, Corbin, KY

Whitley County Sheriff Investigation

May 20, 2011

Audit of Hodge’s office reveals known deficit of $230,040

CORBIN — May 20, 2011.pdf

2008 Whitley County Sheriff audit

2009 Whitley County Sheriff audit

By Becky Killian / Managing Editor

Two newly released state audits of former Whitley County Sheriff Lawrence Hodge’s office have revealed a total known deficit of $230,040.

State Auditor Crit Luallen’s office released the 2008 tax audit and the 2009 fee account audit with a statement indicating both have been forwarded to the FBI.

The state found Hodge failed to maintain adequate accounting records which impacted the county’s taxing districts. The state also found inaccurate accounting of expenses from Hodge’s 2009 fee account.

Prior to Thursday’s release, Luallen’s office had conducted seven audits of Hodge’s office that had found a total deficit or more than $216,000. Those audits also were provided to the FBI.

Hodge’s 2009 and 2010 tax audits as well as an audit of his 2010 fee account are still underway.  

Tax Accounts

Auditors reported Hodge’s office’s records were in “disarray,” which made it impossible to use auditing procedures while reviewing the tax revenues and distributions.

“The tax audit notes continual concerns with how the former sheriff handled tax collection and distribution in Whitley County,” a press release Luallen’s office issued stated.

Audits have revealed surpluses in Hodge’s tax accounts for tax years 2002, 2003, 2004 and 2008 and deficits in 2005, 2006 and 2007.

The tax audit, which covered the period from July 26, 2008, through April 15, 2009, found the office’s tax account had an unexplained surplus of $11,850.

The tax account houses taxes collected from the public and corporations before they are distributed to taxing districts like schools and libraries.

The audit found Hodge’s office failed to account for all paid tax bills, which resulted in some taxes being reported as delinquent when they weren’t. The audit cites one instance where a property with a reported delinquent tax was about to go to a tax sale when the property owner presented proof to the county clerk’s office that the $230 tax bill had been paid during the discount collection period.

“The former Sheriff would be personally responsible for any additional tax bills erroneously turned over as delinquent for any tax year in a deficit or the additional amount in any tax year where the surplus would not be enough to cover the payment to taxing districts,” the audit states.

Another finding indicates Hodge’s office failed to properly document waivers of penalties and fees and granted discounts on tax bills after the discount period had ended.

For the discount period that ended Nov. 30, 2008, auditors found the office’s monthly reports indicated discounts continued to be noted on taxes collected for the following five months.   

During a court appearance in London’s U.S. District Court Thursday, Hodge’s former bookkeeper, Abby Vicky Paul, pleaded guilty to felony embezzlement. She explained that, under Hodge’s direction, she would record discounted tax payments even though the office had collected the full tax bill. Hodge, Paul and another office employee would then split the difference.

Other findings noted in the audit were:

* Fee account money totaling $400 was improperly deposited into the office’s tax account

* The office failed to accurately account for collected franchise taxes — which are taxes paid by corporations and some public utility companies. The office also failed to distribute the franchise taxes in a timely fashion.

* Deposits weren’t reconciled to a daily collection sheet or daily receipts journal.

* The office lacked adequate segregation of accounting duties

* Hodge failed to distribute proper amounts of interest earned on tax collections to school districts and his fee account. The audit notes Hodge owes $508 to the Whitley County School Board, $54 to the Corbin Independent Schools District and $1,250 to his 2009 fee account.

* Tax account money should not have been loaned to the fee account

* The office did not accurately account for the 10 percent sheriff’s add-on fees

* Hodge shouldn’t have collected taxes before signing the official receipt

* Hodge should settle the 2008 taxes by paying a total of $77 to three taxing districts and by getting refunds of $2,495 from Whitley County, $1,048 from Whitley County School Board and $1,134 from the library district.

Fee Account

Among the 12 findings in the audit of Hodge’s 2009 fee account, auditors raised concerns about money spent for tires, vehicle maintenance and gas purchases by Hodge and his deputies.

Hodge was also found to have wrongly used drug and alcohol account money for custom imprinted items including nail files, litter bags, pens, Halloween bags, sheriff’s badges and bracelets. Most contained messages that discouraged drug use.

According to the audit, the imprinted items are considered personal purchases and Hodge should repay $5,176 to the drug and alcohol account.

The audit questions whether $62,760 spent for vehicle repairs and maintenance was “reasonable and necessary.”

Among those purchases were 24 sets of four new tires and three pairs of two new tires. Auditors said they were unable to determine how many cars the department had in use at the time although they did review fuel charges in October 2009. That review determined 16 individuals charged for fuel including two special deputies, although the fuel card statement did not identify the vehicles driven.

Ten invoices were found that showed repairs totaling $4,652 on a vehicle records indicate was sold in 2004.

The audit recommends Hodge consult with the fiscal court to determine if the repair expenditures were reasonable. If the fiscal court determines they weren’t reasonable, Hodge should repay $62,760 to the fiscal court.

Hodge failed to adequately oversee fuel purchases made with credit cards, the audit states.

In October 2009, the audit states there were 18 unsubstantiated fuel charges totaling $578 made by five deputies and the former sheriff.

“Auditors also noted there were seven unusual charges,” the audit states, indicating that on Oct. 12, 2009, Hodge made two fuel purchases one minute apart. Also, a deputy made two fuel purchases four minutes apart on Oct. 23, 2009, and Oct. 26, 2009, another deputy made two fuel purchases five minutes apart.

Hodge was also found to lack adequate controls over overtime and holiday pay, with the audit noting several deputies did not sign their time sheets and that full time employees were treated as salaried workers. Those full time employees were paid the same amount every pay period regardless of hours worked, the audit states.

The other findings include:

*Hodge failed to maintain accurate accounting records.

*Hodge improperly disposed of a county vehicle.

*There was inadequate segregation of accounting duties.

*Vehicles were titled in the name of the Whitley County Sheriff when they should have been titled to the county.

*Hodge failed to take corrective action to a prior year finding concerning under-reported income of $11,603 for two employees.

*Hodge expended seized assets prior to court forfeiture and has failed to make required payments to other offices due portions of the revenue generated by the sale of forfeited items, including the Attorney General’s Office.

*Proper documentation wasn’t maintained for the drug and alcohol account. Auditors found Hodge should repay $1,950 in personal funds to the account.

*Excess fees of $22,344 should be submitted to the fiscal court.

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Whitley County Sheriff Investigation
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