A report published Tuesday by the N.C. Office of the State Auditor finds that former Cape Fear Community College president Ted Spring gave raises and promotions without board approval, used vending funds for personal expenditures and was reimbursed by the college for mileage at amounts exceeding his actual out-of-pocket expenditures.

The report made a series of recommendations to the college and its trustees for corrective action.

Tuesday afternoon, Tammy Smith, the White Collar Crime Resource prosecutor for the N.C. Conference of District Attorneys, said that she is "currently working with the SBI [State Bureau of Investigation] to review the audit report and determine the next best steps."

A criminal investigation could be launched if audit report findings warrant a further probe, she said but added, "Everything an audit finds is not necessarily criminal. We are at a very preliminary stage right now."

The senior administrators who received salary adjustments or were hired by Spring without board approval were as follows, according to the report:

• Senior vice president for business services - $11,796 raise and promotion (8 percent increase);
• Vice president for instructional services - $11,760 raise (10 percent increase);
• Vice president for institutional advancement - $11,004 raise and promotion (12 percent increase);
• Vice president for institutional effectiveness and planning - $3,168 raise (3 percent increase);
• Director of athletics and student activities - $10,308 raise and promotion (19 percent increase);
• Vice president for informational technology services – hired on Oct. 14, 2013.

“The former president’s unapproved hiring, promotions and salary adjustments of individuals to senior administrator roles undermined the ultimate authority of the board of trustees, hindering the board’s ability to control and monitor expenditures,” the report stated. “Also, the unapproved salary increases, amounting to $48,036, were taken away from the board’s allocation process for other areas that supported the college’s overall mission.”

Tuesday, in a response to the audit report, Spring's attorney Gary Shipman contested that finding.

"What this report reflects is the incredible lack of candor either from those at CFCC, including the Board of Trustees, who adopted or failed to adopt policies that they, and not Dr. Spring, administered both before and during his tenure as President, including any financial policies, or alternatively, lack of candor from the State Auditor’s office itself," he wrote.  

The audit report also stated that Spring “failed to adhere to existing policies in place” regarding “appropriate communication” with the board involving changes to senior administration.

“The former president stated this was due to his lack of knowledge and incorrect interpretations of college procedures,” the report continued. “The former president stated he was unaware raises for senior administration needed board approval. He further stated he did not interpret college’s bylaws to require him to receive board approval before he promoted individuals into senior administrator roles or senior level roles that did not directly report to him.”

Everything Spring did regarding those promotions had been green-lighted, Shipman wrote in his response.

"The raises given and the title changes referenced in this report followed a specific request by members of the Board of Trustees to Dr. Spring to investigate whether senior staff members were being paid enough," Shipman wrote. "John Upton, CFCC’s then director of human resources, undertook a thorough analysis and study of each position and compared those positions and salaries with other positions across the state to see if they were competitive. After Mr. Upton completed his report and analysis, positions were reclassified and salaries adjusted in accordance with State policy, and with the approval of the State. This issue had previously been reviewed by the State Auditor’s office in the Fall of 2014, and no report or adverse findings came from that review, which included discussions with Mr. Upton. 

Minutes of trustees’ meetings in 2014 show that Spring did follow proper procedures for raises and hirings that year, according to the audit report.

To prevent future problems, the state auditor’s office recommended that trustees “provide a thorough orientation and training on the proper procedures” to the college president and monitor the president’s actions “to ensure compliance with established bylaws that address the president’s duties."

Other portions of the report addressed Spring’s use of college vending (discretionary) funds to pay for at least $35,993 in vehicle, travel upgrade, meals and other miscellaneous expenses. The state auditor’s office wrote “The lack of a vending fund policy created the potential for more inappropriate spending by the former President than the $35,993 identified ...”

In its report, the auditors recommended that such policies and procedures be adopted and that trustees monitor vending fund expenditures.

A third section of the report dealt with the finding that Spring personally spent about $900 on gas during his use of a leased vehicle, yet received $3,863 in mileage reimbursements from July 2012 to December 2014.

Auditors recommended that CFCC should consult an attorney to determine if it should pursue legal action to recover the “misappropriated funds” and trustees should adopt a policy that appropriately reimburses out-of-pocket expenses for a leased vehicle. Again, the recommendations also included a suggestion that trustees monitor reimbursements to the president to ensure compliance with policies and procedures.

Shipman's response contests the various other points made in the audit report and concludes: "We look forward to a process aimed at the truth in which Dr. Spring gets to participate instead of one that excluded him and selectively chose others.

"At the end of the day, this report represents a fundamental misunderstanding about how the office of the President of Cape Fear Community College, and other Community College Presidents, operated long before Dr. Spring arrived. If that process was/is broken, it was broken before he got there."

The Cape Fear Community College trustees' response to the audit report, addressed to state auditor Beth Wood and dated July 14 was included in the document published Tuesday. 

In the response, the trustees stated “The board acknowledges that the Investigative Report confirms and validates what was believed to be a pattern of misappropriation of funds and deceptive practices of the former president, and that the former president intended to keep such practices and actions from the board, inconsistent with Board of Trustees policies.”
The board stated that it will develop necessary policies and procedures, and will make sure the president follows them.

The internal audit was ordered by the college in early 2015 to inquire into some expenditures by Spring during his tenure as CFCC president. Spring resigned his position in January, an action he was pressured to take, he claimed in a subsequent civil suit against the board.

That suit, in which Spring asks for reinstatement as president and for damages, is proceeding in U.S. District Court. In late June the trustees submitted their response to the suit, which in large part disputed the claims made by Spring in reference to his being forced to resign. The next step is a meeting of the involved parties, called a Rule 26(f) conference, at which the parties consider the nature and basis for their claims and the possibilities for settling or resolving the case.

In its Order for Discovery Plan, dated July 13, the court ordered that this Rule 26(f) conference occur by Aug. 12. It further ordered that a discovery plan must be submitted within 14 days after the meeting. Such a plan outlines what information will be needed for the trial or resolution, and how that information will be obtained.