Kentucky Audit Blasts Spending at County Insurance Provider
The association that sells and manages insurance programs for Kentucky?s 120 counties operates with a ?self-serving culture? that has resulted in millions of dollars in questionable spending the past three years, according to a critical report by the state auditor.State Auditor Crit Luallen today released a special examination of the Kentucky Association of Counties (KACo), which found that as KACo’s revenues increased 75 percent from 2003 through 2008 to more than $5.7 million, the level of discretionary spending by the organization also increased dramatically– on parties, adult entertainment, expensive meals, sporting events, some employee retirement benefits, even condo rentals for executives.KACo, a public, non-profit association primarily funded by public dollars and governed by county officials, offers lobbying and financing services and sells insurance to member counties, which pay insurance premiums and membership dues.The majority ? more than 90 percent– of KACo?s revenue comes from fees paid by the insurance and financial programs administered by KACo staff. The insurance portion of the organization is regulated and audited by the Kentucky Department of Insurance. County membership dues are not a large source of income for KACo, having averaged only about $130,000 each year since 2003.The state auditor?s report claims that a culture of overspending flourished as board members, management and staff spent funds on lavish dinners, alcohol, sports and entertainment tickets, staff birthday meals, adult entertainment, and fancy Christmas parties. The exam found nearly $2 million charged on agency credit cards over a three-year period, with $1.4 million having inadequate or no supporting documentation, an unclear business purpose or was excessive in nature.The lack of board oversight included weak internal controls, minimal conflicts of interest and ethics policies, and no whistleblower policy, the audit report says.The exam reviews KACo?s finances from July 1, 2006 through June 30, 2009 and makes 40 findings and more than 150 recommendations to improve board oversight and management operations.?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.?Luallen?s office announced its plans to audit both KACo and the Kentucky League of Cities (KLC) in July after media reports raised questions about spending at both organizations. Luallen said the KLC audit would be released in the coming weeks.Luallen said KACo should have found ways to return increases in revenues to its member counties as lower membership dues and insurance premiums or as additional training programs instead of on wasteful spending.She said the KACo board has taken steps recently as a result of public scrutiny and media reports to begin to achieve greater accountability.
