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  • Stories Written by Robbie Ward

    This is the 4th article in this series. If you haven’t read Part 1, Part 2, or Part 3 yet, check them out.

    TUPELO – Lee County prosecutor James Moore plans to investigate possible criminal wrongdoing related to the North Lee County Water Association, a nonprofit organization that recently fired a whistleblowing employee for disclosing the company’s 2013 audit, a public document.



    Moore, himself a member of the nonprofit cooperative water provider, said information provided in the audit and additional information he has learned warrants a criminal investigation.

    Sonny Noble, 31, was fired Friday after the Daily Journal published financial mismanagement, non-compliance with a $1.2 million federal loan and broken laws revealed in the company’s fiscal year 2013 audit.

    The prosecutor decided to investigate activities North Lee after Noble shared information the fired outside maintenance supervisor has collected for months.

    “He’s come to see me and about some of the concerns he has in connection with the audit and other things he sees going on there,” Moore said. “After meeting with him, I think they’re worth looking into.”

    North Lee board president Terry Anderson and board attorney Bill Beasley did not respond Tuesday to Daily Journal requests for comment.

    Noble gained notoriety in 2011 after after whistleblowing on corruption and criminal activity related to the water association. Employees worked on the clock on a NLCWA board member’s property, and then-general manager Dan Durham falsified federal water quality reports and received a federal court conviction and three years probation.

    All board members resigned then, leading to a new group of trying to correct shady behavior and questionable decision-making.

    However, the 2013 audit showed the nine-person board hasn’t corrected potentially illegal actions of not paying employees and has unaccounted for money of up to $14,164. Noble also reported current North Lee manager Jim Banker purchased a truck for his use without formal board approval.

    The audit questioned the water association’s purchase of a high-milage vehicle. Records show Banker drives a 2008 Chevrolet Silverado that listed 173,877 miles when purchased; however, paperwork indicates the vehicle’s odometer does not reflect actual miles.

    Recently concerns with NLCWA emerged as the water association continues negotiations related to ceding territory served in Tupelo’s recently annexed areas. North Lee also has received approval for a $8.9 million federal loan for water system improvements, but Tupelo objects have limited progress for drilling six new water wells and installation of more tanks.

    Noble has said he will push for a vote among the water association’s 4,260 members to return him to work. For a vote to happen, about 230 association members must sign a petition calling for the action during a special meeting.

    This is the 4th article in this series. If you haven’t read Part 1, Part 2, or Part 3 yet, check them out.


    town_tupelo_greenBy Robbie Ward

    Daily Journal

    TUPELO – The City Council reluctantly agreed to enter a property management contract for an apartment complex purchased by the city last week.

    Council members supported with a 4-3 vote the contact likely valued at $14,600 for 90 days with TRI Inc. Realtors, although the council didn’t specify the length of the contract.

    No council member seemed thrilled to obligate city money to the contract to handle paying employees, rent collection, maintenance and upkeep and other needed duties at the low-income, 220-unit Azalea Gardens purchased for $2.1 million.

    The city bought the property mired in bankruptcy court for years to try to eliminate crime and safety concerns associated with the complex.

    Council members discussed three months being the term of the contract but didn’t specify during Tuesday’s vote. The agreement requires a 30-day cancellation notice between the city and TRI.

    City leaders learned Friday when it bought the 7.8-acre property from a South Carolina-based development company that no agreement existed to continue property management.

    Some details related to the city’s real estate venture still seem shaky. Tupelo Chief Operations Officer Don Lewis said he’s not quite sure if five employees at the apartment complex should receive paychecks this week or next.

    Either way, Mayor Jason Shelton said apartment employees should feel confident they’ll receive paychecks on time.

    Councilmen Willie Jennings of Ward 7, Markel Whittington of Ward 1 and Jim Newell of Ward 3 voted against the agreement.

    Newell opposed the agreement based on what he perceived as a conflict of interest between the city, TRI and the Neighborhood Development Corporation, a nonprofit redevelopment company working with the city on real estate improvements.

    City leaders anticipate turning Azalea Gardens over to NDC at some point for a yet-to-be-determined redevelopment. TRI owner Ellen Short serves on NDC’s board of directors.

    “In my mind, that’s a severe conflict of interest, or at least a perceived conflict,” Newell said.

    Tupelo city attorney Ben Logan said no conflict of interest exits with the city approving this contract. However, NDC will have to determine if a conflict of interest exists if TRI continues to manage the property after the nonprofit takes over redevelopment efforts for the city.

    The city could take six months to a year to determine exact plans for the property, although Shelton has said he does not anticipate demolition of all apartment units.



    By Robbie Ward

    Daily Journal

    TUPELO – Six-term incumbent U.S. Sen. Thad Cochran’s re-election campaign reported today raising $1.7 million from January through March and having about $1.5 million on hand.

    Cochran’s Campaign Manager Kirk Sims reported this information during a conference call this morning and said he will provide actual campaign finance forms today to news organizations.

    “We’re really pleased with the outpouring of support throughout the state,” he said. “The amount of money raised in Mississippi is over $1 million just in this quarter.”

    Cochran and GOP primary opponent Chris McDaniel and other candidates for U.S. House and Senate races must file quarterly campaign finance reports today to meet Federal Election Commission deadlines.

    Bureaucratic reporting rules prevent the FEC from immediately providing campaign finance information to the public.

    The Daily Journal has requested McDaniel’s campaign provide the same campaign finance information as Cochran’s campaign discloses today. As each candidate’s campaign provides FEC documents, the Daily Journal will post them online.

    Cochran’s total raised during this election cycle is $2.9 million, Sims said.

    Both Cochran and McDaniel receive significant campaign money from out-of-state individuals and political action committees.

    McDaniel’s campaign previously reported raising $487,802 from October through December with $315,390 cash on hand. However, this was after the campaign reported inflated contributions explained by problems with software used to track campaign money.

    During the same reporting period, Cochran reported raising $333,885.

    Read more online and in Wednesday’s Journal.

    FEC documents provided by Cochran’s campaign

    shutterstock_textingMississippi Ethics Commission has issued an opinion that text messages about government business are public record.

    The commission Monday delivered to the Daily Journal and the city of Tupelo its opinion that the city violated the state open records law by not making public Mayor Jason Shelton’s text messages when the Daily Journal requested them for a three-day period last fall.

    It’s the first time the state body has specifically addressed text messages as public records.

    Mississippi open government and transparency advocates view this unanimous commission opinion as precedent-setting for all government bodies and public officials in the state.

    The city of Tupelo denied in October a Daily Journal public records request for Shelton’s text messages made with his personal phone in his official role as mayor from Oct. 23-26, a period when Development Services Director BJ Teal announced her resignation.

    The Daily Journal requested in December an Ethics Commission non-binding, advisory opinion on the open records issue, a procedure laid out in state law.

    The eight-member commission agreed without dissent Friday that Shelton’s text messages, regardless of the device used to produce them, qualify as public records based on the Mississippi Public Records Act passed in 1983. Commission member Sean Milner did not attend the meeting.

    “Any text message used by a city official in the conduct, transaction or performance of any business, transaction, work, duty or function of (the city), or required to be maintained by (the city) is a public record subject to the Act, regardless of where the record is stored,” the commission wrote in the advisory opinion.

    Shelton said Monday the commission’s opinion surprised him but he will work with City Attorney Ben Logan and other city officials to create a digital records policy for the city to meet state law. No government in the state is known to comply with the law for archiving and retaining text messages.

    The mayor said he has yet to decide if he’ll keep using his personal cellphone for city business to keep potential public records separate from his personal information.

    “I didn’t request a city phone because I didn’t want to carry two phones and thought it was wasteful and unnecessary,” Shelton said. “It’s unfortunate, but I may just have to carry two phones.”

    Logan said in October the city does not have possession of Shelton’s text messages. Shelton said he has turned over to Logan the few remaining texts he could find related to the time period specified in the public records request.

    The commission’s opinion said “purely personal messages having absolutely no relation to city business are not subject to protection under the Act.” “Any doubt about whether records should be disclosed should be resolved in favor of disclosure.”

    Mississippi’s Department of Archives and History provides record retention schedules for state public bodies. State law requires municipalities’ permanent retention of “executive correspondence.”

    State public record laws allow for exemptions of some government information, such as personnel records and individual tax records.

    Charlie Mitchell, assistant dean of the Meek School of Journalism and New Media at the University of Mississippi, said the commission reinforced that Mississippi open records laws do not make distinctions between digital and hard-copy version of public records.

    “Records, regardless of form, generated in the conduct of public business in Mississippi are public,” said Mitchell, also an attorney. “That’s the law and has been for decades and the commission is to be commended for its clearly worded analysis and ruling.”

    Leonard Van Slyke, a media law attorney who advises the Mississippi Center for Freedom of Information, said the commission’s position on text messages should have reach across levels of government in Mississippi.

    “This will be precedent for all public officials in Mississippi,” Van Slyke said. “I think the significance of the ruling is public officials can’t use text messages as a method to circumvent compliance of the Public Records Act.”

    Lloyd Gray, executive editor of the Daily Journal, said he was glad the commission clarified the point of the public nature of text messages related to government business.

    “That was our intention all along – to achieve clarity in what the law requires of public officials and we’re pleased that the commission came down on the side of transparency and openness,” Gray said.

    While formal views on text messages as public documents in Mississippi did not exist before this commission decision, other states have interpreted the digital communication as public documents for years.

    Mississippi law allows for fines to “any person” of up to $100 and all reasonable expenses related to lawsuits for “willfully and knowingly” denying public records access to anyone. However, Gray said the Daily Journal has no intention of filing a lawsuit as long as Tupelo officials proceed with plans to develop and institute policies that comply with state law.

    The Ethics Commission currently has no binding legal authority; however, state Senate Bill 2507 provides the commission with enforcement power to hold hearings related to open records issues and to impose fines. The bill passed both legislative bodies in the 2014 session, and Gov. Phil Bryant signed it into law Friday.

    Read the state Ethics Commission opinion below

    town_tupelo_greenBy Robbie Ward

    Daily Journal

    TUPELO – The City Council isn’t sure of long-term plans or short-term details with the city’s recent $2.1 million purchase of Azalea Gardens apartment complex.

    Council members spent the bulk of Monday’s agenda review debating details related to paying five employees at the complex and short-term management.

    With paychecks expected Friday, council members have limited time to reach a consensus.

    The city closed on the property purchase Friday, transferring the 7.8-acre property into taxpayer ownership. Council members said future plans for the 220-unit apartment property with a reputation for crime and safety issues could lead to affordable housing, an expanded park and other enhancements to the area, but nothing is definite for the redevelopment project.

    As for immediate details, Tupelo Chief Operations Officer Don Lewis said employees at the apartment complex will receive paychecks but isn’t sure who will pay them. He said the city didn’t anticipate details related to paying the employees at the complex before finalizing the property transaction Friday.

    “It just wasn’t clear, so we’re clearing it up,” he said.

    Lewis and Mayor Jason Shelton encouraged council members to accept a temporary property management contract with TRI Inc. Realtors, who would pay the employees. Some council members balked at the recommendation, saying they never heard this detail during discussions about purchasing the property.

    Ward 5 councilman Buddy Palmer looked at the proposed contract from the company and didn’t like the cost for taxpayers.

    “It’s expensive,” he said.

    Tupelo City Attorney Ben Logan would not provide the Daily Journal with the proposed contract, saying it was too preliminary.

    Council members haven’t decided whether to proceed with a temporary property management agreement with a private company or have the city provide oversight of the property directly, including employee pay.

    They’ll meet at 5 p.m. today to try to reach an agreement before the 6 p.m. council meeting. Otherwise, the council will hold a work session on Thursday.

    Adam Robison | Buy at Senator Chris McDaniel speaks to supporters on Monday night at the Lee County Republicans meeting at Earnest B's Barbeque in Tupelo.

    Adam Robison | Buy at
    Senator Chris McDaniel speaks to supporters on Monday night at the Lee County Republicans meeting at Earnest B’s Barbeque in Tupelo.

    By Robbie Ward

    Daily Journal

    TUPELO – Area Republicans packed Earnest B’s Barbecue Monday night for ribs and a red-meat conservative stump speech from U.S. Senate challenger Chris McDaniel, an attorney and current state senator looking to unseat the state’s six-term incumbent.

    McDaniel entered the room to a group of many supporters and other Republicans uncertain about a man who decided to battle the state’s senior federal elected official in the June 3 primary challenge.

    McDaniel contrasts himself with Cochran by suggesting the 76-year-old incumbent is out of touch with the state’s conservative values. He mentions 1973, a time when Richard Nixon occupied the White House and Cochran’s congressional career began.

    “In that time, maybe it was fashionable to spend money without regard to future generations,” McDaniel told the Daily Journal before speaking to the audience.

    A hard-line social and fiscal conservative backed by the tea party, McDaniel and supporters try to paint Cochran as a liberal by comparison. He faults Cochran for not filibustering federal funding bills that included President Barack Obama’s signature health care law, the Affordable Care Act. Cochran voted against the law when it passed in 2010 and continued opposition many times since.

    Many Cochran supporters have recently pointed to McDaniel’s comments several years ago from his talk radio program to suggest the candidate has poor judgment in his public statements. Cochran’s campaign spokesman recently described as “embarrassing” McDaniel saying he would move to Mexico if the United States ever paid slavery reparations and would call women there “mamacita,” slang for “attractive woman.”

    McDaniel says the aggressive attacks on him mean his opposition fears his primary challenge.

    After riling up the Republican group with rhetoric about individuals relying on themselves more and the government less and other conservative talking points, McDaniel converted a few Republican primary fence-sitters.

    Jerry Napier, president of Tupelo’s Rotary Club, has friends supporting both candidates but left the restaurant ready to vote for McDaniel. “I was on the fence until tonight,” he said. “When you see him in person, he stands for everything I believe.”



    The story so far: We published a story about the financial mismanagement and several laws broken by the North Lee Water Association with the help of information provided to us by a whistleblower. Then the whistleblower, Sonny Noble, was fired the same day we published as reported in the follow up story North Lee whistleblower fired. Now we follow up with an update to the saga.

    TUPLEO – Whistleblower and former North Lee County Water Association employee Sonny Noble has started an effort to fire North Lee County Water Association board of directors members he holds responsible for firing him.

    Noble, 31, also plans to soon return personal belongings he removed from the rural water association’s main office in Saltillo three days ago.

    He has started a petition drive for the nonprofit cooperative’s 4,260 members to remove five board of directors from leadership roles and return him to work.

    The former outside maintenance supervisor said he was fired Friday for providing a public document showing widespread financial mismanagement, broken state and federal laws and regulations, and noncompliance related to a $1.2 million federal loan.

    However, NLCWA manager Jim Banker used missing time from work as justification to remove the employee from work, Noble said. Board members Donnie Leslie and Gordon Gibbons witnessed Banker fire the employee of nearly six years.

    Noble was fired the same day the Daily Journal published information about NLCWA’s 2013 audit.

    North Lee board president Terry Anderson said Friday the water association policies prevent discussion of personnel issues. He did not return a call requesting comment late Sunday.

    To call a special meeting to consider returning Noble back to work and removing board members, five percent of North Lee members, about 230, would need to sign a petition. A number of association members have voiced disagreement with Noble’s firing. One member, an attorney, has voiced interest in representing the fired employee related to possible legal matters.

    Noble said he feels confident in securing enough petition signatures.

    “I’ve got a lot of free time to make this happen,” he said Sunday.

    At a special meeting to remove board members, each board member facing removal will have a chance to justify why he should remain in the position. The association members calling for removal would also have a chance to speak. Association members who attend the meeting would vote.

    If the vote supports removal of a board member, an election for new members will be held at the same meeting.

    Removal of board members could impact the water association’s plans to proceed with an $8.9 million USDA Rural Development loan for six new water wells and tanks, some in Tupelo’s recently annexed areas. The city of Tupelo opposes the project involving annexed areas and continues negotiations to convince North Lee to cede territory served in annexed parts of the city.

    Not the first time

    Noble has a history of ruffling feathers of board members of the Lee County nonprofit cooperative. In 2011, he shared corruption and wrongdoing information with the Daily Journal that resulted in each board member resigning and then-manager Dan Durham pleading guilty to falsifying federal water quality reports. He received three years of probation.

    After exposing water association corruption in 2011, Noble said he received threats of violence – that he would be “taken out.” Noble kept his job as board members and top management left and has tried to keep watch over shady activities.

    Noble said he’s not surprised he was fired the same day public reports surfaced of the association’s financial mismanagement and federal loan compliance issues.

    If Banker did fire Noble for missing time from work, it seems to violate the water association’s employee discipline and termination policies.

    “In order for progressive discipline to be effective, it is necessary that supervisors remember at all times that it is their purpose to correct the employee and not to punish the employee unless (he) has committed an offense which warrants immediate termination of employment or previous disciplinary action has failed to correct the problem,” the employee handbook states.

    Before firing North Lee employees, policy requires a lengthy process if problem actions aren’t immediate termination offenses.

    The process involves verbal counseling of the issue, written warning, three-day suspension and then termination.

    Nothing in Noble’s personnel file he provided to the Daily Journal showed any documentation of concern related to him not showing up to work. In fact, Banker told Noble he could take time from work to focus on personal issues related to child custody matters, other North Lee employees confirmed to the Daily Journal.

    Board members Donnie Leslie and Gordon Gibbons and a North Lee employee witnessed Banker tell Noble he was fired for spending too much time from work. Other board members Noble will petition for removal include Anderson, Tom Tindall and Ray Stanford.

    The former employee said North Lee board members not making available to the public audit findings of shoddy financial records and noncompliance of the federal loan, not using proper protocol when firing him and other issues justify their leaving leadership roles. He also wants his job back.

    “I just have something inside of me to where I can’t sit and watch wrongdoing and not speak out against it,” Noble said. “I have to fight for what is right.”

    Current Board members
    David Morgan
    Mark Crockett
    Randy “Fud” Hutcheson
    Terry Anderson
    Donnie Lesley*
    Ray Stanford
    Paul Anglin
    Gordon Gibbons*
    Tom Tindall

    By Robbie Ward

    Daily Journal

    TUPELO – Mayor Jason Shelton has planned to asked City Council members to increase the personnel director’s salary 31 percent to $73,000 annually but has postponed this request until a majority of the council can be sold on the idea.

    Shelton has said he believes the city’s nine department heads, supported through the city’s general fund budget, should receive a minimum salary of $73,000, quite a jump from Personnel Director Cassandra Moore’s $56,176 she’ll make beginning next month after most city employees receive 1 percent pay raises.



    Shelton told council members two weeks ago this proposal is about equity among appointed department leaders. Moore, the lowest paid among the department heads, is black, adding race to the equation.

    Councilman Willie Jennings of Ward 7, who is black, said during recent discussions the situation seems to single out Moore and thinks it could involve race.

    “I feel like we’re crossing a line and it’s unfair,” he said. “We’re holding this person’s wages hostage because of who they are.”

    No council member has mentioned capping department head pay but a wide gap exists between the lowest and highest paid among top city jobs. A $42,652 gap exist between Moore and the longest-serving and highest paid department head, Tupelo Water & Light General Manager Johnny Timmons, who makes $97,850.

    Shelton has said $73,000 should be the threshold for Tupelo’s public employee department heads.

    “If someone’s a department head, they need to be paid like a department head,” Shelton said Saturday.

    In May, Tupelo department heads will have a median salary of $76,732.

    But answering the question of “What does it mean to be paid like a department head?” can be tricky.

    Experts in Mississippi municipal salaries said no simple formula exists to determine the most appropriate pay for city leaders, although many cities, compensation consultants and analysts use many different criteria to try to find a formula considered fair.

    Dallas Breen, associate director of the Stennis Institute of Government at Mississippi State University, said factors such as education level, time as department head and as a city employee, how many employees managed, hazardous conditions, stress of position, level of independence and discretion to make decisions are among the top factors.

    However, Breen cautions municipal leaders from making decisions for paying department leaders based solely on comparison among top employees within that city.

    “It doesn’t make much sense to compare department heads in the same city to one another because you have different types of jobs,” he said. “It makes more sense to compare similar department head positions to counterparts across state.”

    Each year the Stennis Institute and the Mississippi Municipal League partner to compile municipal salary and benefits surveys. Not all of the state’s 362 municipalities returned information, and some returned information was incomplete.

    However, the survey can provide a comparison of what other similar cities pay their employees.

    The 2013 salary survey included comparable department positions of city clerk, fire chief, police chief, parks and recreation director, public works director and personnel director.

    The number of cities varied for providing salary information for each position. To compare salaries for Tupelo, the Daily Journal analyzed the cities with populations above 20,000.

    Among Tupelo’s department heads, Parks and Recreation Director Alex Farned’s pay of $73,000 ranks third highest among cities participating in the survey, behind only Madison and Ridgeland, whose director makes $85,426 annually.

    Jackson did not participate in the survey.

    Most other Tupelo department heads ranked sixth and seventh in their respective lists. City Clerk Kim Hanna’s 2013 salary ranked 11th in the state, less than significantly smaller communities like Clinton, Horn Lake and Madison. However, after May, Hanna’s position will combine city clerk and chief financial officer positions and bring her pay to $81,995, which would pull her up to fifth on the state city clerk salaries.

    Tupelo’s lowest-ranking position among peers in the survey is also the city’s lowest-paid department head. Pay for Moore, the personnel director, is $2,988 below the median salary of $58,608 among her peers in cities with populations of 20,000 or higher that provided salary information.

    She ranked ninth among 12 on the list.

    So, when will the council increase Moore’s salary? Three council members – Jennings, Nettie Davis of Ward 4 and Buddy Palmer of Ward 5 – support increasing her pay, while three others – Markel Whittington of Ward 1, Lynn Bryan of Ward 2 and Mike Bryan of Ward 6 – don’t.

    Jim Newell of Ward 3 will determine Moore’s pay increase, if any. He said he’ll evaluate Moore’s pay compared to cities similar to Tupelo as he stakes out his position.

    “If we’re not in the range, and we’re putting the city at risk (for a lawsuit), then we’ll need to fix it,” he said.



    Updates: After being fired, Sonny Noble is now seeking his job back.

    Yesterday: North Lee audit cites financial issues, was written after Sonny Noble provided information to Daily Journal investigative reporter Robbie Ward.

    TUPELO – North Lee County Water Association’s outside maintenance supervisor was told Friday morning he was fired for what he believes is retaliation for sharing a public document that revealed non-compliance of a federal loan, widespread financial mismanagement and unaccounted for money.

    North Lee employee Sonny Noble, 31, said he believes he was fired for providing a copy of the association’s fiscal year 2013 audit to the Daily Journal, the results of which were first published in Friday’s edition.

    “I care about what’s right,” Noble said. “People need to know about this.”

    Noble said two North Lee board members made the audit available to him to provide to a news organization to expose the nonprofit’s financial mess. He identified the board members as David Morgan and Mark Crockett, but neither would confirm Noble’s assertion.

    Board members Donnie Lesley and Gordon Gibbons notified Noble of his termination Friday morning. They said it was based on time missed from work, said Noble, who also said his time away from work was approved by North Lee manager Jim Banker.

    Sources close to the water association indicate Noble’s termination happened without prior knowledge of all board members, some of whom still haven’t received an explanation for the firing.

    Board President Terry Anderson emailed the Daily Journal Friday declining to explain Noble’s termination.

    “(I)t’s been a standing North Lee policy not to discuss personnel issues,” Anderson wrote.

    Noble said he intends to appeal his firing by the two board members to the full board.

    Jones & Jones Certified Public Accountants firm of Booneville presented audit findings to the North Lee board on Feb. 18. Anderson said earlier this week the audit wasn’t a public document. However, Mississippi’s Rural Water Association CEO and a spokeswoman for U.S. Department of Agriculture in Jackson said the document is a public record.

    Federal Office of Management and Budget documents also state the audit should be available for public inspection unless restricted by law or regulation.

    Audit findings included eight “material weaknesses,” practices that could lead to federal money being missing or misspent, or other issues that couldn’t be prevented, corrected or resolved in a timely manner.

    Anderson provided a written response Thursday to audit findings, saying he believed North Lee currently complied with all laws and Rural Development loan requirements. However, a Rural Development loan specialist in the water and environmental division said loan recipients remain out of compliance until they provided board-approved budgets.

    Anderson said the board still hasn’t approved an annual budget, an audit finding for fiscal years 2012 and 2013.

    Financial questions surrounding the water association come as it seeks to proceed with water system improvements funded through an $8.88 million federal loan. The city of Tupelo continues to object to the plan, which includes drilling water wells within city limits.

    Noble has worked the rural water association just shy of six years and was the whistleblower who helped expose corruption in 2011 that led to resignations from the entire nine-member North Lee Board of Directors. Then North Lee manager Dan Durham pleaded guilty in 2012 to falsifying federal water quality reports and was sentenced to three years’ probation.

    Other misdeeds exposed during that period include employees performing work on private properties owned by then-board President Mitchell Scruggs. At one point, the FBI investigated alleged wrongdoing at the organization.

    Daily Journal reporting of North Lee’s financial management problems, including failure to meet federal loan requirements, resulted from the audit and independent research.

    The Daily Journal has also filed Freedom of Information Act requests for applications for both federal loans approved for the rural water association.

    A copy of the full North Lee audit can be seen on

    Thomas Wells | Buy at A 2013 audit suggests the North Lee County Water Association kept poor records.

    Thomas Wells | Buy at
    A 2013 audit suggests the North Lee County Water Association kept poor records.

    Updates: North Lee whistleblower fired, Fired North Lee Employee Seeks Job Back, North Lee Faces Criminal Investigation
    Skip to: The audit, Terry Anderson responses

    TUPELO – An audit of the North Lee County Water Association revealed widespread financial management problems in the nonprofit cooperative.

    The audit’s findings include poor record keeping, failure to file required financial reports and to formally adopt a budget, and approximately $14,000 in unaccounted for funds.

    North Lee violated several state and federal laws, according to the audit, a copy of which was obtained recently by the Daily Journal.

    North Lee Board of Directors President Terry Anderson says the problems cited in the audit – which was for the fiscal year ending June 30, 2013 and received Feb. 18 of this year – are being addressed.

    Increased scrutiny on North Lee after it received a $1.2 million U.S. Department of Agriculture Rural Development loan a year ago included the requirement of an independent audit meeting federal Office of Management and Budget standards. It is likely the most rigorous examination ever of the water association’s financial records.

    Findings included concerns ranging from not paying employees for time worked to not approving an annual budget for two consecutive years and non-compliance with federal loan requirements.

    Booneville-based Jones & Jones Certified Public Accountant firm conducted the audit that covered North Lee’s fiscal year 2013 that ended on June 30 and also identified serious finance-related concerns from FY 2012.

    Federal regulations require North Lee to make audit copies available for public inspection. Mississippi Rural Water Association CEO Kirby Mayfield said the audit is a public document, as did a USDA Rural Development spokeswoman in Jackson.

    But Anderson disagreed, saying only water association members, or customers, should have access.

    The water association also did not comply with state law requiring copies of financial statements to be kept at the Lee County Library.

    Overall, the audit revealed eight “material weaknesses,” practices that could lead to federal money being missing or misspent, or other issues that couldn’t be prevented, corrected or resolved in a timely manner.

    North Lee received $882,763 of the federal loan in fiscal year 2013 for water system improvements and hadn’t used the remainder. The nonprofit has also received approval for a second Rural Development loan of $8.9 million.

    Poor record-keeping

    Specifics in the 2013 audit suggest the nonprofit organization kept poor records leading to overpayment of the employer’s share of insurance costs and didn’t file required quarterly and annual reports as part of the Rural Utility Services loan agreement.

    The report showed two consecutive years of violating state law that requires transfer of money owed to former customers to the state treasurer’s office. Improper actions related to federal loan money include not spending it within the required time after disbursement, having expenses not approved by a designated person, failing to provide quarterly and annual budgets and using quotes instead of actual expense costs to receive loan money.

    No records exist of North Lee’s board passing an annual budget for either 2012 or 2013. The association must send budgets and quarterly reports to the Rural Development Administration as part of loan requirements. The association explained in the audit the bookkeeper wasn’t told to provide the records but has since provided them.

    However, North Lee’s budget provided to Rural Development likely does not fulfill reporting requirements.

    “The budget was never formally adopted by the board,” Anderson said in a written response to Daily Journal questions.

    Janis Nolan, Jackson-based loan specialist with Rural Development’s water and environmental division, said water associations periodically provide tentative budgets but must also provide board-approved budgets.

    “In all properly approved budgets, they are approved by board members,” Nolan said.

    The audit also reported the association’s “billing, accounts receivable, meter deposit, and adjustments record are not sufficient to reconcile recorded income.”

    This resulted in finding a potential missing money of up to $14,164. However, credit card receipts during that year showed higher collections than processing reports data, suggesting $2,415 of the shortage could have been from this reporting discrepancy.

    Records also showed problems in personnel expenditures. A sampling of 109 invoices showed employees who clocked in before 8 a.m. didn’t receive $691 in pay.

    Board President Anderson said work at the water association begins at 8 a.m. and employees who punched their time sheet earlier “understand that it was for their convenience.”

    Anderson responded in writing Thursday to more than a dozen questions from the Daily Journal related to audit findings. He said some of the issues reported resulted from staff and board members not understanding what information they needed to retain and provide to the auditor.

    The audit found that billing records during the year were not properly prepared, maintained or archived; Anderson said board members believe billing statements were correct and maintained properly.

    Past problems

    Rust-colored water and frequent boil notices have been part of North Lee’s water quality problems for years. In October 2011, all board members resigned amid allegations of misconduct and falsifying water reports. Former North Lee manager Dan Durham pleaded guilty in federal court in 2012 to falsifying the water reports and received probation.

    In late 2011, association members elected all new board members, who adopted new bylaws.

    Currently, North Lee and the city of Tupelo are in negotiations related to the water association transferring service to 508 customers – roughly 10 percent of its customer base – in areas annexed by the city to Tupelo Water & Light.

    The North Lee board hired the Tupelo accounting firm Franks, Franks, and Jarrell to help untangle the water association’s finances after mismanagement issues surfaced in 2011. Anderson said the board has remained actively involved in financial oversight and “intend(s) to fully comply with all federal regulations.” The board has adopted a corrective action plan to address issues cited in the audit.

    Rural Development officials will not discuss information related to specific loan, requiring formal Freedom of Information Act requests. The Daily Journal has pending FOIA requests related to both of North Lee’s Rural Development loans.

    Anderson said water association members should feel confident in current board members’ oversight and operations at North Lee despite the audit findings.

    “It is our opinion, that never in its history has the Association had more accountability and transparency,” he said. “We will continue to work with the auditor, an outside accounting firm, our Board Attorney and others to address each issue mentioned in the audit report.”

    Audit fiscal year 2013 of North Lee County Water Association

    Click yellow highlighted areas to read Daily Journal notes to specific audit sections.

    Full responses from North Lee board President Terry Anderson to Daily Journal questions about the audit

    Click yellow highlighted sections for related Daily Journal notes.