ELIZABETH CITY — The City of Elizabeth City’s financial practices are facing a major reckoning following the release of a damning investigative report by the North Carolina Office of the State Auditor (OSA) on November 3, 2025. The report details widespread misuse of public funds, particularly through procurement cards (P-Cards), excessive food purchases, and systemic disregard for City policy by a former City Manager and other employees.

A copy of the report can be found at the end of this article.

The findings may be discussed during a special Elizabeth City Council meeting scheduled for 10 a.m. Tuesday, Nov. 4, in Council Chambers, located on the second floor of the Municipal Administration Building, 306 E. Colonial Ave., Elizabeth City.

The OSA has urged City officials to review transactions for personal use and recoup funds where necessary.

Albemarle Observer inquired with the state Auditor’s office if City Hall was in the midst of an audit several months ago. When the Auditor’s Office could not confirm or deny an investigation into Elizabeth City’s finances, that was a red flag, so we were patient because it was only a matter of time before the audit was released.

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Former City Manager Cited for Policy Violations and $14,640 in Purchases

The investigation was initiated after an allegation regarding a former City Manager’s P-Card use. The former City Manager made 95 P-Card purchases totaling $14,640 between November 2022 and October 2024, with $5,921 spent on food.

The report does not name the former city manager. Montre Freeman was rehired as city manager in October 2022 and served in that role during 2023.

Current City Manager Reginald Goodson began serving as interim city manager in November 2024.

The report flags numerous meals as potentially “excessive or an inappropriate use of taxpayer funds”, including:

• $705 at Sugarcane Grill and Lounge for brunch.
• $505 at Waterman’s Grill for a team dinner.
• $447 at Jersey Mike’s for a Capital Budget Retreat.
• $318 at Sagos on the River for a finance team lunch.

In addition to the questionable spending, the former City Manager repeatedly violated the City’s Purchasing Manual by:

• Failing to obtain supervisory review or approval for $10,619 in purchases.
• Making 9 purchases exceeding the $500 P-Card limit, totaling $7,066.
• Lacking itemized receipts for 14 purchases.
• Charging a meal to his P-Card despite already receiving a per diem for the travel.

The OSA warned that the actions of the former City Manager created a “tone at the top” that effectively encouraged a lack of adherence to the Purchasing Manual, increasing the City’s risk of fraud.

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P-Card Misuse and Financial Instability

The audit expanded to cover P-Card use by other City employees, reviewing 591 purchases totaling $79,166 between January and October 2024.

• Employee Food Purchases: City employees also made “excessive or an inappropriate use of taxpayer funds” on food, including:
  • $415 for 45 Chick-fil-A meals for Fire Department training.
  • $338 at Electric Garden for a wellness program event (25 smoothies).
  • $272 at IHOP for an administrative assistant day breakfast.
• Policy Failures: Employees also failed to follow policy, with 37 purchases (totaling $4,045) lacking an itemized receipt, and 15 purchases (totaling $13,418) exceeding the $500 limit. Furthermore, a number of purchasing logs were either not submitted or lacked a required supervisor’s signature.
• Check Disbursements: The City also spent at least an additional $7,253 on food via check disbursements.

The report also spotlighted instability within the Finance Department, noting that Elizabeth City has employed five different Finance Directors since August 2022 and lacked a permanent director as of September 2025. This turnover forced the City to spend over $500,000 on contractors for financial assistance over the past two years.

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Recommendations and City’s Response

The OSA issued 11 recommendations to the City, with the most urgent calling for:

• A review of all P-Card transactions and the recouping of any personal purchases.
• Updating the Purchasing Manual to provide clear guidance on when and what food purchases are appropriate.
• Hiring a permanent, full-time Finance Director.
• Ensuring Finance Department staff are properly trained to reduce the reliance on external consultants.
• Adding curated budget account codes for department-specific expenditures to increase transparency.

While the City agreed with most of the recommendations, officials noted that paying for work-related gatherings – Public Power Week celebration, a retirement party for a long-time Sanitation Department employee, and a Minority/Women-Owned Businesses retreat – is common.

Some findings included instances in which the city was to be reimbursed by the provider for an event. The employee failed to submit the receipt for inclusion with other event receipts.

The city noted that the report does not include any personal purchases. It also notes that having City staff go through an extensive review of documents already reviewed by the OSA would “more than likely cost more taxpayer dollars than what would or may be determined to attempt to recoup with no guarantee of recoupment.”

In the city’s response, Goodson noted that the city is accepting applications for the finance director position in hopes of hiring a qualified candidate by the end of 2025. The city also intends to review its policies and procedures.

“The end goal is for the City to be self-reliant on internal staff and the in-house staff having the knowledge, skills and expertise (e.g., SKE) to perform all financial tasks both during the audit year as well as during the audit. That is what we are working toward and where we expect to see ourselves in the near future.”