Financial corruption has run rampant in Northern Kentucky over the last year—but you can be part of the solution.
WCPO Northern Kentucky reporter Jessica Noll talked to Kentucky State Auditor Adam Edelen, who’s investigating numerous cases of misspending taxpayers’ money throughout the region, to find out how you can stop the financial misconduct.
In the New Year, he said, it’s time to take a new outlook at your town’s finances and at those who hold the key to the cash box.
From school boards to city administrations and even the airport board, Edelen discusses how their alleged misspending of taxpayer money affects you and your community.
“Unfortunately, I was [in N.Ky.] far too often to announce bad news than I would like. I hope 2014 brings me to the region for more good news,” said Edelen.
The auditor, who looks over hundreds of audits annually—not including special investigations like the current investigation into Kenton County Airport Board’s spending, said that you could hold your public officials and those who run, audit and administer your community, accountable, eliminating his visit to the region altogether.
Q: Where and how does financial corruption begin?
A: It varies. Often it begins when controls are lax and segregation of duties is inadequate. Those weaknesses often combine with a lack of proper oversight by the board or council and a lack of adequate bylaws and ethics guidelines. In many cases we’ve found that those responsible for oversight lack the training and understanding of their fiduciary duties and cede too much control to an executive director or administration.
Q: Are smaller communities immune to financial instability?
A: Definitely not. When resources are scarce as they are in so many small communities, there can be a greater temptation by those in power to grab those resources for the benefit of themselves, family and friends.
The size of the communities doesn’t seem to matter. Again, it goes back to having proper controls and segregation of duties, as well as adequate oversight by the governing body. Small communities often struggle to adequately segregate duties because they don’t have as many employees to divide the duties. And again, they have limited resources, so those in power can sometimes be tempted to grab those resources for themselves. But obviously large cities aren’t immune, as we’ve seen in Covington.
Q: What should the public do to prevent financial misconduct?
A: Be diligent watchdogs.
I’ve said it before – 4 million auditors are better than one. Go to local government meetings, ask to see budgets and spending records, ask questions. Look closely at your tax and utility bills.
We launched an examination in a small city in the Louisville suburbs after a diligent taxpayer questioned a tax rate on a utility bill. And get involved. In far too many communities, not enough engaged citizens want to serve on boards and commissions.
The former Dayton Independent School superintendent is going to serve time in prison and repay the money he stole because the community demanded justice.
- Be engaged
- Get involved in local government
- Attend meetings
- Ask for public documents
- Ask questions
- Run for office
- Serve on boards
- When officials are caught, demand accountability
Q: How can those on the same board, the same city council, etc., stop financial wrongdoing?
A: They must understand their responsibilities, first and foremost. We’ve seen far too many boards where members didn’t fully understand what level of oversight they were supposed to provide.
When citizens get on boards and councils, they need to seek out financial and governance training if they don’t already have those skills—serving on boards and councils isn’t a resume booster or a bragging right, it is a serious responsibility. Members also need to do their homework before meetings, read and understand the documents, attend the meetings and ask questions.
Q: What should communities know about audits that are conducted internally and those that are outsourced?
A: Many people in the community believe all audits have the objective of detecting waste, fraud and abuse. Actually, audits have an objective of stating whether information is presented accurately and in accordance with accounting standards, and auditors are only required to consider the risk of fraud or abuse material to the subject matter. Therefore, communities should not assume that clean audits always equate to an absence of waste, fraud or abuse.
Internal audits are typically performed by employees or contractors of the entity instead of independent auditors. Although internal audits carry less reliance than independent external audits, if the agency’s internal audit department is structured properly, such as to reduce management’s override, the work can be a valuable tool to prevent and detect waste, fraud and abuse.
Q: You’re currently investigating the Kenton County Airport Board. How does the board's spending
habits affect the entire community?
A: Inefficient spending drives up the cost of doing business and ultimately is borne by taxpayers and the flying public. The money that supports airport operations is generated from fees on vendors and airlines that are typically passed along to travelers.
In addition, excessive and unnecessary spending erodes the confidence in boards that are charged with efficiently running public assets, of which CVG is one. The confidence issue is especially important when it comes to an airport that is tied so close to the economy of an entire region. Attracting and retaining airlines is vital to the success of CVG and the Cincinnati/Northern Kentucky region as a whole.
Q: How does poor/erratic/illegal spending affect the community? How does it affect the system as a whole?
A: I said this on my first day in office two years ago: Every dollar wasted to fraud and abuse is one less we can invest in the Commonwealth’s future. That’s money not spent on educating our kids, which is the most important thing we can do. That’s why I’ve had such a large presence in schools. At a time of very limited resources, we must make sure money dedicated to education is reaching the classrooms rather than being consumed by bureaucracies that have become bloated or inefficient.
Q: You make recommendations in the end of your investigation? Can those recommendations be enforced?
A: The auditor’s office does not have the power to enforce its recommendations but it does require agencies to submit a progress report 60 days after we have completed a special examination. We rely on law enforcement and regulatory agencies for enforcement, as well as the public. If the public and press demand accountability, that goes a long way toward getting change.
Q: What should the public do if an elected official is suspected or caught spending tax dollars inappropriately?
A: Demand accountability. In Mason County, school district officials initially thought they could justify exorbitant spending by the superintendent, but the public and press forced him to resign and voters threw two school board members out of office in the next election.
Talk to those who are responsible for overseeing an agency. Ask to see public documents. If that still doesn’t answer questions, report fraud and abuse allegations to the Auditor at 1-800-KYALERT or visit our secure, anonymous SAFE-house at auditor.ky.gov .