released in June that questioned spending by Sandhills Community Action Program Inc. Sandhills covers a four-county area that includes Richmond and has an office in Rockingham.

The audit questions about $35,000 in expenses by Sandhills. The Office of the State Auditor found that Sandhills employees who were sick or on vacation were still charging gasoline to the agency’s credit account on days they weren’t working. It also found some $17,000 in travel and motel expenses were improperly billed to accounts paid by grant funds. The audit took place between August 2007 and March 2008. Some of the questionable expenses date to the summer of 2005.

“What we’re really doing is following up on what the (state) auditor did and do a comprehensive look at the agency,” Hamlett said.

If it is found that funds were spent improperly, Hamlett said OEO will require that Sandhills repay the money.

“We’re going to be looking over their records and we might have a better handle on it by mid month,” Hamlett said.

Nezzie Smith, the director of Sandhills, could not be reached for comment. In a written response to the audit, she said some employees have been reprimanded, but maintains the bulk of the money in question was spent properly. She blames some of the problem on a period of time when the finance manager had personal issues, “which apparently contributed to the relaxed internal controls.”

The finance director has since resigned and a new person has been hired.

The audit was also critical of the oversight from the board of directors of Sandhills.

“We saw no evidence of board reviews of financial statements or reviews of disbursements or other activity designed to ensure internal policies were followed,” the audit reads. “After we began our on-site review, the board did meet and become aware of management’s failure to follow internal control policies and procedures.”

“Receiving taxpayer money to meet a community need was certainly a noble endeavor on the part of Sandhills,” said State Auditor Leslie Merritt in a written release. “But it is imperative that when it received state grants, Sandhills operate within the bounds of the grant agreement, which after all, is a contract with North Carolina taxpayers to use their money for the public good.”

While the state auditor’s office raised the initial concerns, there isn’t much the office can do about it, said Chris Mears, a spokesman for that office.

“The state auditor has the power to look at these books, but lacks enforcement powers,” Mears said. “The best enforcement mechanism would be from the grantors, and that would be the Department of Health and Human Services and the Department of Agriculture and Consumer Services. HSS gave them about $1.6 million and the Department of Agriculture and Consumer Services gave them $160,000.

“Those agencies have the ability to suspend funding. That’s the nuclear option, because without funding, they can’t operate.”

The state auditor’s office questioned $2,425 spent by employees for mileage and hotel expenses that weren’t documented. Another $17,925 in unallowable gas expenses were made in 2006 and 2007. The $17,925 was charged to grant accounts that did not allow for travel expenses.

Sandhills Community Action Program Inc. serves Anson, Montgomery, Moore and Richmond counties, and during the time in question had offices in Ellerbe.

In her written response, Smith said the agency has started a training program for all employees on the importance of proper documentation.

“In regard to gas charges incurred on weekend days and/or when the employee was on sick or vacation leave, these individuals have been reprimanded and have been required to reimburse the charges incurred,” Smith and board chairman William M. Ward Sr. said in a written response to the auditor’s office. “While we do appreciate your office bringing the results of your investigation to our attention, we respectfully disagree with your recommendation that Sandhills Community Action Program, Inc., reimburse the Office of Economic Opportunity for expenses that were directly related to program and administration and the provide of services to low income individuals.”