Mayor says audit shows city financially strong despite theft by former CFO

Nelson County Gazette / WBRT Radio

Tuesday, Oct. 13, 2020 — Linda Gray, a CPA with the Louisville-based Peercy & Gray, reviewed in detail the city’s 2019 audit, detailing some of the ways that the city’s former chief financial officer is alleged to have stolen more than $764,000 dollars from the city’s coffers.

Linda Gray, a CPA with Louisville-based Peercy & Gray, presents her findings regarding her audit of the city’s finances in Dec. 2015 while former CFO Tracy Hudson looks on. (File photo)

Under normal circumstances, the 2019 audit would have been presented to the city council long before now, but due to the investigation into the former CFO’s theft of city funds, the presentation was delayed.

Gray pointed to the 2018 retirement of a key member of the city’s financial team that led to an increase in the alleged theft of city funds by former CFO Tracy Hudson. With that individual’s retirement, Gray said that Hudson was able to routinely circumvent the city’s policies and internal financial controls designed to prevent the theft of city funds.

Mayor Dick Heaton said that 48 percent of the $764,000 stolen from the city took place after the retirement of that finance department employee.

In reviewing her findings, Gray emphasized that her previous audits had repeatedly recommended the city tighten its internal financial controls; she told the council that the former CFO told her that those financial controls were in place.

Gray said that the theft of city funds by someone who overrides an organization’s internal controls are the most difficult to detect.

One of her recommendations was that the city add an additional employee who is knowledgeable in accounting practices. She also recommended that the city consider no longer accepting cash for payments because of the potential for theft. She also suggested that the city establish an anonymous tip line for employees or members of the public to report questionable spending or practices.

With a $60 million annual budget, the city should have more than one employee in the finance department with an accounting degree.

Gray told the council that she felt there was some misunderstanding with the council about the role of the city’s annual financial audit that she’s conducted for the past few years.

Her previous audits had warned of the lack of internal controls in the city’s finances, and that it is the city’s responsibility to implement those internal controls.

“The auditor is not responsible for monitoring internal controls,” she said.

Following Gray’s presentation, Heaton addressed the council, noting that “this 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.

“While this theft from the City did not start on this administration’s watch, the discovery and end of this activity did happen during this administration,” Heaton said. “I want our residents, business owners, and taxpayers to know that this financial loss is being fully prosecuted for recovery of all missing funds through the appropriate law enforcement channels, our bonding company, and attorneys.”


Heaton said the audit made it clear the need for additional internal controls, and he praised the work of the city’s employees who worked diligently for months to identify all the missing money.

“This was a large financial loss, but not one that has greatly impacted the City in its day-to-day operations, nor its ability to make and/or finance large capital expenditures,” Heaton said in a statement.

“Tonight, I want to assure the citizens of Bardstown and Nelson County that we are committed to being good stewards of the City’s funds. The strength and oversight of the City of Bardstown’s finances are stronger today as a result of this event, and I am confident that this will continue to be the rule, rather than the exception, for our financial operations.”

Aaron Boles, the city’s current chief financial officer, told the council that the city’s financial controls have been strengthened. He said that as CFO, he no longer prepares bank deposits or counts cash.

NEXT UP. The Bardstown City Council’s next meeting is 6 p.m. Tuesday, Oct. 27, 2020.


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