North Carolina asked to look into Chowan budget crisis

By Connie Sage, correspondent

EDENTON, N.C.

District Attorney Frank Parrish has asked the State Bureau of Investigation’s Financial Crimes Unit to investigate the budget crisis in Chowan County for any possible criminal misconduct, the county attorney said Tuesday.

The Board of Commissioners had asked the newly appointed county attorney, John Morrison, on Monday to determine whether any laws were broken and, if so, to turn the results over to the district attorney.

Instead, Morrison met with Parrish on Tuesday afternoon. There are “obvious advantages,” Morrison said, to having the SBI look into the fiscal problems. There would be no expense to the county, and “they have the expertise that I do not.”

Morrison said Lawrence Young, special agent in charge of the Financial Crimes Unit, will be in charge of the investigation.

“I will try to meet with Young to see what can be done to expedite this,” Morrison said. “The people of the county want a resolution promptly, and he will have complete cooperation from the county employees, county commissioners and myself.”

County Manager Peter Rascoe told commissioners and more than 850 residents at a meeting Monday that when he took over as chief executive in June, he learned the county had a cash-flow problem and was unable to pay all its bills. A reserve fund that at one time had more than $25 million was nearly depleted, he said.

Former County Manager Cliff Copeland, who retired after 29 years, said Tuesday that the reserve funds were borrowed internally and are still on the county’s books as assets.

“We didn’t just take money and spend money out of the reserve accounts,” he said. “We borrowed the money, and that’s the big difference. It’s a receivable, and it will be paid back.”

Copeland likened it to a consumer bank loan for a mortgage. The bank doesn’t own the house, he said, “but they’re showing the loan as a receivable in their books.”

The state’s Local Government Commission told the county in a July 24 letter that it was in violation of state law by overestimating the current county budget by $4 million.

The county was “tapping the fund balance” by spending more than it received by as much as $3.3 million over each of the past five years, the fiscal watchdog group said.

At the Monday meeting, Rascoe outlined four options to correct the budget shortfall, including no tax-rate increase with services severely cut or a 19-cent tax-rate increase on top of the county’s existing 56 cents per $100 of assessed property value.

He said the county was “in the red” at the end of July by $262,800.

“We paid everybody we possibly could,” Rascoe said Tuesday, and the county will pay the rest of its bills in August.

Commissioners will select one of the four plans at a 6 p.m. meeting Aug. 14 in Swain Auditorium.

Commissioners said they had no idea the reserve fund had been nearly emptied. They contended that Copeland should not have transferred money from reserves for capital projects or to balance the budget, citing a 1998 resolution prohibiting the use of principal from the fund.

Copeland, however, said Tuesday that the resolution “did not say the money could not be borrowed.”

“It was reviewed by the Local Government Commission. Everybody was fully informed. If the commissioners didn’t understand, why didn’t they ask questions?” he said. “I remember telling them this is not cash; this is money invested and we’re going to pay it back.

“They can beat up poor Cliff all they want, but I stand by my integrity and honesty to the end of the day,” he said.

“The money was never spent. It was included in the budget ordinance every time,” he said.

“There are no criminal charges out there. I wouldn’t even charge a pencil to the county. At the end of the day, I will be vindicated.”

Copeland was in a car accident Tuesday after he said he “ ran off the road,” flipping the vehicle twice. He reported no serious injuries.