Luallen Releases Audit of
Magoffin County Sheriff’s Office

Finds $84,990 Deficit in
2006 Fiscal Year Fee Account

Crit Luallen
Auditor of Public Accounts
105 Sea Hero Road, Suite 2
Frankfort, KY 40601

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After their review, auditors issued a “disclaimed opinion,” meaning they cannot give assurance on the accuracy of the financial statements of the sheriff’s office. As a result, the Auditor’s Office requests that the Magoffin County Attorney advise the fiscal court with regard to the continuing operations of the sheriff’s office.

The audit was also referred to the Internal Revenue Service (IRS), Kentucky Department of Revenue (KDR), the Kentucky Attorney General (AG) and several other state agencies that oversee the deficient areas noted by auditors.

“It’s imperative that every local official properly manage fees collected from the taxpayers.” State Auditor Crit Luallen said. “The conditions of the Magoffin County Sheriff’s Office discussed in the audit indicate that public funds are at risk without significant improvement in the office’s financial and administrative practices.”

The audit was referred to the IRS and KDR because the sheriff did not report or remit $67,659 of the $80,424 of total payroll withholdings due for 2006 and has not remitted all withholdings due for 2007. The un-remitted amount was used for operational expenditures of his office, and the employee wage and tax statements reported that the actual payroll withholdings had been withheld.

The $84,990 deficit in the sheriff’s office found by auditors was the result of $58,253 in expenditures in excess of available revenues and an additional $26,737 in disallowed expenditures in 2006.

In his response to the recommendation that the office be reimbursed, the sheriff said in the audit that he will “personally deposit money” into the 2006 fee account for the shortage of receipts and the disallowed expenditures.

The audit indicates that the disallowed expenditures range from $17,682 in bank overdraft fees and insufficient fund charges, to $1,513 in IRS fines for 2005, and $3,378 of expenditures that had no supporting documentation.

Additionally, a noted disallowed expenditure occurred when the sheriff issued a $1,700 check using confiscated money taken during a criminal investigation. The sheriff did not have a court order to use the money. The Auditor’s Office recommends the sheriff seek guidance from the AG’s Office for proper procedures in handling confiscated funds.

Other findings from the audit include:

• Auditors found that the sheriff had unopened mail dating from 2006 and other years. The sheriff was instructed to account for all of the mail, and after the auditors reviewed this process, they discovered the unopened mail accounted for $2,780 in receipts and $14,300 of additional liabilities.
• The Sheriff did not comply with lease agreements on three Dodge Chargers when he failed to make scheduled payments in a timely manner.
• The Sheriff did not require eligible employees to participate in the county employees retirement system. Auditors found eight deputies who worked an average of 107 hours a month over the year, and according to KRS 78.615, these deputies are required to participate in the retirement system because they averaged 100 or more hours per month.
• The Sheriff did not prepare accurate financial reports or maintain required financial records. The audit found that bank reconciliations were not prepared for every month throughout the year and that the sheriff did not file any quarterly reports with the Governor’s Office for Local Development (GOLD) in 2006.
• The Sheriff did not prepare an annual financial statement for 2006 or present it to the fiscal court. KRS 424.220(1) requires the Sheriff to prepare an itemized, sworn statement of funds collected, received, held or disbursed during the year.
• The Sheriff should eliminate the $24,158 deficit in his 2004 fee account and the $3,764 deficit in his 2005 fee account by depositing personal funds into the accounts.

Note: The Auditor’s Office just completed the audit on the Magoffin County Sheriff’s 2006 Tax Settlement Account. The audit found the account statements fairly present the taxes charged, credited and paid for from June 29, 2006-July 31, 2007. Press release/audit to be released soon.

State law requires the Auditor to annually audit the accounts of each county sheriff. In compliance with this law, the Auditor issues two sheriff’s reports each year: one reporting on the audit of the sheriff’s tax account and the other reporting on the audit of the fee account used to operate the office.

Crit Luallen
Auditor of Public Accounts
105 Sea Hero Road, Suite 2
Frankfort, KY 40601
WEB: www.auditor.ky.gov/