Why would the University of Louisville Board of Trustees approve the hire of someone as senior AVP for communications and marketing (and special assistant to the president) who was part of an agency that got caught over billing the state? That’s the question floating around Frankfort at the moment.
Here’s a look at the state government audit (Warning: External PDF Link) from 2006:
FINDING 06-COMM1-51: The Commerce Cabinet Should Ensure The New West Branding Contract’s Billing Procedures Are Improved
As stated in the audit report, the Kentucky Department of Tourism advanced the total amount for the branding initiative that cost $648,027. A monthly retainer of $125,000 was paid to New West for the year ended June 30, 2005. A monthly retainer of $125,000 for the first six months and $100,000 for the last six months was paid to New West for the year ended June 30, 2006. New West voluntarily reduced the amount of the retainer for the last half of that year. Thus, the total retainer paid for the year ended June 30, 2005 was $1,500,000 and the total retainer paid for the year ended June 30, 2006 was $1,350,000. The total retainer for both years was therefore $2,850,000.
The total amount billed to the various participating state agencies was $1,827,563 (against which the $1,500,000 retainer fee was applied) for the year ended June 30, 2005 and $1,633,906 (against which the $1,350,000 retainer fee was applied) for the year ended June 30, 2006. Therefore $327,563 was over billed for the year ended June 30, 2005 and $283,906 was over billed for the year ended June 30, 2006. The total amount over billed for both years combined was $611,469. Thus, Commerce used this amount to partially offset the branding initiative cost of $648,027.
Through work performed by the Office of Policy and Audit, they estimated that $75,132 of the $611,469 was paid from federal dollars by seven state agencies. This $75,132 amount was computed as follows. First, they calculated the total billings ($1,827,563 and $1,633,906) of New West by agency for each fiscal year. Then each agency’s New West billings were divided by the total New West billings for each fiscal year. This percentage was then applied against the total excess billing for each year to come up with each agency’s estimated share of the total excess billing.
As part of their work the Office of Policy and Audit also determined that over two fiscal years (FYE 6/30/05 and FYE 6/30/06) $3,913,454 in federal funds were used to pay for various advertising services under the New West contract. They determined that benefits from the 10% cap calculation were not passed along to agencies using these federal funds contrary to federal requirements, as we have previously described.
This happened because the Kentucky Commerce Cabinet initially determined that state agencies would ultimately benefit from branding in the future and thus should share in the front-end cost of the branding initiative. Apparently, the fact that excess fee payments received from New West to the Commerce Cabinet were not to be paid back to the agencies until reconciliations were performed at the end of the contract period was not effectively communicated back to these agencies. Therefore, payments made by these agencies using federal dollars were not appropriately accounted for and has to be questioned at this time.
We hear two stories. One that New West tried to pull a quick one over on the state. And another, more likely story that the state tried to screw New West by throwing them under the bus. So we genuinely want to know if no harm was done by New West or if this was Ernie Fletcher’s crew pulling another fast one.
All the folks we’ve spoken with at UofL are glad to have her on-board, for the record. So we’re leaning toward the not much to see here side of the story.