Sheriff Department audit released

The State Auditor's office has released the special audit it performed of the Todd County Sheriff's Office at the request of the Todd County Fiscal Court and Sheriff W.D. "Billy" Stokes.

A full rundown of the audit will be in next week's Todd County Standard.

Here is the press release from the auditor:


News from State Auditor Crit Luallen’s Office
Luallen releases ’08 audit of Todd County Sheriff’s Office

(Frankfort, Ky. June 4, 2009) State Auditor Crit Luallen today released the 2008 audit of Todd County Sheriff W. D. Stokes, which found a deficit of $16,051 due to the sheriff using more funds to operate his office than it earned during the calendar year.

During 2008, the sheriff’s office had total revenues of $230,063 and allowable expenditures of $246,114 – with the difference being $16,051. The allowable expenditures included the amounts paid for the sheriff’s maximum annual salary and training incentive benefit.

According to the audit, although the sheriff’s budget contained a revenue line item for Todd County Fiscal Court contributions of $26,152, this contribution, when requested, was only made in the amount of $3,158.

The audit recommends the sheriff only expend available revenues.

Stokes responds in the audit: “Had the Todd County Fiscal Court met its obligation to the sheriff’s office by paying the part it was budgeted to pay, the sheriff’s office would have had $6,943 in excess fees for the year 2008.”

State law requires the Auditor to annually audit the accounts of each county sheriff. The audit found that the Todd County Sheriff’s financial statement presents fairly the revenues, expenditures, and excess fees of the Todd County Sheriff in conformity with the regulatory basis of accounting.

As part of the audit process, the Auditor must comment on non-compliance with laws, regulations, contracts and grants. The Auditor must also comment on material weaknesses involving the internal control over financial operations and reporting.

The 2007 Todd County Sheriff’s budget was audited by reviewing the total revenues and expenditures because of the way fiscal court approved the 2007 budget.

For 2008, fiscal court approved a line-item budget for the sheriff’s office, causing auditors to determine the sheriff’s compliance for each category of revenues and expenditures.

This audit review led auditors to report the following findings:

The sheriff’s office should request budget amendments from fiscal court.
Kentucky law (KRS 64.530) states the fiscal court may fix the maximum amount that the sheriff may expend each year for the expenses of his office.

According to the interpretation of this statute in Funk v. Milliken, Ky., 317 S.W.2d499, 507 (1958), “The fiscal court may fix, in advance, the categories of reasonable official expense that will be allowed and the maximum amount that will be allowed in each category.”

In addition, Kentucky law (KRS 68.210) provides the Kentucky State Local Finance Officer (SLFO) with the authority to implement accounting practices for local government officers. In the County Budget Preparation and State Local Finance Officer Policy Manual issued by the Kentucky Department for Local Government, the SLFO requires the fiscal court to approve the calendar year budget for the sheriff’s office by January 15 of each year.”

On Feb. 22, 2008, the Todd County Fiscal Court voted “to approve the second reading of the sheriff’s line by line CY2008 budget” and “to approve on order 7-64 the sheriff’s maximum expenditure as noted in the CY2008 budget.”

Order 7-64 sets the maximum amount allowed per category for expenses of the sheriff’s office for calendar year 2008. This order does not include payroll items. The maximum amount for payroll items was set with Order 7-63.

During the audit, auditors noted six revenue categories and 16 expenditure categories exceeded budgeted amounts for calendar year 2008. The sheriff's office did not request budget amendments from the Todd County Fiscal Court as categories exceeded budgeted amounts or new categories were created.

The sheriff’s office should establish procedures to monitor budgeted to actual and to request budget amendments when categories exceed budgeted amounts or new categories are created.

Stokes responds in the audit, “As the fiscal court line item budget for 2008 passed, they also included a $30,000 personal state advancement loan by the sheriff, which they had been instructed by the sheriff in September 2007, that the sheriff would no longer borrow, due to him/his estate being personally responsible for the loan, by bond.

“The sheriff has continually agreed to pay interest on a loan made by the County, rather than subject him/his family to have to pay back the local government, should he die or be killed while serving as sheriff. With the fiscal court putting this advancement/loan in the budget, knowing that the sheriff wasn’t going to borrow monies he was personally responsible for, to run a government office, the sheriff notified the Kentucky Department of Local Government, which instructed the sheriff to complete his quarterly reports to the Department of Local Government and to the fiscal court without listing anything in the budget estimate columns. Thus, the sheriff followed the advise of the Kentucky Department of Local Government.”

The sheriff’s office should report wages and pay withholdings and matching timely. The sheriff’s office should report wages and pay the withholdings and matching amounts timely to the County Employees Retirement System (CERS), the Internal Revenue Service (IRS), the Kentucky Department of Revenue (KDR), Todd County Occupational Tax Administrator, City of Elkton, Todd County Payroll Clerk, and Kentucky Public Employees' Deferred Compensation Authority.

The Auditor’s Office has referred the audit to the CERS, the IRS and the KDR for further review.

The sheriff’s office should report wages even when funds are not available to make the payments. During calendar year 2008, withholdings and matching were not paid timely due to cash flow problems. The cash flow problems were caused by the sheriff’s decision not to participate in the state advancement program through the Kentucky Finance and Administration Cabinet and the Todd County Fiscal Court’s decision to only provide $3,158 of the $26,152 budgeted for the sheriff’s office by the fiscal court for financial support in the 2008 fee account budget.

Stokes responds in the audit, “At one of the first fiscal court meetings in 2008, the fiscal court passed a motion to stop doing the payroll for the sheriff’s office. This placed an unprepared burden upon the office, already being understaffed. The office got help for the first few months from an accounting firm, which did not prepare any withholdings. The sheriff then obtained a Certified Public Accountant (CPA), who has since corrected the problems for all payroll deductions, and withholdings to be made in a timely manner. There should not be any other problems with these matters, as the CPA is making the payments for the sheriff’s office currently.”

The sheriff’s salary should be paid monthly in accordance with the maximum salary authorization set by the Kentucky Department for Local Government.

Kentucky law (KRS 64.5275) states the sheriff shall receive an annual salary pursuant to the salary schedule set by the Kentucky Department for Local Government (DLG).

The maximum salary set for the Todd County Sheriff in calendar year 2008 was $70,496. Kentucky law (KRS 64.535) states that 1/12 of this salary shall be received monthly.

Payroll records indicate the sheriff did not receive 1/12 of his salary monthly during calendar year 2008. He did not receive a paycheck during the months of January, February, June, July, August, September, and October.

Instead, the sheriff received paychecks for these months during November and December. Additionally, payroll records indicate the sheriff received $71,199, which is $703 over the required salary amount.

The sheriff was overpaid due to mistakes made in withholding city occupational license fees, dental insurance, and deferred compensation from his gross salary. The sheriff repaid the $703 to his official fee account on April 22, 2009.

In the future, the sheriff should ensure that the proper withholdings are made from his gross salary and that he receives 1/12 of his required salary monthly.

Stokes responds in the audit, “The sheriff asked the fiscal court to pay his monthly salary, as there was not enough funds available in the Office to pay them, but the fiscal court refused to pay the sheriff because he wouldn’t borrow money to run the office. No other county elected official has to borrow money to pay his/her salary.”

For these and other audit findings, please view the audit in its entirety at www.auditor.ky.gov.