A dispute over control of more than $8 million in federal funding provided annually for employee training and job assistance in 17 Central Kentucky counties spilled into public view this week.
Last month, when State Auditor Adam Edelen issued a scathing review of the Bluegrass Area Development District, he took special notice of the district's relationship with the Bluegrass Workforce Investment Board.
The Bluegrass ADD manages the workforce board's $8 million in federal funding and administers its programs across Central Kentucky. Those programs train employees, hold job fairs, help businesses find workers and study the region's labor economics.
Edelen found that Bluegrass ADD officials had tried to influence the workforce board's actions and possibly had misused some of that federal funding. Auditors noted that the Bluegrass ADD had written the agreement between the two bodies, making the Bluegrass ADD's executive board chairman or vice chairman the chief elected official of the Workforce Investment Board. That person chooses all members of the workforce board and makes all important decisions, although the workforce board has a chairman of its own.
The auditors "received concerns that BGADD was attempting to strategically position itself to increase its authority over the decision making for Workforce Investment Area funding," the auditor's report read. "By having the WIB CEO and the BGADD board chair as the same person, a potential conflict is evident since BGADD has a significant fiscal interest in maintaining a fiscal agent role."
Since the report was issued, Workforce Investment Board chairman Daryl Smith, an economic development specialist for Kentucky Utilities, has written letters to the Bluegrass ADD asking that the district account for all spending of workforce dollars, and that the chief elected official of the workforce board look for a new fiscal agent to replace Bluegrass ADD.
On Wednesday, Bluegrass ADD officials signaled just how interested they are in continuing to manage the workforce board's money when they organized a meeting of 14 county judge-executives from the area.
The unorthodox gathering represented no public agency or authority, but an April 2 email message about the meeting, sent to the judge-executives and media, said the group planned to acknowledge that the workforce board's chief elected official was the only person who could pick a new fiscal agent, and that this person should "maintain the relationship with the Bluegrass Area Development District as the local fiscal agent." Doing so "is in the best interests" of the workforce board, the email said.
That raised the hackles of Lexington Mayor Jim Gray, who was invited to the meeting but did not attend. Gray wrote a letter to Bluegrass ADD Executive Director David Duttlinger expressing concern that the "'special meeting' appears to be an attempt on your part to supersede the open and honest consideration of the issue" by the workforce board.
"Given the very serious issues concerning the BGADD raised by the state auditor in his recent audit (including conflicts, undue influence, overreaching and misuse of funds)," Gray wrote, "I do not agree that BGADD continuing as the fiscal agent for the Workforce Investment Board is in the best interest of the Bluegrass Workforce Investment Area."
Garrard County Judge-Executive John Wilson, who chaired the meeting Wednesday, said the gathering was an opportunity to help local leaders understand complicated issues in an open, transparent way.
Two judge-executives who attended the meeting, Henry Branham of Clark County and George Lusby of Scott County, appeared to side with Gray.
"I don't agree that the ADD should be the fiscal agent," Branham said after the meeting. "I would not say it's in the 'best interest' of workforce investment. That's so subjective, for obvious reasons."
Lusby said during the meeting that he was surprised and appalled at the auditor's report.
"I'm very concerned," he said. "I think it ought to go to an outside agency until we straighten it out."
However, that decision lies solely with Winchester Mayor Ed Burtner, the chief elected official of the workforce board, because he is vice chairman of Bluegrass ADD.
Burtner acknowledged that there is a lot of pressure on him as he prepares to make a decision.
"This is a very complex, confusing and difficult process," said Burtner, who attended Wednesday's meeting.
Burtner said he has been meeting with state workforce development officials, and with Duttlinger, executive director of Bluegrass ADD, and Smith, chairman of the workforce board.
Burtner said he must decide in the next three weeks whether to solicit proposals from other organizations interested in managing the workforce board's money and projects. Any further delay would not leave enough time to get a new contract through the state approval process before the next fiscal year begins.
Beth Brinly, state commissioner of workforce development, has issued a separate corrective plan for the Bluegrass Workforce Investment Area that calls for, among other things, a further review of how certain money has been spent. For example, the plan asks the workforce board to ensure that recent property purchases made by Bluegrass ADD were not paid for with workforce dollars.
Duttlinger said he hopes the Bluegrass ADD will remain the fiscal agent for workforce funds because it helps save money with lower administrative costs and better regional economic development and jobs planning.
"With comprehensive economic development, those two agencies have to talk," he said.
Smith, however, appears to see things differently.
In a March 28 letter to Burtner, Smith asked him to start a competitive bidding process for a new fiscal agent because the board shares Edelen's concerns about conflicts of interest between the two groups.
The bidding process "is necessary to instill confidence" in the workforce board and the public about "whose interests the fiscal agent serves," he said.
Linda Blackford: (859) 231-1359. Twitter: @lbblackford.