Mike Harmon, Kentucky’s 47th Auditor of Public Accounts, has released the results of his office’s special examination of the Kentucky Horse Park. The special examination of certain policies, procedures, and financial activity of the park between June 2013 and July 2016 produced eight findings. The full examination will be referred to the Executive Branch Ethics Commission to determine whether further investigation is needed.
“Our eight-month examination found the Horse Park was poorly run with little or no oversight, questionable management practices, and potential conflicts of interest on operations and sponsorships at the park,” said Auditor Harmon. “Because of poor management and oversight, taxpayers have had to prop up the park’s finances to the tune of more than $24 million over the last 10 years.”
Auditor Harmon announced last May his office would conduct a special examination of the Horse Park following requests from Senate Majority Floor Leader Damon Thayer of Georgetown; Tourism, Arts and Heritage Cabinet Secretary Don Parkinson; and Finance and Administration Cabinet Secretary William M. Landrum, III. Among the issues identified in the special examination are:
- 80 percent of food service contracts were not billed in accordance with contract agreements, with some billed lower or higher. Documents supporting price modifications were shredded by staff following the events.
- Contracts included perks to the Kentucky Horse Park Foundation and to one of the park’s major corporate sponsors. Several contracts called for these outside entities to receive free tickets and access to hospitality rooms for events at Alltech Arena.
- Failure to properly bid contracts for services with several vendors, including the company that provides fuel to the Horse Park. That company has been paid more than $473,000 over the last three fiscal years with no contract in place.
- A contractor hired to consult the park’s gift shop also supplied merchandise for sale in the shop. The merchandise contract violated competitive procurement rules. Park employees were aware of the potential conflict because merchandise was initially sold under the same business name as the contractor.
- Flat rates were given to one horse show production company going back to 2006, with the discount in 2016 alone totaling more than $766,000. The company, which is owned by the in-laws of the park’s food services director, also had equipment and trailers housed rent free on park grounds.
- An agreement in 2016 that allowed the park’s former Deputy Executive Director to live in a home on the park grounds and pay only $250 per month in rent.
- Conflicts with state regulations regarding sponsorships. Documentation at the Horse Park was so poor, employees could not provide a complete list of sponsor agreements between 2013 and 2016.
- Use of Horse Park staff on state time to do work for the Southern Lights event sponsored by the Kentucky Horse Park Foundation, which is a private non-profit entity. The Kentucky Horse Park surrendered a significant revenue stream from this event to the Kentucky Horse Park Foundation.
- The Kentucky Horse Park and the Kentucky Horse Park Foundation failed to maintain separation. For example, the two entities agreed to finance new barns in circumvention of state procedures for incurring debt. This arraignment potentially avoided compliance with state procurement and construction laws.
- The Horse Park had a 300 percent increase in the amount of money spent to hire employees through temporary employment agencies, from $544,000 in 2014 to $2.17 million in 2016.
“Not all state agencies are capable of being run like a business and being profitable. However, all state agencies are capable of being ethical and well managed,” Auditor Harmon said. “I urge the new Executive Director of the Horse Park, the Kentucky Horse Park Commission, and the current administration to study our findings carefully and implement our recommendations to put the Horse Park on the path to financial sustainability.”
“We are grateful to Auditor Harmon and his team for performing the audit of the Kentucky Horse Park,” said Secretary Parkinson. “I called for this audit to restore integrity at the Kentucky Horse Park. Improving financial stewardship and oversight are top goals of this administration and the Tourism, Arts and Heritage Cabinet. I am pleased to announce that the new leadership at the park has already begun implementing policies to ensure that the park complies with all statutory and regulatory requirements, including procurement, personnel, and ethics laws.”
“We were happy to cooperate with the State Auditor to ensure that a thorough audit of the park was conducted. When I assumed the role of executive director last year, my new leadership team and I uncovered many of the same issues that the Auditor’s report revealed. This report reinforces the decisions we have made since then to ensure ethical practices at the park,” said Laura Prewitt. “Moving forward, we will continue to enact policies at the Kentucky Horse Park that are both lawful and beneficial to our visitors and the Commonwealth.”
“I appreciate the work of the Auditor’s Office in uncovering problems within the Kentucky Horse Park that I brought to light during last year’s legislative session,” Senator Thayer said. “The audit shows that there have been poor management practices in the past, and I appreciate the efforts of the new leadership at the Horse Park – both the members of the Kentucky Horse Park Commission and the management team – in their efforts to already address many of the issues discovered in the audit.”
The complete special examination of the Kentucky Horse Park can be reviewed by the public at here.
The Kentucky Horse Park Foundation released the following statement via the Northern Kentucky Tribune:
The Kentucky Horse Park Foundation was created in 1985 with the sole purpose of providing private philanthropic support to benefit the Kentucky Horse Park. Since our founding, the foundation has provided over $30 million in improvements and financial support for the park.
The ONLY goal of our board of directors and staff members has been, and continues to be, to raise private money to support the needs of the horse park. More information about the KHP Foundation’s long history of support can be found here.
The Kentucky Horse Park Foundation staff and board members have only ever acted with the best interests of helping the park be the best place it can be for its many annual visitors.
Every decision that has been made by the Kentucky Horse Park Foundation board and staff has been done so with the purest of motives in order to further the park’s initiatives and goals, as identified by the park’s leadership.
The Kentucky Horse Park Foundation has been proud to share Southern Lights with the citizens of Kentucky over the past 23 years. Since its founding, this beloved holiday event has been a partnership between the Kentucky Horse Park Foundation and the Kentucky Horse Park, attracting over 120,000 annual visitors to the park to view the Southern Lights.
The Foundation purchased all of the light displays, covered all costs related to promoting and putting on the event, and provided event logistical administration annually.
Historically, the Park provided manpower to put up the lights.
The State Auditor’s office is correct that until 2009 there was a revenue sharing arrangement as part of the contract related to Southern Lights. However, from 2009 until last year the park’s leadership had agreed to waive the revenue sharing in exchange for the KHP Foundation paying the millions of dollars in loans related to the construction of a three barn complex that the park needed built in order to host the 2010 World Equestrian Games. These three barns cost over $4.5 million to construct, the construction of which was funded entirely through a combination of philanthropic capital support from private donors plus the revenue generated by KHP Foundation fundraising efforts, primarily Southern Lights.
The barns, upon their completion in 2010, were donated to the Kentucky Horse Park so that the park might generate revenue directly from their rental, which it has been doing since that time. While the barn revenue was being realized by the park, the Kentucky Horse Park Foundation continued to pay the principal and interest on the barn loans until they were paid in full.
The State Auditor’s office has failed to note that since 2009, the Foundation has continued to donate a significant portion of the annual Southern Lights revenue directly to the park every year.
In fact, the Foundation provides well over $100,000 in direct support annually to pay for the Kentucky Horse Park’s Volunteer Program, underwrite all costs related to the hosting, maintenance and content management of the KHP and International Museum of the Horse websites, and provide a “park support” line item in the foundation’s operating budget which can be spent at the discretion of the executive director of the park to meet needs not otherwise funded through the park’s own budget.
The special audit also failed to note that the Kentucky Horse Park realizes a great deal of income directly through Southern Lights related to its gift shop revenue, riding concession and food service revenue generated through the Southern Lights event, in the off season at a time when the park’s visitors would be minimal were it not for Southern Lights.
The Kentucky Horse Park Foundation’s focus has never wavered. It was created as a public-private partnership to generate private revenue for the benefit of the park. Moving forward the Kentucky Horse Park Foundation will continue to raise private support to benefit the park. The Foundation will work with the park’s current leadership to ensure this is accomplished in a way that meets all state rules and regulations, as we have striven to do previously with every park administration since 1985.
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