Response and Considerations of APA Special Examination, 2014

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Response and Considerations of APA Special Examination, 2014

As with the entire Area Development District (ADD) network, it would be easy to describe the enormous benefit that the Bluegrass ADD has provided to their Region and to local governments in particular, by quoting the number of grants they have written, the millions of dollars of federal and state dollars they have administered, the public benefit and cost savings they have provided through the recognition and promotion of regional projects, both infrastructure and service alike, the number of unemployed or under employed persons who have been trained resulting in good paying jobs, or the number of seniors that that have received meals and been cared for.  Despite all the vast amount of good that one could provide regularly, the one hanging cloud of suspicion that continues to exist is, “ . . . what about the scathing report on the Bluegrass ADD from the APA?”

Policy leaders who comprise the Board of the Bluegrass ADD, were immediately “on point” in April of 2013, when allegations were brought to the Board’s attention of inappropriate activities associated with the property that was purchased for the use of an approved Prison Re-entry Program authorized by the Bluegrass Workforce Investment Board.  The Board had become increasingly concerned by the activities and leadership displayed by the previous Executive Director of the Bluegrass ADD.  Obviously, when these allegations were brought to light, they immediately directed outside counsel to begin an investigation into the allegations.

While many people outside the ADD have proclaimed that they called the Auditor’s Office, and it may be possible that more than one party did, it is an undeniable fact that the it was the Bluegrass ADD Officers and Board who contacted the Auditor’s Office and requested assistance in the top to bottom review of the organization.  The Board immediately took corrective action, including forcing the resignation of the previous Executive-Director, eliminating the Workforce Re-entry program in question and re-inserted their leadership as the owners, conveners and beneficiaries of the organization.  The bottom line is that the services rendered by the Bluegrass ADD to local communities are vital to the existence of those rural counties and cities, and the organization providing these services is crucial to our region’s prosperity.  That remains the case today will all 15 ADDs.

So after the forced resignation of the previous Executive Director, they opened the doors to the auditor and a demarcation begin on July 1, 2013.  The intent and purpose of the APA examination was to provide a clean slate so that the Board and staff could get back to the important business of delivering vital services to the region.

As the APA worked on the report, they continued to commit themselves to internal reform and before any report was issued, they had implemented increased transparency measures which heightened the fiduciary responsibility of the executive committee, changed the travel policy, implemented a new compensation method, wrote and trained staff on a new personnel policy manual, increased board involvement and communication, hired additional accounting staff, and for the first time, retained in-house counsel.

Three months after the issuance of the APA report, Auditor Edelen visited BGADD to commend the agency for the quick response and correction to all the findings in his examination.


Special Examination by Auditor Edelen

Bluegrass ADD Status / Response

IntroductoryAPA began an examination of the BGADD in Summer 2013, after contacts from the Board of Directors who requested assistance in the top to bottom review of our organization.   Report issued in March 2014. BGADD Actions Completed in parallel with exam:1)      Changed travel policy2)      Eliminated one-time adjustments3)      Completed training on personnel policy manual

4)      Increased Board communication/board involvement

5)      Changes in Internal Management:

  • Retained in-house counsel
  • Committee Meetings
  • Hired assistant finance officer
Finding 1.BGADD Governance Practices are not conducive to proper oversight. 1)      Bylaws committee establisheda)      Adopted by BGADD Board on 7/23/142)      Open Records/Meetings Laws Guidance issued3)      Increased attention to Advisory Committees

4)      New Whistleblower Policy

5)      Revamping BGADD Website:

a)      Access to all files

b)      Increased use of audio/video files from meetings

Finding 2.BGADD is engaged in Activities that were beyond its statutory authority and/or activities that appeared to create conflicts of interest. 1)      Eliminate apparent conflicts of interest through review of Workforce Interlocal Agreement2)      Eliminated all loans from BIF in 20123)      Review of KRS 147.050 through .1404)      Disclosed all significant party transactions

5)      Eliminated contributions to non-profits

6)      Returned $3,800 in disallowed costs to OET

Finding 3.BGADD did not report possible criminal violations to law enforcement authorities The findings from the APA report were turned over to the Attorney General and the Fayette County prosecutor, both of whom reported to BGADD that they considered the matter closed.
Finding 4.BGADD violated procurement policies 1)      Revision and adoption of new procurement policies that include adoption of State Model Procurement Code2)      AR&F Committee meets monthly.3)      Verification that only non-grant money was used in the purchase or improvement of Trent Blvd properties.
Finding 5.BGADD did not have internal controls in place to prevent excessive & unnecessary expenditures, including travel & business reimbursements 1)    All trips are approved in advance with business purpose clearly stated2)    After-action reports required for all trips3)   New travel policies are consistent with US General Services Administration
Finding 6.Significant Noncompliances were identified related to management of federal grants 1)    BGADD does reconcile draw downs to actual expenditures2)    Hired consultant for training on Workforce drawdowns3)    Review of cost allocation plan4)    Unrestricted excess revenue verified it was generated from CDO – not program income
Finding 7.BGADD paid bonuses to employees 1)    The practice in question, while not a payment of bonuses was reviewed and eliminated August 21, 20132)    Procured consultant to conduct compensation study
Finding 8.BGADD utilized an outdated accounting system leading to a lack of internal controls. 1)    Utilize a team of 11 BGADD accountants who are trained to use accounting system – not 1.2)    Utilized internal controls3)    Discontinued used of two accounting systems, implemented a new state of the art, reportable, transparent easy to access and use accounting software system


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