Zebulon, N.C. Broke Its Own Reserve Rule, Then Budgeted $4.6M From It

The Town of Zebulon, North Carolina -- a Wake County town of about 12,237 residents and one of the state's fastest-growing communities -- let its General Fund unrestricted cash reserve fall to 48.58% of its own budget in fiscal year 2025, below the 50% minimum its own financial policy requires, according to a Rapid Response Special Report⧉ from North Carolina's independent, constitutionally elected State Auditor.▸ Rather than pause the drawdown, the Town went on to appropriate $4,638,409 from that same reserve in its FY2026 budget -- equal to nearly 16% of the year's entire $29,270,809 operating budget, and money the auditor's own math says the Town's policy said it should not have appropriated at all.

The reserve breach did not happen in isolation.▸ Zebulon's long-serving Town Manager resigned June 3, 2024, after nine years; the Board appointed an interim manager the next day, hired a permanent replacement that December, watched that hire resign four months later, reappointed the same interim manager in April 2025, and did not seat a different, new permanent Town Manager until February 16, 2026 -- the fourth stint in the office in twenty months, filled by three people in all. OSA opened its review after a Tipline referral alleging weak internal controls, excessive travel spending by Commissioners and administrators, and unsupported consultant payments -- and found evidence for all three, spread across the same period the Town cycled through leadership.

In January 2025, the former interim Town Manager's own consulting firm billed the Town $4,500 for 18 hours of "Town Manager transition, budget development, and miscellaneous support" at $250 an hour.▸ The Town could not produce an executed contract authorizing that rate -- only a proposal document the former interim Town Manager had signed himself, which no Town official ever countersigned. Separately, the Town paid an outside budget-preparation consultant $22,630.22 under a $39,500 contract before terminating it early in April 2025, when the Town Manager and Assistant Town Manager who had overseen the engagement both resigned. Asked for invoices or deliverables to show what the Town got for that money, the Town could produce neither -- OSA reported it was "unable to verify the deliverables received by the Town, if any."

The Town's own accountant inadvertently paid a Town credit card balance of $16,668.87 out of personal funds in December 2023, after an online banking system defaulted to the accountant's personal account as the payment source -- a mix-up the Town caught and reimbursed within a day, but one OSA said "circumvent[ed] normal disbursement controls."▸ Separately, weak invoice controls let the Town pay a $844.92 vendor bill twice and issue $130 in checks for a cemetery-lot purchase that never went through; both sat unresolved on the Town's outstanding-check list for years. State law⧉ required the Town to report checks like these to the State Treasurer as unclaimed property after a year outstanding -- OSA found nine such checks the Town had not investigated or reported, five of them blamed on originals "lost in the mail."

In a formal response signed July 2, 2026, Town Manager Catherine Crosby wrote that Zebulon has, since March 2026, formed a Policy Audit Committee, begun a Financial and Procurement Internal Controls Assessment with outside auditor Cherry Bekaert, put the Town Manager on a weekly review of the check register, and started quarterly financial briefings for the Board of Commissioners.▸ On the reserve shortfall specifically, the Town said its newly adopted FY2027 budget was "developed with restoring fund balance as a priority through expenditure reductions, returning eligible completed project balances to unassigned fund balance, and limiting new recurring expenditures." The response does not dispute any of the auditor's eight findings.