Kentucky auditor’s office updates processes for reviews after Harmon announces gubernatorial bid

(The Center Square) – Kentucky Auditor of Public Accounts Mike Harmon announced steps the state agency has taken to ensure his campaign for governor will not interfere with its work, especially in regards to the state’s unemployment program.

Those measures include him not signing reports and not sitting in on briefings for the Office of State Government Audits and Technology, a division within the auditor’s office that reviews state agencies – including those reporting to executive offices.

“These safeguards will remain in place as long as Auditor Harmon is a candidate for Governor,” Assistant Auditor Farrah Petter said a letter sent Tuesday to Kentucky Labor Cabinet Secretary Jamie Link.

Harmon posted a statement Tuesday afternoon along with a copy of Petter’s letter, which itself was a response to the cabinet’s letter to Harmon sent last week.

Sam Flynn, the Labor Cabinet’s general counsel, sent Harmon that letter Aug. 10 that said his candidacy announcement created a conflict of interest with work on the ongoing single statewide annual audit for the 2020-21 fiscal year.

It added that Harmon’s participation in the unemployment audits could be violations of the state’s Executive Branch Ethics Code. In addition to reiterating a call for interviews with unemployment staffers to be recorded and have a cabinet lawyer on hand, Flynn said the matter may necessitate Harmon recusing himself.

Harmon announced his candidacy for the Republican Party nomination July 12.

While his statement declaring his candidacy last month did not directly mention the state’s Office of Unemployment Insurance, he did note Kentuckians have seen their “livelihoods suspended” and promises to help them in their time of need have gone unkept.

Flynn, in his letter, said the cabinet has concerns because the ongoing audit for the recently concluded fiscal year “has already deviated” from previous reviews. For example, the audit request not only includes files from the 20-21 fiscal year, but it also seeks claimant records from the year before that as well. The cabinet also has concerns about requests for personal banking data, which Flynn said has never been requested by another auditor.

According to Fetter, those records are needed this year because of ”the unprecedented challenges of auditing the high-risk environment” regarding the unemployment system as well as the need to follow up on previous findings.

In the past year, audits on the unemployment system and the problems encountered processing claims properly and handling inquiries during the COVID-19 pandemic have generated statewide media attention. Auditors have also found that state employees had access to their own unemployment claims.

Democratic Gov. Andy Beshear, who plans to run for a second term in 2023, has faced numerous questions about the unemployment program during his COVID-19 press conferences. He’s citied previous cuts to the department, antiquated systems and the rapid exponential increase in claims brought on by the pandemic as reasons why the program has faced challenges in processing payments and dealing with an ongoing backlog of claims.

Beyond the request for more information, cabinet officials are also concerned about the auditor’s office denying – without a “legitimate reason,” according to Flynn – a request for Labor Cabinet employees to have an attorney with them during interviews and for those interviews to be recorded.

“As a result, while you are campaigning to lead the Executive Branch, including OUI, your office is demanding secret meetings,” Flynn wrote.

Fetter, in response, said Flynn misrepresented the response he received from the auditor’s office regarding the cabinet’s requests. The auditor’s office has not banned Labor Cabinet lawyers from attending but officials in the auditor’s office believe their presence would have a “chilling effect” during employee fraud interviews.

“APA has not attempted to dictate a course of action to the Kentucky Labor Cabinet, but rather to inform the Kentucky Labor Cabinet about the professional responsibility of auditors and the potential negative consequences of Mr. Flynn’s proposed course of action,” she wrote.

In his statement, Harmon said threats to objectivity and independence are taken seriously.

“If there’s one thing the public expects from my office, it is transparency,” he said. “It is one of the cornerstones of our motto: “‘Follow the Data.’”

In addition to audits of state agencies, the auditor of public accounts also reviews county-level organizations – such as fiscal courts, county clerks offices and sheriffs’ departments – and other public agencies that receive state funding. It may also handle audits at the request from public officials, taxpayers, the Kentucky Legislative Research Commission and the governor’s office.

Those reviews include both financial and performance audits as well as other examinations.

Messages to the Labor Cabinet and Beshear’s office seeking comment were not returned Wednesday.

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