The Auditor of Public Accounts plays an important role in Kentucky government as an independent office tasked with reviewing accounts, financial transactions and the performance of all state government — making sure books are balanced in state agencies from local sheriff’s offices to the Department of Education.
Although the auditor’s race is a partisan election, the position itself is designed to serve as an independent check on state government regardless of the candidate’s political affiliation. Auditors must hold a bachelor’s degree and have at least 20 hours experience in accounting. They serve four year terms.
The office performs a number of regular audits outlined in state law, but also has subpoena power and can perform special examinations into allegations of fraud, waste and abuse.
Over the past four years, Republican incumbent Mike Harmon has used the powers of his office to oversee special audits of the state’s pension systems, the Administrative Offices of the Courts, Kentucky Department of Fish and Wildlife Resources and the University of Louisville Foundation.
Harmon is a graduate of Eastern Kentucky University where he majored in math, statistics and theater. He served 13 years in the state legislature and in 2015, defeated incumbent Democrat Adam Edelen to become auditor.
Harmon touts both his legislative and auditing experience, pointing to the audit of the state’s broadband project, KentuckyWired. That review found that the project was nearly $100 million over budget and raised questions about its inception under former Gov. Steve Beshear’s administration.
Harmon’s Democratic challenger is Sheri Donahue. She graduated with a degree in industrial
engineering from Purdue University. She has worked as a government employee auditing weapons systems for the Navy, but much of her career has been in the field of cyber security where she has worked with the FBI and more recently, for Humana in Louisville. Last year Donahue fell short in a bid to run against Julie Raque Adams for a seat in the state senate.
Donahue says she will “restore faith in government” by making the office more accessible to the public and government agencies with questions about best practices. She also says she would use the office to improve the state’s cyber and election security and look into auditing Braidy Industries, the Martin County Water District and state pension systems.
Libertarian Kyle Hugenberg is a certified internal auditor with a master’s degree in accounting from the University of Louisville. He has spent his career auditing a variety of institutions including healthcare, financial services and manufacturing businesses.
Hugenberg said his political affiliation as a libertarian makes him the most independent candidate for the office. He said his experience as an auditor gives him a professional skepticism and that personally, he believes people wouldn’t pay property taxes in an “optimal free society.”
All three of the candidates sat for interviews with WFPL. Here are some of their responses, which have been edited and condensed for clarity.
Why are you running for office?
“I feel like the work we’ve done has been phenomenal. We’re kind of an auditor of firsts, we did the very first audit of the KLEFPF, the Kentucky Law Enforcement Foundation Program Fund, where basically, we helped to assure the tax dollars that are intended for our police and fire actually make it to our police and fire. We did the very first audit of AOC, which is the Administrative Office of the Courts, where the Chief Justice did invite us in, and we had like 20 findings. And probably the one that was that we thought was the most egregious, was, they had leased space for one of the justices from a company, that company just happened to be owned by the two justice’s sons, and just happen to be three times higher than the next closest bid. So, you know, we did an audit of KentuckyWired that received national recognition. We do 500 to 600 audits per year, everything from your statutory audits of your fiscal courts and your sheriffs and your county clerks.”
“So last year when I ran for state Senate, I had the great opportunity to meet and talk with a lot of people in my district. And it really touched me how people feel like they have lost faith in our government. They just feel like there is no trust there. And it really made me think a lot about what could I do. And when I looked at what the races were this year, and based on what my background is, I felt like running for auditor was the thing that I needed to be doing. I’ve been a public servant my whole adult life. And this felt like actually the best fit for me, based on what I have done and what I could bring to the state. You know, I was raised that we should always work to give back and I feel like this is my way to give back.”
“Well, I’m running for auditor because I’m a libertarian. And I think the office, frankly, needs a libertarian in there, someone who has a genuinely critical and skeptical view of government and the role of government and society to begin with. And as far as the auditor position goes, it’s the one that I’m by far the most qualified for. I’m a professional auditor, I spent my entire career auditing. I have a bachelor’s and master’s degree in accountancy, a CIA certification, which is the certified internal auditor from the IIA, which is the Institute of Internal Audits. It’s one of the three professional certifications for auditing. So my professional career, my experience, my knowledge base, all that sort of stuff really leads me to being the most qualified for this position. And, frankly, I believe I could do a lot of good in it.”
What would you do in your first 100 days in office?
“We’ve started doing what’s known as data bulletins. And what I mean by that is, there’s a lot of information out there already available to everybody. But you know, the average person’s busy working, raising their families trying to make a little money and so they don’t really have the opportunity to distill it down. So we’ll take a little distill it down…
“One of the additional data bulletins we did was the jail, the regional jail data bulletins and in that one, we ended up finding that there was one of the regional jails that had been existing for 10 years and have never been audited. So we’re going to be auditing that. But our goal is to for one, continue to be a resource, try to be more of a resource, try to continue the great work we’ve done and more specifically look for things that have not already been audited.
“Now there’s certain things that need to be audited every year and we’ll continue to do that. But we want to also look for things that have never been out because it’s important for us to always to shine the light on these… because it’s funny, and I won’t go into it right now. But there’s been some things that we’ve been doing recently in certain areas that really haven’t been looked at as much and when you shine the light on it, we’ve had a couple of people come forward and basically confess their sins as it were, where if we had not been going in there, they would have never come forward.”
“Well, the first thing I want to do is audit the auditor’s office and that hasn’t been done. The current auditor said four years ago that he was going to do that, he hasn’t done that. There have been peer reviews , [but], a peer review is not an audit of the office.
“And as I said, as an engineer — I’m an industrial engineer — I am about systems and efficiencies and processes. And when we get in there, we can’t figure out where we want to go and what we want to do until we know where we’re at right now. So we need to figure out ‘what are the issues?’ That’s the first thing. The second thing is well, ultimately, I will be responsive to whatever the needs of the office are. When Adam Edelen was first elected auditor he probably had no idea that the first thing he was going to have to do was audit [former agriculture commissioner] Richie Farmer, right? He got in there and found out like the first day. So as far as reorganizing the office, I want to make IT security audits its own division and put someone in charge who has a cyber security background.”
“The first thing I would do is conduct an analytical review of all of the local taxing authorities. The second thing is going to be conducting reviews of the largest disbursements in spending programs and then analyzing the purchasing around those. This is the obvious low-hanging fruit. This is the area where we have the most related-party risks, we have the most fraud risk, from any organization. And then the third would be all the revenue generating activities, get into the taxing authorities. How are they are they are they collecting the correct amounts? What are the practices that they’re using? How are they targeting tax returns? How are they targeting audits? All that sort of stuff. So the three big areas are local taxing authorities. the second is just any disbursements activities so different purchasing groups, that kind of stuff. And the third is revenue generating activities. These are always the biggest risk in organizations, these are the areas that need to be focused on.”
What are some of the ethical values that you think you consider to be important to the office?
“I always try to be trustworthy and truthful and honest. I don’t know that from a standpoint of ethics, you have to be, you know, a man serving the Lord, but I certainly I think it’s very important. I serve my Lord Jesus Christ. I want to make sure that if, when I get up in the morning, and look in the mirror, or if I, talk to my Lord that I can be honest and forthright with him and be able to face him.”
“It’s about independence, it’s about being aware that the trust that people will have in you to do your job as a government employee, period. Not as auditor, not as attorney general not as whatever the decision might be, but as a public employee. We look at our firefighters and our police officers, our school teachers, our state workers, right? We want to know that if something bad happens, if someone breaks into our house, if we have an accident right out here on Fourth Street, if we have our house catch on fire, we want to know that they are doing their job and showing up because our taxpayers, our tax dollars go to make sure we have that service there.
“The Auditor’s Office should be making sure that those tax dollars are not being wasted, or going into the corporate pockets of our governors, friends, or whatever it might be, that we don’t have a governor who’s appointing his friend to head, the Office of Technology and paying them $375,000 a year.”
“Well, you know, most professionals have like a code of ethics, or like the CPA has guidelines for CPA, the IA has ethical guidelines for auditors and conducting their work. As far as far as, you know, practically, what makes you effective at doing the work? It’s one having the capability of developing strong relationships with your audit clients. And then it’s being able to have those tough conversations in a fair way. As far as scope limitations or scope creep goes and that kind of stuff, where people argue, well, you can audit x, y, z, but you can’t argue a and b and c, most public companies are handling this through an internal audit function charter. Or they say, basically, the internal audit function has the access to any documents that they want anytime they want. And that’s your authority, you have the ability to define your scope, however you choose. You use professional judgment in determining what you shouldn’t be focusing on. And you should be capable of making a risk-based argument.”