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East Spencer loses gang prevention grant

By Nathan Hardin
nhardin@salisburypost.com
EAST SPENCER ó The state auditor pulled the plug on East Spencerís Gang Prevention grant Thursday, citing a misappropriation of funds.
The Office of the State Auditor posted the report on its website, capping a year-long investigation into the use of grant funds. The N.C. Governorís Crime Commission is still investigating if East Spencer will have to repay funds.
The town was awarded nearly $540,000 over two years for the East Spencer Gang Prevention Project in May 2009. The grant allocated $332,184 to the town for the first year, with $207,650 in the second. The N.C. Governorís Crime Commission called for a precursory audit of the grant last spring after reports were deemed inaccurate and untimely.
East Spencer Mayor John Cowan said the grant was suspended shortly after he took office and he did not have enough knowledge about the situation to comment.
The grant intended to fund a project that would target 7- to 14-year-olds who may have been at risk for joining a gang.
According to the State Auditorís report, East Spencer had several issues in violation of the grantís requirements. East Spencer used the grantís funds to pay the salaries of two police officers who did not primarily focus on gang activities.The report said the town also failed to report personnel changes within the townís management and did not have a suitable administrative infrastructure for administering the grant.
According to the report, town officials believed the grant was available to ěsupplement the townís general fund and subsequently applied grant funds to police service instead of directly to ëgang preventioní activities.î
The report also said former Police Chief Ron Hines believed the gang prevention grant was ěfor equipment that was needed above and beyond what the town could furnish and not necessarily specific to gang prevention.î
Hines said he was never informed that officers were to be 100 percent devoted to gang prevention, according to the report, and he said he did not believe gang prevention was serious enough to justify a police officer devoted strictly to that unit.
Misunderstanding
Despite the report explicitly stating that ěwe do believe that town officials intentionally misrepresented their plans with regard to obtaining and using the grant funds to pay for two needed patrol officers,î State Auditor Beth Wood said the issue was not an intentional misrepresentation.
ěSomething went wrong in (the Crime Commissionís) review process, so the application was sent back as being approved,î Wood said. ěSo East Spencer just moved forward with that.î
According to Wood, all monies have been suspended. ěNo more payments are being made to the town,î Wood said.
Wood said there is no evidence the town intentionally misrepresented plans to use the grantís funds.
ěIt was more of a misunderstanding than a misrepresentation,î Wood said.
Approved budget
In a response letter to the State Auditorís findings, Mayor Cowan wrote that the funding was not misappropriated because the budget had been approved.
ěWith respect to the cost reporting, budget changes and personnel changes, the town submits that no funding was misappropriated for uses outside of those approved in the grant by the Commission Ö,î Cowan wrote.
According to Wood, the Crime Commission is investigating if East Spencer will have to reimburse the Commission for the misappropriated funds. Woods said the conflict is that the investigated amount was approved by the Commission in East Spencerís budget.
ěThatís being discussed now,î she said. ěIt has not been decided.î
Police Chief Floyd Baldo said he was not a part of the administration that made decisions regarding the grant.
ěThat was in 2009. That was under the previous administration,î Baldo said.
Baldo said he regrets the grantís shutdown because of East Spencerís tight financial situation.
ěI would have done my best to prevent that from happening,î Baldo said. ěWe need the money.î
Earlier problems
This isnít the first time East Spencer has used restricted funds for normal operating expenses.
In 2008, state officials analyzed East Spencerís audited financial statements, finding about two thirds of the townís $201,717 general fund reserve was made up of Powell Bill money. Powell Bill funds are restricted by law for use on street construction and maintenance, leaving only about $67,000 for emergencies.
Wednesdayís State Audit report also stated that, because of changed positions of authority, East Spencer did not have an effective check-and-balance administration.
According to the report, East Spencerís town clerk served as both the ěGrant Authorizing Official,î responsible for reviewing and approving grant related documents, and the ěGrant Financial Officer,î responsible for completing and submitting cost reports.
State Auditor Wood did not provide a time frame for the investigation.
Contact Nathan Hardin at 704-797-4246 or nhardin@salisburypost.com.

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