Special Reports

Library finances: Checking out the books

Kathleen Imhoff, the Lexington Public Library's chief executive officer, spent more than $134,000 in five years on national and international travel, scores of meals at upscale Lexington restaurants, gifts for employees and board members, and other items, mostly on her library credit card.

Imhoff and her superiors on the library board of trustees defend her spending as appropriate for a high-profile businesswoman running a $15 million-a-year institution.

"The board hired me for several reasons, and among those was to increase library usage, to get the library more known in the community and to be an ambassador for the library, regionally, nationally and internationally," said Imhoff, 63, in a recent interview.

Of the $134,158 that Imhoff has spent since joining the library in 2003, she or others later reimbursed $6,568 for charges not related to library business, and $10,294 was billed to the non-profit group Friends of the Lexington Public Library.

Lexington's civic agencies are being scrutinized following a credit card spending scandal at Blue Grass Airport that led to the resignations of top managers and a criminal investigation.

Acting on a tip to State Auditor Crit Luallen about possible excessive and inappropriate personal spending, city auditors went to the library last week to secure financial records and interview Imhoff. Library officials said they were surprised, but they will cooperate.

Imhoff's spending pales in comparison to the more than $500,000 charged by airport officials. But it does raise similar questions about oversight.

Luallen and others criticized the airport board of directors for not noticing controversial purchases that happened on its watch, including visits to strip clubs.

At the library, hired auditors in 2007 warned about questionable credit card usage with inadequate documentation to support it. Still, the library board did not review Imhoff's credit card bills. They said it was unnecessary after she assured them she had added strict controls.

This month, after the Herald-Leader's review of Imhoff's charges, board Chairman Burgess Carey reversed himself.

Starting in May, Carey said, he will review Imhoff's credit card bills. But that does not reflect lost faith in her, he added. More oversight seems like a good idea in the face of increased concern about public funds, he said.

"She has done an outstanding job addressing the priorities we gave her," Carey said. "We have an excellent library that Lexington can be proud of, a library that is recognized nationally and that has a heightened visibility here in our community."

Unlike the airport, where just part of the funding is public, nearly all of the library's budget comes from Fayette County and Kentucky taxes. When Imhoff charges, taxpayers usually pick up the tab.

In the last five years, Imhoff has charged for items including:

Travel, $81,736, of which she or others have reimbursed the library $6,262: Trips to Norway, the Netherlands, the Czech Republic, South Africa and Canada, as well as 15 states (visiting some states many times) and Washington, D.C., including airfare, hotels, meals and shopping.

Staff gifts and special events, $15,139, of which she has reimbursed $9: These included custom-made, spiral-bound, full-color calendars that show off personal photographs that she and other library officials took ($8,154); silk flowers ($630); pastries from Magee's Bakery ($500); baby clothing and blankets for her executive assistant ($483); grocery gift cards for two assistants ($300); staff gifts from the Metropolitan Museum of Modern Art ($240); gift baskets from the Keeneland Shop ($187), tickets to a lawn party at Ashland, the Henry Clay Estate, for a library manager and her husband ($170); food and gifts from Liquor Barn for a staff party ($152); and Christmas cards ($101).

Meals, $10,800, of which she has reimbursed $46: Frequent brunches, lunches and dinners at Lexington restaurants, including Bellini's (32 meals, $2,216), Portofino (25 meals, $1,666) and Jonathan's at Gratz Park (seven meals, $1,234).

Edward Maley said the library board should have been watching Imhoff's expenses all along.

Maley was the library's chief financial officer until he quit last year for a private-sector job. His duties included reviewing Imhoff's credit card bills, which was ticklish, he said, because she was his superior.

"A lot of it was really borderline," Maley said. "Gifts ... eating out all the time. But nobody was going to go into Kathleen's office and ask her about any of this. She was the boss."

And Imhoff's spending is just part of the big picture: She is one of 20 library employees who carry active library credit cards.

Essential expenditures

Library policy is clear.

"A Lexington Public Library credit card is mainly to be used for travel expenses, including airline tickets, hotel reservations and conference registration," the policy states. "Credit cards are not to be used for ordinary business purchases."

However, the policy also gives Imhoff the power to approve additional card charges as she thinks necessary.

In a recent interview, Imhoff said all her spending is necessary.

"Corruption or personal gain, there was none of that here," Imhoff said. "We're talking about values. Whether we should interview a person at Bellini's and pay for a $30 lunch or whether we should buy a sandwich. That's a values issue."

"It has nothing to do with the kind of issues that there were at the airport," she added. "My board wants me — like the mayor — to be a city ambassador."

Imhoff is one of Lexington's highest-paid public officials, with a base salary of $137,035 a year. For the current year, the board also has given her an extra $1,600 in "variable pay" and $1,200 for private financial planning.

She makes more than the mayor (who gets $120,574) and more than her counterpart at the considerably larger Louisville Free Public Library (who gets $118,224).

Aside from her library credit card, her perks include a home computer system with Internet connection and a cell phone for personal and business use, the costs of which average a little more than $3,000 a year.

Imhoff said she tries to curb expenses when she can, such as sharing hotel rooms on library trips when that's feasible. Since last summer, the board has asked to approve her travel plans in advance because of the sinking economy, she said.

Board members said they did not monitor Imhoff's spending specifically, but they do watch the library's overall budget and are comfortable that she isn't breaking it. The library allocates about $50,000 a year for travel for about 80 library employees and its seven-member board, for example.

Joseph Miller, the library board's vice chairman, said he has been assured that library credit cards aren't abused as they were at the airport.

"What I have seen, what I have been told about (Imhoff's expenses), doesn't even begin to compare," Miller said. "We haven't had the helicopter rides, we haven't had the expensive champagne."

Auditor's warning

In March, Imhoff sat for an interview at the library, flanked by several members of the library board, two attorneys from Stites & Harbison and a public relations executive from Meridian Chiles.

Imhoff occasionally conferred with one of her attorneys, Mauritia Kamer, who advised her not to answer certain questions — such as those about outside auditors who in 2007 criticized how library credit cards are used. The auditors urged greater scrutiny by the board.

"The cards are intended to be used for travel and emergencies," the auditors wrote in their report for the board. "However, our procedures indicated the cards are being used for some expenditures that have not met this criteria. Further, we noted instances where documentation for these charges were inadequate."

Lanny Brittain, the auditor with Ray, Foley, Hensley & Co. who was behind the warning, recently said the board didn't have rules in place to prevent managers from using their library credit cards for everyday purchases with no obvious benefit to the library.

"That's something they do need to address: whether these expenditures are reasonable and necessary," Brittain said.

The problems raised in the 2007 audit involve confidential personnel matters, so library officials won't discuss them publicly, Imhoff said.

According to minutes of the library board meeting on Nov. 14, 2007, Imhoff assured the trustees that she would institute strict controls for the credit cards.

"Ms. Imhoff stated that she was confident this problem would not happen again," according to the minutes.

Maley, the former chief financial officer, said other library employees were required to fill out forms and submit receipts to justify their spending. But Imhoff sometimes just used a blank piece of paper to write her own description of what she had bought, added a price and a date and submitted that to the business office without any actual receipts, Maley said.

A Herald-Leader review of Imhoff's spending records over five years found a number of handwritten submissions by Imhoff, as Maley described.

Maley said he asked Imhoff to better document her spending, but she reacted poorly, so he gave up. Eventually, the auditors criticized this lack of documentation in light of so much credit card spending, he said.

"I worked for her. She didn't work for me," Maley said. "So it was sort of hard for me to get in her face and say, 'What's the justification for all this spending? Where are the receipts?'"

"Kathleen did not like to be questioned," Maley said. "She made the rules."

Imhoff said she could not respond to Maley's statements because of a confidentiality agreement involving his departure from the library.

The library board fired Brittain's accounting firm after the 2007 audit — it had held the job for at least a half-dozen years — and replaced it with a new firm, Mountjoy & Bressler. Brittain said he never learned why.

In interviews, several trustees said the timing was coincidental. They said they decided to bring in fresh eyes to review the books to be prudent, not to punish or avoid the auditors who spoke up about the credit card problems.

Rocky relationships

The Lexington Public Library is legally an independent non-profit, although it runs on public money and is overseen by a board nominated by the mayor and confirmed by the Urban County Council.

Thanks to a 1979 lawsuit by an unhappy library patron, and to subsequent court rulings, the library is guaranteed a nickel of every $100 in Fayette County property taxes. That provides a healthy, rising revenue stream. Unlike other cities, such as Louisville, Lexington cannot cut its library's funding in hard times.

City Hall veterans say library officials tend to protectively close ranks around their budget when people ask questions.

"Basically, they kind of run their own show over there," said David Stevens, who left the Urban County Council last year after 15 years. "Their board is paranoid about any outside scrutiny. If one of us asked them questions about their money, they would frown and say, 'What are you picking on us for?'"

Newberry recently said that for all of its city funding, the library traditionally expects to tend to its own affairs. The time has come for some outside review, Newberry said.

Referring to some of Imhoff's credit card purchases, the mayor said, "Certainly some of the expenses that you identified seem of concern on the surface."

In 2003, the library board needed a chief executive to replace Ronald Steensland, who retired after a quarter-century. They chose Imhoff, then the deputy director of the library in Fort Lauderdale, Fla., for a salary of about $125,000 a year.

Carey, the board chairman, said the board told Imhoff to shake up the comfortable library staff, starting with a new merit-based pay system.

She did. That upset employees accustomed to seeing their salaries rise every year, Carey said. Those changes — and Imhoff's aggressive, take-charge style — have created hard feelings between her and some library workers, Carey said.

When enough employees complained about Imhoff, the board paid more than $2,000 for a management consultant to coach her on her leadership skills. Imhoff charged more than $700 on her credit card for management teaching materials designed to improve the workplace culture.

The consultant ultimately issued a written assessment of Imhoff that the library board — after consulting its attorneys — declined to release.

"It would just serve to embarrass Kathleen," Carey said. However, he said, the board stands behind Imhoff and is confident it did not err in hiring her.

Gifts and meals

Imhoff explained her $134,158 in spending over five years — most of it on her credit card — as legitimate business costs.

Restaurant meals are used to discuss business; gifts and special events improve employee morale and reward library board members for their service; and frequent trips across the country and around the world are necessary for professional development, she said.

To cite an example of gifts, Imhoff has spent $1,166 at local luxury retailer L.V. Harkness for presents to give employees, including a manicure set, a clock, jewelry boxes and crystal pieces.

L.V. Harkness is owned by Meg Jewett, chairwoman of the Lexington Public Library Foundation, which raises money for the library. Jewett said she was unaware that Imhoff — who sits on her foundation's board — spends taxpayer money at her store.

"I wouldn't know," Jewett said. "I'm not down at the register."

Other gifts charged by Imhoff include a $132 birthday lunch at Portofino for a library manager, $116 in silk-flower arrangements for two aides to celebrate Professional Assistants Day and $483 in baby clothing and blankets from Bella Bliss for her executive assistant.

Imhoff said the library board typically knows about staff gifts she purchases. In some cases, such as the baby gifts she charged for her assistant, the board specifically told her to buy those and set a $500 limit.

Carey, the board chairman, confirmed that.

Imhoff said the gifts, charged to taxpayers, should be considered as just another form of compensation for certain employees who she thinks have worked especially hard.

"You try to keep up morale in recognizing people," Imhoff said. "I certainly do not see anything wrong with what I think is a standard business expense."

Imhoff also dines out frequently at some of Lexington's finer restaurants and charges the food to taxpayers. She says that's appropriate because she discusses library business at these meals.

For instance, Imhoff spent more than $1,800 on 15 meals she charged with Philadelphia architect James Keller, who helped design the new Northside library. They usually ate at upscale places such as Bellini's and Jonathan's at Gratz Park.

Imhoff said she and Keller used their mealtime to talk about library building projects. The total number of meals they shared certainly was greater than 15, she said, but they took turns picking up the check.

Keller prefers to eat at Jonathan's at Gratz Park — one of Lexington's most expensive restaurants — because he stays at the attached Gratz Park Inn when he visits the city on library business, she said.

Keller's architecture firm, Vitetta, confirmed that he often picked up the checks from meals with Imhoff. His food and lodging expenses while in Lexington are charged to the library's account, said firm president Alan Hoffman.

What others do

Some libraries of comparable size have tougher rules about credit card spending.

Library representatives in Louisville and St. Charles County, Mo., said their chief executives don't get credit cards. Madison, Wis., severely curbs how such credit cards are used and requires the mayor or another superior to approve the library director's charges.

In Canton, Ohio, the library limits credit card use to meals and ground transportation at library conferences; the library's fiscal office arranges for airfare, hotels and registration. Employees must submit purchase orders to explain charges, and those are compared to the monthly statements.

Canton's library director cannot use his library credit card to dine out or entertain locally or to go shopping, fiscal officer Russell Humerickhouse said.

"We really restrict the use of credit cards," Humerickhouse said. "I'm surprised that your library allows that level of freedom with its credit card spending. We would never allow that here."

Frequent flier

Asked why she travels so much at public expense, Imhoff said she is active in five regional, national and international library organizations that hold meetings throughout the year, across the country and around the globe.

She said she attends these meetings to represent the Lexington Public Library, meet other librarians and bring back innovative strategies, such as the self-service check-outs that she introduced at the Tates Creek, Northside and Village Branch libraries. Imhoff said she learned about self-service check-outs by touring Scandinavia.

As a member of the International Federation of Library Associations, Imhoff has attended meetings in the last few years in Canada, across Europe and in Africa. The Africa journey alone cost $5,874, after she and a friend repaid the library for $1,807 in other expenses they put on her library credit card during the trip.

The library board does not limit the number of organizations Imhoff can join or conferences she can attend. Carey said the board wants her out and about as much as possible.

"One of the priorities we gave Kathleen when we hired her was to be more public and to be in the community representing the library," Carey said.

Imhoff said it's important for her to maintain her professional contacts.

In addition to her Lexington job, Imhoff works for a Minneapolis-based firm, Library Consulting, that advises public libraries about their programs and construction projects. The firm has clients in a dozen states.

Imhoff declined to say how much she is paid for her private consulting, but she said she does not mix that work with her Lexington duties.

Numbers dispute

Imhoff and her attorney disputed the $134,158 sum the Herald-Leader reached after tallying up all her credit card and cash spending from July 2003 to December 2008.

They said it was unfair to include money Imhoff spent on gifts for other people, on meals she shared, on $17,405 for her moving expenses over five years (a benefit guaranteed by her contract), on materials that went into the library collection, on travel costs she paid for library board members and on various other items.

By Imhoff's estimate, she said in her March interview, she should be considered personally responsible only for $59,756 in spending over five years. This month, she revised that sum upward to $64,254.

For instance, Imhoff said her credit card covered some shared expenses when she took a dozen employees to Chicago for a conference in 2005 and a half-dozen board members to Seattle and Vancouver, British Columbia, for a conference and tour in 2007.

When Imhoff paid the $547 dinner tab at Trader Vic's in Chicago for dishes including filet mignon and pressed duck, she wasn't alone at the table, she said. Likewise for the board members who helped her eat $1,271 worth of food at Metropolitan Grill, one of Seattle's most expensive steakhouses, which went on her card.

Friends help pay

Imhoff said nearly $10,300 in travel costs on her credit card was for "view trips" that she arranged for library employees other than herself to visit libraries around the country and study how they operate.

One such trip, sending four employees to Islip, N.Y., in 2004, cost $2,639 in airfare on her card.

Imhoff said she passed the bill for these view trips to the non-profit Friends of the Lexington Public Library, which operates a used bookstore and raises about $250,000 a year to help the library.

Aside from paying for view trips, Friends provides $4,800 a year to the library staff for "celebrations," a pot of cash that Imhoff occasionally taps for restaurant meals.

Just before Christmas 2005, for example, she picked up a $164 lunch bill at Azur Restaurant and Patio. She charged $122 to Friends and put the rest on her library credit card.

Charles Young Jr., who was Friends' treasurer at the time, said library officials asked to use some of his group's donations for "staff morale." Young said he was unaware that Friends ended up paying for expensive restaurant meals.

"They asked us for some money every year to have funds available for little parties. Like maybe buy a cake," Young said. "But the director does what the director does."

Missing oversight

Imhoff said her credit card statements are reviewed by her staff at the library's business office before they write checks to pay the bills. She, in turn, reviews the expenses of the 19 others with library credit cards.

Her business staff can approach her at any time about her expenses, Imhoff said. But as it happens, she said, none of them has raised questions in at least a year, and no one has ever challenged her.

"I don't believe anybody has ever challenged why I spent anything on the credit card," she said in March.

Of course not, said Maley, the library's former chief financial officer, now assistant controller at Thermal Equipment Sales in Lexington. Library employees concerned about their livelihoods are not comfortable challenging Imhoff, he said.

Not only should the library board closely watch her credit card use, he said, but she should not have a taxpayer-provided card in the first place.

Even after reforms the library board announced this month — including a new rule that makes employees initially responsible for paying their credit card bills — the library ultimately is on the hook for what is charged.

"If it was my system, we wouldn't issue library credit cards," Maley said. "We might have one card for emergencies. Otherwise, you would spend your own money, and then have to justify it after the fact for reimbursement."

That's a great idea, said Danielle Clore, director of the Nonprofit Leadership Initiative at the University of Kentucky. Clore counsels board members on their oversight responsibilities at public and non-profit institutions.

If the library is going to hand out credit cards, the library board absolutely should review how its chief executive uses hers every month, and it should ask questions and offer her guidance, Clore said.

"As a board member, if we were spending that kind of money on lunches and dinners at restaurants, I think I'd ask the executive director if she couldn't schedule her meetings away from meal times," Clore said.

Unfortunately, she said, as seen at Blue Grass Airport, too many boards prefer to look the other way on CEO spending.

Board members become so friendly with their chief executive that they worry about angering him or hurting his feelings by asking questions, Clore said. Eventually, they reflexively defend him, assuming he can do no wrong, Clore said.

Also, many civic board members are affluent white-collar professionals — bankers, lawyers, real-estate developers — comfortable with their large expense accounts in the private sector. They don't realize that public and non-profit institutions should be thrifty, she said.

"They think, 'Well, of course you take your clients out to an expensive lunch and charge it! That's just what you do,'" Clore said.

When board members try to rationalize questionable spending, she said, "I tell them to ask themselves, 'Does this pass the front-page test?'

"'If the way your organization spends its money was reported on the front page of the local newspaper, would it make you proud? Or would it maybe make it look like you weren't paying enough attention?'"

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