State Releases Scathing Audit of Union Co. Fiscal Court

The Kentucky Auditor of Public Accounts has released 2014 audit of the Union County Fiscal Court. In the scathing 56-page report, state auditors reported finding, among other things, the fiscal court and Judge Executive Jody Jenkins failed to implement adequate internal controls over county purchases; failed to advertise for bids in accordance with state law and failed to follow proper purchasing procedures.

Among the numerous issues state auditors cited in their report was Union county's lack of adequate internal controls over capital asset purchases and capital asset record maintenance. According to the audit, which solely covered the 2014 fiscal year, Union County's records show nearly $1.2 million worth of assets, including two bridges, two buildings, a road repaving project and 20 vehicles were omitted from the county's list of assets.

The audit also found the county's normal purchasing procedures of acquiring equipment when it is needed and requested by a county department was not followed. In the case of six pieces of heavy equipment seized by the FBI on December 31, 2014, the equipment was purchased because it was being offered at a good price, according to the audit. The county's insurance carrier, KACo, denied the county's repeated insurance claims. The county could never recoup the $97,775 spent on the equipment.

In early January, after an extensive investigation, authorities arrested Thomas Elpers, 62, and his son Andrew Elpers, 36, for allegedly masterminding a $1.5 million theft ring involving heavy machinery.
Upon receiving information that some of the stolen equipment was located in Union County, Eyewitness News interviewed Judge Executive Jody Jenkins on January 14th.

"We purchased the equipment through what we could consider a reputable company or group," Jenkins said.
However, according to records obtained by Eyewitness News, Habermel Equipment was neither a company nor a group. It was one man: Jason Habermel, who 'did business as' Habermel Equipment. Habermel was later federally indicted on numerous charges in April.

According to the Kentucky and Indiana Secretaries of State and the Vanderburgh County Recorder's Office, there is no documentation that supports the official existence of Habermel Equipment. Even if a company is doing business under a fictitious name -- or DBA -- the owner must file paperwork with the proper county and state.

Despite this, Jenkins and the Union County Fiscal Court did business with Habermel anyway.
In early April 2014, Union County purchased a 2012 "Case 50XB" tractor, records show. However, that model does not exist. Case does make a "CX50B" model. According to purchasing records, Union County paid $19,500 for the equipment. Jenkins signed the check written out to Habermel, according to purchasing records. According to the leading machinery trading websites, the estimated market value for similar pieces of equipment range from $40,000 to $55,000.

On April 22nd, purchasing records state the county purchased a 2011 Caterpillar 289C track loader for $19,950. The estimated market value on that piece of equipment is between $36,000 to $50,000, according to equipment trading websites. Jenkins signed the check written out to Habermel, according to purchasing records.

In June 2014, according to purchasing records, the county purchased a Takeuchi skid steer for $16,500. That price is approximately $10,000 less than the estimated market value, according to equipment trading websites.

In July 2014, the county bought a 2013 Case CX55B mini excavator for $19,875. The estimated market value on that piece of equipment exceeds $55,000, according to equipment trading websites. The Fiscal Court approved of the purchase on July 8th. According to law enforcement sources, that same piece of equipment was stolen from Koberstein Contracting, an Evansville-based business, from a job site near Memorial High School. The company purchased the mini excavator for $72,000 in March 2014, company officials said. The equipment was reported stolen on July 3rd, 2014, according to an Evansville Police Department incident report. Days later, the mini excavator was in Union County's possession for just under $20,000, according to purchasing records.

"There was no management oversight to determine if capital asset records were being accurately maintained. The effects of the lack of adequate controls over capital assets has lead to the county purchasing stolen equipment, improper reporting of capital assets and loss of county funds and property," state auditors said in their final report.

The state audit also makes mention of the county's failure to document serial numbers and identification numbers for all assets purchased in 2014. Eyewitness News obtained a picture of one of the pieces of equipment. The picture shows what some could consider a clearly altered serial number.

Jenkins has maintained that the equipment was bought in good faith.

The audit also found the Union County Fiscal Court violated state laws governing proper bidding practices. As Eyewitness News has previously reported, Judge Jenkins allegedly gave preferential treatment when it came to the awarding of county projects. The beneficiary of this practice, according to law enforcement sources, was Steve Eckels, the owner of E&E Services in Corydon. Eckels is considered one of Jenkins' closest friends.

According to documents obtained by Eyewitness News, Eckels' business, E&E Services, was involved in a number of lucrative county jobs. Between January 2013 and August 2014, E&E Services took home more than $200,000, according to purchasing records. The projects included mowing county cemeteries, renovating the Uniontown Ballpark and renovations at Moffit Lake. According to purchasing records and corresponding Fiscal Court meeting minutes, these projects did not exceed $20,000. Therefore, the projects weren't bid out by the Fiscal Court.

On a voucher dated October 15th, 2013, E&E Services began cleaning out Moffit Lake on October 7th and continued through October 13th. The voucher was for $6,885. A voucher dated October 18th, shows the renovations continued on October 14th and October 15th. The bill was for more than $2700, according to purchasing records. A voucher dated October 30th shows the work continued from October 16th through October 19th. The price on that voucher was for $6,660. Lastly, a voucher dated December 13th was for the work done two months prior on October 21st through October 24th.

With the only day missing (October 20th) being a Sunday, the vouchers appear to be all related to the same project completed during a two week stretch. However, instead of being included all in one voucher, it is broken into four separate vouchers. Combining all four vouchers exceeds $20,000.

According to the state audit, the practice of splitting one project into several smaller projects is against the state's model procurement laws.
However, additional records suggest it would happen again the following year at the same location involving the same business -- E&E Services.

E&E Services began working on water and electric lines at Moffit Lake on March 23rd, 2014. The work continued through the end of June, according to purchasing records. The project appears on seven different vouchers and has a combined cost of $37,235.

State auditors noted in their report that the practice of taking one project and splitting it into several smaller projects that individually cost less than $20,000 is in violation of the state's model procurement laws. Model procurement laws are intended to ensure that every business is on the same level playing field when it comes to being awarded county projects.

Additionally, Union County is insuring 13 buildings and seven vehicles that are not owned by the County, according to the state audit. There is not a contractual agreement for the County to maintain insurance on those particular items, state auditors said. The minutes from Fiscal Court meetings did not document when the County purchased assets for other governmental entities as well, state auditors said.

Lastly, state auditors determined the Union County Fiscal Court circumvented internal controls by paying for county expenses from a Union County First checking account and later reimbursing Union County First. Union County First, which is formerly known as Union County Economic Development, is a non-profit organization that focuses on economic development opportunities in the county. According to business filings with the Secretary of State's Office, Jenkins served on the board of directors in 2014.

According to the audit, the fiscal court had 12 disbursements to Union County First, totaling $80,099 during the 2014 fiscal year. Fiscal Court expenses were also co-mingled with Union County First expenses. Jenkins told state auditors that reimbursements were paid from the UC First account because, 'he was a check signer and the invoices were requested to be paid before the Fiscal Court met.'

This practice circumvents normal procurement controls because it does not allow the Fiscal Court the opportunity to review or question the expenditure before the check is written.

One of those expenditures was described as a "2013 Caterpillar Tooth Bucket Reimbursement." A tooth bucket is a scooping device that attaches to the front of the machine. However, that piece of equipment already came with a tooth bucket, according to law enforcement sources who spoke on the condition of anonymity.
Jenkins responded to the issues state auditors noted in their final report. In Jenkins' responses, he said the issues have already been rectified or they were in the process of being rectified.

However, nowhere in the 56 page audit does it mention Jenkins refuting or disagreeing with what the state auditors found.

PREVIOUS UNION COUNTY STORIES

Part 1 - http://www.tristatehomepage.com/news/questions-in-union-county 
 

Part 2 - http://www.tristatehomepage.com/news/special-report-more-questions-in-union-county

Part 3 - http://www.tristatehomepage.com/news/questions-in-union-county-more-than-just-equipment 

Part 4 - http://www.tristatehomepage.com/news/questions-in-union-county-insurance-claim-denied 

Part 5 - http://www.tristatehomepage.com/news/questions-in-union-county-equipment-rentals-called-into-question 

 Part 6 - http://www.tristatehomepage.com/news/local-news/questions-in-union-county-missing-equipment 

 Part 7 - http://www.tristatehomepage.com/news/local-news/questions-in-union-county-open-meetings-closed-doors

 Part 8 - http://www.tristatehomepage.com/news/local-news/questions-in-union-county-snow-crab-valet-parking-and-interest-fees


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