Lexington council gave thousands to nonprofits but never asked how money was spent, audit finds
A city audit has found Lexington council members need to up oversight of more than $150,000 in grants the council typically doles out annually to neighborhood associations and nonprofits.
The audit, released June 8, showed the council members gave grants to nonprofits and neighborhood associations but never followed up to determine how that money was spent.
“The recipient is not required to provide a final accounting of the use of the allocation or return any unspent funds,” the audit found.
Moreover, the audit, which looked at council spending for 2021 and 2022, found many nonprofits did not sign agreements with the city when receiving those funds.
Approximately 76 of the 336 grants — around 20% — did not have agreements returned to the council administrator. Yet, the money was disbursed anyway.
In contrast, Louisville Metro Council, which has a similar neighborhood grant program, does not disperse money until the grant agreements are signed, auditors found. Louisville also tracks how that money is spent.
For 2021 and 2022, each council members was allotted $15,000. Approximately $10,000 is set aside for neighborhood development funds. The remaining $5,000 is for council spending, such as supplies, travel and food. Council members are allowed to move money from their supply and travel expenses to neighborhood grants. Many of them do.
The grants are given to various neighborhood and nonprofits.
For example, at recent meeting, the council gave CASA of Lexington, Inc. $3,400.00; Hartland Estates Neighborhood Association, Inc. $1,000.00; the Plantory $500.00; the Ky. Center for Grieving Children and Families, Inc. $500.00; the Gardens of Hartland Homeowners Association, Inc. $1,000.00; the Lexington History Museum, Inc. $1,000.00; Common Good Community Development Corporation $500.00 and William Wells Brown Neighborhood Association, Inc. $1,901.67.
The audit also found the vast majority of grants were going for specific purposes, like helping to pay for beautification efforts in a neighborhood or to buy a new printer for a nonprofit. However, some of the grants — approximately 8% — were for unspecified reasons.
The audit recommended the council only give grants to nonprofits for projects, not ongoing expenses.
The audit did not find any wrongdoing on the part of the nonprofits. However, it was impossible to say if the money was spent as intended since the council did not track it.
Other money the city gives, such as larger grants to nonprofits to house the homeless or economic incentives to businesses, are tracked to determine if the money was spent as intended.
Vice Mayor Dan Wu, who first started serving on council in January and was not responsible for any of the questionable funding found in the audit, said in an audit response that the council is currently overhauling its rules and procedures. All of the auditor’s recommendations will be considered when it changes its rules, likely sometime this fall.
The audit and its recommendations couldn’t have come at a better time.
In the proposed budget for the fiscal year that begins July 1, the amount council members get for neighborhood development grants will increase to $15,000 a year.
Other questionable council spending
Internal auditors also examined council spending on food, travel and other supplies — the roughly $5,000 set aside each year per council member.
Council members can use a card to purchase those expenses.
However, documentation of those expenses was sometimes lacking, the audit found.
Ninety-six of 315 purchases — or roughly 30% — of council transactions on those purchasing cards had no back-up documentation, the audit found.
The city’s rules regarding use of those cards require documentation such as receipts, packaging slips or copies of ordering forms.
Wu, in his response to the audit, said the auditor’s recommendation to up oversight of documentation will be considered as part of the council’s overhaul of procedures. In addition, Wu said the council is considering centralizing all purchasing under the council administrator. It’s not currently a centralized process.
The review of the purchases showed most appeared to be reasonable. A little less than 5%, or about $688, in purchases could have been for personal use and include drinks such as Red Bull, Ale-8 and large bags of beef jerky.
“The non-standard purchases also included a country brunch purchased for a group and we were told that the intent was for this purchase to be made with a personal credit card, not a (city purchasing card),” the audit said.
When employees get a city credit card for purchases, the agreement states the card can’t be used for personal expenses, auditors said.
However, auditors noted the council rules do not specify council members have to follow all the city’s purchasing rules, which all other city employees are required to follow. The council should amend its rules to ensure all purchasing requirements are followed, auditors recommended.
The audit was started in January after the Kentucky State Auditor received a tip about questions about council spending. The auditors forwarded those concerns to the city’s internal audit board, which initiated the audit of council spending.
