Audits released Thursday of the 2021 tax settlement for the Daviess County Sheriff’s Office showed material misstatements. According to the DCSO chief financial officer, the inaccuracies were only technical meaning there was no missing money or misappropriated funds, and the issue came after a miscommunication on how to present the reports following the early retirement of Keith Cain and the appointment of Barry Smith. Multiple offices across the state had similar problems due to new incoming sheriffs, according to DCSO.
The audits were released 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.
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.
Cain and Smith both deferred to O’Bryan when asked for comment Thursday. O’Bryan provided current Sheriff Brad Youngman with information on what caused the errors. Her direct response to the audits is also included in the highlights of the reports below.
Youngman said there was a miscommunication on how to complete final settlements during the transition from Cain to Smith.
“After reaching out for assistance in closing out the old sheriff, Shelly was told that she needed to complete a settlement for Regular Revenue collections,” Youngman said. “An auditor from the Department of Revenue was on site for 2 days during the closeout and balancing of the settlement statement. She was never informed of the need for another settlement for the Telecommunications and Public Service collections during that time.”
Youngman said a final settlement for each tax collected was completed at the end of collections in April 2022, and the final settlements for all taxes were balanced and approved by the State Auditor’s Office.
“When the 2021 audit was completed, the auditor informed Shelly that several of the counties that had a new in-coming sheriff experienced the same problem,” Youngman said. “There is little training for finance personnel which caused this oversight.”
The sheriff’s office experienced another transition, from Smith to Youngman, during the 2022 tax year. All settlements were completed as required by the state at that time, according to Youngman.
“There are $70 million dollars going through this office every year,” Youngman said. “This office has always had a very high percentage of accuracy, but there’s also a reason why these audits are so important, to make sure that we get it right.”
Audit of Former Daviess County Sheriff’s Tax Settlement (Keith Cain)
The audit summary can be found here.
The former Daviess County Sheriff’s tax settlement was materially misstated: The former Daviess County Sheriff’s tax settlement, for the period April 16, 2021 through November 30, 2021, was materially inaccurate. The former sheriff’s settlement was overstated by the following:
• Franchise Taxes of $2,373,521
• Penalties of $3,434
• Discounts of $9,158
• Tax Commissions of $61,236
• Taxes Paid of $2,702,179
The settlement also did not include unpaid real estate taxes of $582,062, as a separate settlement for fire district taxes was not made, and the street lighting district was omitted from the former sheriff’s property tax settlement. Due to this omission, there was also an understatement of real estate taxes by $210,066.
This was due to an error when preparing the tax settlements that were presented to fiscal court. The franchise and fire district tax settlements that were approved by the fiscal court included taxes that were collected by the incoming sheriff in December 2021 and January through May 2022. As a result, the former sheriff’s settlement presented and approved by the fiscal court was not a complete and accurate reporting of taxes collected as of November 30, 2021.
… The former sheriff should have presented separate settlements for the franchise and fire district tax collections that occurred while he was sheriff. The street lighting district should also have been included on the former sheriff’s property tax settlement as well.
Audit of Former Interim Daviess County Sheriff’s Tax Settlement (Barry Smith)
The audit summary can be found here.
The former interim Daviess County Sheriff’s tax settlement was materially misstated: The former interim Daviess County Sheriff’s tax settlement, for the period December 1, 2021 through August 31, 2022, was materially inaccurate. The former interim sheriff’s settlement was overstated by the following:
• Real Estate Taxes of $263,720
• Franchise Taxes of $1,073,055
• Discounts of $7,333
• Tax Commissions of $29,914
• Taxes Paid of $1,309,735
This was due to an error when preparing the tax settlements that were presented to fiscal court. The franchise and fire district tax settlements that were approved by the fiscal court included taxes that were collected by the outgoing sheriff in the period of April 16, 2021 through November 30, 2021. As a result, the former sheriff’s settlement presented and approved by the fiscal court was not a complete and accurate reporting of taxes collected for the period December 1, 2021 through August 31, 2022.
… The former interim sheriff should have presented separate settlements for the franchise and fire district tax collections that occurred while he was interim sheriff.
Response from O’Bryan to both findings
Upon the retirement of Sheriff Cain, I reached out to our auditors as well as County Fees for clarification on best practices to close out his term. Concerning taxes, I was told to complete a settlement for property taxes collected in the month of November. The settlement was completed for the real estate/tangible collections we were currently involved in. I learned one year later that a settlement should have also been completed for franchise taxes collected to the end of his term.
As a result, a material misstatement was made. It is important to note that all taxes balanced for the 2021 tax year. There were no funds missing or misappropriated.
Sheriff Barry Smith left our office on December 31, 2022. Upon his retirement, settlements were completed for both regular revenue and franchise taxes. The problem has already been corrected.
