Special Reports

Newberry asks agencies to swap auditors

In light of the controversy over Blue Grass Airport officials' expenses, Lexington mayor Jim Newberry is urging six quasi-public agencies to start rotating the auditing firms they hire to dig through their books.

On Friday, Newberry sent a two-page letter to the board of directors of the airport, Lexington Public Library, Lextran, Lexington Convention and Visitors Bureau, Lexington-Fayette Health Department and the Lexington Center.

Newberry said he was surprised to learn that the airport had been using the same auditor, the Lexington-based Potter & Company, for 20 years.

Federal legislation passed after Enron's collapse earlier this decade requires publicly traded companies to change auditing firms every five years, he said in the letter.

"I am inclined to believe that Lexington's public agencies would benefit from at least some of the safeguards provided" by the Sarbanes Oxley Act, Newberry wrote. "I encourage you to rotate auditors in a fashion consistent with SOA, even though that statute is not applicable to your agency."

This month, the airport board accepted the resignations of four of Blue Grass's five top directors after a series of Herald-Leader articles raised questions about hundreds of thousands of dollars' worth of travel and expenses incurred, including at least one trip to a strip club, concert tickets, electronics and lavish lunches.

Many of the directors' credit-card statements, which were approved by former executive director Michael A. Gobb, lacked explanations and copies of receipts, which are minimum standards for business expenses.

"We had a checks-and-balance system that didn't work," the outgoing airport board chairman, Bernard Lovely, said last week.

Among reforms the board is likely to adopt will be regularly changing auditing firms, Lovely told the Herald-Leader.

The auditing firm, Potter & Company, stated in its recent reports that gave the airport a clean bill of financial health that it didn't delve into the airport's expense approval procedures.

"We do not express an opinion on the effectiveness of the airport's internal control over financial reporting," it said in a disclaimer attached to the audits.

Accounting experts have said it's not unusual for that type of an audit to focus on an agency's overall financial condition, such as verifying investments, assets and revenue flow rather than investigating receipts and purchasing.

Greg Mullins, a partner at Potter & Company, told the Herald-Leader earlier this month he couldn't comment on the specifics of a client's audit. In addition to the airport, that firm also audits Lextran's books.

Newberry, in his letter, requested that the chairmen of the six agency boards respond to his letter by Feb. 20.

"I am confident that you and your board share my goal of seeing that public funds are appropriately monitored, controlled and reported," Newberry wrote. "Lessons learned from the Airport Board's experience and the private sector's experiences can help to make that goal a reality."