Lexington council wants federal audit of area development district

The Urban County Council wants U.S. Labor Department investigators to audit the Bluegrass Area Development District’s use of federal workforce funds.

The Urban County Council will consider a resolution at its Thursday meeting asking the Office of Inspector General for the federal labor agency to audit Bluegrass.

Councilwoman Susan Lamb introduced the resolution Tuesday at a council work session.

Lamb said she thought the federal audit would get to the bottom of longstanding financial questions surrounding the agency, which serves a 17-county region that includes Fayette County. The agency is appealing an order requiring it to repay nearly $900,000 in federal workforce dollars that were found to have been misspent from 2010 to 2013.

Councilwoman Peggy Henson agreed with Lamb.

“Workforce dollars are very, very important to our community,” she said. “We have to get this straightened out.”

The executive committee of Bluegrass recently decided to appeal an $898,525 judgment by the Kentucky Education and Workforce Development Cabinet for the money the state agency says was misspent. The cabinet says the agency should repay the state for workforce dollars spent on rent for Bluegrass’s Perimeter Drive building. The rent was paid to a nonprofit that was created by a former Bluegrass director. Other misspending included credit card expenses and one-time bonuses paid to Bluegrass staff.

That final determination letter found that there were unresolved financial oversight problems at the agency. At the April 13 meeting, the executive committee said there was no backup documentation for the findings that there were current financial oversight problems. The group also decided to hire financial experts.

David Duttlinger, the executive director of Bluegrass, said in a written statement that if Lexington wanted an additional audit, then Lexington should pay for it.

“Our concern about all this is the cost — real taxpayer money that continues to be spent that could be used to better purposes,” Duttlinger said. “We assume that this Urban County initiative involving an additional examination will be budgeted and paid for by the council and not passed on to the ADD.”

Lamb said Wednesday that she doesn’t believe that an office of inspector general examination will cost anything.

“It’s my understanding that there would be no cost,” Lamb said. “I hope they will realize that this could clear their name.”

Former state Auditor Adam Edelen released an examination of the agency that does job training, aging, planning and other services in 2014. In 2015, the state workforce cabinet and the Department of Aging and Independent Living launched separate examinations based on Edelen’s audit. The two cabinets found more than $2.8 million in questioned costs.

Bluegrass officials have said they have made changes at the agency and that many of the cited problems have since been corrected. Those examinations led to the ouster of former director Lenny Stoltz.

In his statement on Thursday, Duttlinger said the group turned in a corrective action plan that was accepted by Edelen.

“Let me be clear as possible: the doors of the Bluegrass ADD are always open to any level of inspection or investigation,” Duttlinger said.

Lexington Mayor Jim Gray and other Lexington officials pushed for the state examination in 2013. Last year, Lexington tried to create its own workforce investment area separate from Bluegrass, but that bid ultimately failed.

Councilwoman Jennifer Mossotti questioned during Tuesday’s meeting whether there was a need for a federal audit, given the state auditor examination and the examinations of two state agencies.

Kevin Atkins, the city’s chief development officer, said the state audit looks only at business practices.

“In this case, the OIG would make sure money has been spent according to federal law ... and the agreements in place,” Atkins said. “The topic has been out there for a few years now, and you could argue this would bring some finality to it.”

Atkins said he would notify Bluegrass officials of the resolution before Thursday night’s meeting. Lamb said she was open to hearing from Bluegrass at the meeting. Lamb and at-large Councilman Richard Moloney attended last week’s Bluegrass executive committee meeting.

The Office of Inspector General for the U.S. Department of Health and Human Services notified state officials last month that it was investigating how Bluegrass spent federal aging dollars. Federal labor investigators would conduct a similar review, Atkins said.

Attorneys for Bluegrass told the executive committee at the April 13 meeting that the Health and Human Services investigation is open.

The Urban County Council resolution does not guarantee a federal investigation. The resolution only asks the federal government to conduct the audit. The agency can decline. If the $898,525 judgment stands, that money will go back to the federal government because it involves federal workforce dollars.

Lamb said it’s possible that the resolution will get its first and second reading at Thursday’s meeting.

This story was originally published April 20, 2016 at 12:29 PM with the headline "Lexington council wants federal audit of area development district."