(A) Except as provided in divisions (B) to (D) below, each city shall, after the close of each fiscal year, cause each fund of the city to be audited by the Auditor of Public Accounts or a certified public accountant. The audit shall be completed by March 1 immediately following the fiscal year being audited. The city shall forward an electronic copy of the audit report to the Department for Local Government for information purposes by no later than April 1 immediately following the fiscal year being audited.
(B) In lieu of the annual audit requirements in division (A) of this section, a city with a population equal to or less than 1,000 based upon the most recent federal decennial census may elect to have an audit performed every other fiscal year in the following manner:
(1) After the close of each odd-numbered fiscal year, the city shall for that odd- numbered year cause each fund of the city to be audited by the Auditor of Public Accounts or a certified public accountant. The audits shall be completed by March 1 immediately following the fiscal year to be audited. The city shall forward an electronic copy of the audit report to the Department for Local Government for information purposes by no later than April 1 immediately following the fiscal year being audited.
(2) After the close of each even-numbered fiscal year, the city shall not be required to complete an annual audit but shall forward an electronic copy of its financial statement prepared in accordance with KRS 424.220 to the Department for Local Government by no later than October 1 immediately following the close of the even-numbered fiscal year.
(C) In lieu of the annual audit requirements in division (A) of this section, a city with a population of more than 1,000 but less than 2,000 based upon the most recent federal decennial census may elect to have an audit performed every other fiscal year to cover the two fiscal years occurring since the prior audit in the following manner:
(1) After the close of each odd-numbered fiscal year, the city shall cause each fund of the city to be audited by the Auditor of Public Accounts or a certified public accountant. The audit shall include both fiscal years since the prior audit and shall be completed by March 1 immediately following the fiscal years to be audited. The city shall forward an electronic copy of the audit report to the Department for Local Government for information purposes by no later than April 1 immediately following the fiscal years being audited; and
(2) After the close of each even-numbered fiscal year, the city shall not be required to complete an annual audit but shall forward an electronic copy of its financial statement prepared in accordance with KRS 424.220 to the Department for Local Government by no later than October 1 immediately following the close of the even-numbered fiscal year.
(D) Any city, which for any fiscal year receives and expends, from all sources and for all purposes, less than $150,000, and which has no long-term debt, whether general obligation or revenue debt, shall not be required to audit each fund of the city for that particular fiscal year. In addition, each city exempted in accordance with this division (D) shall:
(1) Annually prepare a financial statement in accordance with KRS 424.220, and shall not later than October 1, forward one electronic copy to the Department for Local Government for information purposes; and
(2) If exempted under this division (D) for more than four consecutive fiscal years after July 1, 2022, have prepared an attestation engagement covering the fourth fiscal year in which the city qualified for an exemption under this division (D). An attestation engagement completed pursuant to this division (D) shall be:
(a) Prepared by an independent certified public accountant or by the Auditor of Public Accounts pursuant to a contract with the city using generally accepted attestation standards as promulgated by the American Institute of Certified Public Accountants and any additional procedures established by the Department for Local Government through administrative regulation;
(b) Completed by no later than March 1 immediately following the conclusion of the fiscal year in which in the attestation engagement is required;
(c) Submitted to the Department for Local Government as one electronic copy no later than
April 1 after its completion;
(d) Advertised to the public within 30 days of its completion by causing the publication of a legal display advertisement of not less than six column inches in a newspaper qualified under KRS 424.120 stating that the attestation has been prepared and copies have been provided to each local newspaper of general circulation, each news service, and each local radio and television station which has on file with the city a written request to receive copies of financial statements under KRS 424.220. Any city advertising under this division (D)(2)(d) shall be exempt from publishing its financial statement under KRS 424.220(6)(b) for any year in which it is required to have an attestation engagement completed; and
(e) Provided to the Auditor of Public Accounts upon request for review of the final report and all related work papers and documents regarding the attestation engagement.
(KRS 91A.040(1) - (4))
(E) Each city required by this section to conduct an annual or biennial audit shall enter into a written contract with the selected auditor. The contract shall set forth all terms and conditions of the agreement which shall include, but not be limited to, requirements that:
(1) The auditor be employed to examine the basic financial statements which shall include the government-wide and fund financial statements;
(2) The auditor shall include in the annual city or biennial audit report an examination of local government economic assistance funds granted to the city under KRS 42.450 to 42.495. The auditor shall include a certification with the annual audit report that the funds were expended for the purpose intended;
(3) All audit information be prepared in accordance with generally accepted governmental auditing standards, which include tests of the accounting records and auditing procedures considered necessary in the circumstances. Where the audit is to cover the use of state or federal funds, appropriate state or federal guidelines shall be utilized;
(4) The auditor prepare a typewritten or printed report embodying:
(a) The basic financial statements and accompanying supplemental and required supplemental information;
(b) The auditor’s opinion on the basic financial statements or reasons why an opinion cannot be expressed; and
(c) Findings required to be reported as a result of the audit.
(5) The completed audit and all accompanying documentation shall be presented to the City Council at a regular or special meeting; and
(6) Any contract with a certified public accountant for an audit shall require the accountant to forward a copy of the audit report and management letters to the Auditor of Public Accounts upon request of the city or the Auditor of Public Accounts, and the Auditor of Public Accounts shall have the right to review the certified public accountant’s workpapers upon request.
(F) A copy of an audit report which meets the requirements of this section shall be considered satisfactory and final in meeting any official request to the city for financial data, except for statutory or judicial requirements, or requirements of the Legislative Research Commission necessary to carry out the purposes of KRS 6.955 to 6.975.
(G) Each city shall, within 30 days after the presentation of an audit to the City Council, publish an advertisement, in accordance with KRS Chapter 424, containing:
(1) The auditor’s opinion letter;
(2) The “Budgetary Comparison Schedules - Major Funds,” which shall include the general fund and all major funds;
(3) A statement that a copy of the complete audit report, including financial statements and supplemental information, is on file at City Hall and is available for public inspection during normal business hours;
(4) A statement that any citizen may obtain from City Hall a copy of the complete audit report, including financial statements and supplemental information, for his or her personal use;
(5) A statement which notifies citizens requesting a personal copy of the city audit report that they will be charged for duplication costs at a rate that shall not exceed $0.25 per page; and
(6) A statement that copies of the financial statement prepared in accordance with KRS 424.220, when a financial statement is required by KRS 424.220, are available to the public at no cost at the business address of the officer responsible for preparation of the statement.
(H) Any resident of the city or owner of real property within the city may bring an action in the Circuit Court to enforce the provisions of this section. Any person who violates any provision of this section shall be fined not less than $50 nor more than $500. In addition, any officer who fails to comply with any of the provisions of this section shall, for each failure, be subject to a forfeiture of not less than $50 nor more than $500, in the discretion of the court, which may be recovered only once in a civil action brought by any resident of the city. The costs of all proceedings, including a reasonable fee for the attorney of the resident bringing the action, shall be assessed against the unsuccessful party.
(KRS 91A.040(7) - (10))
Statutory reference:
Department for Local Government to provide assistance, see KRS 91A