Minton orders AOC start biennial audits in 2020

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FRANKFORT, Ky. (KT) - Kentucky Supreme Court Chief Justice John D. Minton, Jr., with the concurrence of the other justices, has ordered the Administrative Office of the Courts to undergo an external audit every other year.


The order, issued on Monday, calls for the biennial audits to begin with the 2020 fiscal year, which starts July 1, and to make the audit findings public.


The order also calls for the AOC to create Administrative Procedures to establish an Audit Oversight Committee and stronger internal auditing controls.


“As I testified before the legislature last summer, the Judicial Branch believes in being transparent and accountable to the taxpayers and to the General Assembly for all funding appropriated to the court system,” Minton said. “That’s why nearly two years ago we invited the Auditor of Public Accounts to conduct an audit and why the Supreme Court has now ordered external audits on a biennial basis for the AOC.”


That audit, the first since the AOC was founded in 1976, came on the heels of media reports on the sale of cars and other items in private, AOC employee-only auctions.


The examination detailed 20 findings, including a lack of documentation on why office space was rented for a Supreme Court Justice from a company owned by his sons when it cost almost three times the amount of another proposal. Other issues included $2 million of inventory errors, lack of documentation for credit card expenses by the Chief Justice and AOC Director, taxable benefits like take-home vehicles were not properly reported, and there was overall lack of policies and oversight.


As a result of his examination, Harmon recommended annual audits of the AOC, either by his office or an outside CPA firm.  That recommendation is also the essence of House Bill 380, sponsored by Rep. Jason Nemes, R-Louisville, a former director of the AOC. 


Minton said the AOC intends to use the audit as a catalyst for change by strengthening the AOC’s financial and administrative operations and providing more transparency to the public. To that end, the AOC engaged Deloitte as a consultant to help with Phase I of the audit implementation. Deloitte, a highly-regarded global company, has consulted on projects for the Kentucky Executive Branch.


Phase I took place from October 2018-January 2019. During that time, a team from Deloitte was on-site at the AOC and worked closely with executive officers and managers to:


--Make recommendations on developing a robust Internal Auditing Department with an independent Audit Oversight Committee.


--Develop charters for the Internal Auditing Department and Audit Oversight Committee and a strategic roadmap for implementation.


--Make recommendations regarding the AOC’s organizational structure.


--Provide written process documents for four of the AOC’s financial processes: Budget, Travel Reimbursement, County Facility Reimbursement and Property Accountability.


--Make recommendations on implementing technology and other internal controls for these four processes.


Other implementation plans include:


--The AOC will issue a Request for Proposals for external auditing services to be conducted on a regular and ongoing basis, with audit reports to be made available to the public.


--The AOC and Supreme Court will evaluate the initial recommendations from Deloitte and develop a plan to reinforce the organizational structure of the financial and administrative functions at the AOC.


--The AOC and Supreme Court will procure appropriate technology to incorporate additional internal controls in the financial processes of the Judicial Branch. 


--The AOC will continue to evaluate, supplement, revise and draft procedures relating to financial and administrative functions.


“The Judicial Branch took the lead in requesting this extraordinary level of outside scrutiny and we’re proud of the steps we’ve taken to address the concerns raised in the Auditor’s report,” Chief Justice Minton said. “It is my hope that the Executive and Legislative branches of state government will follow our example and commit to conducting regular audits and making the results public.”

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