County attorney audit referred to other agencies

By Lilly Adkins
BSN Associate Editor

FRANKFORT —State Auditor Mike Harmon conducted a special examination of nine county attorney’s offices between July 1, 2017, and June 30, 2019, that resulted in nine findings with Lawrence, Boyd and Gallatin being referred to law enforcement and other agencies. Auditors found that in Lawrence County that over a two fiscal-year period, County Attorney Mike Hogan awarded $134,500 in bonuses for delinquent tax fees to employees in his office, with 94 percent, $126,500, going to his wife. Auditors noted that the awarding of bonuses violates the Kentucky Constitution unless the bonus is paid for work performed and that the bonuses may also violate local ethics rules because more than 90 percent went to his wife, thereby providing a substantial benefit to the Lawrence County attorney. The finding is being referred to the Federal Bureau of Investigations (FBI), Internal Revenue Service (IRS), and the Lawrence County Ethics Commission, the audit said. Harmon recommended in the audit that Hogan discontinue awarding bonuses to employees in violation of section 3 of the Kentucky Constitution; spend public funds in a manner consistent with Funk v. Milliken, OAG 05-002, and the Technical Audit Bulletin adopted by the Kentucky County Attorney Association and said expenditures should be “reasonable in amount, beneficial to the public and not predominately personal to the officer.” “No support was identified to substantiate these additional employee payments, and the Lawrence County Attorney indicated that he was not aware of any restriction on the use of delinquent tax funds for any purpose, including bonuses, donations, and advertisements identified in testing,” the audit said. “Based on our special exam of the Cabinet for Health and Family Services’ Child Support Enforcement (CSE) Program, which my office released last December, we identified various issues that prompted our decision to conduct an examination of nine county attorney offices,” Harmon said. “We found numerous issues related to poor oversight and lack of controls over taxpayers funds, and little guidance and review from the state level.” The auditor’s office conducted an initial survey of 16 county attorney offices from across the Commonwealth, and nine offices were selected for further examination based on survey results, the audit said. The nine offices included Boyd, Breathitt, Christian, Clark, Gallatin, Knox, Lawrence, Pike, and Todd Counties. Auditors found that more than $16,000 had been paid to a former Child Support Enforcement (CSE) Office Supervisor in Boyd County in 2018, the audit said. The documents detailed questionable activity by the former office supervisor including falsified expense reimbursement requests, altered supporting documents for expenditures and excess income and unearned benefits paid to the former CSE office supervisor, the audit said. The activity was uncovered after auditors requested bank records related to the Boyd County Child Support program, the audit said, at which time the Boyd County Attorney informed them that the former CSE office supervisor had returned the bank records and admitted she had taken money from the child support office. Kentucky State Police conducted an investigation, which led to the former CSE office supervisor being indicted on 77 charges last November relating to more than $113,000 allegedly taken by the former CSE office supervisor over a seven-year period, the audit said. “In this case, by simply asking questions and providing a bit of sunlight, our auditors led to the law enforcement investigation that brought about her indictment,” Harmon said. In addition to a referral to KSP, Harmon’s office will also refer the findings to the FBI and the Kentucky Office of the Attorney General, the audit said. Harmon’s office discovered the Gallatin County Attorney’s office paid over $36,000 for both personal expenses and expenses related to the Gallatin County Attorney’s private law office, the audit said, with the majority of the funds coming from the delinquent tax fund, for which his wife is responsible as the county attorney’s bookkeeper. Auditors discovered through an examination of records and interviews, accounts with the county attorney’s office were used to pay credit card bills, a family monthly cell phone bill, expenses for the private law practice, and a loan to the county attorney’s private law office, the audit said. The finding will be referred to the FBI, the Kentucky Office of the Attorney General, and the Gallatin County Ethics Commission, the audit said. In addition to the three referrals to law enforcement, the audit details a wide variety of issues within the nine offices reviewed. For six current county attorney offices, the percentage of expenditures tested that had no supporting documentation exceeded 36%. Similar issues were also discovered for county attorney offices in Christian and Clark County, but they took place under the prior county attorneys in both counties. Donations to various local organizations were made, including $1,900 by the Pike County Attorney to local groups and organizations, including local high school sports teams, which were documented under the office’s expenses as “bad check advertising.” Also, one instance was identified where the Lawrence County attorney used public funds to pay for an advertisement for his private law practice. Eight of the nine county attorney offices examined failed to turn over excess cold check fees to their respective fiscal court, which is required by state law. “We also found that when it comes to state laws pertaining to the operation and oversight of county attorney offices, they are minimal at best and don’t require an annual audit of county attorney offices by our office or any outside firm,” said Auditor Harmon. “Based on the findings identified in our exam, including the referrals to federal and state law enforcement, I am calling on the Kentucky General Assembly to pass legislation in 2021 to require an annual audit of all county attorney offices. If we truly want to shine the light of transparency on how public funds are spent, then county attorneys must be included in the same way fiscal courts, sheriffs, and clerks are held accountable to the taxpayers.” The full report, which includes responses from the county attorneys, can be found on the auditor’s website.