Audits of the 2021 financial statements for the Daviess County Sheriff’s Office showed material misstatements for both the fourth quarter and the 75% account financial reports — including receipts and disbursements being overstated by more than $3 million. According to the DCSO chief financial officer, the discrepancies were only technical and there was no actual wrongdoing, and resulted after miscommunication on how to present the reports following the early retirement of Keith Cain and appointment of Barry Smith.
In 2021, Cain served as Sheriff from January 1-November 30 while Smith held the office from December 1-31. (Smith served as Sheriff throughout 2022, but the audit was only for the 2021 calendar year.) Shelly O’Bryan was, and still is, the DCSO Chief Financial Officer.
Brad Youngman, who officially began his role as Sheriff earlier this week, said DCSO is like all government offices in being audited routinely as required by law.
“It is not uncommon for these audits to show small discrepancies,” he said. “This particular audit was somewhat different than usual in that it covered a time frame in which the sheriff left office early and a new sheriff was appointed to complete his term. Because this was an unusual circumstance, the CFO wisely contacted various agencies for guidance. The important thing to note is that there was no finding of any wrongdoing. The discrepancies were of a technical nature and pertain to the way the information was submitted.”
He continued, “These small procedural things can happen especially when there are unscheduled changes in leadership and when you have so many moving parts. But I have always had and will continue to have faith in our CFO. She does an amazing job and is rarely recognized for the positive impact she has on our operations.”
In both audits, Harmon’s office recommended DCSO implement internal control procedures to ensure that the financial reports are accurate and complete before submitting them.
“We always welcome their guidance and will always strive for improvements,” Youngman said. “However we do have to balance the financial impact of adding more staff against the cost to the taxpayer. I am confident in the controls that we have and the job that our office does.
The audits were released Thursday morning by State Auditor Mike Harmon. State law requires the auditor to annually audit the accounts of each county sheriff. In compliance with this law, the auditor issues two sheriff’s reports each year: one reporting on the audit of the sheriff’s tax account, and the other reporting on the audit of the fee account used to operate the office.
Audit of the January 1 – November 30, 2021 financial statement of former Daviess County Sheriff Keith Cain
Comment from Auditor
The former Daviess County Sheriff’s fourth quarter financial report was materially misstated: Disbursements were understated by $122,747. The former sheriff’s chief financial officer failed to include the outstanding liabilities as of November 30, 2021, on the fourth quarter financial report. According to the chief financial officer this was just an oversight on her part. As a result, the fourth quarter financial report was incorrect and did not reflect an accurate and complete financial presentation of the Daviess County Sheriff’s Office as reported to the Department for Local Government (DLG) for the period ended November 30, 2021.
Former County Sheriff’s Response
The Chief Financial Officer was unsure how to proceed when Sheriff Cain retired. As a result, she reached out to County Fees for guidance. She (w)as told to complete a Quarterly Report for October and November under Sheriff Cain and a separate Quarterly Report for December under Sheriff Smith. The Quarterlys were prepared as directed. She neglected to show the Unpaid Obligations on the October – November Quarterly Report which were forwarded to the state in December. All monies are accounted for. This was an oversight on her part.
Audit of the December 1–31, 2021 financial statement of Daviess County Sheriff Barry Smith
Comment from Auditor
The Daviess County Sheriff’s financial statements were materially misstated: The Daviess County Sheriff’s fourth quarter financial report and the 75% account financial report were both materially misstated. On the fourth quarter financial report, the chief financial officer presented the activity of the former sheriff (for the period January 1, 2021 through November 30, 2021) in three columns, had a separate column for the activity of the current sheriff (for the period December 1, 2021 through December 31, 2021), and then a combined year to date total. This was the fourth quarter financial report that was submitted to the Department for Local Government (DLG) as of December 31, 2021. As a result of this, receipts and disbursements were both overstated by $3,200,414. On the 75% account financial report, the chief financial officer included all the activity for calendar year 2021; therefore, resulting in receipts and disbursements being overstated by $3,000,970 and $4,408,855, respectively.
According to the chief financial officer she felt like she had properly separated the activity of the former sheriff and the current sheriff on the fourth quarter financial report. She also felt she had properly followed the guidance from County Fees for reporting the activity of the 75% account. Her understanding was since all the activity for calendar year 2021 was all for the current term it wasn’t necessary to separate the activity of the former sheriff and the current sheriff. She also felt it was necessary to show the combined year to date totals on both financial statements for budgetary comparison purposes.
As a result, the fourth quarter financial report was incorrect and did not reflect an accurate financial presentation of the Daviess County Sheriff as reported to DLG for the period December 1, 2021 through December 31, 2021. Additionally, the financial report for the 75% account was incorrect for this period as well. KRS 68.210 gives the state local finance officer the authority to prescribe a uniform system of accounts. The County Budget Preparation and State Local Finance Officer Policy Manual requires accurate financial reporting. Each period stands alone in accounting for receipts and disbursements and should be accounted for accordingly in each audit period. Additionally, good internal controls dictate that all financial statements be accurate.
County Sheriff’s Response
The Chief Financial Officer was unsure how to proceed when Sheriff Cain retired. As a result, she reached out to County Fees for guidance. She was told to complete a Quarterly Report for October and November under Sheriff Cain and a separate Quarterly Report for December under Sheriff Smith. The Quarterlys were prepared as directed. The CFO was not informed that the financial information from the previous eleven months did not need to be included on the December report. She completed the report in this manner because she believed the entire yearly finances needed to be shown as balanced.
