Kentucky’s courts system asks for audit amid attorney general investigation

In the midst of a state attorney general investigation, the administrative arm of Kentucky’s court system has asked state Auditor Mike Harmon to review its financial operations.

The Administrative Office of the Courts said in a news release Friday that the audit started June 1 and will include recommendations from Harmon on how to improve management of the AOC’s finances.

“I’ve long been a proponent of transparency within the administration of the judicial branch,” Kentucky Supreme Court Chief Justice John D. Minton Jr. said in a news release. “Requesting this audit demonstrates our commitment to openness and accountability.”

The Herald-Leader reported in April that Attorney General Andy Beshear’s office was investigating a 2014 “employees only” sale in which four surplus vehicles were sold for prices 70 percent or more below their value. The newspaper also reported that one employee had been placed on leave pending the outcome of the investigation.

AOC spokeswoman Leigh Anne Hiatt said Friday that the employee remains on leave. She continued to decline to identify the person, saying the AOC doesn’t release names when an investigation is pending because no determination has yet been made.

Hiatt said the agency has been conducting an internal audit for the past several months on its sales of surplus items.

“Following the information regarding the handling of its surplus sales, the AOC felt it was best to expand the scope of the audit by bringing in an independent third-party to evaluate the agency’s internal checks and balances and to determine if there are other areas of our financial operations that need to be improved,” she said.

Hiatt also said AOC director Laurie Dudgeon asked to meet with Harmon in April and then requested “a comprehensive review of our accounting, auditing and other practices.”

Minton issued an order in April providing guidelines on how the judicial branch will dispose of surplus vehicles and property in the future.

The AOC has refused to release any information about the sales in question, but documents obtained by the Herald-Leader from the state Transportation Cabinet showed that some of the 225 employees at the AOC’s Frankfort headquarters got extremely good deals.

One such worker paid $1,250 in September 2014 for a 2008 Chevrolet Impala with 116,181 miles. Less than two years later, Glenn Nissan in Lexington resold the same car for $4,500, according to transportation records.

The 2008 Impala brought the highest price in the AOC’s vehicle auction. The lowest was $300, according to the Transportation Cabinet.

It is unclear how many bids were made on those vehicles, or even how many surplus vehicles have been sold by the AOC since they began holding employee-only sales in 2013. The AOC has refused to provide that information, citing the investigation.

The Kentucky Open Records Act would require any other public agency to release the documents requested by the newspaper, but the judicial branch of state government is not subject to that law.

The attorney general’s office has not said when its investigation might conclude.

In a letter outlining the scope of the review, Harmon said the primary focus of the audit “will be to evaluate AOC’s policies and procedures over its financial activities and other operations to determine whether management can rely on these processes to help ensure (that) the risk of waste, fraud, and abuse is at an acceptably low level.”

Harmon said his office will interview key AOC employees and review written procedures and analyze financial information such as accounting records and other internal financial information such as contracts, invoices, and bank records.

“At the conclusion of our work, we will also provide training to AOC employees on good management and governance practices, including recommendations that result from this special examination,” he said.

The audit will cover fiscal years 2016 and 2017 but can be expanded to cover time before or after that.

Harmon spokesman Michael Goins said it is unclear how long the audit will take.

The AOC supports the activities of nearly 3,400 court system employees and 404 elected justices, judges and circuit court clerks. It has an annual budget of $74.85 million.

This story was originally published June 2, 2017 at 12:06 PM with the headline "Kentucky’s courts system asks for audit amid attorney general investigation."