Kentucky Enacts Municipal Insurance Accountability Laws

Kentucky Gov. Steve Beshear has signed into law two Senate bills that will ensure that public entities 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 calls for a Web site with a database with the entities’ expenditures. SB 88 also requires the entities to adopt procurement, ethics, personnel, compensation and complaint policies.

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 them firmly under the statute prohibiting illegal inducements in any insurance transaction. This law allows for closer scrutiny and expands a formal conflict of interest policy.

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 critical of their spending.

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, sporting events, some employee retirement benefits, even condo rentals for executives.

A separate state audit of the KLC found a “staff-driven” organization that resulted in executive staff receiving unprecedented salaries and 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.