Kerr-Tar seeking $311,367 for depleted fund

May. 02, 2013 @ 06:20 PM

Kerr-Tar Council of Governments, an administrative and service arm for grants and programs, is asking for a one-time per capita assessment from the 21 entities in the five counties it serves.

Brian Pfohl, chairman of the board of directors, sent a letter to the member government entities explaining an unintentional accounting irregularity involving the Economic Development Administration Revolving Loan Fund. Pfohl explained the problem was reviewed and no evidence of “intentional wrongdoing” was found.

Diane Cox, the interim executive director since July, confirmed by telephone “there was no intentional wrongdoing by the previous director here,” referring to former executive director Timmy Baynes.

Baynes left in 2012 and is now the executive director in Region Q, known as the Mid-East Commission, which encompasses Pitt, Beaufort, Martin, Bertie and Hertford counties.

Kerr-Tar has been asked by the EDA to repay $138,537 and segregate its account. Previously, Kerr-Tar worked from a singular checking account to maximize returns and minimize banking fees, according to past board minutes.

The council, however, also needs operating funds in the account. The 21 government entities have been asked for a total of $311,367, a per capita assessment of $1.39.

The annual per capita assessment is 48 cents.

“During the 2011-12 audit review, there were certain receivables we’d been carrying on books that were not going to come in as projected or were deemed uncollectible,” Cox said. “As a result of writing off those receivables, some more than 12 months, it put us in a negative cash flow.

“We utilize one checking account for our general fund. There were other funds in the account that are restricted. Because we were in a negative cash flow, we inadvertently used some of those restricted revolving loan funds.”

Cox said because of a federal compliance binding, the EDA asked for those funds to be paid back “immediately.”

“We received a letter back in mid- to late-March from EDA,” Cox said, “and it said cease and desist using the revolving loan fund. We had to move funds over. We set up a bank account and deposited some funds in the account, though very limited.

“There was another phone call with folks from EDA on the 19th of April, at which point, they said we need these funds deposited to the account made whole immediately. During the call, we had our attorney on the call, and we asked if we could go back to the governments for the one-time assessment and it would be done in May. The deposits would be made shortly after the end of May.”

Cox said a date is not set in stone, but there’s no mistaking the urgency on either side.

Vance County, at its commissioners’ meeting Monday, has an agenda item for its $40,941 of the equation. Henderson is being asked for $21,362, Kittrell $649 and Middleburg $185.

Granville County’s share is $50,696 and Oxford $11,761.

Warren County’s share is $26,233, with Norlina being asked for $1,554, Warrenton $1,198 and Macon $165.

Attempts by The Dispatch to speak with Terry Garrison, the Vance County commissioners’ representative to the council board, were unsuccessful. Attempts to reach James Pearce, the finance director for the council, were also unsuccessful.

Pete O’Geary, the Henderson mayor who represents the city on the council board, was contacted and declined comment.

The council works through federal, state and local programs as an administrative and service arm. The needs and priorities come from local member governments in the five-county region of Vance, Granville, Warren, Person and Franklin.

Sixteen regional councils cover the state.

The council’s estimated budget revenues for fiscal year 2012-2013 are estimated at more than $6.1 million.

Cox said it was September of last year when the council became aware of the accounting problem. Cutbacks in staffing and staff benefits went into effect Oct. 1.

“It is important to realize, the board reviewed the matter and there was no intentional wrongdoing by the previous director here,” Cox said. “There are internal controls implemented.”

At the March 28 board meeting, the COG’s annual audit report was presented. According to the auditor, there was “a material weakness in internal control over financial reporting in that there is insufficient segregation of duties to maintain adequate internal control.”

The finding is common in entities with small staff. It was also a repeat finding from the prior year, according to the minutes of the meeting.

The board’s corrective action in July 2012 was an adoption of Financial Policies and Procedures.

Cox said the council’s problem was like some faced in households throughout the region served.

“If you don’t have the money, you have to figure out how,” Cox said. “Council governments do not have the statutory authority to incur debt. The only means is to go out to the members and ask for additional assessment.”

Cox said board members have been supportive. She also believes they understand the gravity of the situation and what the council means to their communities.

“I think it’s important to note that over time, for the assessments you put in, for every $1 you put in, you receive $61 back in federal and state grants and programs in this region,” Cox said. “There’s a whole spectrum of services that we offer our member governments. For the general public, they may not always see that. However, if all of the sudden those services weren’t there, nobody else is there to provide them.

“I believe our member governments understand and value what we do. This is a difficult situation and unfortunate, but we’re ready to move forward and provide services for the citizens of this region.”


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