Mayhaw County collects property (real estate taxes) from its residents annually. The taxes are calculated by multiplying the countys assessment of the property value by a small percentage. The average property tax for residential property in a neighborhood is $650 per year, with larger amounts of land (farms, rural) being significantly more. Property taxes are the primary source of funds collected from taxpayers by the county. There are no restrictions on how those funds can be used, as long as they are in support of county operations and approved by the county executives.

The county sends the property tax bills in the first quarter of each year. The total tax due is displayed prominently in a box in the middle of the document. Below that amount are a series of voluntary taxes that country property owners may elect to pay if they wish, including amounts for supporting the library, animal shelter, parks and recreation, and historic landmark upkeep. These small voluntary taxes range from $2.00 to $5.00. If a taxpayer chooses to pay all the voluntary taxes, it would amount to $17.00 above their mandatory property taxes due. If a taxpayer adds a voluntary amount to their taxes remitted, they are supposed to check a box for the voluntary tax(es) they have selected to pay and write in the new total at the bottom of the bill. For decades, this voluntary tax program generated a lot of money for these projects, but in recent years, voluntary payments have been on the decline.

Last month, a local television station reported that Mayhaw County raised in excess of $1.5 million for an animal shelter after 15 years of voluntary taxes, but none of the funds had been spent on animal shelter or for animal welfare. Shortly, after the report, a county accountant revealed funds that the county had spent $500,000 to acquire a facility to be used for a future animal shelter. Several

investigative reports released stories that land had been purchased and a facility constructed; however, the current occupant of the facility was the county sheriffs office, which was paying monthly rent (at a significantly reduced rate) back to the animal shelter fund. The building includes offices with wiring for internet and phones, interview rooms, and a small jail. The county claims that the use of the building by the sheriff was temporary.

Accounting and Ethics Questions:

1. What are the ethical issues, if any?

2. Who are the affected parties (stakeholders)?

3. What set of generally accepted accounting principles does Mayhaw County likely follow?

4. How should Mayhaw record the collection of voluntary taxes?

5. If the funds are temporarily invested prior to being spent for the intended use, how should gains and losses be recorded? Should the Sheriff's Office be considered a temporary investment?