Report: KSU made undocumented credit card transactions, gave extravagant bonuses, more

FRANKFORT, Ky. (WTVQ) — Kentucky State University made undocumented credit card transactions, wastefully spent money on extravagant bonuses and has crippling budget and procurement failures, Auditor Mike Harmon said in his special examination report released Wednesday afternoon.

The examination began in April 2022 and covers the financial and internal policies of the university between July 1, 2018, and June 30, 2021.

“I can be honest. I’ve just not seen this level of failure in terms of checks and balances,” says Dr. Ronald Johnson, interim president at Kentucky State University.

Johnson was brought in by the KSU board last summer because of his extensive background in experience in finance and government.

According to the report, 20 issues were identified, including $3.34 million in federal grant funds being at risk, $2.7 million withdrawn from internally endowed funds to supplement cash balances and more.

“This is not the first time this office has conducted a special examination of Kentucky State University. In 2000, a report by former Auditor Ed Hatchett detailed 16 findings addressing university financial controls. Many of the issues identified in that report still appear to be problems within the university,” Harmon said, calling KSU’s accounting environment “chaotic” and lacking “effective safeguards and responsible management and board oversight.”

“Our work identifies a poor, sporadically functioning internal control and environment which resulted in a variety of issues, including 3 million dollars in federal funding now being at risk and the wasteful pay of bonuses to the elite KSU executives,” says Harmon.

Harmon is sending his examination to the U.S. Attorney’s Office for the Eastern District of Kentucky, the Kentucky Office of the Attorney General, the U.S. Department of Treasury and the U.S. Department of Education.

The report also found the following:

  • A poor internal communication system, which created a fear of retribution among employees, allowing known financial problems to go unaddressed
  • Missing or unsupported documentation of the expenditure of the federal grant funds by KSU, putting the university at risk of having more than $3.34 million in questioned costs
  • More than $1.3 million in credit card transactions made each of the three-fiscal years reviewed, with little to no documentation on most of the purchases selected for review
  • Former university administrators receiving unallowable benefits, including bonuses, and supplemental health insurance. In addition, KSU’s former president received a retroactive housing allowance over $84,000 and the university spent nearly $4,000 toward the former president’s utilities at his personal residence
  • Inaccurate accounts payable amounts submitted by the former EVP for Finance to KSU’s former president and former board chair amid rumors of unpaid bills by KSU
  • KSU’s former EVP for Finance holding dual employment with Tennessee State University without notifying KSU

Harmon’s report details numerous recommendations for the university to address these areas of concern.

“The many problems found in our examination did not happen overnight, and frankly they will not be solved overnight. What is clear is that past practices at KSU detailed in our exam report must come to an end,” Harmon added.

The State Auditors Office has put together a list of recommendations, including training for employees.

Kentucky state university says changes are already in the works. KSU has put together a team to help steer the university towards what they’re hoping is a better future.

“The current KSU leadership recognizes the urgent need to address the challenges that lay before us,” says Dr. Johnson.

To read the full report, head here:

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