New law: Area development districts must be more transparent

Published 1:12 pm Thursday, April 27, 2017


Kentucky Auditor

Lost in the headlines of the recently completed 2017 Regular Session of the Kentucky General Assembly is a new law that is designed to increase transparency of the 15 area development districts across Kentucky by shining greater light on their activities.

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My office is keenly familiar with past issues uncovered by our auditors during a 2014 examination of the Bluegrass Area Development District.  The prior auditor, in releasing the findings of the Bluegrass ADD, said the examination “…depicted an agency with rogue management that conducted activity far outside its scope and without proper oversight, used federal money for questionable purposes and failed to report potential criminal activity to law enforcement.”

Most recently, questions were raised with the Barren River Area Development District after it was discovered more than $82,000 in funds designated for aging and independent living services were instead used to pay bonuses to BRADD employees between 2009 and 2014. A report issued at the end of 2016 by the Kentucky Office of Employment and Training questioned expenditures made to workforce clients by BRADD, and led to the state asking the ADD to repay more than $91,000.

While BRADD’s situation did not result in a special examination by my office, it illustrated to many people that legislative changes were needed in the oversight of ADDs. Shortly after the release of the Bluegrass ADD examination, Rep. Susan Westrom of Lexington began pushing for more accountability and transparency for area development districts.

This past session, Rep. Westrom and Rep. Jim DeCesare of Bowling Green worked with our office, the Kentucky Council of Area Development Districts, the Kentucky Chamber of Commerce, Commerce Lexington, and others to craft House Bill 189, which passed unanimously in both the House and Senate and was signed by Gov. Matt Bevin last month. A special thanks goes to my Chief of Staff, Sara Beth Gregory, who headed the team from our office.

House Bill 189 will require area development districts to comply with transparency and accountability laws already in place for similar agencies like the Kentucky Association of Counties. The new law, among a number of requirements, specifically prohibits the awarding of bonuses and one-time salary adjustments for ADD employees, and requires ADDs to submit financial reports to the legislature that detail how funds are allocated and spent, and the number of people served by ADD programs.

As for my office, House Bill 189 gives us a right of first refusal to conduct each of the ADDs annual financial statement audits, which is the same process we use for county fiscal court audits. We also will have the ability to review audits of the ADDs conducted by outside accounting firms, both before and after the audit reports are released, to ensure all 15 districts are being audited consistently and appropriately. This review process will also give my office an effective way to determine if there are any red flags or areas of concerns that would necessitate further examination of particular ADDs in the future.

Kentucky’s area development districts have and continue to serve a valuable role in the commonwealth. House Bill 189 will help guarantee the districts are doing so in a much more transparent manner.

Mike Harmon was elected as the 47th auditor of public accounts for the Commonwealth of Kentucky in November 2015. Prior to that, he served 13 years in the Kentucky House of Representatives as the representative for the 54th District, including Boyle County.