Federal investigation centers on spending


State sends letter informing district about inquiry Costs were questioned in 2014 state audit State will step up monitoring of are development district



2014 RPNA Photo The Bluegrass Area Development District, whose offices are at 699 Perimeter Drive, is being investigated by a federal agency for questionable expenses.


A federal agency is investigating the Bluegrass Area Development District’s spending of federal money for aging services, according to a letter obtained by the Herald-Leader.

Deborah Anderson, commissioner of the state Departmentof Aging and Independent Living, sent a letter dated Friday to the development district informing the 17-county agency that state authorities have been told by the Office of Inspector General for the U.S. Department of Health and Human Services that the office has launched an investigation. In 2016, Bluegrass ADD had a budget of about $27 million, 90 percent of which comes from federal and state grants. The inspector general is the investigative arm of the federal Department of Health and Human Services.

“Furthermore, in light of the ongoing federal investigation, (the state) will increase the monitoring of the (Bluegrass Area Development District) to include weekly contacts to review the operation, administration and financial management of those programs,” Anderson wrote.

In addition, Anderson asked the agency to provide the state with information including how it has changed its policies and procedures since a March 2014 state audit raised questions about spending. After that audit, the state Education and Workforce Development Cabinet and the Department of Aging and Independent Living conducted separate investigations. In total, the two agencies found more than $2.8 million in questioned costs — a figure the area development district has disputed.

The questioned costs were from 2010 to 2013. The examination led to the ouster of former executive director Lenny Stoltz.

David Duttlinger (who rehired the ousted Stoltz as a consultant after his forced resignation), who took over as head of the agency after Stoltz’s ouster, said the agency asked for the 2014 state audit and has cooperated with state and federal officials.

“Since the Department of Aging and Independent Living has been informed by the HHS OIG that they are conducting a federal investigation, we look forward to sitting down with them at the earliest opportunity to provide them with any information they require and assist them in any manner possible,” Duttlinger wrote in an email.

Some of the aging services the development district oversees include caregiving programs designed to keep seniors in their homes, and money for senior citizen centers.

Mary Kahn, a spokeswoman for the Office of Inspector General for the U.S. Department of Health and Human Services, said Monday that the agency could not confirm or deny an investigation of the development district.

The state Education and Workforce Development Cabinet and the Department of Aging and Independent Living have not determined whether the agency will have to repay any of the $2.8 million in questioned costs.

Among other things, the state agencies questioned more than $200,000 in travel expenses and credit card charges.

The state auditor’s initial investigation found $513,770 in questionable credit card expenditures — those that lacked supporting documentation or appeared excessive. The state agencies also questioned $625,524 in bonuses paid to district employees from 2010 to 2013.

Bluegrass ADD officials have said they made changes to its financial oversight and governance since the 2014 state auditor’s examination.

In fiscal year 2016, Bluegrass ADD received $6.4 million in state and federal funding for aging and independent living, according to data released by the Cabinet for Health and Family Services on Monday. Jill Midkiff, a spokeswoman for the cabinet, said the state decided to step up its monitoring of the district after being notified of the federal investigation.

“This is the first time we have been notified of a federal OIG investigation with an ADD,” Midkiff said. “ Our process has been developed based on consultation from our federal partner, the Administration on Community Living.”

The state Department of Aging and Independent Living is part of the cabinet.

Questions about Bluegrass ADD’s financial oversight have been raised in a pre-bid challenge of an $11.4 million federal workforce grant to serve unemployed and underemployed workers in a 17-county region. Bluegrass ADD was awarded the contract in December despite outstanding questions about whether it will have to repay state and federal agencies, Community Action of Kentucky has said in documents challenging the awarding of the contract to Bluegrass.

Community Action was one of three bidders for the workforce
contract. Bluegrass ADD has had the contract for decades.

Bluegrass has countered that it provided all of the information about the state audit and state agency examinations to the locally elected officials who scored and ultimately awarded the contract to Bluegrass. Many of the locally elected officials who gave Bluegrass ADD high marks also sit on its executive board, raising questions about conflicts of interest, Community Action of Kentucky has alleged in bid-challenge documents.

A decision on Community Action of Kentucky’s bid challenge has not been made, in part because it’s not clear which agency would hear the challenge. Anna Whites, an attorney for Community Action of Kentucky, said the group is waiting to hear which agency has oversight over the bid challenge. Whites said that if no agency agrees to hear the challenge within the next week, Community Action of Kentucky probably will have to file a lawsuit in circuit court.

Beth Musgrave: 859-231-3205, @HLCityhall


$27 MILLION Bluegrass Area Development District’s annual budget, about 90 percent from state and federal grants