State auditor finds $160K missing from Dunklin County Sewer District

JEFFERSON CITY, Mo. -- A report issued by state Auditor Scott Fitzpatrick reveals how a husband and wife duo violated the Missouri Constitution and mismanaged the Dunklin County (Missouri) Sewer District for years, resulting in at least $62,579 in missing or misappropriated funds, additional missing money estimated to be at least $98,096 and the district being placed in receivership.

The audit, which was requested by the City of Malden, gives the sewer district a rating of "poor" and recommends the city continue to work with law enforcement officials regarding criminal prosecution of the missing and misappropriated money and services.

"This is a clear and egregious violation of the public's trust as taxpayer dollars were mismanaged by the individuals who were entrusted with the responsibility of overseeing the operation of the sewer district. My office will continue to work with law enforcement to ensure justice is served," Fitzpatrick said. "I want to thank the City of Malden for allowing us to conduct the audit and for working to restore public trust in the district by taking the recommended steps to ensure proper oversight and protection of taxpayer dollars."

The audit covers a period during which Korey Adams served as board president and his wife, Jennifer Adams, was employed as the district's bookkeeper. Auditors found money and sewer services totaling at least $62,579 were missing and/or misappropriated from the district from Jan. 1, 2017, through March 5, 2021, and estimated an additional $98,096 was not deposited during this time and also is likely missing.

Payroll overpayments totaling $54,049 were made to the bookkeeper; unsupported payments totaling $4,567 were made to the board president and the bookkeeper; sewer services totaling $3,063 were not paid by the board president and bookkeeper; sewer security deposits totaling $900 and an additional estimated $98,096 in sewer security deposits and sewer receipts were not deposited by the bookkeeper. During the same period, a review of the personal bank accounts of Adams and his wife found cash deposits totaling $29,146.

The report also notes that by hiring and paying his wife to serve as the bookkeeper, Korey Adams violated the state's constitutional nepotism prohibition. Additionally, the board, which allowed two vacant positions to go unfilled for more than four years, did not establish adequate oversight over district operations, did not obtain annual audits as required by state law and did not obtain bond coverage for district officials responsible for receipts and disbursements.

Another finding in the report identifies the failure of the bookkeeper to ensure payroll tax forms were filed and payroll taxes were remitted to the IRS in a timely fashion. As a result, the sewer district was assessed $756 in penalties, $287 in interest and $1,881 in additional taxes. As of July 8, 2022, at least $10,252 was still due to the IRS and significant interest and penalties were still accruing.

The Dunklin County Reorganized Common Sewer District No. 1 was reorganized in 2012 to be governed by a five-member board of trustees. However, from Jan. 1, 2017, to November 2020, two vacancies were not filled and the three remaining members of the board acted as the decision-making body for the district's operations. Two of the members resigned in November 2020 and left the district under the control of the Adamses. The district was ordered into receivership in 2021, which transferred all responsibilities, functions, duties, powers and authority of the district to the City of Malden. The Malden City Council then passed a resolution requesting the state audit.