All Entries in the "Crit Luallen" Category

State audit finds problems with petty cash account, technology

By Beth Musgrave – bmusgrave@herald-leader.com

FRANKFORT — An audit released Thursday of the state’s finances found few substantial problems but made several recommendations to tighten controls over a few key programs.

The Statewide Single Audit of Kentucky, which is performed by State Auditor Crit Luallen, listed 53 recommendations that range from tightening security for information technology systems to ensuring that the state parks department pays its vendors on time.

The audit of $24.7 billion in expenditures for the fiscal year that ended June 30, 2010, found several specific problems, including:

• $11,000 in purchases with little or no documentation at Hazelwood, a state-owned facility that houses people with intellectual and developmental disabilities.

Audit of Pike Co. utility raises concerns about state lawmaker

By John Cheves – jcheves@herald-leader.com

Mountain Water District, a public water and sewer utility in Pike County, has paid more than $36 million in fees to a private management company since 2005 without adequate disclosure or evidence that ratepayers got a good deal, State Auditor Crit Luallen said Thursday.

The utility entered into the original 2005 contract with Utility Management Group without any public board discussion or review of the contract terms “which resulted in costly management fees and conflicts of interest,” Luallen’s office said in audit of the district it released.

One of the conflicts state auditors found was with a company owned by state Rep. Keith Hall, D-Phelps, which collected more than $171,000 for electrical work from the water district. He used a billing method that avoided competitive bidding and public discussion by the district’s board.

As the area’s state representative and a member of the House Appropriations Committee, Hall also helped to allocate state funds for the project he later won, Luallen said. The work was done in 2004 and 2005.

Two Passport Health executives fired

Passport Health Plan has terminated the contracts of two top officers, Mark Carter, its interim chief executive officer said Tuesday.

Governor Steve Beshear called last week for the ouster of the two executives — Executive Vice President Shannon Turner and Associate Vice President Nici Gaines— after the state auditor found widespread conflicts of interest and lavish spending at the group that manages Medicaid services in Jefferson and 15 surrounding counties.

Passport’s $800 million-a-year contract is the state’s largest.

The Passport board of directors must approve the firing of Turner and Gaines.

Bill would require disclosure from state’s prison canteens

By Valarie Honeycutt Spears – vhoneycutt@herald-leader.com

A state lawmaker has pre-filed legislation for the 2011 General Assembly that would require the state’s centralized prison canteen operation, which manages between $2 million and $3 million annually, to make its business public.

The legislation, sponsored by State Rep. Brent Yonts, D-Greenville, was suggested recently by Kentucky Auditor Crit Luallen.

While auditing the state’s $12 million contract with Aramark, the food service giant that provides three meals a day at the state’s 13 prisons, Luallen’s staff found issues with the Kentucky Centralized Inmate Commissary Inc., which is made up of the commissioner of the Department of Corrections, wardens and other top corrections officials.

Aramark runs only two of the prison canteens, where inmates buy such items as toiletries and additional food. The audit said the centralized canteen operation, commonly known as KCIC, is not a public entity and is not acting as a public board.

Auditor finds excessive spending, huge salaries at state’s largest contractor

By Beth Musgrave – bmusgrave@herald-leader.com

FRANKFORT – State auditors are calling for sweeping changes to the state’s largest contract after an audit released Tuesday found excessive spending on travel and entertainment, poor oversight and favoritism to certain health care providers.

The staff of Passport Health Plan, a managed care provider of Medicaid, “traveled frequently, stayed in luxury resorts, used limousine services, ate expensive meals and purchased numerous gifts – all with funding received from Medicaid and many without a clear business purpose,” according to the audit. Medicaid is a state and federal program to provide health care for the poor.

As Passport’s revenues grew, the 228-page report from the office of the state auditor found it spent more taxpayer money on lobbying, travel and salaries and provided grants and other money to its original investors over other health care providers in its 16-county region, which includes Jefferson and surrounding counties.

Passport has received about $2.5 billion in state and federal taxpayer money over the past three years.

State Auditor Crit Luallen said in a written release that the organization should become more transparent to ensure that the money is used to pay for health care for the state’s poorest residents.

“Passport plays such a vital role in the lives of many Kentuckians, it is imperative that it use state and federal Medicaid funds in an equitable and transparent manner,” Luallen said. “Any cost savings generated by the program should take the form of lower costs to the state or additional services.”

State auditor opens broad review of pension agency

By John Cheves – jcheves@herald-leader.com

State Auditor Crit Luallen is opening a sweeping review of all aspects of the Kentucky Retirement Systems, including its Board of Trustees, employees, business conduct, purchases, ethics policies and the adequacy of its audits and financial reports.

The U.S. Securities and Exchange Commission also recently opened an “informal inquiry” into KRS, although that appears to be limited to the use of “placement agents,” middlemen paid to connect the pension fund with investment companies selling financial products.

Luallen told KRS officials in an Oct. 5 letter that her wider exam is based on “concerns received by this office and recent reports regarding certain activities and financial transactions” at the public pension agency, which covers 330,000 state and county employees and retirees. Luallen declined to comment on her letter Wednesday.

News of Luallen’s review surprised and pleased a few KRS trustees, who say they’re concerned by how competently the system’s $12.5 billion in assets is managed.

SEC opens inquiry into retirement system’s use of middle men

By John Cheves – jcheves@herald-leader.com

The U.S. Securities and Exchange Commission, which regulates investment markets, has opened “an informal inquiry” into the Kentucky Retirement Systems’ use of middle men known as placement agents.

The SEC’s Division of Enforcement in New York this week sent a letter asking for documents from KRS, which oversees the $12.5 billion fund that provides benefits to state and county retirees.

Specifically, the SEC asked for a copy of an internal audit conducted this year that identified nearly $15 million in fees paid to placement agents, the middle men who help private investment companies sell their products to KRS. The fees are paid by the investment companies, who then are paid by KRS.

The SEC also asked for contracts held by KRS that list placement agents’ fees and minutes of KRS Board of Trustees’ meetings at which placement agents were discussed. The SEC said this is a voluntary matter and it’s not accusing anyone of wrongdoing, but it would like the documents no later than Sept. 22.

Retirement system to ask Luallen to audit placement agents

By John Cheves – jcheves@herald-leader.com

FRANKFORT — The Kentucky Retirement Systems will ask State Auditor Crit Luallen to review its use of placement agents, the well-connected middlemen who have collected nearly $15 million in fees since 2004.

The KRS board’s audit committee on Wednesday voted to ask Luallen to conduct an independent audit, a move that was requested last week by Gov. Steve Beshear.

Later, KRS board chairman Randy Overstreet said the full board would take up the audit committee’s recommendation and that he would personally meet with Luallen in the near future to request her audit.

Board members said the credibility of KRS — which provides benefits to state and county retirees — suffered because of public disclosure of the large payments to placement agents, especially while the $12.5 billion fund is struggling to keep up with its pension and health care commitments.

“The numbers we’re talking about don’t wash with someone getting a $900 monthly pension check,” said KRS board member Robert Wilcher.

Beshear wants Luallen to audit state pensions

By John Cheves – jcheves@herald-leader.com

Gov. Steve Beshear wants State Auditor Crit Luallen to scrutinize investment practices at the Kentucky Retirement Systems.

In a letter this week to KRS Board Chairman Randy Overstreet, Beshear suggested an outside audit to delve into the nearly $13 million in fees paid since 2004 to “placement agents,” the middlemen who bring private investment deals to the KRS, a public agency that provides benefits to state and county retirees.

The KRS released an internal audit of placement agents on Aug. 12 that disclosed the names of placement agents and their fees but identified no serious problems. The agents’ fees are paid by investment companies, not the KRS, although the KRS then pays management fees to the companies to cover their expenses.

The KRS Board of Trustees voted last week to reopen the audit and return it to a board committee for further review, in part because several trustees complained that they were unaware of the large sums collected by placement agents until the audit essentially was finished.

Adam Edelen quitting as Beshear’s top aide

By John Cheves – jcheves@herald-leader.com

Adam Edelen is resigning as Gov. Steve Beshear’s chief of staff, to be replaced by Mike Haydon, the governor’s chief legislative liaison.

Edelen, 35, took the post in July 2008 after serving six months as Beshear’s homeland security director. His final day will be Sept. 15. Edelen said he plans to work in Lexington as a business management consultant, steering clear of state government contractors to avoid possible conflicts of interest.

“I just think it’s time,” Edelen said. “As the governor moves into the fall and prepares for another legislative session, it’s good for the purposes of continuity for him to have a new chief of staff in place.”

Edelen would not address rumors that he hopes to run next year as a Democratic candidate for state auditor. The current auditor, Crit Luallen, is term-limited and cannot seek re-election.

“My life’s passion is public service,” Edelen said. “I’ll have something more to say in the future about that passion.”

Haydon, a former mayor of Springfield, has served in state and local government for several decades, including stints under Gov. Paul Patton as revenue secretary and deputy secretary of the governor’s cabinet.

“Mike knows every corner of this state, and he has dedicated his life to public service,” Beshear said. “He brings a breadth of knowledge and depth of understanding about this state’s challenges that few can match, and I am confident in his ability to serve my office and the people of Kentucky in this critical position.”