Call to Order and Roll Call
The fourth meeting of the Interim Joint Committee on Local Government was held on Wednesday, October 27, 2010, at 10:00 AM, in Room 171 of the Capitol Annex. Representative Steve Riggs, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Damon Thayer, Co-Chair; Representative Steve Riggs, Co-Chair; Senators Walter Blevins Jr., Julian M. Carroll, Alice Forgy Kerr, John Schickel, Johnny Ray Turner, and Robin L. Webb; Representatives Ron Crimm, Mike Denham, Ted Edmonds, Derrick Graham, Charlie Hoffman, Dennis Keene, Adam Koenig, Stan Lee, Tom McKee, David Osborne, Arnold Simpson, and Jim Wayne.
Guests: Representative Mike Cherry; J.D. Chaney, Bert May, Joe Ewalt, Tony Goetz, and Temple Juett, Kentucky League of Cities; Bowling Green Mayor Elaine Walker and KLC President; Paducah Mayor Bill Paxton and KLC First Vice President; Denny Nunnelley, Carolyn Belcher, Shelley Hampton, and Tim Sturgill, Kentucky Association of Counties; Mayor Ed Burtner, City of Winchester; Debbie Batliner, Simpsonville City Clerk; Dan Walton, Labor Cabinet; Sam Crawford, Kentucky Magistrates and Commissioners’ Association; Ned Sheehy, Kentucky Tobacco and Candy Association; and Teena Halbig, Floyd’s Fork Environmental Association.
LRC Staff: Mark Mitchell, Kristopher Shera, Joe Pinczewski-Lee, Tom Dorman, Matt Niehaus, Bryanna Carroll, and Cheryl Walters.
Approval of Minutes
Upon the motion of Representative Crimm, seconded by Representative Simpson, the minutes of the September 22, 2010 meeting were approved by voice vote.
Discussion of Kentucky League of Cities’ (KLC) and Kentucky Association of Counties’ (KACo) Response to the State Auditor’s Report and 2010 SB 88
Representative Riggs introduced Bowling Green Mayor and KLC President Elaine Walker, and Paducah Mayor and KLC First Vice President Bill Paxton. Mayor Walker discussed KLC’s implementation of SB 88. KLC has met or exceeded all of SB 88 requirements.
Policies and procedures. KLC’s Executive Board adopted a new employee handbook in June. The handbook was adopted by governing boards of all affiliated organizations.
Open records and open meetings. KLC has complied for nearly one year to the open records request. A policy was adopted to facilitate handling of requests. KLC and all affiliates have been in compliance since July with the open meetings requirement. A regular meeting schedule was adopted by all boards.
Adoption of procurement policy. KLC established a competitive selection process. Approval of the Executive Board is required for any purchase over $50,000.
Adoption of compensation process. KLC’s Executive Board will have oversight. There will be required use of pay data and analysis. Documentation will be required.
Complaints. KLC’s Board officers will be responsible for receiving and investigating complaints. There will be an online process for receiving complaints.
Training. KLC Board member training was provided in June and July. There will be training on legal, financial, and fiduciary obligations. Ongoing annual training will be provided.
Adoption of a code of ethics. Conflicts of interest and standards of conduct, financial disclosure, nepotism, and gratuity policies have all been adopted
Annual audits. KLC and affiliates have received annual audits for years. KLC insurance services are audited and regulated by the Kentucky Department of Insurance.
Financial information. Online and searchable database of all expenditures and budget and audit information posted online will be fully operational by January 1, 2011. KLC has also integrated its “open door” on its website to promote transparency
Mayor Paxton discussed KLC’s response to the State Auditor’s report.
KLC will have new limits on reimbursable expenses, rigid documentation requirements, use the federal per diem for travel, and prohibit spouse travel.
KLC will limit use of credit cards and there will be a by-laws task force to look at its corporate structure. Retention bonuses have been eliminated.
KLC has adopted a policy to govern disposition of surplus property. Harassment policies have been updated to ensure Executive Board is informed the event of any claims. KLC has adopted a whistleblower policy.
Purchase of vehicles will be overseen by the finance committee. Assignment of vehicles will be based on need for travel. NewCities funding will be evaluated.
Mayor Walker told the committee that KLC has found a new executive director who will start November 1, 2010. Jon Steiner is the former New Hampshire Local Government Center Deputy Director of Membership and a former elected official. She concluded by stating the desire on KLC’s part to be an affective representative of cities and its desire to work in an open and transparent manner.
Representative Crimm told the mayors that he appreciates the work they have done to comply with SB 88 and the State Auditor’s recommendations. In response to a question from Representative Crimm, Mayor Walker said current board members were required to take the training, and Mayor Paxton said he hopes the board members will volunteer to take the training that KLC will offer each year.
Senator Thayer said he appreciated KLC’s report and thanked them for working with Representative Riggs, Senator Kerr, and State Auditor Crit Luallen in a collaborative fashion. In response to a question from Senator Thayer, Mayor Walker said regarding expenses noted in the Auditor’s report with no business purpose, there was not appropriate documentation and the funds were repaid by the employee.
In response to a question from Senator Thayer relating to loans extended, forgiven, and granted without executive board authorization, Mayor Walker explained that the retention loans were made to employees to buy time into the retirement system and that the loans were not required to be repaid. The loans were an incentive to keep them on for a certain amount of time.
Senator Thayer commented that people in the real world do not have that opportunity. State employees have to buy that time.
In response to a question from Senator Thayer regarding “golden parachutes” received by the former leaders, Mayor Walker said that new employment contracts will be used. In reference to the retention loans, Mayor Paxton said procedures are in place so those loans will not be made anymore.
Senator Thayer told the mayors to remember that KLC is paid for with taxpayer money, and it has a long way to go because people are still very angry and upset.
Mayor Paxton stated that KLC’s desire not to repeat past mistakes is why it did a nationwide search for an executive director.
Mayor Walker expressed her thanks for the KLC’s Executive Board’s and staff’s work.
Senator Thayer said he appreciates KLC staff for their hard work.
Representative Riggs announced that the new executive director of KLC will be at the committee’s next meeting. The committee members will still want to work closely with KLC’s board members and leaders, not just the employees.
Representative Wayne suggested that KLC use an external entity to watch over reforms such as the whistleblower policy and prepare annual reports. KLC could report to the Local Government Committee for external oversight for compliance with reform efforts. Mayor Walker stated the Board now has responsibilities regarding whistleblower allegations and KLC would be willing to work with the committee.
Representative Simpson thanked the mayors for their excellent report, and indicated that he was pleased with the direction KLC was going in. He did not want to stand in judgment and noted that mistakes were made and aggressive action has been taken in response. He felt that it was not necessary that KLC report to the Local Government Committee.
Senator Carroll told the mayors that their report was excellent and that he had full confidence in both mayors. It needs to be said, however, that there were failures but not all were with KLC—but the result was that the system works. He commended KLC for its work in reforming the organization.
Representative Riggs next introduced KACo President-Elect Chris Harris and Judge John Wilson, KACo First Vice President.
Magistrate Harris told the committee that it was the goal of KACo to comply with SB 88 and the State Auditor’s recommendations. It was a shame that the actions of a few and a lack of Board oversight hurt the entire agency.
Magistrate Harris said that former KACo president Mike Foster, upon assuming office in 2008 asked the executive director to adopt written board and staff travel policies. The board had adopted those policies in 2009. When the State Auditor first published the list of recommended policies for nonprofit boards, the KACo board adopted those policies and additional policies relating to credit card use and employee business expense guidelines. The board then began a 3 year process to develop a comprehensive plan and to perform a management review to make recommendations concerning its internal structure which included the hiring of additional personnel. In September 2009, a search began to replace the executive director, and in January 2010, the new executive director was in place. In March of 2010, KACo held its first board training and orientation class.
Magistrate Harris said that KACo and its affiliate organizations are complying with SB 88. He pointed out that a packet that the members received at the meeting contains details regarding procurement policies, a detailed equitable personnel policy, code of ethics policy, all of which have been adopted, and copies of annual financial disclosure statements for board members, officers, and management personnel, and a policy on the employment of persons related to members and officers and employees of the organization.
Judge Wilson said that KACo had supported the passage of SB 88 from the outset. The bill affirms KACo’s compliance with open meetings and open records which has been tradition at KACo to include a schedule of regular meetings required by the Open Meetings Act. Referring to the packet that was distributed at the meeting, Judge Wilson continued to say that KACo had adopted a procurement policy that includes a transparent competitive bidding selection process for licensed professional services and bond underwriting and bond counsel services and financial products and services. KACo has adopted personnel and compensation policies and a pay scale that reflect the state protocols. Board member and employee ethics policies have been adopted which include a conflict of interest form and financial disclosure form to be completed annually by board members and management personnel. SB 88 expanded KACo’s existing policies relating to the policies for employment of individuals relating to members, officers, and employees, and it is now in compliance with the SB 88 requirements. There is also a process to receive, analyze, and process concerns about KACo which is located on the KACo website and has been since July, 2010. SB 88 also requires KACo to include facilities for the public to review substantive financial data. This system is required to be completed by the first of the year, and KACo is preparing to have it ready by Christmas. The bill also included a provision to have KACo audited every year by a Certified Public Accountant. KACo has been audited every year of its existence since 1974.
Magistrate Harris noted that the goal was not only to comply with SB 88 and the auditor’s recommendations, but to take it further to avoid the appearance of improprieties, and to set a new standard for transparency and financial accountability and responsibility.
In response to a comment from Senator Schickel, Magistrate Harris said the use of government travel rates was a good recommendation for integration into KACo’s travel policy and that KACo would take a look at it. Judge Wilson noted that rates are negotiated with the hotels for a conference. Senator Schickel pointed out that sometimes travel does not include attending a conference.
In response to a question from Senator Schickel, Magistrate Harris said the $50 reimbursement policy for dinner required receipts. Senator Schickel said $50 seemed excessive to him. Magistrate Harris said KACo is keeping a close eye on all of the expenses and the Board had entertained long discussions on the rates. Senator Schickel pointed out the government rate could be applied for reimbursement of meals, which would be a better use of taxpayer money. Judge Wilson said KACo would take that recommendation back to the board.
Representative Wayne suggested KACo, like KLC, get outside review of its policies and get the State Auditor to audit them periodically, and also that KACo should report to the Local Government Committee or another outside group suggesting it would add credibility to its reform.
In response to a question from Representative Riggs, Magistrate Harris said the acceptance of exotic travel opportunities or gifts by persons selecting vendors would be a violation of KACo’s ethics policy and would have to be disclosed.
Representative McKee congratulated KACo and KLC for their efforts in reforming. He hoped it would be continued and the committee would hear from them again. Representative McKee urged both groups to make their credit card use policies stricter.
Representative Hoffman thanked the co-chairs for having KACo and KLC appear before the committee. He also thanked both groups for their presentations and reform efforts. He hoped that both groups continue to remember their mission statements and how they came to be and know why they exist. Both organizations are imperative to local governments.
Senator Schickel said KACo should review the use of moneys for advertising its organization. Judge Wilson said all advertising has been eliminated except for some charitable advertising. Senator Schickel thanked KACo for its efforts and said charity advertising should not be the role of KACo using taxpayer money.
In response to a question by Senator Webb relating to the whistleblower policy, Magistrate Harris said all policies were reviewed by its general counsel and had been sent to the State Auditor.
Senator Thayer thanked the representatives of KACo for supporting SB 88 early on. He urged them to seriously consider Senator Schickel’s suggestions.
In a response to a question by Senator Thayer regarding “golden parachutes,” Judge Wilson said new employment contracts are in place and the “payout” provision included in previous directors’ contracts has been removed so that will never happen again.
Senator Thayer told the gentlemen that KACo has a way to go. The committee wants to maintain a working relationship with KACo.
Senator Blevins thanked Denny Nunnelley, KACo Executive Director, and Carolyn Belcher, KACo Chief Financial Officer, for their efforts, and commented that both groups are needed. Mistakes were made but KACo and KLC are moving forward.
Representative Riggs announced that the next meeting of the committee would be on November 17th.
There being no further business, the meeting was adjourned at 11:45 a.m.