Audit of Whitley sheriff referred to FBI; thousands of dollars "missing"

bestep@herald-leader.comFebruary 25, 2010 

Services such as schools and libraries didn't get as much money as they should have from 2007 tax collections in Whitley County because the sheriff let many people pay less than they owed, according to audits released Thursday.

Sheriff Lawrence Hodge also had a deficit of at least $92,000 in two accounts, the audits said.

Added to a deficit of more than $124,000 identified in audits released last year, Hodge's office is short more than $216,000, according to a news release from state Auditor Crit Luallen.

Much of the $92,000 shortfall identified in the latest audits resulted from undeposited receipts, meaning Hodge's office took in money that was not then deposited in the bank, according to the audit and interviews.

"That money's missing," Luallen said in an interview.

The audit findings have been referred to the FBI, Luallen said.

The true deficit in the Whitley County sheriff's office probably was higher, but auditors couldn't document that because of poor records.

Hodge did not respond to the audit findings.

Luallen's office released two audits of Hodge's office Thursday. One was on the settlement of 2007 tax collections; the other was on the operation of his office in calendar 2008.

The audits identified several problems in the office, including money being deposited into the wrong accounts, lack of oversight, poor documentation and late tax payments to other agencies.

In one case, two employees got a total of more than $11,000 for unused vacation time, but the payment was posted to an account for office supplies. The money was not shown as taxable income for the two, the audit said.

In addition to providing law enforcement, sheriffs in Kentucky collect taxes and fees that go to the state and a variety of local agencies such as schools, libraries and health departments.

That means shortfalls, poor bookkeeping or the failure to collect taxes affect other agencies.

"It is imperative that proper reporting is maintained by the sheriff's department," Luallen said in a statement. "When receipts go undeposited and reports are inaccurate, this directly affects the local taxing districts and vital services suffer."

In March 2009, Hodge reported he had less than $1 in excess fees to turn over to the county, when in fact he had at least $46,061, the audit said.

That total could have been higher, but the accounting in Hodge's office was so poor that auditors couldn't tell, the report said.

An earlier audit showed that Hodge owed the county $134,000.

Checks made as part of the latest audits showed that Hodge's office collected more in taxes from people than it reported to other "taxing districts," such as the school and library systems, the audit showed.

In some cases, people paid their taxes late and paid a 5 percent penalty, but Hodge's office reported the payment at face value, the audit said.

The 2007 audit said Hodge also let many people pay property-tax bills at the early, 2 percent discount rate after the discount period had passed, and waived or reduced penalties for late payments.

Sheriffs are supposed to file "supplemental reports" when they make those kinds of adjustments on tax bills.

The law envisions such reports will be used sparingly, but Hodge filed an unusually large number, covering more than $1 million in taxes, the audit said.

His office previously filed reports covering $2.4 million in taxes, audits showed.

"Supplemental reports can be used to conceal the theft of tax payments to the sheriff's office," the audit said.

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