A state audit questions nearly $76,000 in expenditures by former-Carter County Sheriff Chris Mathes. A fraud complaint was filed with the state regarding the payments, which local and state officials say they did not know were being made.
The auditor’s report, which was released by the Tennessee Comptroller’s Office Wednesday, says a “Fraud Reporting Form” was filed with the state office Sept. 30 about funds disbursed by Tennessee Business Enterprises, the operator of Carter County jail commissary.
After the complaint, the report said, a manager of the Division of Local Government Audit met with Carter County Finance Director Ingrid Deloach, current Sheriff Dexter Lunceford and Chief Deputy James Parrish. Auditors also met with the TBE manager, whose identity is not disclosed in the report, who provided auditors with a copy of the agreement between TBE and Mathes.
The agreement between the two, according to the audit report, said the commissary company does not pay a commission in order to operate the program but said the commissary manager wanted make an annual donation to the Sheriff’s Department.
“The manager will voluntarily contribute up to $12,000 annually,” the audit report quotes the agreement as saying. “Donations will not be in cash but will be in the form of free goods and services. If the sheriff determines a specific need, he can advise the commissary manager, and arrangements will be made for the commissary manager to purchase the item(s) provided the cost does not exceed the annual contribution.”
As part of the inquiry, the TBE manager supplied auditors with bank statements, emails, invoices and other records documenting the use of the funds.
“Based on the TBE manager’s records, we were able to determine that between Aug, 11, 2009, and Aug. 12, 2014, the TBE manager disbursed approximately $75,847 at the discretion of Sheriff’s Department personnel,” the audit report said. “These disbursements consisted of sponsorships and donations to various churches, school organizations and civic organizations, including the Kiwanis Club, Chamber of Commerce and United Way. Disbursements were also made for expenses associated with employee functions, cable television services, K-9 expenses, ATV accessories, postal charges, flowers, training and jail-related expenses.”
The auditor’s report also singles out a specific disbursement from the funds that took place just weeks before Mathes left office.
“Additionally, one disbursement on Aug. 12, 2014, for $2,300 to a local credit union appears to be on behalf of a Sheriff’s Department employee,” the report said. “This payment is unauthorized compensation approved by the sheriff without the approval of the County Commission.”
As part of the agreement, the TBE manager had created an account for the funds donated to the Sheriff’s Department, Deloach said. Whenever Mathes requested funds to make a purchase, Deloach said, the TBE manager would write a check to make the purchase.
“Nobody over here knew anything about the account,” Deloach said.
According to the auditor’s findings, the Sheriff’s Department and TBE circumvented the county’s purchasing statutes through their contracted agreement. The report recommends that in the future, the TBE should pay fees generated through the operation of the jail’s commissary program directly to the county trustee and all operating expenses then be appropriated through the county’s Finance Department. Auditors also recommended that “county officials should seek to recover the unauthorized compensation.”
As part of the audit, Mathes was given the opportunity to respond to the finding, and his response is included in the auditor’s report.
In his response, Mathes said that when he took office in 2006, he had concerns about the commissary program and then-County Mayor Johnny Holder “advised me that all jail activities and the retention of commissary would be entirely at my discretion,” so he worked with TBE to reach an agreement on the program.
As part of that agreement, Mathes said the manager wished to make donations to the Sheriff’s Department by buying needed or requested items for the department.
“The TBE manager’s donations were completely voluntary, and any decision to provide a donation was entirely at her discretion,” Mathes said, adding that donations required a request from him and approval from the TBE manager. “The TBE manager maintained all records, and at no time did I or any Sheriff’s Department employee have access to those records or to any funds.”
Mathes said “there was never any issue called into question or documented negatively” by state auditors during any of the previous annual audits of the department under his supervision.
In reference to the $2,300 disbursed from the account to a sheriff’s department employee, Mathes said the money was given to the employee after the TBE manager “indicated to me that an employee bonus would not be inappropriate” as he and the manager worked to close out the account at the end of his term of office. The employee’s identity is not given in the report, but in his statements, Mathes refers to the employee as a female.
“At that time, I identified an employee to the TBE manager as one deserving of such a bonus,” Mathes said. “This employee had served as the liaison person for the last four years working with the TBE manager on a routine basis.”
“The TBE manager’s decision to give a bonus to my employee was voluntary,” Mathes added.
Mathes said no fraud occurred and he and the TBE manager entered into the agreement “in good faith” as an accepted practice for receiving donations.
Following Mathes’ response, the report lists a section of auditor’s comments where the auditor responds to Mathes’ statements.
“These payments were not donations made independent of the fact that the TBE operated the commissary,” the report said. “Rather, these payments were made pursuant to the agreement for operating the commissary.” The auditors also note these payments are considered to be county revenues generated by the Sheriff’s Department and these county revenues were being spent from the TBE account.
“Regarding the sheriff’s comments about auditors not having findings on this practice in the past, we were unaware of the payments until they were brought to our attention after Sheriff Mathes left office,” the report said.
The report also notes “the examination of these activities is ongoing.”