City audit board rejects subpoena [The Lexington Herald-Leader, Ky.]

July 22--Lexington's internal audit board has decided not to comply with a subpoena from an Urban County Council investigative committee.

However, at a meeting Wednesday, the board said it would turn over documents related to an ongoing investigation of fraud allegations made by Patrick Johnston, director of risk management for the city, if he gives permission to do so.

"This wasn't a simple decision for the board," said vice-chairwoman Jennifer Burke. "We're not trying to obstruct, but we do have an obligation to the public" regarding internal auditing.

The fraud allegations made by Johnston in 2008 and 2009 are the subject of a council investigation and an audit by the state. At issue is whether the allegations are related to the proposed elimination of Johnston's job. Johnston has questioned how the city procured some of its insurance policies.

Burke said internal auditors must be able to promise confidentiality to the people who come forward to report problems in the government. If those conversations or documents can automatically be turned over to the city council, it could have a chilling effect on future audits, she said.

The city's external auditor, Mountjoy Chilton Medley, received the allegations during routine audits in 2008 and 2009.

Medley forwarded the 2009 allegations to Bruce Sahli, director of the city's internal audit division, who investigated them and found no credible evidence of fraud. Sahli said Wednesday that Medley did not give him the 2008 allegation.

Sahli did not advise the board on its vote regarding the subpoena, but in a statement he said that complying with the subpoena could make it more difficult to do future audits if people are concerned that their comments and notes may be read by people outside the Office of Internal Audit.

In addition, an outside lawyer hired by the internal audit division, former law commissioner Terry Sellars, told the board he doubts the committee has the power to subpoena the documents because it was not given expressly by the General Assembly.

George Myers is the chairman of the council's investigative committee and a member of the audit board, putting him in the unusual position of subpoenaing himself.

He recused himself from both the discussion and the vote on the subpoena, but later criticized the unanimous decision of audit board members Burke, Councilman Ed Lane and Finance Commissioner Linda Rumpke. Mayor Jim Newberry's senior adviser, Joe Kelly, is a non-voting member.

"I don't know why the internal audit board continues to obstruct work of the special investigative committee," Myers said.

Last month, Myers called for the resignation of the audit board's chairman, DeWitt Hisle, because although Sahli had informed Hisle about the 2009 allegations, he had not informed other board members, including Myers. Hisle, who is also finance chairman for Newberry's re-election campaign, later stepped down voluntarily.

Burke said the board does not have a set of guidelines for reporting such allegations and is planning to create a clearer set of rules.

The Division of Internal Audit is at city hall, but is considered an independent agency. Its board is made up of two certified public accountants from the community (Burke and formerly Hisle), two Urban County Council members (Lane and Myers), and the mayor or his designee (Rumpke). Council administrator Rebecca Langston and Kelly are non-voting members.

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