Auditor Of Public Accounts
State Auditor Crit Luallen Releases Findings From an Investigation into City of Manchester

Press Release Date:  Wednesday, December 20, 2006  
Contact Information:  Jeff Derouen
Phone: (502) 573-0050
Fax: (502) 573-0067
Pager: (888) 222-5670

State Auditor Crit Luallen released today the findings from a special investigation into the City of Manchester in Clay County.  The Auditor of Public Accounts’ Division of Examination and Information Technology conducted the examination.  Findings in the examination have been forwarded for further action to the Attorney General’s Office, the Manchester City Attorney, the Governor’s Office for Local Development, the Manchester Board of Ethics, and the Transportation Cabinet.

The examination, conducted in response to complaints received by the Auditor’s Office, uncovered that the City authorized the paving of private driveways as part of a November 2005 contract to pave certain city streets.  The private driveway paving was addressed at a November 21, 2005 City Council meeting, the Mayor stating that the owners of the driveways agreed to pay the city prior to receiving the service.  In interviews with the Mayor, the City Road Supervisor, and a City Council member, auditors were informed that approximately “six or seven” driveways were paved based upon verbal arrangements with the citizens.

An on-site examination on April 13, 2006 uncovered no documentation to show arrangements for paving of private driveways, billings to the property owners, or reimbursements to the City.  After this initial on-site review, the City provided eleven invoices totaling over $4,000 sent to driveway owners, the first invoice dated April 21.  As of August 15 a total of $2,834.50 had been collected. Documentation provided the auditors revealed a total of 34 private driveways were paved. 

The examination also discovered that the City of Manchester, in violation of statute, failed to provide audits for fiscal years 2004 and 2005 and a unified financial report.  Because of these failures the Governor’s Office for Local Development suspended Municipal Road Aid payments to the City.  Additionally, the City did not comply with a $1.7 million United States Department of Agriculture Rural Development grant and loan agreement that could jeopardize future funding from Rural Development.

Other findings include: City funds were used to improperly reimburse personal travel expenses or expenses that did not have proper documentation; the City conducted business with employees and officials creating potential ethics code violations; former City employees and officials remained authorized signatories for City bank accounts; and the Certified Public Accountant hired to conduct City audits may lack independence required by audit standards.

“The State Constitution, Kentucky Courts, and simple common sense indicate that governments should not provide services such as private paving to select private citizens. Proper financial management, with the checks and balances required by law, are not optional for government. Taxpayers deserve that all governments follow the law and protect their money,” State Auditor Crit Luallen said.

This examination, along with responses from the City of Manchester and the Clay County Tourism Council, are posted on the Internet at the following site: