Mayor questions lack of N.C. county budget oversight

By Connie Sage

EDENTON, N.C.

Mayor Roland Vaughan on Monday questioned why no one in authority knew that millions of dollars in Chowan County reserve funds were all but emptied over the past decade.

"Where's the oversight?" Vaughan asked after the Local Government Commission last week notified county officials that the county is operating in violation of state law.

Calling the fiscal problems "very serious," the state's fiscal watchdog agency found that the county has spent more than it has taken in by $1.3 million to $3.3 million annually for each of the past five years. It was making up the shortfall by tapping its reserves, according to a letter sent to county officials.

Edenton residents pay not only town taxes but also county taxes and will be affected by cuts in services or a tax rate increase to balance the current budget as mandated by the state agency.

"How does the manager have the authority to draw down on funds specifically set aside, and why weren't questions asked during audit reviews?" Vaughan asked.

County Manager Peter Rascoe is struggling to balance a new 2008-09 county budget as directed by the Local Government Commission. The state could step in to oversee day-to-day operations of the county if officials fail to balance the budget.

Rascoe took over as county manager at a June 16 meeting from longtime manager Cliff Copeland, who retired. Copeland's last responsibility was to recommend that the commissioners approve the 2008-09 budget, which was adopted that night. It called for no tax increase.

Rascoe said he was told the next day that the county had a serious cash flow problem and depleted reserves.

The Local Government Commission found that the county has not balanced its budget for years without tapping into reserve funds set aside for emergencies. Only $723,335 remained in the accounts, according to the agency, compared with $19.5 million in 2003.

According to November 1998 county meeting minutes, at least $29 million was in two health care funds from a lump sum payment for the long-term lease of Chowan Hospital to University Health Systems.

Commissioners two months earlier had mandated that the principal should never be expended unless authorized, and that no more than 75 percent of the interest from the funds could be spent, according to minutes.

Rascoe said the county's annual audit did show there was a reduction in reserve funds each year.

County commissioners maintain that they were unaware that funds were being transferred from reserves to the general fund.

Some Chowan County department heads already are cutting part-time positions and services.