Politics & Government

Lexington council expected to approve revamp of Internal Audit Board

Lexington's Internal Audit Board would be revamped with new members and its first detailed set of by-laws under proposed new rules the Urban County Council is expected to approve Thursday evening.

Changes to the city's investigative arm were recommended by State Auditor Crit Luallen last summer after a controversy over how a whistleblower's claims were treated by his superiors in city government.

The proposed ordinances would add two more certified public accountants from the community to the board, for a total of four. They would also create by-laws that outline how the board meets, handles conflicts of interest and handles fraud allegations.

"It's really pretty straightforward," said council member Ed Lane, who serves as one of two council members on the Internal Audit Board. Lane said he expects the ordinances to be accepted by council.

The lack of such by-laws became a big issue last summer when the head of risk management for the city alleged fraud over how the city purchased insurance. Shortly afterward, his job was targeted for elimination as part of a broader reorganization.

The two city council members on the Internal Audit Board — George Myers and Lane — were not informed of the allegations by Internal Audit Director Bruce Sahli or then-Chairman DeWitt Hisle.

One of the new by-laws says that all fraud allegations should be communicated to the full audit board as soon as possible. The board will be allowed to use closed meetings to discuss such allegations, which is apparently allowed under the state's Open Meetings Act because fraud allegations can result in personnel decisions.

After learning of the fraud allegations last year, council members voted against the job elimination and created an investigative committee to examine the matter.

Hisle later resigned as chairman of the Internal Audit Board because he was serving as finance chairman for the re-election campaign of former Mayor Jim Newberry.

Sahli successfully blocked a subpoena by an Urban County Council investigative committee and did not testify before the investigative committee.

Both the committee and Luallen concluded that there was no fraud but said significant changes were needed in the city's auditing and fraud-reporting processes.

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