At the request of Lexington Mayor Jim Gray, the new commissioner of the Lexington Fayette-County Health Department has asked state Auditor Crit Luallen to review his organization's finances.

Dr. Rice Leach said he and Gray discussed the need for an outside audit of the department before Leach accepted the job as health commissioner on March 2.

In a March 29 letter, obtained by the Herald-Leader through a state open-records request, Leach pointed out that articles in the Lexington Herald-Leader and a site visit review conducted by the federal Health Resources and Services Administration, or HRSA, had pointed to concerns about the finances of the health department. HRSA is overseeing an $11.7 million construction grant for a new primary care center for the department.

The department's staff members also have questioned some of its financial practices, Leach said.

"I'm a popular guy around here" said Leach, who retired as executive director of the Primary Care Center last year but became head of the department after Dr. Melinda Rowe resigned. "When I came back, my friends came to see me."

Leach declined to cite specific staff concerns.

The state auditor's office and the health department are working together to "establish the scope of the audit," said Susan Straub, Gray's spokeswoman.

It's too early in the process to say when the audit might be complete, said Terry Sebastian, a spokesman for Luallen's office.

Leach said Thursday he doesn't expect the audit to find serious problems. But, he said, after a tumultuous few months — top officials resigned, a pharmacy investigation was revealed and challenges with maintaining the $11.7 million grant became apparent — it seemed like a good idea to have an outsider check the books.

"I want a baseline," he said. "Are we operating in a way that the public can have confidence in?"

Plus, he said, "I want to know what I am getting myself into."

Leach compared the request to a doctor consulting with a specialist about a patient. At a minimum the health department could get suggestions for how to improve how money is handled.

"I would be surprised if there weren't some things that we could do better," he said.

A December report from HRSA officials questioned the way in which city tax dollars are allocated by the Board of Health to the Primary Care Center, which provides medical and dental services to mostly low-income patients.

The Board of Health doesn't finalize the allocation until the end of the year, and any money the Primary Care Center makes from patients is deducted from the allocation.

Because of that, the Primary Care Center "is not able to track their finances based on a fluctuating tax allocation" and "operates in a deficit situation," HRSA officials wrote in their review.

The health department has received about $37 million in property tax money since the city began collecting the tax specifically for the department in 2005. Leach said he couldn't speak for federal officials but said "it couldn't hurt" that the department is taking steps to insure finances have been handled correctly.

Leach's own financial management as director of Primary Care might be scrutinized.

Rowe and chief operating officer Rodger Amon resigned March 1 after a series of highly charged public meetings at which employees complained of mismanagement and low morale.

Rowe remains on leave since resigning as commissioner and continues to earn $178,000 a year. She has asked to be considered for a newly created position of public health doctor. Leach initially said he would decide in early March, but he said Thursday that the department still was working to resolve questions about Rowe's employment.

The health department, which has 360 employees and an annual budget of $28 million, is also the focus of an ongoing investigation by the state Office of the Inspector General and the Kentucky Board of Pharmacy. Two employees have been reassigned in relation to that investigation.

Reach Mary Meehan at (859) 231-3261 or 1-800-950-6397, Ext. 3261