KentuckyHB 5552025 Regular SessionHouseWALLET

AN ACT relating to local government financial practices.

Sponsored By: Chris Freeland (Republican)

Signed by Governor

Financial ResponsibilityLocal GovernmentState AgenciesEthicsAuditor of Public AccountsAudits and AuditorsCities

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Bill Overview

Analyzed Economic Effects

5 provisions identified: 1 benefits, 0 costs, 4 mixed.

Local Service Payments Stay Protected

The state cannot withhold required payments for services cities provide to the state because of missing audits or financial statements. The same protection applies to local governments facing withholding for failing to meet ethics-code requirements. Protected payments include money owed for utility services. Other allowed withholding remains available.

Cities Get Longer Audit Deadline Extensions

Cities needing annual or every-other-year audits must use a written contract with a certified public accountant or Kentucky's state auditor. The Department for Local Government can extend audit or financial-statement deadlines by up to 18 months from the original deadline, up from nine months. Cities must request extensions in writing on the department's form. The department must find that circumstances beyond the city's control or other factors justify the delay.

Exposition Center Gets More Audit Options

Kentucky's state auditor conducts the Eastern Kentucky Exposition Center corporation's annual audit unless an alternative is chosen. The city that appoints board members can permanently choose to include the corporation in its own annual audit. The corporation must repay the city's direct audit costs. Alternatively, the city and board can jointly choose an independent auditor whose audit meets the law's requirements. Audits under either option must go to the state auditor.

Local Assistance Funds Require Spending Checks

Assistance agreements under Kentucky's local government economic assistance program must require an independent annual audit. They must also require certification that the money was spent for its intended purpose. The exemption in KRS 91A.040(6)(b) still applies. Recipients must send the audit and certification to the designated state agency within 18 months after fiscal year-end.

Small Cities Get More Audit Options

Kentucky cities with 3,000 or fewer residents, based on the latest federal decennial census, can choose every-other-year audits. They audit each fund after odd-numbered fiscal years and submit financial statements after even-numbered years. The separate fund-audit exemption rises from $150,000 to less than $500,000 received and spent yearly, with no long-term debt. Financial statements replacing audits must reach the Department for Local Government by October 1. Cities skipping annual audits under these exceptions must publish a newspaper notice of at least six column inches within 90 days after year-end, stating that financial statements are ready and copies went to specified news outlets.

Sponsors & Cosponsors

Sponsor

Chris Freeland
Republican • House

Cosponsors

There are no cosponsors for this bill.

Roll Call Votes

All Roll Calls

Yes: 225 • No: 2

Senate vote • 3/28/2025

passed

Yes: 98 • No: 0

Senate vote • 3/27/2025

3rd reading, passed

Yes: 36 • No: 2

House vote • 2/28/2025