Kentucky Horse Park Looks Toward Correcting Financial Mismanagement After Audit

Mar 8, 2017 - 2:41 PM
“We overbuilt,” said Kentucky State Senator Damon Thayer about Kentucky Horse Park construction done for the 2010 Alltech FEI World Equestrian Games. Photo by Kat Netzler.

An audit report released last month has many in the local equine community questioning recent management of the Kentucky Horse Park in Lexington.

Mike Harmon, Kentucky’s auditor of public accounts, released a report in late February highlighting numerous management issues at the KHP following public criticism from a number of political officials close to current state governor Matt Bevin. Harmon’s investigation covered financial activity between 2013 and 2016, which was prior to the tenure of current KHP executive director Laura Prewitt.

“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 Harmon in a statement. “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.”

Harmon’s report found one unnamed horse show production company was given a flat rate on facility leases since 2006, which meant that company saved over $766,000 in 2016 alone. The company is owned by family members of the KHP’s food services director. Event sponsorships at the park were poorly documented, with a number of vendors operating on the property without having bid for contracts with the state.

Some 80 percent of food service contracts were billed differently than arranged on contract agreements, with explanatory documentation for the changes shredded by staff members. The report also alleged that the KHP did not “maintain separation” between itself and the Kentucky Horse Park Foundation, a private non-profit designed to help support the park’s operations.

“We were happy to cooperate with the State Auditor to ensure that a thorough audit of the park was conducted,” said Prewitt. “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. 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.”

A joint statement released by Kentucky Horse Park Foundation executive director Laura Klumb and board chairman Cabby Boone indicated the report’s findings threw an unfair light on the Foundation’s motives.

“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,” the statement read in part. “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.”

The Kentucky Horse Park’s 1,200 acres include a competition complex with cross-country courses and indoor/outdoor riding space, a 260-space campground, offices for more than 30 horse organizations, two equine non-profits, a riding program, and a tourism component including two museums and several live exhibits. The KHP hosted the 2010 Alltech FEI World Equestrian Games and is the home of the Rolex Kentucky CCI****, as well as numerous national, state and regional hunter/jumper, dressage, Western and eventing shows, breed-specific events and Breyerfest. An estimated 1 million tourists and equestrians visit the park each year.

But this isn’t the first time an audit has found improper accounting at the park. An audit released in 2015, covering a period between 2010 and 2014, also raised concerns about record-keeping and vendors operating without contracts.

Management of the park has been a hot political topic in central Kentucky headlines for a number of months. Prewitt replaced Jamie Link, who was also executive director of the 2010 WEG. In an article released in early 2016, the Lexington Herald-Leader indicated the park’s bottom line improved under Link, with park revenue increasing 15 percent between fiscal years 2014 and 2015, with a budget deficit that was down 40 percent.

Still, local politicians called for skepticism with regards to the park’s management. State Senator Damon Thayer called for the audit around the same time and also started about reorganizing the Park’s governing board.

“Sometimes the old saying of ‘Faithful are the wounds of a friend’ is true,” he said. “I guess it took someone like me, who’s a park loyalist, to question the management, because I just thought from hearing from my constituents who use the park on a regular basis that there were questionable activities occurring there.”

Thayer, whose district includes the town of Georgetown just minutes from the park’s gates, believes the KHP is still struggling to recoup losses from facility construction around the 2010 WEG. One of the biggest hits came from the Alltech Arena, a large indoor complex, which was projected to cost $40 million at the time Kentucky received a bid for the WEG.

The park had been under consideration for the 2022 WEG but withdrew its bid in January, citing $12 million in deferred maintenance costs.

“We overbuilt,” said Thayer, who was one of the key supporters of funding for the WEG facilities. “One of the arguments we made was these facilities can be used for future events. Here we are, seven years down the road, and the park still requires a $2.5 million annual subsidy from the taxpayers, and there’s tons of deferred maintenance that needs to be done. That arena really hasn’t shown to be worthy of the investment taxpayers made.”

The park receives support from both private donors through the Kentucky Horse Park Foundation and the state budget. Thayer said he is hopeful the facility will be able to lessen its reliance on state funds with reforms to accounting practices under Prewitt. He would also like to see the park benefit from additional public/private partnerships, which could allow for construction of new commercial operations on the property. This kind of partnership could open the door for a hotel to be built on the property, an idea that has been floated off and on through the years but never picked up much steam.

Thayer would also like to see the park create new competitions or events under its own control. Currently, events like Rolex are put on by third-party organizations, which rent the park facilities for a flat fee. Organizers keep the revenue, and while Thayer said the park’s availability for rent is important to the local equestrian community, a few park-owned events could prove helpful to its bottom line.

“I used to work at the Breeders’ Cup, and there are five or six different revenue streams to see profits from with those events,” said Thayer, citing sponsorship, ticket sales, merchandising and media rights as missed opportunities for the Park. “If you’re renting the place out for the year, you don’t have the chance to share the upside of those events.”

Thayer said he’s optimistic about the park’s future under Prewitt and the current staff, and he’s looking forward to the day he doesn’t have to tussle with legislators from other parts of the state over the property’s costs.

“I love the Kentucky Horse Park,” he said. “I want it to thrive, but I don’t want it to be at the expense of taxpayers in Kentucky. I think the future looks better now that we’ve been able to look inward at the operations of the park, and I think that will help provide us a path that is more prosperous than in the past.”

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