FRANKFORT — The Kentucky Division of Emergency Management engaged in "waste and abuse at one of the most vital agencies in state government," questionably spending millions of dollars on alcohol, meals, gifts, entertainment, hotel rooms, no-bid contracts and other items, state Auditor Adam Edelen said Tuesday.
Edelen estimated the total for questionable spending from 2007 to 2012 at $5.6 million. But he said his auditors had difficulty determining exactly how Emergency Management spent money because its director, Brig. Gen. John W. Heltzel, and other managers "openly threatened" employees to intimidate them into staying quiet. Simultaneously, spending records were altered or manufactured to conceal where funds went, he said.
For instance, $4,111 paid for alcoholic drinks at a 2010 conference in Louisville deliberately was hidden on a hotel invoice under the description "room rental" at the request of Emergency Management officials, auditors wrote in their report. The true expenditure would not have been permitted under state rules, auditors wrote.
Also, Emergency Management paid $15 each for 63 New York strip steak dinners at the same conference, according to an altered invoice the agency gave to auditors. But the dinners actually cost $41 each, which is $26 more than state rules allowed, according to the original invoice the auditors obtained from the Galt House Hotel and Suites, where the conference was held.
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"The report paints a disturbing picture of agency leadership that does not believe the rules apply to it," Edelen said at a news conference.
Edelen said he's forwarding his report to state Attorney General Jack Conway, the Executive Branch Ethics Commission and — because federal funds are involved — the U.S. Department of Homeland Security. He declined to give his opinion on whether crimes were committed, saying others will need to decide that.
Emergency Management coordinates state and federal responses to disasters in Kentucky and runs a 24-hour Emergency Operations Center in Frankfort. It generally performs well, but that's no excuse for what auditors uncovered during a five-month investigation, Edelen said.
"I want to point out that being good at your job is not a license to permit a system in which taxpayer resources are abused," Edelen said.
Heltzel declined to be interviewed on Tuesday. A brigadier general commissioned in the Kentucky National Guard, Heltzel was appointed to his current post in July 2008 by Democratic Gov. Steve Beshear. In a written response to the audit, Emergency Management disputed the auditors' findings.
"Mistakes may have been made," the agency replied, but "no illegal, immoral or unethical actions have been initiated or condoned by the division leadership."
Edelen brushed aside that defense during his news conference.
"There is no such thing as accidentally altering documents," Edelen said. "They are literally caught red-handed here."
Beshear issued his own statement to say he was "disappointed" by the auditor's report and "there is no place in state government for threats or intimidation of workers."
However, Beshear did not mention any repercussions for Heltzel, who makes $79,538 a year. Beshear praised "the work this agency has done to respond quickly and effectively to the needs of our citizens in those times of catastrophe."
Others were less sanguine. The Kentucky Emergency Management Association, which represents local government emergency responders, said it will lobby Beshear for Heltzel's removal.
"Today's release is a black eye to all in emergency management," KEMA said in a news release. "It will take years to regain and recover public trust."
Edelen said his auditors, acting on tips, opened their special investigation in March. Routine audits at Emergency Management had "raised red flags" for years, he said.
For example, past audits found serious waste and abuse of money in the agency's Chemical Stockpile Emergency Preparedness Program, or CSEPP. Federal funds pass through CSEPP for the 10 counties surrounding the Bluegrass Army Depot near Richmond, where dangerous chemical weapons are stored.
Although Emergency Management officials regularly pledged reforms after those past audits, they clearly fell short, Edelen said Tuesday.
Auditors discovered an "atmosphere of intimidation" this year when they tried to ask Emergency Management employees about spending, Edelen said.
Agency managers, including Heltzel, warned employees to be silent during the auditor's inquiry or face on-the-job reprisals, which is not allowed under state law, Edelen said. Some employees feared that their office email accounts and phones were secretly monitored by their managers to spy on them, though no evidence could be found to support that, Edelen said.
The accusation of "threatening whistleblowers" is one that should be reviewed by the attorney general, Edelen said.
What does the Kentucky Emergency Management do?
■ Led by Brig. Gen. John W. Heltzel, who was appointed by Gov. Steve Beshear.
■ Coordinates state and federal responses to disasters in Kentucky and operates a 24-hour Emergency Operations Center in Frankfort
■ Spent $64 million in Fiscal Year 2012, with the majority of its money coming from the U.S. Department of Homeland Security