Tax collector shortfall found during audit

A $618,000 shortfall in the Madison County Tax Collector’s office appears to have been caused by overpayment of tax collection commissions, a forensic auditor told the Board of Supervisors last week. 

Stephanie Smith, a forensic auditor with Ridgeland-based Grantham Poole, was hired in July to review the shortfalls following the most recent county audit. 

“My charge was to find the shortfall and look at it,” Smith told supervisors.

She explained that since the county collects ad valorem taxes for Madison and Ridgeland, they are supposed to keep up to $75,000 in commissions and the rest is diverted to the cities. She said that the county was receiving excess commissions, and then when they turned around and paid it back to the cities, it was paid out twice on the books. 

“Going as far back as the fiscal year that ended in 2018, there was no mechanism in place to cut those commissions off to the county,” Smith said. “The Tax Collector’s office was paying these ad valorem commissions to the county.”

She said an employee, who is no longer at the office, would look up one day and see the cap was hit and then they would settle the money. 

“This ad valorem money received was settled twice,” she said. “It should have gone to (the cities). It should not have gone to the county. That created the shortfall.”

Supervisors asked about Flora, Gluckstadt and Canton. 

Smith said Flora has never hit the $75,000 threshold and neither has Gluckstadt since it’s a new municipality. She said she was investigating if an agreement is in place with Canton. 

She told supervisors that going back to 2018, the cities have all been made whole. 

“What safeguards can we put in effect to make sure this doesn’t happen again,” District 2 Supervisor Trey Baxter asked. 

Smith said earlier this year they implemented a software safeguard to prevent this from occurring. 

“There were some assumptions and prematurely things that were taken by this board as funds missing in my office,” Tax Collector Kay Pace said. “That’s incorrect. There have never been any funds missing in my office.”

Smith asked the board if they wanted her to continue investigating some issues she noted or if they wanted her work to end on the board. 

“There are, I know, at least four areas I’d like to dig a little deeper into,” she said, pointing to the tax sale, refunds, voided credit card transactions and bank reconciliation. 

Board President Gerald Steen asked if she could look further back than 2018 to make sure that the cities and the county all properly received the money owed to them. 

“We want to make sure that everything is fair between the county and the cities,” he said. 

The board approved for Smith to continue working on the Tax Collector’s books. 

The effects of the shortfall remain to be seen, with County Administrator Greg Higginbotham telling supervisors in June that the audit resulted in a “qualified opinion,” which could impact the county’s borrowing ability.