The president of the Kentucky Association of Counties took away all credit cards issued to individuals on the staff and called for a management review Thursday in response to questions about KACo's expenses.
J. Michael Foster, the Christian County Attorney who is KACo's president, also announced that the organization's officers accepted the resignation of Spencer County Judge-Executive David Jenkins, its past president, from the board.
Jenkins came under fire after the Herald-Leader reported that expenditures at two strip clubs and a Lexington escort service were charged on his KACo-issued credit card while he was president in 2008.
Foster called the special board meeting Thursday to approve steps to "regain trust of our constituents," he said.
"Ultimately, the conduct of KACo business is our business," Foster told the board. "Therefore, we are called upon at this time to set the bar and, yes, raise the bar, for behavior and expectations of the organization and its leaders."
There has been no discussion at KACo meetings of the future of Executive Director Bob Arnold, who was responsible for signing off on expenses reviewed by the Herald-Leader.
Arnold did not speak at the meeting.
The 34-member board, made up of county officials, unanimously approved Foster's recommendation to create a permanent auditing committee to oversee KACo's finances and regularly report to the board of directors.
Carolyn Belcher, Bath County judge-executive and a certified public accountant, will lead the committee and will be joined by Daviess County Judge-Executive Reid Haire, who worked for the IRS for 27 years, and Johnson County Judge-Executive R.T. "Tucker" Daniel, a former president of Kentucky-West Virginia Gas Co.
To review the management structure and procedures, Foster tapped former Madison County Attorney Robert L. "Bobby" Russell, who has worked as state Transportation Cabinet inspector general and general counsel.
The board, at Foster's request, approved setting aside $250,000 from KACo's contingency funds to cover the costs of Russell's review, as well as costs associated with state Auditor Crit Luallen's investigation of KACo.
Luallen announced that her office would look into KACo after a Herald-Leader review last month found that the organizations's top five staff members spent $600,000 in two years on travel, meals and other expenses. Those included $500-a-night hotel rooms, sports tickets, gifts and meals costing as much as $7,000.
Luallen has assigned eight auditors to investigate KACo and will make recommendations to further improve the non-profit group's financial controls.
"It's encouraging that the board leadership is beginning to take steps toward greater accountability," Luallen said in a statement after KACo's special meeting.
An awkward situation
Part of Luallen's review will be to determine who made charges to two Louisville strip clubs and a Lexington escort service on Jenkins' KACo card in 2008 and a charge to the same escort service on Arnold's card in May 2007. Foster also has asked KACo's outside counsel, Brent Caldwell, to investigate those charges.
Both Arnold and Jenkins have denied making the charges.
"I feel it's in the best interest of the organization that I step aside," Jenkins said in a brief letter of resignation, which Foster read to the board. "I want the executive committee of KACo to be able to make decisions based upon facts and not upon personalities."
Foster said he did not spoken to Jenkins, but said he thought other board members asked him to resign. He said he didn't know which board members.
Jenkins didn't return a call for comment.
"There was a consensus among the executive committee that he was one of the issues," Foster said. "It would be awkward, at best, for him to try to come up with a resolution to issues that were unique to him personally."
Foster didn't need board approval to strip 18 KACo staff members of their credit cards. Foster had already cut up his card. One credit card will be kept to make travel reservations — but under tight controls, Foster said.
'Proud to see changes'
Several board members praised the steps Foster implemented.
"What Mike Foster has done is sit down and put some of his initial thoughts together about things we could do right away," said Belcher.
Larue County Judge-Executive Tommy Turner said he and others were "proud to see the changes begin."
Foster said the board was unlikely to discuss other possible staff changes until they receive "all the facts" from the reports by the state auditor and Russell's investigation, which he said he hoped would be done in October.
KACo is a non-profit group that provides lobbying, training, insurance and financing for counties.
Foster, in his remarks to the board, conceded that KACo's staff made mistakes, but said it succeeded in other areas, such as lowering insurance rates for the counties.
"The same leaders that have come under fire for mistakes in building internal management controls ... have been creative in effectively providing members' services," he said. "Their failure has been in not giving the same kind of attention to internal processes and procedures that assure appropriate spending and management controls."