Kentucky Gov. Beshear Signs Municipal Insurance Accountability Bills

Gov. Steve Beshear has signed into law two Senate bills that will ensure that public entities and affiliated organizations such as the Kentucky Association of Counties (KACo) and the Kentucky League of Cities (KLC) conduct their business operations under the light of public scrutiny.

“Kentuckians demand that any agency receiving taxpayer dollars be open and accountable for its use of public funds,” said Beshear.

Senate Bill 88 sets conditions for open meetings and records and calls for ceration of a Web site with a database containing information on the entities’ expenditures. The legislation also sets forth auditing requirements for these organizations. SB 88 also requires the entities to adopt procurement, ethics, personnel and compensation, and complaints policies and requires training of local officials in related responsibilities.

Senate Bill 77 strengthens the Kentucky Department of Insurance’s oversight of liability self-insured groups and clarifies some areas that had been disputed, including placing these entities firmly under the statute prohibiting illegal inducements in any insurance transaction. This law allows for closer scrutiny of these groups, expands the establishment of a formal conflict of interest policy, provides for more transparency and offers greater protections for the policyholders and injured workers who rely on these funds.

Both KACo and KLC are non-profit associations funded primarily with public dollars that offer insurance services, training, lobbying and other services for member government entities. Both groups were targets of audits by State Auditor Crit Luallen that were critcial of their spending and salaries.

The state audit of KACo found the group operates with a “self-serving culture” that has resulted in millions of dollars in questionable spending the past three years. Luallen found that as KACo’s revenues increased 75 percent from 2003 through 2008 to more than $5.7 million, the level of discretionary spending by the organization also increased dramatically– on parties, adult entertainment, expensive meals, sporting events, some employee retirement benefits, even condo rentals for executives.

More than 90 percent of KACo’s revenue comes from fees paid by the insurance and financial programs administered by KACo staff.

A separate state audit of the KLC found a “staff-driven” organization with weak board oversight that resulted in executive staff receiving unprecedented salaries and exorbitant retirement bonuses that cost more than $500,000; more than $350,000 in excessive or questionable spending; and numerous conflicts of interest – including inappropriate relationships with KLC vendors.

“At the conclusion of our audits, we knew it was important to formalize our key recommendations through legislation,” said Luallen. “It is a positive step for taxpayers that lawmakers showed unanimous support for a measure that will ensure greater accountability and transparency for two organizations that provide important services to local governments.”

Topics Legislation Kentucky