HealthFirst Bluegrass voted Wednesday to spend no more money on its planned Southland Drive health clinic after months of bad financial news, including a recent internal audit that projected additional losses.
Members of the finance and budget committees of HealthFirst directed executive director William North to stop all payments on the construction project, which is financed by $11.7 million in federal grant money.
"My heart and soul and your heart and soul have been put into this project since day one," building committee chairman Tom Burich told board members. But, he said, "we have the fiduciary responsibility to do what is right for the taxpayer."
The full volunteer board had set a May 16 deadline to sufficiently resolve financial problems or end the project.
HealthFirst, a primary care clinic supported mostly through tax dollars, serves about 17,000 patients a year, many of them poor, at its clinic at 650 Newtown Pike. Officials had hoped to serve at least twice as many patients by opening the new clinic, but that appears to be in serious doubt. The Newtown Pike clinic will continue to operate regardless of whether HealthFirst opens the proposed clinic on Southland Drive.
On Wednesday, Burich went through an 11-point checklist to see whether progress had been made in addressing financial issues that put in jeopardy the agency's ability to follow through on the Southland Drive clinic.
The news was uniformly bad. Deficits from cuts in federal funding and local tax dollars remain unresolved. In addition, a new internal audit shows that HealthFirst losses more than doubled for 2013.
Last week, Rick West, treasurer for HealthFirst, projected a loss in 2013 of about $235,000 on a $11 million budget. He said an internal audit report contracted through the accounting firm of Blue & Co., presented to him Wednesday, projected a much greater loss: $515,000. West did not disclose additional details because the audit had not yet been presented to the full HealthFirst board.
Because hundreds of thousands of dollars' worth of contracts have already bid, it is not clear how HealthFirst would stop work on the Southland Drive project.
The contracts include $15,000 a month being paid to developer Ted J. Mims for work as project manager. Mims, who according to his contract has earned $120,000 from HealthFirst so far, told the board he didn't want to take that money any longer.
But it's unclear whether Mims, as landlord on the property because he is a partial owner, will continue to receive $23,000 a month in rental payments, which began in March.
Geoff Reed, a senior adviser to Mayor Jim Gray, said that at a work session Tuesday, Gray encouraged Kentucky State Auditor Adam Edelen to examine HealthFirst's finances. The auditor's office already was reviewing HealthFirst documents provided by North, who contacted the agency.
In a letter April 26, North did not directly ask for an audit, but he wrote that he was acting in response to an open-records request from the Herald-Leader regarding money spent to build the Southland Drive clinic.
He also cited an April 26 editorial: "An editorial in the Lexington Herald Leader today suggested that 'State Auditor Adam Edelen should have a look at this entire mess.' We are not sure what that means, but we take any concerns raised publicly very seriously."
Stephenie Steitzer, communications director for Edelen, said the documents North submitted are being reviewed, but no decision has been made about an audit.