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August 5, 2009

Auditor in chief

Internal auditor uncovers flaws in city payroll system, sparking criticism of mayor

Testifying before a Metro Council committee about a lack of oversight in the city’s payroll system, Metro Human Resources Director Bill Hornig tried to downplay one of several blunders uncovered by a recent internal audit.

The snafu in question stemmed from Mayor Jerry Abramson’s decision to pay two top officials more for accrued vacation time than Metro policy allows.

“These were two people essential to the budget crisis and it was an exception for a good reason,” says Hornig, explaining that although the mayor has the authority to approve such measures, he admits the exemptions were not properly documented. “The only problem I see is that I didn’t write it down. I should have done that.”

While Hornig took the blame (or at least tried to minimize it), officials with the Abramson administration maintain that although human resources failed to properly record the transaction, the mayor did nothing wrong.

Here’s their explanation: In trying to work through the city’s $20 million budget shortfall, Abramson authorized 60 vacation payout days for Jane Driskell, then the city’s chief financial officer, and Rick Johnstone, then a deputy mayor, persuading them to postpone retirement, saying their expertise was needed. Given Metro policy caps payout days at 40, it was a sweet deal that both employees accepted.

And although the administration argues the exceptions were appropriate, officials concede that in the future HR should better document such allowances, which should also be forwarded to the county attorney’s office for review.

A review of records by LEO Weekly reveals the only documentation of the exemptions are two undated letters of approval signed by Abramson. Officials in the Mayor’s Office say they cannot recall when Abramson signed the documents or why they weren’t dated, and they are quick to disregard any suggestion of impropriety, like the notion that perhaps the papers were drafted after the auditor’s report was issued in April.

“The conspiracy theorists can think what they want. The reality was [Driskell and Johnstone] asked for that as part of their decision [not] to retire and went through the process with human resources,” says mayoral spokesman Chad Carlton. “It was a judgment call,” he says about Abramson’s decision to grant the extra vacation pay, “but we’ll do a better job in the future. There should have been documentation.”

And while none of the red flags in the latest audit point to intentional wrongdoing, critics say a lack of transparency in the Abramson administration is troubling and proof that an internal auditor is crucial in keeping local government in check.

“This is another instance when the mayor has exercised authority that he would probably be better checking with someone else,” says Councilman Kevin Kramer, R-11, referring to Abramson’s decision to disregard Metro policy in the case of Driskell and Johnstone. “I think there are times when the mayor’s overstepping. He’s not bothering to check the process to make sure what he’s doing is in line.”

Earlier this year, Metro Council earmarked an additional $100,000 for the internal auditor’s office, touting a dedication to ensuring transparency in government. Some council members say the findings of the auditor’s April payroll report prove the position is crucial.

In addition to shedding light on the mayor’s approval of extra pay for two top officials, the audit also found that the city had inadvertently overpaid a single Metro employee by $27,759, the result of a clerical error in the finance department.

Former Lt. Col. Tim Emington, who retired from the police department last year, received the overpayment due to “an inadvertent data entry error,” says Bill Patteson, a spokesman for the county attorney. The improper payment was an isolated incident, he says, and Emington has been cooperative with the collection process, which is in its final stages.

“Our internal auditor is our first option for insuring that we are functioning legally and appropriately,” says Councilwoman Tina Ward-Pugh, D-9, adding their reports uncover questionable practices Metro government can correct. “Empowering that office with additional funding for personnel to perform those duties is high on our priority list.”

Ward-Pugh says the administration’s decision to exempt two top officials from vacation pay policy and the miscalculated payment made to a retired police officer raise concerns and suggest even more transparency is needed.

The council recently affirmed that position when it passed a city bill creating an anonymous tip line for Metro employees to report fraud, abuse and other unethical activities.

Louisville Metro Auditor Mike Norman had been urging Metro government to adopt a 24/7 anonymous tip line since 2005. The recommendation repeatedly stalled out in the Mayor’s Office, until finally the council pushed the ordinance through this past spring. The council appropriated $25,000 in the city budget to pay for a third-party administrator to oversee the hotline.

Terry Sebastian, a spokesman for Kentucky Auditor Crit Luallen, says they were encouraged when the city adopted a reporting system for Metro employees. Luallen recommended the tool after her office issued a blistering report on the city’s housing department that found gross mismanagement in the agency.

Later this year, Luallen is scheduled to examine all of Metro government in a report that will be released by February 2010.

For the past three years the state auditor had allowed the city to handpick a certified public accountant to perform the annual review. This year, however, the state will dispatch its own team of auditors to review Metro government. The report will concentrate on top agencies, the appropriation of federal stimulus dollars and specifically, past internal audit reports.