By Judy Clabes
In a specially called meeting, the Bluegrass Area Development District executive committee voted unanimously Wednesday to appeal the state’s order to repay $898,000 in “disallowed” costs for federal workforce programs from 2010-13.
After hearing reports from attorneys John Gay and Jeff Walther about options related to next steps, the board also authorized BGADD’s attorneys to hire outside financial experts to re-examine the questioned costs to help state officials new to the process to understand the complexities of the issue.
The board remained firm that under new leadership and responsible governance, BGADD had corrected all the issues that were cited by former state auditor Adam Edelen’s examination released in 2014 that found a number of issues at the agency that occurred under previous leadership, including misallocation and duplication of travel costs and improper bookkeeping related to credit card payments.
The board had requested Edelen’s examination and had begun to put accountability procedures in place even before the final report was issued. The eight corrective actions recommended by Edelen were implemented, and he attended a special meeting of the board in 2014 to praise the ADD for its swift action in resolving all findings. At that meeting he said, “It is difficult to adequately describe a home run, but that is exactly what the taxpayers got when the ADD completed their corrective action plan.”
Originally, the state cited some $2.5 million in questioned costs but closer examination reduced that number to $898,000, and the BGADD board questions even that conclusion. The costs objected to include rent payments to the Bluegrass Industrial Foundation, travel costs, questioned credit card payments, one-time “bonuses” for employees and monies paid for a prison re-entry program.
As the appeal moves forward, BGADD will secure the $898,000 in a way acceptable to the state, which attorney Gay said, could be through a line of credit or a mortgage on their office building on which there is currently no mortgage.
David Duttlinger, BGADD executive director, said the agency has the cash to repay but that could cause cash flow issues because of the timing of state payments for federal workforce development work. But Duttlinger was firm in his view that the cost allocations were legitimate and allowable.
“The state just wants to keep bringing up old plowed ground,” said Edwinna Baker, citizen member from Anderson County. “We have resolved these issues.”
The board agreed and expressed frustration with a process that doesn’t allow the issues to be put to rest.
Mayor Gray suggested a “mediation” approach and the hiring of an outside financial expert to help focus on the remaining issues so the “misunderstanding” could be cleared up once and for all.
The latest 31-page determination letter dated March 31 was issued by the Education and Workforce Development Cabinet and signed by new Secretary Hal Heiner. The board was generally most offended by a reference in the 41-page letter that the BGADD lacked “fiscal integrity.”“The board agreed that the EWDC’s ‘final determination’ letter lacks the necessary evidence that the remaining $898,000 is owed,” Duttlinger said. “We hope additional examination by another outside expert will convince the state that the changes we have made to our accounting processes really do reflect the ‘fiscal integrity’ they wrongly claim is lacking.”
The final determination was also questioned by the board as to whether it was referring to unresolved issues from the EWDC imposed corrective action plan or the state auditor’s corrective action plan. Based on previous comments from Edelen, the APA Examination seemed to be resolved and by EWDC’s own report their corrective action plan was reported as final.
“We believe the state should stop making these serious decisions based on old information that is just cut-and-pasted into their reports. We simply want a fair and honest review that includes the breadth of reforms that new leadership — including a new, engaged board — has put into place,” said Duttlinger.
Duttlinger pointed out that two top CPA firms, Blue and Company and Dean, Dorton Allen and Ford have given the organization clean audits over the past several years. In addition new accounting software has been put into place, making cost allocations more transparent.
He also pointed out that the dollars in question would not revert to the state but would be returned to the federal government, which has not asked for re-embursement.
The board also appointed a new Audit Committee made up of Burtner, Gray, Bourbon County Judge Mike Williams and citizen board member Skip Daugherty of Madison County.
At the close of the meeting Nicholas County Judge Executive Mike Pryor made an impassioned plea that reason prevail and that recognition be given to the important work the BGADD does across the region.
“We are a small county,” he said. “We would not have the resources to pay for the work the Bluegrass ADD does for us. We wouldn’t have our new sewer system — We wouldn’t have the expertise or the resources to make that happen. We need the BGADD and we need everyone to understand the hard work the board and the ADD’s leadership have done to move forward from the problems of the past.”