State audit reveals Town purchased services from company owned by Town employees

(updated Nov. 8, 2023, 3:57 p.m.)

Audit: use of septic service company violated Town policy

The following is a quoted summary of the report posted online by N.C. State Auditor Beth Wood and staff on Nov. 2, 2023, regarding the Investigative Audit of Town of Taylorsville, online at: https://www.auditor.nc.gov/audits-reviews/all-other-reports/investigative-audits

“The Office of the State Auditor initiated an investigative audit in response to an allegation received regarding the Town of Taylorsville (Town). The allegation was related to the Town contracting with a company owned by Town employees, and the Town employees being paid through the company that they owned for services performed for the Town during their work hours as Town employees.

Key Findings

• From March 2006 through January 2023, the Town paid Miller Septic Service, a business owned by two Town employees, $746,839 for septic and sewer services in violation of the Town’s Procurement Policy.
• The Town did not have any procedures in place to ensure that the owners of Miller Septic Service were not performing services for the Town, through the company, while they were being paid as Town employees.

Key Recommendations

• The Town Council should ensure that the Town Manager enforces the Town Procurement Policy.
• The Town Council should ensure that the Town has safeguards, such as policies and procedures, to prevent employees from being paid through their company and the Town at the same time.”

Lack of Oversight

The report noted that this situation was due to a lack of oversight by the former Town Manager.

“According to the former Town Manager, he did not implement any safeguards to ensure that the owners of the company were not paid through the company and as Town employees at the same time because he trusted the employees,” the report stated.

“The former Town Manager stated that, if the employees were doing something of substance through their company, they were to clock out for the Town. However, he also stated that no one was comparing their timesheets to invoices to ensure they were clocking out.

“Further, the Town Manager did not require Miller Septic Service to submit invoices with details such as the time of day the services were performed, and the number of hours required for the services.

“The former Town Manager stated, ‘it has to do with trust.’ ”

Town’s Response

The Town’s response to the audit was also included in the audit report. It stated:

“The Town of Taylorsville sincerely appreciates the opportunity to respond to the draft investigative report issued to our town on October 26, 2023. The Town Council has reviewed and understands the findings listed in the investigative report. After discussion, the Town Council along with the new Town Manager and Town Staff plan to implement the following actions to correct the findings as follows:

“Finding #1 – Town Paid Company Owned by Town Employees in Violation of Policy

“The Town will ensure that all policies in place for the fiscal management of the Town are followed, including but not limited to the Procurement Policy, Conflict of Interest Policy, Personnel Policy and Ethics Policy. These policies when followed prevent personal interest of staff members, officers, and council members of the Town of Taylorsville from interfering with the performance of their duties to the Town of Taylorsville, or resulting in personal financial, professional, and lor political gain on the part of such persons at the expense of the Town of Taylorsville.

“The Town’s Conflict of Interest Policy and Procurement Policy were breached when the former Town Manager authorized the Town to do business with Miller Septic Service, a company owned by two Town of Taylorsville employees. Under new management, all policies will be strictly followed and monitored for compliance. All policies will be reviewed and signed as acknowledgement of understanding on an annual basis per conditions of employment and/or election of office and/or appointment of committee. The Town will conduct personnel proceedings as applicable by law and in addition to the breach of the Town’s Personnel, Conflict of Interest and Ethics Policies in regards to the findings disclosed by the report regarding all employees named.

“Finding #2 – No Procedures to Ensure Employees Were Not Double Paid

“Effective October 3, 2023, Aaron Wike was named Town Manager for the Town of Taylorsville. Under new management, The Town will ensure that all policies in place for the fiscal management of the Town are followed, including but not limited to, the Procurement Policy, Conflict of Interest Policy, Town Personnel Policy and the Town Ethics Policy. These policies when followed prevent personal interest of staff members, officers, and council members of the Town of Taylorsville from interfering with the performance of their duties to the Town of Taylorsville, or resulting in personal financial, professional, and lor political gain on the part of such persons at the expense of the Town of Taylorsville.

“The Town has now purchased a new vacuum truck and hired an employee to operate [it] as needed; therefore, there should not be a need to contract any services from Miller Septic Service or any other provider of this type in the future unless emergency situations should dictate where more than one (1) truck is needed. The Town will conduct personnel proceedings as applicable by law and in addition to the breach of the Town’s Personnel, Conflict of Interest, and Ethics Policies in regards to the findings disclosed by the report regarding all employees named. In years past, the Town Manager was also the Finance Director. As an additional fiscal management safeguard, The Town plans to separate those duties by hiring a Finance Director.

“We have implemented a new work order process to improve documentation of all authorized work orders. We will also be installing security cameras at town buildings.

“The Town Council would like to express their thankfulness to The NC State Auditor’s Office for the opportunity to respond to the findings contained herein. We feel with a high degree of confidence that we now have in place with new management, along with the planned addition of a Finance Director, the capabilities to segregate positions and duties and ensure that correct management of fiscal policy and all Town policies are followed accordingly.

Respectfully Submitted,
The Town Council of Taylorsville,
George Holleman, Mayor, Kenny Poole, Mayor Pro Tem, Ronnie Robinette, Kim Brown, and Jack Simms, Council Members.”

Wood’s report noted on the final page that the state’s investigative audit required 538 hours at an approximate cost of $57,964.

Attorney for Miller’s Septic Service owners responds to audit

Joel Harbinson, local attorney who is representing the owners of Miller’s Septic Service, sent The Times a lengthy reply to the state audit. In part, his response reads:

“The findings of the Office of State Auditor were simple and to the point — the Town of Taylorsville violated their own procurement policy by contracting maintenance and emergency repair work with Miller’s Septic Service (Miller’s), a company owned and/or operated by two Town employees, Warren Miller and Darrin Weaver.
Miller’s was only sought out by the Town when an emergency arose which needed the special and expensive equipment that Miller’s provides. Yes, they billed the Town for nearly $750,000 over the past 17 years for services rendered, which comes out to approximately $40,000 per year. By comparison, Alexander County Schools pays Miller’s approximately $25,000 per year for their services.

“After this issue of ‘dual employment’ was raised by the anonymous ‘whistleblower,’ the Town Council purchased a bigger wastewater truck for $300,000 which is less efficient and capable than what Miller’s uses. And even after this purchase, the Town hired Miller’s, once again, as recently as September 28, 2023, in order to get the job done. And once again, as they have done for nearly 30 years, Miller’s showed up when called upon, and delivered essential services to the Town of Taylorsville, benefitting every single citizen.

“Without Miller’s, it’s likely that the Town might have been unable to afford operating the wastewater treatment plant. I commend the Town for having the insight of hiring Miller’s to meet the needs of taxpayers and citizens. What I condemn is the Town trying to escape any responsibility for an arrangement they created and had full knowledge and complete oversight of — by now making my clients the scapegoats.

“While many choose to cast blame and assume that someone is at fault, the context of the situation leaves only two possible conclusions — either no one’s at fault OR the past and present Town Council members are solely to blame. Certainly past Town Manager, the late David Odom, can’t be blamed. He was merely carrying out a Town Council practice that he inherited which the Council kept ratifying — year after year after year. And especially not my clients — who did what they were hired to do as part-time Town employees AND as independent contractors with Miller’s — providing a critical service at an affordable rate only when specifically requested by the Town,” Harbinson stated.