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Kentucky audit finds non-compliance issues with spent federal funds

This audit looks at if federal dollars awarded to Kentucky are used properly. This year, they audited 21 federal programs and found 30 instances of non-compliance.

LOUISVILLE, Ky. — A more than 100-page report from the state's auditor of public accounts found continued problems at Kentucky's unemployment office.

"From last year's Volume One and Volume Two audit that dealt with fiscal year 2020, we have seen improvements, but obviously, there are still areas that need to be continued to work on," Auditor Mike Harmon, R-Kentucky, said.

This audit looks at if federal dollars awarded to Kentucky are used properly. This year, they audited 21 federal programs and found 30 instances of non-compliance. 

Of those, 22 related to the Cabinet for Health and Family Services and the Office of Unemployment Insurance.

Harmon said that's likely because of the large amount of money that runs through those departments. 

"We received $22.6 billion in cash and non-cash funding from the federal government that passed through the state," Harmon said. "That's a little more than $5 billion more than what we had just last year and a little more than $10 billion than what we received as early as two years ago."

RELATED: Kentucky pandemic unemployment two years later, tens of thousands still waiting benefit payments

The audit found Kentucky's unemployment office didn't always maintain and submit all required documents and reports relating to the Lost Wages Assistance Program, which was created to give extra benefits to people affected by the pandemic in August and September 2020. 

It also found the unemployment office didn't record over-payments and penalties, or notify people getting unemployment benefits about the over-payments.

"If they don't receive proper notification of over-payment, then they wouldn't know that they needed to pay that back," Harmon said. 

The audit also showed several people got unemployment benefits who were ineligible because they didn't participate in a program aimed at getting laid-off people back to work faster. 

"Unemployment is supposed to be there for a temporary fix to help people get back to being employed," Harmon said. "In this particular case, that particular program was set up to try to help people make that transition from unemployment back to employment, and if they failed to participate in it, then they should not have received those benefits because they're not participating in the full program to get them back to work."

RELATED: Two years later, first wave of unemployment checks are arriving for Rex Burton

On the Cabinet for Health and Family Services side, after reviewing a sample of 40 cases, auditors found one non-citizen was improperly approved and received Medicaid benefits. 

"There are a limited amount of funds available, and if you're paying them out to people who don't qualify for them, then those are not available to people who in fact, need them," Harmon said. 

In total, this audit called $161,000 of federal funds used by Kentucky into question, but this audit just looks at a sample of cases.

"It could be much more if you looked at every single item," Harmon said.

On June 30, a spokesperson with the Kentucky Office of Unemployment Insurance said:

“The Kentucky Office of Unemployment Insurance (OUI) takes issue with several findings in the audit report that are based on misleading or inaccurate statements by the Office of the Auditor of Public Accounts,” Holly Neal, chief information officer for the Labor Cabinet. “Many of the findings outlined by the APA in Volume II have already been publicly discussed and addressed by OUI.”

“It is also disappointing and unfortunate that the auditor continues his involvement with an active audit of OUI while simultaneously pursuing a gubernatorial bid,” Neal said. “Auditor Harmon has failed to disclose his conflict of interest under state ethics laws and auditing standards, and similarly created a conflict between his political interests and his ability to conduct impartial audits of OUI.”

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