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Transpark audit shows organization was at risk for fraud

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Allen Thomas.jpg

By Ginger Livingston
The Daily Reflector and
Reggie Ponder
The Daily Advance

Thursday, April 25, 2019

The state auditor found “significant misstatements” in the North Carolina Global Transpark’s financial reporting because of inadequate internal controls, according to an audit report released on Wednesday.

The audit covered the fiscal year that ended June 30, 2018, which is the year Allen Thomas, one of six Democratic candidate for the 3rd Congressional District, became the Transpark’s executive director.

The report from State Auditor Beth Wood said the deficiencies left the organization with an increased risk that “fraud could occur and go undetected,” that people using the financial documents could be “misinformed” about the organization's financial condition and increased audit costs diverted money from other work at the Transpark.

One of the most significant problems surrounded a $454,407 entry recorded to balance the financial statements because of accounting errors. Wood said her staff eventually accounted for every penny by identifying the accounting errors.

“When you can plug your books for $454,000 and nobody knows why, the door is wide open for fraud to be committed,” Wood said. That didn’t happen, but the situation is troubling.

“While money did not go missing, the numbers need to be accurate on a day to day, week to week, month to month basis,” Wood said.

Wood said her staff raised concerns with the Transpark Authority Board of Directors about the time when the audit for the fiscal year ending June 30, 2017, was completed.

Staff said there were signs that the financial experience of the person in the controller’s seat needed to be watched.

“We saw red flags that there could be issues in the up and coming year in the fiscal year 2018,” Wood said.

Along with the finding of a lack of management oversight, the audit also found there was ineffective oversight by the authority’s board of directors.

In a response dated April 10 and signed by interim Executive Director Richard Barkes and board Chairman David Howard, the authority concurred with the audit’s findings and listed the corrective actions being undertaken.

The audit stated management did not “fully cooperate” with the audit process, saying it didn’t provide all required financial statements until Feb. 14, 146 days after they were originally promised.

Wood said Thomas never responded to her staff requests or talked with them. She said the controller did send financial information but it was in disarray or incorrect or had significant errors.

It wasn’t February, when Wood contacted Secretary of Transportation James H. Trogdon III, the authority’s board chairman and members of the authority board that her staff started getting the correct documentation.

Thomas said he also was talking to the transportation department about the issues with the existing controller and David Tyeryar, the state transportation department’s retired chief financial officer, was brought in as a consultant to help organize the Transpark’s finances.

Along with the $454,407 plug, the audit showed operating expenses were overstated by nearly $1.3 million, 75 percent of the final audited amount. It also found the fiscal year’s beginning balances were misstated by $89,893 event after the Office of State Controller provided the required amount to management.

Among the problems directly attributed to Thomas:

■ The executive director did not review the financial statements that the controller prepared.

■ The executive director did not ensure that staff responsible for the preparation of the financial statements were sufficient in number or possessed the necessary knowledge and training.

■ The executive director did not have an adequate year-end plan designed that would result in a complete and thorough review of the financial statements prior to submission for audit.

Wood said Thomas did not notify her office that he was resigning. The state auditor is required to report any subsequent event from the time her staff finishes its field work to the time the report is published.

Thomas insisted the report does not reflect badly on his leadership.

“It's a reflection on us facing challenges there and turning it around,” Thomas said. “We all knew that the Global Transpark had lost its way a number of years ago. It was an organization that had been defunct for years. My job was to find problems and fix them.”

Thomas said he did fix the problems and actually reported to state officials the problems that were reflected in the audit report.

“The audit just echoed what we had already done,” Thomas said. “We have a new controller in charge of finance.”

Thomas said once he realized the previous controller at the GTP was not doing his job he began the process of firing him, but that process took longer than he thought it should.

“It took awhile for the state to allow me to do what I needed to do,” Thomas said, explaining that he reported problems with the controller at GTP to state human resources officials and the state officials delayed the process of firing the employee.

Thomas said the report's statements about delays in providing documents and lack of cooperation from management reflect the problems with the controller.

Thomas said he didn't recognize at the very beginning of his tenure at GTP that there were severe deficiencies in fiscal control, but once he did realize it he immediately contacted his board and officials at the state level.

“I inherited dysfunctional folks and outdated systems,” Thomas said. “I'm proud of taking on a defunct entity and turning it into one that is creating jobs.”

Thomas said the GTP has had $72 million in new development in the past year.

Thomas and Wood agreed that increased business at the Transpark, and the resulting increase in transaction, is why the deficiencies appeared in the 2018 audit. 

“When you are not writing checks and there is not a whole lot going on the financial statements are not that difficult,” Wood said. “Once business increases and there are many more transactions coming through the books, that is where these things came to fruition and the problems showed up. There is more activity in the Transpark so there were more opportunity for the weaknesses in the financial management to show up.”

Thomas said the volume of work must have been more than the controller could handle.

The release of Wednesday’s report came six days before the April 30 primary elections in the 3rd Congressional District. Wood said the release of the report followed a schedule that is based on when her staff has its final meeting with an organization’s management and financial team and when the organization sends a letter responding to the findings and outlining corrective actions.