Auditor addresses BGADD board, calls on it to take ownership of headquarters

Calls for changes to board structure, more accountability to be detailed in 60-day progress report

LEXINGTON, Ky. (March 13, 2014) — At a meeting of the Bluegrass Area Development District executive committee Wednesday, Auditor Adam Edelen called on the beleaguered agency to take ownership of its headquarters from the Bluegrass Industrial Foundation and told the BGADD that it has two months to begin making significant changes to its governance structure or auditors from his office would return to make further inquiries.

“The primary focus of my exam was to document the myriad abuses by the former administration,” Edelen said. “Now, those findings must serve as the impetus for real change. Decades of mismanagement must end now. This agency has too important of a public mission for it to continue.”

Edelen last week released a scathing report of the BGADD, finding a 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.

The exam was referred to eight agencies, including the Kentucky Attorney General, Kentucky State Police and FBI.

The exam found that the BGADD has been leasing its office space from BIF since 1994, paying more than $250,000 a year. Documentation identified that $1.1 million of the $1.6 million purchase price for the building was funded through sources available to or approved by BGADD, raising questions as to why BGADD didn’t buy the property itself or establish a financing mechanism in which the title of the property would vest to BGADD when the mortgage was paid. Instead, the current lease arrangement does not convey any ownership to BGADD, although lease payments made to date would have more than paid for the property and the current arrangement gives the appearance that BGADD is leasing from itself.

“The first step the ADD needs to take to regain taxpayers’ trust is to demand ownership of 699 Perimeter Drive,” Edelen said. “Millions of taxpayer dollars have been paid to a shell organization run by a former ADD director to lease this facility. The ADD shouldn’t spend another dime enriching the former director in the guise of rent.”

The ADD board voted unanimously Wednesday to pursue ownership of the building, per the auditor’s request.

Edelen also told the ADD board that the agency is on life-support after the auditor’s exam. Ninety percent of BGADD’s $24 million annual budget comes from state and federal grants. That money is in jeopardy as state and federal agencies review the auditor’s findings, he said.

Edelen said the agency’s 60-day progress report back to his office should include reforms it plans to make to its governance structure and accounting systems. In addition, it should demonstrate increased accountability and transparency and an evaluation of new and existing programs for appropriateness.

“I’m optimistic real reform can happen,” Edelen said. “But if we aren’t satisfied with the report, I won’t hesitate to send auditors back to the agency to make sure this mess gets cleaned up once and for all.”