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SHERIFF AUDIT RELEASED

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SALYERSVILLE – The state auditor released a total of 10 audits on the Magoffin County Sheriff Department, with numerous discrepancies found regarding money not in the correct funding accounts, deficits that will have to be paid by the sheriff personally and a close-to-$60,000 penalty fee owed to the IRS that cannot be paid by taxpayer money.

The audits, released by State Auditor of Public Accounts Mike Harmon on Monday, September 9, dating from September 2, 2013 through December 2016, looked at Sheriff Carson Montgomery’s funds for unmined coal taxes, general funding account, the annual sheriff’s settlements (for property tax collections), gas and oil taxes. 

Operationally, the auditor found that taxes were not being reported and distributed monthly, accounts were not settled in a timely manner, with many unpaid liabilities still due out of those accounts, monthly bank reconciliations had not been performed and checks were not included in disbursement ledgers, all falling under the findings that the sheriff did not have proper internal controls and lacked segregation of duties within his office, resulting in accounting errors and multiple internal weaknesses.

In a quick count by the Independent, tallying each time the auditor mentioned that Montgomery is to personally pay for deficits, liabilities and disallowed expenditures, it is estimated that he will personally owe $23,577 either to the fiscal court, the taxing districts or the state treasury. 

In an equally-unofficial tally, an estimated $256,574 was not in the proper accounts, in many instances showing excess fees had been transferred to other years instead of being turned over to the fiscal court. The auditor recommended these moneys be reallocated to the proper year’s accounts and paid back to the fiscal court, taxing districts or state treasury, as applicable.

Perhaps the biggest infraction uncovered is in relation to the 2014 payroll withholdings. The correct amounts had been withheld from payroll, but had not been turned over to the proper agencies, leading to incurred penalties and interest from the IRS for failure to pay withholding and matching amounts and for failure to file wage reports for 2014, resulting in an accrued total of $58,039 due to the IRS. 

The auditor stated in regards to paying the IRS penalties, “Payment of these penalties and interest is not an allowable disbursement of the fee account because they are a waste of taxpayer resources and are indicative of poor financial management practices.” 

Montgomery stated that they have the money and want to pay that bill, but the fiscal court will not approve the payment. The auditor noted that the penalties and interest incurred from late payment to the IRS are not allowable expenses of a fee account and cannot be paid from remaining excess fees. 

Magoffin County Judge-Executive Matthew Wireman, who was also a magistrate on the fiscal court prior to being elected as judge-executive, stated the fiscal court has taken no action in the matter, but it is his belief that they cannot pay bill that since it is not an allowable expense for a county. 

While we can’t go line-for line on the major infractions listed in the documents, here are some of the notable findings:

- To correct a deficit in the 2014 fee account, Montgomery is recommended to deposit personal funds of $14,011 into his 2014 official bank account. The auditor noted that the deficit is a result of failure to post payroll disbursements to the ledger and maintained a separate payroll account, which should have been reconciled to zero each month. According to the audit, the sheriff used the remaining cash balance in the account from prior years to pay the payroll for calendar year 2014, resulting in a deficit in the 2014 fee account. 

“This was due to December payroll that was worked in December that was paid in January. No deficit exists. This deficit exists in numbers only, not actual funds,” Montgomery responded in the audit.

The auditor replied, “An actual deficit exists in the account when all amounts owed from the account are paid.”

- In 2014, the sheriff had $1,600 in disallowed expenditures, including for coffee and for invoices paid for 2013 paid out of the 2014 account, with Montgomery recommended to personally reimburse the 2014 fee account $1,600. 

The sheriff responded, “Regarding the invoices, if the invoices are dated for 2013 but not received until 2014, it is only logical they be paid in 2014, most suppliers’ bill on net 30. I can’t imagine anyone would want to provide us with goods or services during the month of December if that were the case.”

The auditor responded that invoices dated for December 2013 should have been paid from the 2013 fee account regardless of when the bill was received, further noting, “Had the invoices been paid timely from the 2013 fee account, it would not be an issue.

- In the 2013-2014 unmined coal taxes audit, Harmon’s office commented that Montgomery’s office did not comply with the state’s uniform system of accounts, regarding how receipts and disbursements ledgers are maintained and the monthly bank reconciliations. Montgomery responded in the audit that new staff have since been delegated to the task and all errors have been corrected. 

- Also in the 2013-2014 unmined coal taxes audit, they noted the sheriff did not distribute 10% add-on fees on a monthly basis, which he also commented this error has been corrected.

- On numerous audits, the annual settlement of tax collections was not prepared timely, the auditor found. The tax settlements are due on September 1 of each year, with the sheriff’s budget running January to December, and the last of the tax collection running through the end of June, the auditor noted the sheriff’s office had ample time to prepare the reports for the fiscal court.

The auditor only recommended the sheriff comply with the state law by timely preparing these settlements. 

- At least five years the auditor found the sheriff had not settled fee accounts:

The sheriff did not settle his 2011 fee account, which still owes $17,978 to the fiscal court. Montgomery stated his office is working diligently to correct this matter.

The sheriff did not settle his 2012 fee account, which still owes $69,278 to the fiscal court. In 2017, $58,543 of those funds had been transferred to the 2017 fee account. Montgomery thought the fiscal court had given him the 2012 excess fees, but according to the minutes, Judge-Executive Dr. Charles Hardin’s motion only referred to the 2014 excess fees. Montgomery stated his office is working diligently to correct this matter.

He also did not settle his 2013 account, still owing the fiscal court $7,223 in excess fees. Montgomery stated his office is working diligently to correct this matter.

In 2015 the sheriff did not present an annual settlement to the fiscal court and did not pay excess fees of $22,659 for the calendar year 2015. Montgomery stated his office is working diligently to correct this matter.

Similarly, in 2016 he did not present an annual settlement to the fiscal court for the calendar year 2016 and did not pay excess fees of $18,255. The sheriff stated that this issue has been addressed and corrected to the best of their ability, noting that all money is still accounted for. 

- The sheriff’s office did not report and distribute taxes collected by the 10th of each month, as required by law, but Montgomery responded that this has been corrected by hiring a new office manager.

- On numerous audits, the auditor found material weaknesses in internal controls, with the office lacking segregation of duties, noting that the oversight could result in undetected misappropriation of assets and inaccurate financial reporting and by not overseeing daily operations, his office had significant accounting deficiencies. Montgomery said he now has new staff in place to make sure everything is done timely and with better checks and balances within the office.

- In the 2014 audit, Montgomery’s response stated, “I do not agree that the sheriff 2014 has a deficit in the 2014 fee account. This was payroll that was paid for time worked. Funds are at zero January 1. However, when employees work the last week or so in December the payroll should be paid out of the old account. Therefore, the payroll does not have a deficit indicated as it sounds. The auditors’ response to paying out of an old account at the first of the year is to lay employees off and close the office. The sheriff needs his deputies and office staff and feels strongly that laying staff off during Christmas isn’t justified.”

The auditor replied to this comment that there are procedures in place to amend their budgets, he had nine months to reconcile and settle the accounts, and that December payroll and withholding payments paid in January should be paid from the following year’s account, not that they were suggesting a layoff.  

In a later audit when cited for the same issue, Montgomery responded that the payroll account was abolished as of January 1, 2019, and that the matter has been addressed and corrected.

- The sheriff did not submit quarterly financial reports to the Department for Local Government, as required by law, according to the audit. Montgomery responded that this issue has been corrected for a few years now. 

- Also in the 2014 audit, the auditor noted that the sheriff did not maintain controls over fuel cards, with the bookkeeper’s card charged a total of $9,551 and the deputy clerk’s charged $7,512 for the calendar year, but proper daily logs were not kept that are required, which would include mileage, etc. The auditor noted that fuel cards should be issued solely to the sheriff and deputies and that documentation should be kept if someone other than the cardholder uses the fuel card. Montgomery replied that office staff were issued cards when deputies needed them but were not available to answer personal questions for the vendor. He also noted that the issue has been addressed and the fuel cards are only issued to deputies and one member of the office staff, which is only used when a CSO does transports.

“We have not now, nor have we ever, used [Vendor] Fuel Cards inappropriately!” Montgomery stated in the reply. 

- The sheriff’s office overcharged taxpayers for vehicle inspections, charging $10 for on-site vehicle inspections and $20 when a certified inspector had to travel to the site of the vehicle.

According to statutes, the fees should have been $5 per inspection and an additional fee of $10 per trip if the certified inspector had to travel to the site. Montgomery took full accountability for the oversight and said he had corrected it the moment he learned his office was not in compliance.

- Court security officers (CSOs) were paid by the Administrative Office of the Court (AOC) while working in the tax and fee office. CSOs can work in the sheriff’s office (not just in the justice center), but if they are not doing tasks related to their court duties, they cannot be paid by AOC funds. The auditor replied that two CSO employees had multiple instances of issuing receipts for various fees in the office, but were issued a payroll check for the same days to be reimbursed by the AOC. 

Within Montgomery’s response, he stated, “AOC guidelines regarding the duties of CSOs clearly states that CSOs are allowed to provide security services for the court within the immediate area of the courthouse. The sheriff’s office is within the immediate area of the courthouse. The receipts in question, were done by one employee, not two. They were pertaining to the civil process.”

In the 2015 audit when the issue was re-cited, Montgomery’s response included, “This comment is being taken as a personal attack on this office and its staff.”

- The sheriff did not have adequate controls over the payroll process, incorrectly compensating employees for hours worked in excess of 40 hours per week. According to the audit, employees were not paid compensatory time and a half for hours worked in excess of 40 hours per week and the sheriff did not have a written statement on file from employees indicating they chose to accept compensatory time in lieu of overtime. With employees keeping track of their compensatory and leave time, employees may have taken too much leave in the calendar year 2014. The auditor recommended compensatory time for employees be granted in accordance with the law and for the sheriff to have a written policy for vacation and sick leave. Montgomery stated this matter has been addressed and corrected, and that compensatory time is no longer part of payroll.

Any money still owed to the fiscal court is to be paid and if not collected without suit, they can authorize the county attorney to institute a suit for the collection of the amount reported by the auditor within 90 days of the release of the audit report, which was released on Monday, September 9. The actual total owed to the fiscal court is not completely clear at this time.

Goins also clarified for the Independent that there have been no referrals to any law enforcement agencies in the audits, noting that although they found numerous issues in the audits, “none rose to the level of any legal wrongdoing.”

“We are hopeful the sheriff follows the recommendations of our auditors in addressing the issues identified in the audit reports,” Goins said. “If he does, the areas identified in the audits should not be an issue next year.”

While State Auditor Mike Harmon’s office could not specify the exact cost of the extensive audit (which will have to be paid by the Magoffin County Fiscal Court), Communications Director Michael Goins did comment, “When our auditors began their work, they discovered issues that impacted another year or another account with the sheriff’s office, such as the comingling of funds between accounts over several years.  That work kept leading us to other issues in other years, and with other accounts.  The amount of findings in the audits is reflective of the time auditors had to spend reviewing multiple years and accounts.” 

The Independent is in the process of submitting an Open Records Request to the sheriff’s office and the county for more information. 

Mortimer Media Group checked with the sheriff, who is out of town this week for a conference. 

Responses made by Montgomery in this story (seen in italics) were in written form and included in the audits released this week.
 

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Heather Oney

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