State audit strongly criticizes Eastern Region financial practices

North Carolina Eastern Region's Executive Director Tom Greenwood rented a house at Pinehurst for guests who could contribute little to the authority; took questionable trips to New Orleans during Mardi Gras and to Ireland for golf; and was reimbursed for expenses that had negligible documentation, according to a scathing report issued Monday by the state auditor's office.

Greenwood left his job in February after receiving a six-month settlement package of about $70,000. Sylvia Nesbitt, the region's chief financial officer was appointed interim executive in addition to CFO duties.

The audit, signed by State Auditor Leslie W. Merritt Jr., cites the authority for poor oversight of the executive director as well as underreporting earned interest, and characterizing a consultant as an independent contractor instead of as an employee.

The North Carolina Eastern Region's "Executive Director operated without sufficient oversight from the … Commission," auditors concluded.

The commission has a responsibility to taxpayers who fund the group to ensure money is spent appropriately. "… The lack of oversight from the Commission relative to development activities resulted in certain expenditures that were inconsistent with the Eastern Region mission …," the report states.

The region's mission is to "promote and encourage economic development by fostering or sponsoring development projects to provide land, and infrastructure requirements for business and industry within the 13-county development zone."

Member counties include Lenoir, Carteret, Craven, Duplin, Edgecombe, Greene, Jones, Nash, Onslow, Pamlico, Pitt, Wayne and Wilson counties.

Greenwood rented a house at Pinehurst during the U.S. Open Golf Tournament in June 2005. The house was to be a hospitality center for guests who might be interested in conducting business with the authority.

"The Eastern Region staff member responsible for mailing invitations to the event said she sent out a number of invitations but there was very little response," the audit reports. …"When questioned about the matter one staff member replied, 'I wish I knew who attended.'"

The report says Greenwood "was unable to provide us with an accurate list of attendees. We determined that the attendees included one lead-generating contact, a local business owner, individuals who assist with the Eastern Region's marketing efforts and the Executive Director's spouse and son."

An associate of the Eastern Region's marketing contractor told auditors he was at the house for only two days and one night. He said Greenwood and the business development consultant left in the morning "and they did not see them again. This individual said that they took it upon themselves to purchase breakfast and lunch for the one prospective business client that was staying at the house."

Auditors report that the cost of the outing was $12,000 to rent the house; $2,435 for additional tickets to the tournament, and $1,131.46 for food, refreshment and miscellaneous expenses.

"… the benefit derived from the event for the Eastern is questionable," auditors determined.

Luck of the Irish
Greenwood took a two-week trip to Ireland from June 29 to July 11, 2003. When questioned about the trip, auditors say Greenwood told them "the trip was to visit other economic development organizations in order to look at how Ireland 'turned their education around.'"

Greenwood said the Eastern Region is similar to Ireland. When questioned further, he admitted he had a golf trip planned for the first week and directed a staff member to set up meetings for the second week.

"The staff member states that he had a difficult time researching and calling around with other developers as there were not any current projects associated with Ireland," although he finally scheduled meetings with various government and economic development officials.

Greenwood charged the region only for the expenses incurred during the second week. "Still, any benefit to the Eastern Region from this trip to Ireland appears minimal at best," auditors said. "The Executive Director stated that he did not discuss this trip in advance with the Commission and that after he returned he mentioned it to them but did not give a formal report of the trip."

Greenwood billed the region $2,357.27 for the Ireland meetings, including $141.96 for "meal in Raleigh night before travel."

Party time in New Orleans
Greenwood and the business development consultant were in New Orleans Feb. 16-18, 2005. Greenwood said the trip was to learn about "I CAN Learn," a method for teaching math in school classrooms.

A represented from the company that owns the software later gave a presentation at the Eastern Regional office in Kinston. Nothing else resulted from the visit to New Orleans.

The Eastern Region may have benefited somewhat from the trip, auditors said, "However, we question the need for the Executive Director and the Business Development Coordinator to travel to the company's headquarters to learn about the product in advance, considering the timing of the trip was during Mardi Gras celebration in New Orleans."

The Eastern Region paid Greenwood $531.20 for out-of-pocket expenses, car rental and parking.

Double dipping?
Greenwood had an American Express credit card in his own name and another American Express card issued to the Eastern Region. Auditors questioned many of his submitted receipts for expenses paid in cash.

Auditors also questioned the accuracy of how personal and businesses expenses were separated.

"In addition to meals, expenses included travel, conference fees and mileage reimbursements for travel outside of the region. Also, internet service at the Executive Director's home and membership dues at the Kinston Country Club in the Executive Director's and Spouse's name were reimbursed by the Eastern Region," the report states.

Greenwood received a monthly car allowance of $900, which was increased to $1,000 in 2005.

Auditors said Eastern Region staff said the country club membership was needed to entertain prospects. "However, we did not see evidence of significant business related use of the membership other than an occasional meal with Eastern Region staff and/or Commission member(s). We confirmed the country club requires memberships to be in an individual's name rather than a corporate name," auditors said.

Next: Read the strange details of Greenwood's expense receipts, how a business consultant was paid twice for the same expenses and how he was treated as contract labor instead of as an employee, and the auditor's final recommendations to the Eastern Region.