(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 February 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 March 1 immediately following the fiscal year being audited.
(B) In lieu of the annual audit requirements in division (A) above, 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.
(2) The audits shall be completed by February 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 March 1 immediately following the fiscal year being audited.
(3) 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) above, 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.
(2) The audit shall include both fiscal years since the prior audit and shall be completed by February 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 March 1 immediately following the fiscal years being audited.
(3) 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 $75,000, 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. Each city exempted in accordance with division (C) above shall annually prepare a financial statement in accordance with KRS 424.220 and shall, not later than October 1 following the conclusion of the fiscal year, forward one electronic or paper copy to the Department for Local Government for information purposes.
(E) If a city is required by another provision of law to audit its funds more frequently or more stringently than is required by this section, the city shall also comply with the provisions of that law.
(F) 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 or biennial city 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 or biennial 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 shall 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.
(G) 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.
(H) 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.
(I) (1) 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.
(2) 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 or owner of real property within the city.
(3) 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.
(J) (1) In the event of extenuating circumstances that prevent a city from completing and submitting a required audit or financial statement in compliance with the applicable deadlines in divisions (A) to (D) above, the city may submit a written request for an extension of time to the Department for Local Government on a form prescribed by the Department for Local Government. The Department for Local Government shall approve the request if it is submitted on or before the applicable deadline and, in the judgment of the Department for Local Government, the request is warranted by extenuating circumstances beyond the control of the city.
(2) Extensions granted under this division (J) shall not exceed nine months from the original due date of the audit or financial statement. If the Department for Local Government approves an extension for a city and the city fails to complete and submit the required audit or financial statement in compliance with that extended deadline, then the provisions of division (K) below shall apply.
(K) If a city fails to complete an audit or financial statement and submit it to the Department for Local Government as required in divisions (A) to (D) and (J) above, the Department for Local Government shall notify the Finance and Administration Cabinet that the city has failed to comply with the audit requirements of this section, and that any funds in the possession of any agency, entity or branch of state government shall be withheld from the city until further notice. The Department for Local Government shall immediately notify the Finance and Administration Cabinet when the city complies with the requirements of divisions (A) through (J) above for all prior fiscal years it has failed to comply with the audit requirements of this section, and the Finance and Administration Cabinet shall direct the reinstatement of payments to the city, including any funds that were withheld due to the noncompliance.
(L) Within a reasonable time after the completion of a special audit or examination conducted pursuant to KRS 43.050, the Auditor shall bill the city for the actual expense of the audit or examination conducted. The actual expense shall include the hours of work performed on the audit or examination as well as reasonable associated costs, including, but not limited to, travel costs. The bill submitted to the city shall include a statement of the hourly rate, total hours and total costs for the entire audit or examination.
(KRS 91A.040)
Statutory reference:
Department for Local Government to provide assistance, see KRS 91A.050