Published: October 30, 2009 09:35 am      

Luallen report blasts KACo expenditures, management

By Ronnie Ellis / CNHI News Writer

The motto listed on Kentucky Association of Counties (KACo) reads: “Working for you in ways you never imagined.”

A lot of county officials and taxpayers must be thinking today that’s a whopper of an understatement. State Auditor Crit Luallen on Thursday released a scathing report on KACo’s expenditures and operations which found “a self-serving culture” which produced more than $3 million in excessive and questionable spending over three years. More than $1.4 million of that excessive spending “had inadequate or no supporting documentation.

“This culture flourished as many board members, management and staff spent funds on lavish dinners, alcohol, sports and entertainment tickets, staff birthday meals and extravagant Christmas parties,” Luallen said.

Among the cited excesses — and charges to KACo by staff and board members without proper documentation — were $219,000 in restaurant charges, including an $8,857 meal at Mike Ditka’s Restaurant in Chicago, an $8,161 meal at Z’s Oyster Bar and Steakhouse in Louisville, $43,000 spent on alcohol over the three-year period, nearly $29,000 for sports tickets, and $890 on “adult entertainment.”

The report, running almost 400 pages, made 150 recommendations for better controls and oversight — some already implemented by the KACo board — and 40 findings.

“Our examination provides the leadership of KACo the proper tools to continue to strengthen accountability and to fulfill its responsibilities to the counties and the taxpayers,” Luallen said. “I believe the public expects no less. In this current economic downturn, when our counties are struggling, our citizens have no patience for waste and excess from those who hold their trust and handle their tax dollars.”

KACo is a non-profit association offering lobbying and financial services to its members made up of county officials who oversee the organization. It is funded by fees on services it provides to the counties as well as dues charged members — ultimately paid for by taxpayers as the report points out. A series of stories in the Lexington Herald-Leader brought to public attention questionable spending practices, prompting Luallen’s examination.

Among the items reported by the Herald-Leader — and detailed in Luallen’s report — were charges on KACo credit cards to escort services and signed by Bob Arnold, the Executive Director who has since resigned, and former KACo President David Jenkins, Spencer County Judge/Executive — the “adult entertainment” referred to by the report. Both claimed someone else made those charges, but Luallen’s report concluded they likely made them.

“According to documentation obtained by this office, auditors found evidence to support that the escort charges were incurred by the cardholders,” the examination report states. It goes on to say signed contracts included charges, times and “Location of Performance” which corresponded to hotel room numbers of the cardholders, Arnold and Jenkins.

There were also charges to a Louisville strip club on the card issued to Jenkins, but he denied making those as well.

Luallen called the many undocumented and questionable charges detailed in her report “excessive but apparently not illegal.” She said, however, the report was turned over to the Internal Revenue Service because the personal use of cars and other KACo property should be reported as income. That did not include the adult entertainment charges.

Arnold declined to be interviewed by auditors, Luallen said. Jenkins spoke with auditors but did not address the issue of who incurred the charges for the escort service. He previously denied making the charge.

Local officials expressed shock at the findings of the report, though most hadn’t had the opportunity to read it in detail. Laurel County Clerk Dean Johnson serves on KACo’s board, though not on the executive board which approved the reimbursements.

“I couldn’t believe some of the charges on those credit cards,” said Johnson. “Some of this was extremely excessive and shouldn’t have ever happened.”

Rowan County Judge/Executive Jim Nickell said the disclosures of spending “concerns me a great deal. Evidently for years there’s been very little oversight of how those monies have been paid out and for what they were paid out.”

Both Johnson and Nickell are hopeful changes implemented already by KACo and others recommended by Luallen will prevent future abuses.

“I think with some new leadership, they’ll get things worked out,” Nickell said. “KACo provides some needed services to the counties and it’s important they stay in good standing and solvent.”

Johnson said he expects the next executive director “will be a person who has the right kind of knowledge and will make commitments to the board to exercise some scrutiny and do things they way they should be done.”

Among the services KACo provides to county officials is insurance coverage for legal defense. Luallen said during her press conference Thursday KACo should have a provision for repayment of those costs if officials are found guilty. For example, KACo helped foot the legal bills of Barren County Jailer Leland Cox who entered an Alford plea to 30 counts of sexual harassment of female deputies.

Other examples of credit card and reimbursed expenditures which had an “unclear business purpose, inadequate documentation, excessive or no supporting documentation” were $48,426 for board Christmas dinners; $28,700 for sports tickets; $11,593 for staff birthday parties; and $7,262 for staff Christmas gifts.

Examples of “questionable expenditures” were double retirement payments for staff of $622,355, board payments for meetings of $334,300, a sports advertising contract of $247,944 and $12,600 for a Frankfort condominium.

RONNIE ELLIS writes for CNHI News Service and is based in Frankfort. Reach him at rellis@cnhi.com. Follow CNHI News Service stories on Twitter at www.twitter.com/cnhifrankfort.