Auditor says risk of fraud high in Owsley County clerk's office

bestep@herald-leader.comJune 25, 2012 

State Auditor Adam Edelen has referred several findings of financial mismanagement by Owsley County Clerk Sid Gabbard's office to federal and state authorities.

The audit of Gabbard's office, which covered 2010 and was released Monday, included more than 15 examples of problem financial practices. Those ranged from failing to give people receipts for payments to not sending in tax and retirement withholdings from employees' checks to the Internal Revenue Service and the state.

Gabbard's office had a known deficit of $61,398 at the end of 2010. The amount might have been higher, but there was no way to determine the total, according to Edelen's office.

The deficit and other problems in Gabbard's office — including failing to account for some delinquent tax bills — meant the school system, the health department and other agencies in one of the poorest counties in the nation didn't get all the revenue they were due.

In addition, the audit cost the county $45,000, said Stephenie Steitzer, spokeswoman for Edelen's office.

That was far more than the usual cost of about $8,000 because poor accounting in Gabbard's office made it harder to complete the audit, Steitzer said.

Edelen's office referred findings from the audit to the IRS, the state Department of Revenue, the Kentucky Department of Labor, Attorney General Jack Conway and the county attorney.

The audit concluded there was a high risk of fraud in the office. The bookkeeping was so bad that auditors could not express an opinion on the financial statement of the office.

It was the 10th year in a row the auditor's office issued such a "disclaimed" opinion on Gabbard's office, Steitzer said.

The audit recommended Gabbard pay $61,398 out of pocket to make up for the deficit.

Gabbard said Monday he had sent money to the IRS and state for the unpaid tax liabilities but had not yet paid all the money due to local agencies.

Gabbard said he plans to change bookkeeping procedures to fix the problems identified in the audit but hadn't finished that process.

"I'm trying, that's all I can tell you," he said. "What I've not (addressed), I will."

Gabbard said he has been clerk for 25 years.

People auditing his office have made suggestions going back a decade on how he could correct bookkeeping problems, according to the audit.

It said Gabbard had made improvement, but the office still fell far short of accepted practices in 2010.

Much of the 2010 deficit resulted from unrecorded or undeposited receipts in Gabbard's office, according to the audit, meaning his office took in money but didn't put it in the bank.

The poor accounting practices put taxpayer money at risk, creating a situation in which missing money could go undetected, the audit said.

Bill Estep: (606) 678-4655. Twitter: @billestep1.

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