DATE: Sunday, September 7, 1997             TAG: 9709070144

SECTION: LOCAL                   PAGE: B1   EDITION: NORTH CAROLINA 

SOURCE: BY CATHERINE KOZAK, STAFF WRITER 

DATELINE: SOUTHERN SHORES                   LENGTH:   62 lines

OFFICIAL LEAVES QUESTIONS ON BLUE SKY UNANSWERED

An audit of the town's and Blue Sky's finances should show if the building project is in trouble fiscally.

Southern Shores Town Manager Cay Cross has taken a leave of absence for medical reasons, leaving unresolved questions posed by the public at a Town Council meeting Tuesday about the financial health of the Blue Sky program.

Cross' handling of Blue Sky has come under public scrutiny after the publication of stories in a local newspaper that questioned her management of the project's finances.

Town officials have appointed Councilwoman Diane Henderson to temporarily replace Cross, who is expected to return to work by Oct. 15.

Cross, also Blue Sky program manager, was criticized in the local newspaper for requesting a $251,000 loan from the town to Blue Sky, a nonprofit program designed to help builders erect storm-resistant homes and buildings, and an attempt to incorporate the program in the state of Delaware.

Henderson said there is no evidence of impropriety in the town manager's action. But, she added, an audit of the town's and Blue Sky's finances, expected to be done in about a month, should show whether Blue Sky is in trouble fiscally and whether Cross is at fault.

``This is no indication of anything like that,'' Henderson said, ``but until the audit is completed, we don't know.''

The audit is routine and had been scheduled in July, Henderson said.

Funded by federal, state and town money, in addition to about 15 corporate partners, the $2.8 million Blue Sky project has been widely praised by insurance companies and emergency management agencies as an innovative way to prevent property damage in coastal regions.

The program teaches builders how to retrofit existing homes and build new homes that can withstand hurricane-force winds. Most storm damage - roofs blown off, windows shattered, doors blown out and the collapse of gable-end walls - occurs because buildings are not sealed tightly enough from wind and water, Blue Sky engineers say.

Cross was instrumental in bringing the program to Southern Shores more than two years ago. The town last year built a Blue Sky model behind Town Hall that is used as headquarters for the program.

Henderson said it is ``perfectly legal'' to deposit grant money in town accounts. In fact, she said, it is done all the time. But because the Blue Sky grant was so large, the town created a separate account for it within the town budget, she said.

Henderson said the town loaned the program $251,000 months ago in the form of a transfer from the town's unobligated fund balance to the Blue Sky account.

As for Cross's attempt to incorporate in Delaware, Henderson said she understands that the state law is known to be ``kind'' to nonprofits wishing to incorporate.

``It has always been the intention that the Blue Sky project would eventually not belong to the town - that it would be a nonprofit corporation,'' Henderson said.

She added that she believes the incorporation has gone no further than Cross registering the project name.

Cross, who is in Chapel Hill for medical tests, was unavailable for comment.

Henderson and project architect Ben Cahoon plan to meet next week with a representative from the state Division of Emergency Management in Raleigh to discuss completion of Blue Sky grant requirements, Henderson said.

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