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A sweeping investigation by the North Carolina Office of the State Auditor (OSA) has exposed alarming financial mismanagement, contract violations, and fraudulent practices within the town of Mount Olive, implicating both the Municipal Airport and the Water Department. The findings point to a pattern of oversight failures, unauthorized spending, and misuse of public funds dating back years, culminating in significant financial losses and public trust erosion.
“Proper management at the local level is incredibly important to ensuring resources are not abused and protocol is followed,” said State Auditor Dave Boliek. “Our Investigative Division took a deep dive into Mount Olive’s finances and uncovered several concerning issues. Local officials agreed with the findings in our report. Now, it’s time for our recommendations to be put into action.”
Airport fuel and contract failures raise red flags
At the Mount Olive Municipal airport, investigators uncovered widespread issues in aviation fuel management and a troubling breakdown in contractual compliance. While the airport operator was contractually responsible for purchasing and selling fuel and was entitled to a commission on profits, there was no written agreement specifying the commission rate prior to the audit.
After the investigation began, the town and the operator signed an addendum confirming a previously undocumented verbal agreement: the operator would receive 30% of fuel profits, while the town would retain 70%.
During the investigation, it was discovered that fuel purchases were being debited directly from a town bank account, despite the town not being a party to the fuel provider’s contract.
“It is unclear why and how a town bank account is being debited for fuel purchases,” stated the report. “Fuel purchases were improperly authorized by someone outside the town.”
Also, payment processes for customers lacked internal controls. Customers who did not pay by credit card were allowed to receive fuel on credit, with invoices sent informally by email to the town clerk. These transactions were not entered into the town’s accounting system, creating risks of lost or uncollected revenue.
Further compounding the issue, the finance director failed to verify fuel commission invoices. According to investigators, after interviewing the finance director, they believed she “did not fully understand the supporting documentation and did not have a process to confirm the invoiced amount was accurate.”
Reviewing fuel sales commissions for 2024 revealed that the town paid the operator 31% in commissions.
“OSA is reasonably assured that the 1% difference occurred due to timing differences in accounting reconciliation,” stated the report.
More troubling was the town’s failure to record commission checks properly. Of 10 checks issued to the operator in 2024, only three were entered into the accounting system by year’s end.
“The Finance Director’s failure to record checks in the town’s accounting system put the town at risk of fraud and/or embezzlement,” the report warned.
In response, the town plans to clarify fuel purchasing and commission responsibilities through a new contract with the airport operator. Interim Town Manager Glenn Holland stated that the town will implement monthly reconciliations of fuel commissions signed off by both parties and reviewed by the finance officer and town manager. Also, semiannual reports on revenue, expenses, inventory and commissions will be required moving forward. The town has also stopped paying for fuel, placing purchase responsibility back with the operator.
Unpaid services and unverified charges
The investigation also revealed that the town continued to pay for airport Wi-Fi and telephone services, expenses contractually assigned to the operator between 2017 and 2024.
Although the town received $300 per month in Wi-Fi reimbursement from January to September 2024, it failed to consistently pay its internet provider “due to a dispute.”
The report states that the town’s finance director reported the town issued a single $10,000 lump sum payment in September; however. records provided by the internet service provider during the investigation show this payment was not credited to the town’s account.
Phone records were similarly murky. Of seven phone lines billed to the town, only two could be traced to airport operations. The remaining five lines and various unexplained charges could not be accounted for by either the finance director or the airport operator.
In response to the audit, the town has committed to a full review of all Wi-Fi and telephone invoices since the contract began in 2017 and will seek reimbursement from the airport operator for costs outside the town’s responsibility. The town has discontinued Wi-Fi service at the airport and terminated all unverified phone lines. A revised contract is being drafted to clearly outline fiscal responsibilities, with oversight measures to ensure compliance. The town projects full implementation of corrective actions by Dec. 30.
Water Department audit exposes fraud and over $210K in losses
The investigation also uncovered a culture of misconduct and gross negligence within the Mount Olive Water Department, resulting in a confirmed loss of $210,837 in utility revenue and evidence of fraud involving employees.
At the heart of the allegations was a sitting town commissioner who had his $100 water cutoff fee waived nine times in 2024.
“The commissioner did not make a single payment on his utility bill until August 2024 – when OSA received the allegation – at which point his outstanding balance was $942,” stated the report.
Investigators also found that Water Department staff had engaged in similar behavior. The Water Department supervisor and billing clerk repeatedly voided their own cutoff fees while continuing to receive water service. The supervisor voided her own fees in 11 out of 12 months, and the billing clerk in 9 months. Both employees were suspended in January and terminated in March.
OSA determined that from April to May 2024 alone, hundreds of $100 cutoff fees were voided without documentation, a practice attributed to both intentional misconduct and the town’s lack of formal billing policies and controls.
Billing errors cost the town thousands
In addition to misconduct, the audit revealed critical billing errors stemming from improperly implemented rate increases. In 2023 and 2024, commercial water rates approved by the town board were entered incorrectly into the billing system, with minimum and maximum usage rates set identically.
As a result, commercial customers were billed only a flat base charge no matter how much water they consumed. Businesses that should have paid over $1,000 a month were charged an average of $17. This mistake persisted until March, at which point efforts to correct the errors led to gross overcharges.
The OSA concluded that if proper review procedures had been in place, such critical mistakes could have been prevented. Overall, the town lost $210,837 in revenue due to these missteps, further straining municipal finances.
The town has agreed with the OSA’s findings. Moving forward, the finance officer will assume responsibility for forwarding rate tables to the billing software vendor and verifying updates. There will be no access to rate tables by water billing employees.
Only the Water Billing Supervisor will have access to void fees, and every void will require written justification, which will be reviewed and approved monthly by the finance officer. Town manager approval will be required for any voided fee needed for a town employee, town commissioner or vendor. The town also plans to pursue collection of outstanding balances and update its utility billing policies.
“A recommendation will be presented to the town board to pursue the collection of outstanding balance of all inactive accounts, including the accounts referenced in the Audit Report. It is also recommended that voided fees, including disconnect fees and late fees, be collected on the accounts referenced in the Audit Report as well as all other accounts that can be justified.”
Additionally, a rate study by the North Carolina Rural Water Authority is underway to help ensure that future rates are appropriately set and implemented.
To report alleged incidents of fraud, waste or abuse in state government contact the Office of the State Auditor’s Tipline 1-800-730-8477 or visit auditor.nc.gov/about-us/state-auditors-tipline.
