State

Ex-treasurer allegedly wrote herself extra checks for $114,506. Audits caught up with her.

Auditor: Former county official made ‘numerous improper payments to herself’

Statement from Auditor Mike Harmon about the 75 findings and referral by his office to the FBI, Kentucky State Police, and Attorney General's office of the audits of the Jackson County Fiscal Court for 2015 and 2016.
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Statement from Auditor Mike Harmon about the 75 findings and referral by his office to the FBI, Kentucky State Police, and Attorney General's office of the audits of the Jackson County Fiscal Court for 2015 and 2016.

A former Jackson County treasurer took advantage of poor financial controls to write herself an extra $114,506 in checks in two years, according to two audits released Tuesday.

Beth Sallee was supposed to receive 24 paychecks totaling $45,450 in the fiscal year that ended June 30, 2015, but instead issued 26 additional checks to herself for an extra $46,173, field auditors found.

Sallee also dipped into federal funding the county receives to prepare for emergencies, writing herself more than three dozen checks totaling $60,180 from a grant.

Furthermore, she took extra paychecks in the fiscal year ending June 30, 2016, according to the audit.

At the same time she was padding her pay, Sallee allowed county bills to go unpaid, costing taxpayers extra money for late fees and interest, an audit said.

State Auditor Mike Harmon said findings from the two reviews will be reported to the FBI, state police, the state attorney general’s office and the Kentucky Department of Revenue. The referrals could result in criminal investigations.

“We are referring both audits to federal and state law enforcement agencies because of the egregious conduct of the former county treasurer who improperly made numerous payments to herself,” Harmon said in a news release.

Jackson County residents “deserve better from those entrusted to handle the people’s business” Harmon said.

The two audits released Tuesday were of the Jackson County Fiscal Court, covering the period from July 1, 2014, through June 30, 2016.

The reports said the county’s accounting and financial practices were a mess in that period. The audits cited 35 deficiencies in the 2015 fiscal year, then repeated those and added five more for 2016.

Among the problems, the county overpaid and underpaid employees at times; incorrectly withheld retirement payments from part-time employees; did not set a required salary schedule; did not properly withhold health insurance premiums; paid health premiums for people no longer employed; did not properly calculate occupational tax withholding on all employee wages; paid magistrates expenses without a required assignment to working committees; did not budget properly; and failed to keep accurate records, the audits found.

The county also spent more money than it had, finishing the 2015 and 2016 fiscal year with deficits.

The deficit at the end of the 2016 fiscal year in June was $287,898, according to the audit for that budget year.

On top of that, the payroll account had an estimated deficit of $233,589 in mid-2016, the audit said.

The audits said the county had a lack of internal accounting controls designed to identify problems and prevent fraud. Those can include splitting financial duties among employees to create a system of checks.

The absence of such controls and of proper management oversight “created an environment in which funds were misappropriated and financial records were manipulated,” Harmon said.

Sallee allegedly wrote extra checks to herself from county payroll funds and from grant money the county received under the Chemical Weapons Stockpile Emergency Preparedness Program, or CSEPP.

The federal government provides money through that program to several counties to help them prepare for potential leaks from the aging stockpile of chemical weapons at the Bluegrass Army Depot in Madison County.

County Judge-Executive Shane Gabbard said in responses included in the audit that the county has taken steps to fix the problems identified in the reviews and has cut costs to make up the deficits.

Sallee could not be reached for comment.

Jackson County officials have faced critical audits before. In the 2011 fiscal year, for example, an audit found that the county failed to pay employee payroll and retirement withholding on time; coded receipts in the wrong categories; and did not spend coal-severance tax receipts as required by state law.

Then-county Sheriff Denny Peyman cited that audit as the basis for arresting William O. Smith, who was judge-executive at the time, and Sallee in January 2014.

Peyman charged Smith and Sallee with forgery, falsifying records abuse of public trust and other felonies.

However, special prosecutor Jackie Steele, the commonwealth’s attorney in neighboring Laurel County, said there was insufficient evidence to support the charges and moved to dismiss them.

Smith sued Peyman and won a settlement of $62,500.

Peyman had significant bookkeeping problems in his own office, according to audits.

The audit of his final year in office in 2014 said Peyman did not turn over $32,871 in excess fees to the county as required and failed to settle a deficit of $28,169 from previous years.

State police arrested Peyman last month on charges of growing marijuana and trafficking in steroids.

There have been earlier problems related to CSEPP funding as well.

In 2011, the former Laurel County emergency manager admitted rigging a bid for equipment counties were buying under the program so that a woman he later married could get a $530,000 contract.

Brian Reams was sentenced to 18 months in prison and ordered to pay $215,134 in restitution.

And last year, Tamara Phelps, the former finance officer for Madison County’s program funded by CSEPP, pleaded guilty to stealing more than $332,000 over eight years.

She was sentenced to two years and eight months in prison; her attorney said she planned to repay the money.

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