State financial audit finds few major problems

Luallen lists fixes to improve oversight

bmusgrave@herald-leader.comFebruary 18, 2011 

Audit Released

State Auditor Crit Luallen

DAVID PERRY

FRANKFORT — An audit of the state's finances, released Thursday, found few substantial problems but made several recommendations to tighten controls over a few key programs.

The Statewide Single Audit of Kentucky, which is performed by State Auditor Crit Luallen, listed 53 recommendations that range from tightening security for information technology systems to ensuring that the state parks department pays its vendors on time.

The audit of $24.7 billion in expenditures for the fiscal year that ended June 30, 2010, found several specific problems, including:

■ $11,000 in purchases with little or no documentation at Hazelwood, a state-owned home for people with intellectual and developmental disabilities.

■ Improper authorization by a state Transportation Cabinet supervisor of four property transfers to a Perry County coal operator in 2007 and 2008, during Gov. Ernie Fletcher's administration.

■ A lack of internal controls over security and administration of the Kentucky State Treasury's computer systems.

"As in the previous year's audit, we make numerous recommendations to correct these deficiencies so there is stronger oversight of state government's day-to-day business operations," Luallen said in a written statement.

At Hazelwood, auditors found several questionable purchases from the petty cash fund. One of those purchases was for $469 for the replacement of a resident's chair. That chair later disappeared.

Auditors also found several expenses totaling $470 for a local wrestling event. A staff member was a wrestler in a local wrestling association. The audit found that the association decided which wrestler would perform in the main event based on the number of tickets sold.

The Cabinet for Health and Family Services, which oversees Hazelwood, said in its response that it has closed the petty cash account for Hazelwood and is improving oversight over all the home's financial controls.

In 2007 and 2008, a Transportation Cabinet district supervisor improperly authorized right-of-way property transfers between the state and a Perry County coal company. The supervisor was the only person who authorized the property transfers, which is not allowed under Kentucky law, the audit found. Any sale of property or transfer of property must be authorized by the Finance and Administration secretary and the governor.

The Transportation Cabinet, in its response, said it was seeking legal advice on whether the transfer of property was legal. The cabinet also said it has documented procedures on the transfer of property and plans to have all of its appropriate staff review and acknowledge that they have seen that policy.

Chuck Wolfe, a spokesman for the Transportation Cabinet, said the issue involving the land transfer is still under review. The Transportation Cabinet's Inspector General has investigated the incident and found no criminal wrongdoing, Wolfe said.

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