State Auditor Beth Wood released an audit this week questioning several financial practices that were in place during Eddie Madden’s time as Elizabethtown Town Manager.
Madden was manager for Elizabethtown from 2008 through 2021, when he was hired as county manager for Columbus County.
Wood’s investigation was started after allegations that Madden did not have proper amounts withheld when he was on the Elizabethtown payroll. Further investigation showed an apparent lack of documentation on purchases made using the town’s credit card.
The report said that changes to Madden’s withholdings led to a $28,892 deficiency in federal withholdings, and state tax withholdings being short by $1,384. Social Security and Medicare tax withholdings were short by a total of $1,329, the report said. At one point, Madden went from $263.32 federal withholdings per pay period to zero. That was adjusted in April 2016 to $8.30 per pay period.
Madden told investigators he did not instruct town employees to alter his withholdings. The former town finance officer and town accountant who worked under Madden both told Wood’s office that they did not make the changes. The investigation noted that there was no way to determine who authorized the adjustment.
After consulting with a CPA, Madden paid the withholdings that were due, and received a federal refund.
The audit also discovered that documentation of credit card purchases was lacking. The audit said that the credit card was assigned to Madden, but Madden notes that the town had only one credit card, and several staff members were authorized to use it. He also disputed the state’s assertion that proper documentation was not provided to show the charges had a “valid town purpose.”
The town did not have written policies in place at the time that required a paper trail showing that items were included in the budget, and were required for use by the town. While itemized receipts were available, there was no “documented town purpose” for some of the charges, as well as validation that the purchases were in the budget. There was also a lack of review of credit card bills, the audit reported.
“The Town Council should ensure that no financial obligation of the Town is being paid without supporting documentation that ensures the obligation was included in the budget and is for valid a Town purpose,” the audit report said.
Between January 2019 and April 2021, the report said, the town’s credit card was used to make 137 purchases. State auditors had questions about 119 of the purchases, a total of $8,448. Of those, 64 had itemized receipts, but lacked documentation of the reasons for the purchases. Those receipts came to $5,173. Another 55 purchases, totaling $3,275, “had neither an itemized receipt nor documentation to support a valid Town purpose,” the report said.
“As a result of the lack of documentation for the credit card charges, the Town potentially paid for Town potentially paid for purchases that did not have a valid Town purpose,” the report stated. “There was no Town policy that required that supporting documentation be submitted for credit card charges.”
“Additionally, the Town was unable to provide documentation to support that the card charges were for purchases that had been included in the budget and were for a valid Town purpose before the credit card bill was paid.”
Madden took issue with the auditor’s criticism of procedures.
The former town manager said he provided signed letters from former Town of Elizabethtown finance staff members from 2019-21 period that detailed the receipt and documentation process.
The letters “clearly outline the process that was followed each month to ensure that all receipts were obtained, scanned, and filed for auditing purposes,” he said in a press release. “Those same individuals also confirmed that the credit card records were stored electronically in the town’s server as well as in paper format that were retained and in custody of the town.”
Local governments are required by law to have annual fiscal audits. The town’s auditor found no deficiencies or procedural problems in the annual audit, Madden said. The town’s finance staff under Madden reconciled credit card statements on a monthly basis, and documented the results.
“The current finance director for the town, Sharon Penny, was employed during the period in question and assumed all duties of reconciling bank statements and credit card statements,” Madden wrote. “There was never any mention of any concerns by her under my tenure.”
The town council also backed Madden in their official response to the state auditor’s report.
“They have verified that all purchases were for official town purposes,” Madden wrote.
Wood’s office said that records provided by the credit card company are not sufficient, and do not provide the purpose of the expenditures. Madden noted that the state audit was in error when it said he was the sole user.
“The town credit card was not used exclusively by any one individual. It was the only credit card assigned to the administration and planning departments and was used to pay for budgeted expenses such as dues, subscriptions, registration fees for conferences, travel, to purchase supplies and materials in the aftermath of Hurricane Florence as well as for supplies needed for the Covid pandemic.”
In accordance with the recommendations of the audit, Elizabethtown officials are establishing a new policy for town credit card use, as well as implementing a system that requires a signature to change payroll information.
