State Auditor reveals ‘chaotic’ accounting practices at Kentucky State University

Published 10:21 am Thursday, March 23, 2023

State Auditor Mike Harmon released the details of a special examination of Kentucky State University on Wednesday with some findings being referred to the state and federal officials for possible action.

The special examination began in April 2022, following the passage of legislation during the 2022 General Assembly, directing the Auditor’s office to conduct an examination of the Historically Black College and University (HBCU) located in Frankfort.

According to the report, there were 20 findings identifying significant issues, all occurring in a chaotic accounting environment that lacked effective safeguards and responsible management and Board oversight.

Among the specific findings:

–A poor internal communication system, which created a fear of retribution among employees, allowing known financial problems to go unaddressed.

–Failure to complete internal audit work associated with the Fiscal Year 2021 board-approved internal audit plan due, in part, to directives from the university’s former Executive Vice President for Finance to not assist the university’s internal auditor, as well as incomplete records.

–Missing or unsupported documentation on the expenditure of federal grant funds by KSU, putting the university at risk of having more than $3.34 million in questioned costs.

–More than $1.3 million in credit card transactions made each of the three-fiscal years reviewed, with little to no documentation on most of the purchases selected for review.

–Use of a fund designated for recognition of faculty, staff, and students by the former university president to pay for rental of the Kentucky Castle for a daylong retreat for the KSU board of trustees.

–Former university administrators receiving unallowable benefits, including bonuses, and supplemental health insurance.  In addition, KSU’s former president received a retroactive housing allowance over $84,000 and the university spent nearly $4,000 towards utilities at his personal residence.

–Inaccurate accounts payable amounts submitted by the former EVP for Finance to KSU’s former president and former board chair amid rumors of unpaid bills by KSU.

–KSU’s former EVP for Finance holding dual employment with Tennessee State University without notifying KSU.

Harmon noted, “This is not the first time this office has conducted a special examination of Kentucky State University.  In 2000, a report by former Auditor Ed Hatchett detailed 16 findings addressing university financial controls.  Many of the issues identified in that report still appear to be problems within the university.”

Harmon is referring his report to the Kentucky Attorney General’s office, the U.S. Attorney’s Office for the Eastern District of Kentucky, the U.S. Department of Treasury, and the U.S. Department of Education.

Interim KSU President Ronald A. Johnson thanked the Auditor’s office for their work and stated, “It doesn’t matter if it is a public entity, a private institution, or a non-profit, if the governance and leadership are not working, then the rest of it is a waste of time.”

Gov. Andy Beshear noted, “We know that change was needed, we knew that there had been significant issues, and hopefully this provides an extra roadmap for constructive change moving forward.  We need KSU.  We need a strong KSU.  It is an important part of our commonwealth and the education we provide to all of our people.”