Audit slams lack of oversight at Kentucky State University
March 23, 2023
FRANKFORT, Ky. (AP) — An audit of Kentucky State University’s finances revealed a “chaotic accounting environment” that lead to undocumented credit card transactions, extravagant bonuses and a lack of controls that put millions of dollars in federal grant funding at risk, the state auditor’s office said Wednesday.
The examination was referred to federal and state prosecutors after identifying 20 “significant issues,” Auditor Mike Harmon’s office said.
The special examination to drill down into the finances at the historically Black university was ordered by Kentucky lawmakers last year. It primarily focused on KSU’s financial and internal policies between July 1, 2018, and June 30, 2021.
The examination revealed “poor to non-existent record keeping, little to no financial oversight, high level of staff turnover and questionable expenditures,” Harmon told reporters.
“The many problems found in our examination did not happen overnight,” the auditor said. “Frankly, they’re not going to be corrected overnight either.”
The university in Frankfort is searching for a new president and hasn’t had a permanent leader since July 2021, when
M. Christopher Brown II resigned amid growing concerns about the school’s financial health.
Interim President Ronald A. Johnson said the university welcomed the audit’s “constructive input” and pledged that his administration is committed to addressing the problems. Johnson joined Harmon at Wednesday’s press conference.
Hired last year, Johnson acknowledged the severity of the problems, saying, “I’ve just not seen this level of failure in terms of checks and balances.”
KSU leaders are working on remedies to several issues exposed in the report, Johnson said. Harmon praised the school’s leadership for “working diligently to try to right the ship.”
The examination revealed missing or unsupported documentation on KSU’s expenditure of federal grant funds, putting the school at risk of having more than $3.3 million in “questioned costs.” The auditor’s office said it would refer the findings to the U.S. Treasury and Education departments. If federal agencies determine funds were spent inappropriately, KSU might have to repay those funds, Harmon said.
The audit also found:
— More than $1.3 million in credit card transactions in each of the three fiscal years reviewed, with little to no documentation on most of the purchases selected for review.
— A fund designated for recognition of faculty, staff and students that was used to pay for costs associated with a daylong retreat for the university’s board.
— Former university administrators receiving unallowable benefits, including bonuses and supplemental health insurance. KSU paid bonuses totaling more than $138,000 to select administrators over a two-year period, although no policy or contract existed to permit the awards.
Gov. Andy Beshear, who along with lawmakers took action to try to resolve KSU’s financial and governance woes, said he hoped the audit offers “an extra road map for constructive change.”
“We knew that change was needed,” the governor told reporters later Wednesday. “We knew that there had been significant issues.”
The Democratic governor and the Republican state auditor both emphasized KSU’s role in higher education. Beshear called the school “an important part of our commonwealth,” and Harmon said it was imperative that the school ”not only survive but also that they thrive.”
Recounting the challenges of examining the school, Harmon said in some situations, “records simply did not exist or were only partially complete.” He called it “an incredibly difficult environment in which to audit.”
Harmon noted this isn’t the first special examination of KSU’s finances. A 2000 audit highlighted many of the same issues that the new report found, he said.
“The big question may be now, what is next for Kentucky State University?” Harmon said.
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