Team Western Kentucky Tornado Relief fund had error rate of less than 1%, audit finds

The audit of a state-run disaster relief fund established to help victims of the December 2021 tornadoes in Western Kentucky uncovered “a small number of inappropriate payments,” according to the report released Tuesday.

Out of more than $42.3 million spent through June 30, the Auditor of Public Accounts’ special examination deemed nearly $240,000 in spending from the Team Western Kentucky Tornado Relief Fund as “inappropriate payments” — an error rate of about 0.57%.

Inappropriate expenditures identified by the auditor’s office included “duplicate payments, people who received payments that were later deemed ineligible and overpayments.”

The majority of that spending — $213,000 worth — was related to $1,000 in checks mailed in December 2022 directly to insured homeowners and individuals who got FEMA assistance.

Herald-Leader reporting in February revealed that a number of those checks had been canceled by Treasurer Allison Ball’s office after receiving calls from recipients who said they weren’t affected by the storms.

By the time the audit was announced in July, the Treasury had canceled 218 checks.

“Most of the inappropriate (checks) were issued to individuals who claimed damage to property outside the designated disaster area,” the auditor’s office said in a news release Tuesday. “These payments were based on FEMA verified data which incorrectly indicated these individuals were eligible.”

The Public Protection Cabinet, which administers the fund, told the Herald-Leader earlier this year that relying on FEMA and insurance company data, “the state does not have to expend donated funds to administer the program, meaning all funds go directly to survivors.”

Gov. Andy Beshear, too, spoke of the cost-savings associated with using those data sets to identify eligible survivors.

“By using their verification system, we didn’t have to pay millions of dollars to independently verify each and every person,” he said previously. “And what that means is even if there’s a hundred checks that we have to pull back, it means millions of extra dollars ended up in people’s pockets.”

In a response by the Public Protection Cabinet included with the published audit, general counsel Jacob Walbourn said the cabinet “does not consider” those payments outside the declared disaster counties “to have been made by PPC in error and believes these payments did go to individuals impacted by the tornadoes.”

The cabinet and FEMA had a “confidential data sharing agreement,” and the cabinet “cannot conclusively determine why FEMA’s data apparently included data outside the parameters of PPC’s request.”

“There are many reasons why this may have happened — because much of this data is collected in the field from traumatized survivors; by accidentally recording a mailing address as the disaster dwelling address; by mistyping a zip code or address; or FEMA might have simply included additional addresses errantly,” Walbourn wrote.

Additionally, the auditor’s office “did not identify any inappropriate payments” from the Team Eastern Kentucky Flood Relief Fund out of nearly $5.4 million expenditures.

Finance and Administration Cabinet review

In addition to the audit, the Office of the Inspector General of the Kentucky Finance and Administration Cabinet also issued an independent review of the two funds, which began in August.

That review found “that the funds have been managed properly and helped survivors of the 2021 tornadoes and the 2022 floods.”

It also put the flooding relief fund error rate at 0%, but placed the tornado relief fund error rate at 0.15% on total dollars paid (the Office of the Inspector General looked at spending through the time of the November monthly report, which showed nearly $48 million in payments, whereas the audit looked at the fiscal year ending June 30, when spending stood at just over $42 million).

The inspector general found 53 payments totaling $69,785 were issued in error from the tornado fund, and 38 of those were due to “its data analytics not catching inconsistencies in the data because of the way the data was delivered to the cabinet by insurance companies.”

Because of that, the inspector general recommended the Public Protection Cabinet formalize its internal review and approval process and that it refine the data analytics and review process going forward.

Both funds were established by executive order of Beshear in the wake of historic natural disasters that struck the commonwealth: the December 2021 outbreak of tornadoes that killed dozens across several counties, and the July 2022 flooding that devastated large swaths of Eastern Kentucky.

Altogether, the two funds collected almost $65.8 million in tax-exempt donations from individuals, businesses and non-profits across the world. The bulk of that cash, more than $52 million, was given to the tornado relief fund.

In addition to the direct payments to survivors, the funds also paid for funerals of those killed in the disasters and to long-term recovery efforts.

The audit, announced in July, came at the request of co-chairs of the Legislative Oversight and Investigations Committee, Rep. Adam Bowling, R-Middlesboro, and Sen. Brandon Storm, R-London. The time frame of the audit spanned from the creation of the funds in the immediate aftermath of the disasters through the end of Fiscal Year 2023.

The full audit is available on the auditor’s website at www.auditor.ky.gov. The report from the Office of the Inspector General is also available online on the Finance and Administration Cabinet’s website at finance.ky.gov