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Sunday, Jun. 28, 2009

The high cost of doing the counties' business

When the Kentucky Association of Counties sent six people to Washington, D.C., in March 2008 to attend a conference and lobby officials, the $31,700 trip included two dinners totaling $4,277 and a $10,000 cancellation fee for hotel rooms that weren't used.

That trip was one of the most expensive among dozens of jaunts taken by leaders of KACo, a non-profit group that lobbies for counties and provides them with insurance and financing services.

In all, the association's top five executives racked up nearly $600,000 in travel, entertainment and other expenses over the last two years. More than half was charged on the credit card of Executive Director Bob Arnold.

The county association's officials purchased thousands of dollars worth of sports tickets and gifts and paid 50 restaurant tabs of more than $1,000 each between January 2007 and 2009, according to a Herald-Leader review of records provided under the Kentucky Open Records Act.

The five top officials whose expenses were examined were Arnold; Denny Nunnelley, deputy director; Joe Greathouse, director of insurance; Grant Satterly, director of financial services; and Tim Sturgill, general counsel. Fourteen other KACo employees have credit cards.

The spending and salaries for KACo executives increased over the two years while the organization raised fees on its insurance and financing programs for counties. Those same counties were often strapped for cash as they struggled with increased costs from overcrowded jails and employee pensions.

Many of the 34 county officials who serve as KACo board members have traveled out of state on trips paid for by the association. Besides that board, no state or regulatory group oversees how it spends the counties' money.

"Ultimately, it's these boards that are the ones that have to be held responsible and accountable," said State Auditor Crit Luallen. "They are on these boards by virtue of their elected positions, and they have a fiduciary duty" to be good stewards of counties' money, she said.

She also noted that there is a precedent for her office to audit KACo. In 1993, it performed a management audit of the association.

The current president and head of the KACo board, Christian County Attorney Mike Foster, instituted a more stringent approval policy for travel expenses in March after the Herald-Leader filed a request for the organization's expense records. Previously, no one person examined all expenses. Now the association's general counsel will.

Foster says he's willing to consider other ways to tighten oversight.

Still, other county leaders, while praising the training and other services KACo offers, said they're concerned that the organization is spending too much of the counties' money to benefit a group of insiders.

"The purpose of KACo is service to the counties, so we have to ensure that the purpose of KACo is not to serve KACo," said Tommy Turner, LaRue County Judge-Executive. Turner serves on the KACo board and said he has previously raised concerns about the organization's spending.

Arnold, a former Democratic Franklin County judge-executive, said the money spent on travel, meals and entertainment for officials and vendors is the "cost of doing business."

"We have spent a lot of time and money over the last nine years to try to make us a really good business for counties," he said. "We are operated by counties, for counties. Do we make money? Yes, we do make some money," but, he added, that's because KACo does a good job for the counties.

Only a 'low end' BMW

Created in 1974 to help the counties lobby state government, KACo gradually expanded to include various insurance services and financing for big county projects. KACo is also financing the construction of its new $12 million headquarters near the intersection of I-64 and U.S. 60.

Membership in KACo is voluntary, but all 120 counties pay dues — $134,000 in total this year. Much of the rest of KACo's income comes from counties' payments for its services.