Ky. auditor: Cincinnati/Northern Kentucky International Airport board needs overhaul

Edelen: ‘Don't let the tail wag the dog here'

HEBRON, Ky.  – The status quo at the Greater Cincinnati airport is no longer acceptable, its governance is a "mess" and a complete restructuring of the airport board is needed. So says the Kentucky state auditor after a nine-month long investigation into the board’s travel, spending and practices.

“It’s clear that the status quo is a divided board whose great hallmark is politics and tension,” Kentucky state auditor Adam Edelen said.  Continuing the status quo is, “indefensible, a patronage operation, and (results in) the most expensive airfares of the United States.”

The 70-page report released Tuesday details Edelen’s 12 recommendations to revamp the Kenton County Airport Board, the body that runs the Cincinnati/Northern Kentucky International Airport.

“We have to modify and reform the structure,” he said.

Reforming the board, squashing frivolous spending and steering away from politically fueled agendas would help grow the airport for the economic benefit of the entire region, the report says.

“The 2.2 million people in the metropolitan area ought to care a lot. The airport is one of the key drivers in economic prosperity,” Edelen said. 

READ MORE: Auditor opens special investigation into board spending

Edelen recommends moving from a seven-member voting board, all of whom are solely appointed by the Kenton County judge executive, to an 11-member board that would include three appointments from Ohio and three from neighboring Northern Kentucky counties. Specifically, he recommended that these officials have appointment power:

  • Kenton County judge executive: Three appointments.
  • Boone County judge executive: Two appointments.
  • Campbell County judge executive: One appointment.
  • Kentucky governor: Two board appointments
  • Ohio governor: One board appointment
  • Mayor of Cincinnati: One board appointment.
  • Hamilton County Board of Commissioners: One board appointment.

The responsibility, he said, should be that of the governors from both states, Northern Kentucky counties’ judge executives, as well as Hamilton County and the city of Cincinnati.

This change would give a louder voice to Ohio. “In my view, you can’t have shared prosperity without shared responsibility,” Edelen said.

It’s the only way, he said, for the airport to have a “fighting chance at bringing fares down and growing the airport.”

Restructure: CVG's board v. other airports

“You can’t change the culture without changing the structure,” Edelen said. “If [it’s] only operating as an appendage of the judge executive in Kenton County, it won’t run for the full benefit of the region.”

Turbulence has resulted from a year’s worth of chaos, including a lawsuit filed by the former board chair against the airport’s secretary for alleged wiretapping, a plan to oust CEO Candace McGraw and several board meeting outbursts driven by disagreements, including how the board should be structured.

Most recently, that tension erupted at Monday night’s meeting when board chair Bill Robinson, who was appointed in February replacing Jim Huff, made a motion to stifle board members from commenting on airport-related issues —adding that only he and the airport’s CEO, Candace McGraw, should speak to the public.

READ MORE: Tension overload – CVG board chair: No comment but mine, CEO’s

It's not the way to run an airport, the auditor said.

“They should be at the point of cooperation rather than a point of contention. Politics [are] diminishing our role to grow the airport into what we want it to be,” he said. “There is a culture at the airport board that is more focused on self-dealing and patronage instead of focusing on critical economic development for the region.”

Nathan Smith, who is on the 11-member, nonvoting advisory board, agreed.

“Anytime you give absolute power to any one person, it’s never a good idea,” he said. “Once the governor appointed me, I saw very quickly some of the inadequacies that existed.”

“We need to be more collaborative in the Northern Kentucky/Greater Cincinnati area,” Smith said about revamping the board’s structure. “While I would never be for a majority of the board being appointed from another state or county, some small shared governance is very appropriate here.”

But as it stands, Edelen said, “If you don’t have a vote, you don’t essentially matter at the end of the day.”

The current structure in place gives the Kenton County judge executive the privilege to appoint all seven voting members to the board—essentially giving no voting rights to other Northern Kentucky counties or Ohio.

“The most successful boards are ones that reflect the diversity of strengths… instead of a one-world view, which is what we have now,” said Edelen, whose report included an analysis of other airport boards of similar size. 

Edelen recommended that CVG’s board structure be re-examined and rebuilt, including how board members are selected.

“The existing structure provides appointments from primarily a single authority and the two-tiered structure by which the board and the advisory committee operate has created confusion and conflict among board and advisory committee members," Edelen said in the report. Coupled with the limited appointing authority outside Kenton County, the structure "has led to concerns that political influence exists over board members,” Edelen said in his report.

The ideal members, he said, would be appointed to “further reflect the regional community served by an airport such as CVG, to reduce the risk of political influence on the board.”

“No one person ought to be able to dominate a board. And that is the system we have right now,” Edelen said. “Don’t let the tail wag the dog here.”

READ FULL REPORT

READ MORE: Ohio wants bigger voice at CVG

Board restructuring, however, would have to go through the Kentucky General Assembly.

Digging into spending and policies

In his report, Edelen details expenses that he called duplicative, excessive and wasteful:

Finding: A contractor was paid $41,000 for work completed, but board maintained report in draft-form, circumventing open record laws.

Recommendation: Acknowledge when report is finalized, refraining from placing documents in permanent draft status.


Finding: A contractor was paid $24,500 plus expenses, “a violation of purchasing policies,” for providing guidance and support to the board and senior airport staff regarding strategies to enhance airport business development and operational efficiency.

Recommendation: Establish purchasing policies and ensure contracts for vendors are properly approved prior to services rendered.


Finding: A consulting firm was paid $60,000 for public relation services without first consulting CVG staff, “leading to duplicative services and potential wasteful spending.”

Recommendation: Discuss future potential service needs with CEO and other key CVG management prior to initiating a contract with a vendor.


Finding: No formal written contract has been created with board attorneys’ firm in decades—between July 2012 and December 2013, costing the board $511,000 in fees for services rendered.

Recommendation: Board should ensure any agreement it enters into is documented in a written contract, specifying services contractor intends to perform.


Finding: The board contracted services to perform duplicative auditing work for $25,000. Expense “appears questionable, wasteful and fiscally irresponsible.” The airport already has another auditing service on retainer as well as two auditors on staff.

Recommendation: Discuss the need for any potential services with key management at CVG prior to entering into a contract with vendors, eliminating the chance of duplicative services.


Finding: Cost for industry conferences associated with board and advisory committee members “appears excessive.” CVG spent nearly $96,000 for four conferences between July 2012 and December 2013.

Recommendation: Limit number of conferences board members may travel to each year, on a rotating basis.


Finding: Airport incurred expenses ($8,800) on behalf of Kenton County Judge Executive Steve Arlinghaus and his wife, “in conflict with existing board policy.”

Recommendation: Eliminate invitations to the appointing authority to attend airport industry conferences at the expense of the airport.


Finding: Routinely incurring “excessive costs for board meals,” spending more than $32,500 between July 2012 and December 2013.

Recommendation: Make finalized revisions to travel and expense policies for the board including re-evaluating meals at board meetings and controlling the cost of food reimbursements. Funds should not be used for the purchase of alcohol during board functions. 


Finding: There was insufficient supporting documentation for more than $101,000 in reimbursements paid between Jan. 1, 2012 and Dec. 31, 2013.

Recommendation: Establish a reasonable per diem rate based on guidelines issued to federal employees. Reimbursement documentation should be submitted within 45 days of the travel being completed.


Finding: CVG did not follow the required employment process when hiring Arlinghaus’ daughter in a field maintenance department position in August 2012. The position was not posted and no other applicants were considered when she was hired.

Recommendation: Ensure proper hiring policies are consistently followed, including documenting and maintaining in the job file. Also, CVG personnel should not circumvent established hiring policies.


Finding: The board’s process to investigate and resolve concerns is not openly shared with public, limiting its effectiveness.

Recommendation: Update its website, make a hotline more accessible on the home page for employees and public.

The board will review and discuss Edelen’s report, including his recommendations, and submit a final response to his office within 60 days.

Immediately following the Tuesday release the state auditor report, Delta Airlines, CVG's largest provider of flights, released the following statement about the report:

"Delta thanks Kentucky State Auditor Adam Edelen for his investigation into the policies, structure and spending of the Kenton County Airport Board. Efficient, transparent and ethical operations and oversight at

Cincinnati/Northern Kentucky International Airport is critical to maintaining the airport’s positive impact on the community. Delta is reviewing the audit and the recommendations of the Auditor General carefully and looks forward to participating in discussions about the best approach for providing effective governance of Cincinnati/Northern Kentucky International Airport, which is a major economic engine for the region, supporting thousands of jobs and billions of dollars in economic activity."

For more stories by Jessica Noll, including in-depth CVG coverage, go to www.wcpo.com/noll. Follow her on Twitter @JessicaWCPO.



 

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