BARDSTOWN, Ky. — The City of Bardstown has been given recommendations on how to handle taxpayer’s cash after an internal audit revealed thousands of dollars were allegedly embezzled by a former chief financial officer.
The report confirms nearly $764,000 in missing cash receipts, undocumented personal expenses and account credits from 2013 to 2019.
It outlines how the CFO was able to conceal the missing money – like taking cash from payments made by customers before a deposit was prepared, buying a $1,449 cell phone on the City’s credit card and getting paid for vacation time before it was accrued.
“She just, I think, took advantage of anyway she could come up with to take even more money,” Linda Gray, a Louisville-based certified public accountant, said during an Oct. 13 audit presentation to the Bardstown City Council.
Here’s how Gray outlined some of the money that was taken:
- Cash was taken from the payments made by the customers before a deposit was prepared and deposited in the bank.
- Expense reimbursements without proper documentation and approval totaling $899 were included on paychecks
- Payments were made by the City on behalf of the former CFO/OTA to the 401K pension plan in excess of the amount withheld from the former CFO/OTA’s wages. The excess payments totaled $700 in the fiscal year ended June 30, 2019 and $100 in July 2019.
- An I Phone XS Max was purchased on a City credit card for $1,449 for personal use of the former CFO/OTA.
- On several occasions, vacation pay was paid before the vacation days were accrued. No one verified or approved these transactions.
- A $1,600 pre-payment credit was recorded on the former CFO/OTA’s cable account that could not be traced to an actual payment.
"I hope that we have found everything but I guess we'll never know. I mean, it was really unfortunate," said Gray.
The former CFO, who has not been named, has not been charged with anything at this time but the findings in the audit have been turned over to Kentucky State Police.
“The crime was the act of one rogue employee who concocted a scheme to undermine the checks and balances of prudent accounting practices that were previously in place,” Mayor Dick Heaton said.
$134,121 in missing funds have been recovered along with an iPhone. Officials said a credit on the former CFO’s cable account has been reversed.
“When cash is received, strong internal controls and segregation of duties must be implemented to safeguard cash as it is always susceptible to theft. To accomplish this, the process of counting, depositing and recording cash should be segregated,” it read. “All reimbursements to employees should be documented and approved by another designated employee. Any credits to employee utility accounts should be approved by another designated employee.”
Here are the recommendations the auditor said the City of Bardstown needs to do to strengthen controls over cash.
- Discontinue the practice of accepting cash payments as cash is always susceptible to theft
- Multiple employees should be involved in counting and depositing cash receipts
- The handling of cash should be segregated from the recording of cash.
- All receipts should be deposited daily and any new customer accounts be created promptly.
- The access to daily deposits should be limited by locking it in a separate safe.
The recommendations also noted that all employee expensed reimbursements should be approved and reviewed by specified personnel, this also includes vacation accruals.
They said they city should also consider another employee to the accounting staff to aid in the review process and believe this person should have a degree in accounting and previous experience in accounting.
A spokesperson for the Bardstown Mayor said there are no plans for discontinuing cash payments, but other changes have been put in place. For example, the current CFO is no longer involved in counting cash or making deposits.
"My role here is to be as transparent as possible and I'm trying to keep the council and the mayor involved in being able to see the activity that's happening in the city financially," said CFO, Aaron Boles during the presentation on October 13.
Kentucky State Police did not give a timeline for when the investigation will be complete.
READ THE ENTIRE DOCUMENT
►Make it easy to keep up-to-date with more stories like this. Download the WHAS11 News app now. For Apple or Android users.
Have a news tip? Email assign@whas11.com, visit our Facebook page or Twitter feed.
► Contact reporter Heather Fountaine at hfountaine@whas11.com and follow her on Twitter (@WHAS11Heather) and Facebook.