The Cumberland County District Attorney’s office was asked to investigate misappropriated town funds in Gray, officials confirmed last week, four months after notifying residents of the discovery.

An annual town audit in April found that an employee who was leaving a job was paid $27,000 in accrued sick time – far more than allowed under the town policy.

In a letter dated April 7 to town officials, auditors from RHR Smith & Co., a certified public accounting firm in Buxton, detailed other problems, including missing credit card invoices, inconsistencies with vacation time records and a lack of internal controls with payroll. They also noted problems with payroll tax withholding that led to IRS penalties.

Auditors also found that some town employees were paid for vacation days while also receiving their regular pay.

Town officials reported the alleged misappropriation to “local and state law enforcement,” the town manager and Town Council wrote in a letter to residents in May. The letter did not say who was responsible for the alleged misappropriation or who received the $27,000 in accrued sick pay.

“The Town Council is as disappointed and angry about this misappropriation as we are sure Town residents and citizens will be learning of it,” the town officials wrote. “We will pursue all available remedies to ensure the Town recovers these missing funds.”

The audit has not been discussed at Town Council meetings since May.

Krista Chappell, who chairs the Town Council, confirmed in an email last week that the investigation had been referred to the district attorney’s office but said she could not share any additional information. Abbey St. Clair, a spokesperson for the district attorney, said she was unable to confirm the referral.

Nathaniel Rudy, who was the town manager at the time of the audit, resigned his position this month to take a job out of state but said before he left that he was not authorized to talk publicly about the situation. Interim Town Manager Josh Tiffany did not respond to multiple requests for information about the status of the investigation.

State Auditor Matthew Dunlap said the independent auditing firm, RHR Smith & Co., reached out to his office about how to proceed after auditors found “there was a risk that something had gone wrong.”

Dunlap said the auditors told him they had called the attorney general’s office but were told it was busy with other matters. A spokesperson for the office said she could not confirm if it was investigating.

The state auditor added that he suggested the firm reach out to law enforcement if there was a possibility that funds had been misused. He said he does not know if there is an ongoing criminal investigation.

FINANCIAL PROBLEMS

In its April letter to town officials, auditors pointed out that the $27,000 in accrued sick leave paid to an outgoing employee did not appear to have been approved by the town manager or Town Council.

The town’s personnel policy says employees who leave in good standing are entitled to be paid for half of their accumulated sick time, not to exceed 45 days, if they have worked for the town for at least five years. Those who don’t leave in good standing don’t get that pay.

The auditing firm recommended the town train more than one person to handle town finances and that it reconcile all general ledger accounts monthly.

In their letter to residents, town officials said they were reviewing all “fiscal procedures, practices, and policies and will implement whatever additional controls are necessary to prevent these inconsistencies from happening again.”

When it came to the financial accounting errors, they said all of the town funds had been accounted for, and that the auditor had corrected all transactions and transfers and completed a comprehensive reconciliation of the town’s accounting for fiscal year 2023. The reconciliation resulted, they said, in a net positive increase in available funds and did not impact the current budget.

“We recognize this is a fortunate outcome and it could have turned out differently,” the town officials wrote. “We do not want to see this situation repeated and are committed to ensuring it does not happen again.”

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