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Kenly told LGC will withhold part of sales tax after late FY2022 audit; town says reserves cover shortfall
Summary
An auditor told Kenly’s council that a late FY2022 audit prompted the Local Government Commission to deny a waiver and temporarily withhold sales-tax payments; town officials said reserves and staffing changes should prevent cash-flow problems.
Lee Grissom of S. Preston Douglas & Associates, LLP told the Kenly Town Council on Oct. 13 that the town’s fiscal year 2022 audit was submitted late — the audit was issued July 11, 2025 for a period that was due Oct. 31, 2022 — and the Local Government Commission (LGC) therefore denied a waiver and will withhold a portion of the town’s sales-tax revenue.
Tony Sears, interim town manager, told the council the withheld funds are 100% refundable and will be taken in three installments; the town expects to miss the first payment in November but said existing reserves should cover cash-flow needs. The auditor said the town’s fiscal snapshot showed improvement: a fund balance equal to roughly 6.7 months of operating expenses and nearly $3 million in cash on hand, up from about $1.2 million five years earlier. The water and sewer fund’s net position also rose by roughly $1.2 million and property tax collections exceeded $1 million.
Grissom and staff emphasized that the delay in issuing audits left the town more than two years behind schedule and that bringing FY23 and FY24 audits current — projected by staff to be completed by late 2025 — is the key step to restoring normal revenue flows. The council heard that an internal-control finding regarding segregation of duties was a routine consequence for small offices but that management had provided full access to records and auditors found no evidence of illegal acts.
The presentation was informational; no council action was required that evening. The council noted that new hires in the finance area are intended to ensure future audits are completed on time and to restore withheld funds as audits are filed.
