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AN ACT relating to special purpose governmental entities. 1
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 2
Section 1. KRS 65A.030 is amended to read as follows: 3
(1) For fiscal periods beginning on or after July 1, 2026[July 1, 2014], requirements 4
relating to audits and financial statements of special purpose governmental entities 5
are as follows: 6
(a) Every special purpose governmental entity with the higher of annual receipts 7
from all sources or annual expenditures of less than one hundred fifty 8
thousand dollars ($150,000)[one hundred thousand dollars ($100,000)] shall: 9
1. Annually prepare a financial statement; and 10
2. Once every four (4) years, contract for the application of an attestation 11
engagement as determined by the DLG, as provided in subsection (2) of 12
this section; 13
(b) Every special purpose governmental entity with the higher of annual receipts 14
from all sources or annual expenditures equal to or greater than one hundred 15
fifty thousand dollars ($150,000)[one hundred thousand dollars ($100,000)] 16
but less than seven hundred thousand dollars ($700,000)[five hundred 17
thousand dollars ($500,000)] shall: 18
1. Annually prepare a financial statement; and 19
2. Once every four (4) years, contract for the provision of an independent 20
audit as provided in subsection (2) of this section; and 21
(c) Every special purpose governmental entity with the higher of annual receipts 22
from all sources or annual expenditures equal to or greater than seven 23
hundred thousand dollars ($700,000)[five hundred thousand dollars 24
($500,000)] shall: 25
1. Annually prepare a financial statement; and 26
2. Be audited annually as provided in subsection (2) of this section. 27 UNOFFICIAL COPY 25 RS BR 284
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(2) (a) To provide for the performance of an audit or attestation engagement as 1
provided in subsection (1)(a) to (c) of this section, the governing body of a 2
special purpose governmental entity shall employ an independent certified 3
public accountant or contract with the Auditor of Public Accounts to conduct 4
the audit or attestation engagement unless the provisions of subsection (3) of 5
this section apply. 6
(b) The audit or attestation engagement shall be completed no later than twelve 7
(12) months following the close of the fiscal year subject to the audit or the 8
attestation engagement. 9
(c) 1. The special purpose governmental entity shall submit for publication on 10
the registry the audit or attestation engagement, in the form and format 11
required by the DLG. 12
2. A federally regulated municipal utility may comply with the 13
requirements of this section for the public power component of its 14
operations by submitting an audit that conforms to the requirements 15
imposed by the federal agency with which it maintains a wholesale 16
power contract. 17
3. A public utility established pursuant to KRS 96.740 that is not a 18
federally regulated municipal utility may comply with the requirements 19
of this section for the public power component of its operations by 20
submitting a copy of its annual audit performed under KRS 96.840. 21
(d) 1. The audit or attestation engagement shall conform to: 22
a. Generally accepted governmental auditing or attestation standards, 23
which means those standards for audits or attestations of 24
governmental organizations, programs, activities, and functions 25
issued by the Comptroller General of the United States; 26
b. Generally accepted auditing or attestation standards, which means 27 UNOFFICIAL COPY 25 RS BR 284
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those standards for all audits or attestations promulgated by the 1
American Institute of Certified Public Accountants; and 2
c. Additional procedures and reporting requirements as may be 3
required by the Auditor of Public Accounts. 4
2. Rather than meeting the standards established by subparagraph 1. of this 5
paragraph, the audit submitted by a federally regulated municipal utility 6
or a public utility established pursuant to KRS 96.740 that is not a 7
federally regulated municipal utility with regard to the public power 8
component of the utility's operations shall conform to KRS 96.840 and 9
the financial standards of the Federal Energy Regulatory Commission's 10
Uniform System of Accounts. 11
(e) Upon request, the Auditor of Public Accounts may review the final report and 12
all related work papers and documents of the independent certified public 13
accountant relating to the audit or attestation engagement. 14
(f) If a special purpose governmental entity is required by another provision of 15
law to audit its funds more frequently or more stringently than is required by 16
this section, the special purpose governmental entity shall comply with the 17
provisions of that law, and shall comply with the requirements of paragraph 18
(c) of this subsection. 19
(g) Notwithstanding any provision of the Kentucky Revised Statutes to the 20
contrary, a unit of government furnishing funds directly to a special purpose 21
governmental entity may require additional audits at the expense of the unit of 22
government furnishing the funds. 23
(h) All audit reports, attestation engagement reports, and financial statements of 24
special purpose governmental entities shall be public records. 25
(3) (a) Any board, commission, or agency established by statute with regulatory 26
authority or oversight responsibilities for a category of special purpose 27 UNOFFICIAL COPY 25 RS BR 284
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governmental entities may apply to the Auditor of Public Accounts to be 1
approved to provide an alternative financial review of the special purpose 2
governmental entities it regulates or oversees that are required by subsection 3
(1)(a) of this section to submit an attestation engagement. The application 4
shall be in the form and format determined by the Auditor of Public Accounts. 5
(b) The Auditor of Public Accounts shall review the application and if the auditor 6
determines that the board, commission, or agency has the resources and 7
capacity to conduct an acceptable alternative financial review, the auditor 8
shall notify the DLG that the board, commission, or agency is approved to 9
provide an alternative financial review of the special purpose governmental 10
entities it regulates or oversees that are required by subsection (1)(a) of this 11
section to submit an attestation engagement. 12
(c) The Auditor of Public Accounts shall advise the DLG and the board, 13
commission, or agency regarding modifications to the proposed alternative 14
financial review procedures necessary to obtain the Auditor of Public 15
Accounts' approval. 16
(d) Any board, commission, or agency approved to provide alternative financial 17
reviews shall reapply to the Auditor of Public Accounts for approval to 18
continue to provide alternative financial reviews at least every four (4) years. 19
The Auditor of Public Accounts may require more frequent approvals. 20
(e) The Auditor of Public Accounts or the DLG may withdraw any approval 21
granted under this subsection if the board, commission, or agency fails to 22
conduct alternative financial reviews using the procedures and including the 23
terms and components agreed to with the DLG. 24
(f) Any board, commission, or agency approved to provide alternative financial 25
reviews shall notify the Auditor of Public Accounts and the DLG if an 26
irregularity is found in the alternative financial review. 27 UNOFFICIAL COPY 25 RS BR 284
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(g) Any special purpose governmental entity subject to regulation or oversight by 1
a board, commission, or agency that obtains approval to provide an alternative 2
financial review under this subsection shall have the option of having an 3
alternative financial review performed by the board, commission, or agency, 4
or may contract for the application of an attestation engagement as provided 5
in subsection (1)(a) of this section. 6
(4) The DLG shall determine which procedures conducted under attestation standards 7
will apply to special purpose governmental entities meeting the conditions 8
established by subsection (1)(a) of this section. The DLG may determine that 9
additional procedures be conducted under attestation standards for specific 10
categories of special purpose governmental entities or for specific special purpose 11
governmental entities, as needed, to obtain the oversight and information deemed 12
necessary by the DLG. 13
(5) Based on the information submitted by special purpose governmental entities under 14
KRS 65A.020 and 65A.090, the DLG shall determine when each special purpose 15
governmental entity was last audited, and shall notify the special purpose 16
governmental entity of when each audit or attestation engagement is due under the 17
new standards and requirements of this section. 18
(6) (a) In determining the requirements relating to audits and financial statements of 19
special purpose governmental entities under subsection (1) of this section, the 20
DLG may exclude annual receipts received by the special purpose 21
governmental entity if: 22
1. The receipts constitute nonrecurring, nonoperating grants for the 23
purpose of capital asset acquisition, capital construction, disaster 24
recovery efforts, or other one (1) time purposes as determined by the 25
DLG; and 26
2. The special purpose governmental entity requests, in writing to the DLG 27 UNOFFICIAL COPY 25 RS BR 284
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and for each fiscal year it receives the revenue in question, that the 1
revenues in question not be included in determining its annual revenues. 2
(b) In determining the requirements relating to audits and financial statements 3
under subsection (1) of this section of special purpose governmental entities 4
that are public use airports operating under KRS 183.132 to 183.160, the DLG 5
may exclude annual receipts received by those public use airports if the 6
receipts constitute nonoperating or recurring grants for the purpose of capital 7
asset acquisition, capital construction, disaster recovery efforts, or other one 8
(1) time purposes as determined by the DLG. 9
(c) Any receipts excluded under paragraph (a) or (b) of this subsection shall still 10
be reported as required under KRS 65A.020(2)(a)2. 11
(7) The DLG may promulgate administrative regulations in accordance with[pursuant 12
to] KRS Chapter 13A to implement[ the provisions of] this section. 13
Section 2. KRS 65A.010 is amended to read as follows: 14
As used in this chapter: 15
(1) "County" means any county, consolidated local government, urban-county 16
government, unified local government, or charter county; 17
(2) "DLG" means the Department for Local Government established by KRS 18
147A.002; 19
(3) "Establishing entity" means the city or county, or any combination of cities and 20
counties, that established a special purpose governmental entity and that has not 21
subsequently withdrawn its affiliation with the special purpose governmental entity 22
by ordinance or other official action; 23
(4) "Federally regulated municipal utility" means a municipal utility governed by the 24
provisions of KRS 96.550 to 96.901, that maintains a wholesale power contract 25
with a federal agency that also serves as its regulatory authority; 26
(5) (a) "Fee" means any user charge, levy, assessment, fee, schedule of rates, or tax, 27 UNOFFICIAL COPY 25 RS BR 284
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other than an ad valorem tax, imposed by a special purpose governmental 1
entity. 2
(b) "Fee" shall not include the following charges imposed by special purpose 3
governmental entities that provide utility services: 4
1. Any fuel cost adjustment that is: 5
a. Made pursuant to an agreement with a power supplier; 6
b. Amended by the power supplier based on the variable cost of fuel; 7
and 8
c. Passed through to the consumer by the utility pursuant to the 9
agreement between the utility and the power supplier; 10
2. Any power or energy cost adjustment implemented pursuant to a duly 11
adopted base rate that provides for the periodic adjustment of a 12
component of the rate, including any fuel costs or transmission costs, in 13
accordance with the formula or conditions set forth in the base rate; or 14
3. Any environmental control cost adjustments or surcharges implemented 15
pursuant to a duly adopted base rate that provides for the periodic 16
adjustment of a component of the rate in accordance with a formula or 17
conditions set forth in the base rate; 18
(6) (a) "Private entity" means any entity whose sole source of public funds is from 19
payments pursuant to a contract with a city, county, or special purpose 20
governmental entity, including funds received as a grant or as a result of a 21
competitively bid procurement process. 22
(b) "Private entity" does not include any entity: 23
1. Created, wholly or in part, by a city, county, or combination of cities 24
and counties to perform one (1) or more of the types of public services 25
listed in subsection (9)(c) of this section; or 26
2. Governed by a board, council, commission, committee, authority, or 27 UNOFFICIAL COPY 25 RS BR 284
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corporation with any member or members who are appointed by the 1
chief executive or governing body of a city, county, or combination of 2
cities and counties, or whose voting membership includes governmental 3
officials who serve in an ex officio capacity; 4
(7) "Public funds" means any funds derived from the levy of a tax, fee, assessment, or 5
charge, or the issuance of bonds by the state or a city, county, or special purpose 6
governmental entity; 7
(8) "Registry" means the online central registry and reporting portal established 8
pursuant to KRS 65A.020; and 9
(9) (a) "Special purpose governmental entity" or "entity" means any agency, 10
authority, or entity created or authorized by statute which: 11
1. Exercises less than statewide jurisdiction; 12
2. Exists for the purpose of providing one (1) or a limited number of 13
services or functions; 14
3. Is governed by a board, council, commission, committee, authority, or 15
corporation with policy-making authority that is separate from the state 16
and the governing body of the city, county, or cities and counties in 17
which it operates; and 18
4. a. Has the independent authority to generate public funds; or 19
b. May receive and expend public funds, grants, awards, or 20
appropriations from the state, from any agency, or authority of the 21
state, from a city or county, or from any other special purpose 22
governmental entity. 23
(b) "Special purpose governmental entity" shall include entities meeting the 24
requirements established by paragraph (a) of this subsection, whether the 25
entity is formed as a nonprofit corporation under KRS Chapter 273, pursuant 26
to an interlocal cooperation agreement under KRS 65.210 to 65.300, or 27 UNOFFICIAL COPY 25 RS BR 284
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pursuant to any other provision of the Kentucky Revised Statutes. 1
(c) Examples of the types of public services that may be provided by special 2
purpose governmental entities include but are not limited to the following: 3
1. Ambulance, emergency, and fire protection services; 4
2. Flood control, drainage, levee, water, water conservation, watershed, 5
and soil conservation services; 6
3. Area planning, management, community improvement, and community 7
development services; 8
4. Library services; 9
5. Public health, public mental health, and public hospital services; 10
6. Riverport and airport services; 11
7. Sanitation, sewer, waste management, and solid waste services; 12
8. Industrial and economic development; 13
9. Parks and recreation services; 14
10. Construction, maintenance, or operation of roads and bridges; 15
11. Mass transit services; 16
12. Pollution control; 17
13. Construction or provision of public housing, except as set out in 18
paragraph (d)8. of this subsection; 19
14. Tourism and convention services; and 20
15. Agricultural extension services. 21
(d) "Special purpose governmental entity" shall not include: 22
1. Cities; 23
2. Counties; 24
3. School districts; 25
4. Private entities; 26
5. Chambers of commerce; 27 UNOFFICIAL COPY 25 RS BR 284
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6. Any incorporated entity that: 1
a. Provides utility services; 2
b. Is member-owned; and 3
c. Has a governing body whose voting members are all elected by the 4
membership of the entity; 5
7. Any entity whose budget, finances, and financial information are fully 6
integrated with and included as a part of the budget, finances, and 7
financial reporting of the city, county, or cities and counties in which it 8
operates; 9
8. Federally regulated public housing authorities established pursuant to 10
KRS Chapter 80 that receive no more than twenty percent (20%) of their 11
total funding for any fiscal year from nonfederal fees, not including 12
rental income; or 13
9. a. Any fire protection district or volunteer fire department district 14
operating under KRS Chapter 75 with the higher of annual receipts 15
from all sources or annual expenditures of less than one hundred 16
fifty thousand dollars ($150,000)[ one hundred thousand dollars 17
($100,000)]; or 18
b. Any fire department incorporated under KRS Chapter 273. 19
Section 3. KRS 95A.055 is amended to read as follows: 20
(1) As used in this section: 21
(a) "Fire district" means any fire protection district or volunteer fire department 22
district operating under KRS Chapter 75 with the higher of annual receipts 23
from all sources or annual expenditures of less than one hundred fifty 24
thousand dollars ($150,000)[ one hundred thousand dollars ($100,000)]; and 25
(b) "Nonprofit fire department" means any fire department incorporated under 26
KRS Chapter 273. 27 UNOFFICIAL COPY 25 RS BR 284
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(2) If a fire district's annual revenues or expenditures equals or exceeds one hundred 1
fifty thousand dollars ($150,000)[ one hundred thousand dollars ($100,000)] for 2
two (2) consecutive fiscal years, then the fire district shall, for the next reporting 3
period and any subsequent reporting period for which it exceeds that amount, be 4
considered a special purpose governmental entity as defined in KRS 65A.010 and 5
shall comply with KRS Chapter 65A until its annual revenues or expenditures are 6
less than one hundred fifty thousand dollars ($150,000)[ one hundred thousand 7
dollars ($100,000)], whereupon it may again qualify as a fire department under this 8
section. 9
(3) Each fire district shall for each fiscal year beginning on and after July 1, 2016, 10
annually submit to the commission the information required by this section. The 11
information shall be submitted at the time and in the form and format required by 12
the commission. The information submitted shall include at a minimum the 13
following: 14
(a) Administrative information: 15
1. The name, address, and, if applicable, the term and appointing authority 16
for each board member of the governing body of the fire district; 17
2. The fiscal year of the fire district; 18
3. The Kentucky Revised Statute and, if applicable, the local government 19
ordinance under which the fire district was established; the date of 20
establishment; the establishing entity; and the statute or statutes, local 21
government ordinance, or interlocal agreement under which the fire 22
district operates, if different from the statute or statutes, ordinance, or 23
agreement under which it was established; 24
4. The mailing address and telephone number and, if applicable, the 25
website[Web site] uniform resource locator (URL) of the fire district; 26
5. The operational boundaries and service area of the fire district and the 27 UNOFFICIAL COPY 25 RS BR 284
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services provided by the fire district; 1
6. A listing of the taxes or fees imposed and collected by the fire district, 2
including the rates or amounts charged for the reporting period and the 3
statutory or other source of authority for the levy of the tax or fee; 4
7. The primary contact for the fire district for purposes of communication 5
with the commission; 6
8. The code of ethics that applies to the fire district, and whether the fire 7
district has adopted additional ethics provisions; 8
9. A listing of all federal, state, and local governmental entities that have 9
oversight authority over the fire district or to which the fire district 10
submits reports, data, or information; and 11
10. Any other related administrative information required by the 12
commission; and 13
(b) Financial information including budgets and financial expenditure 14
information that are designed to ensure that all public funds received by the 15
fire districts are being responsibly used. The commission shall, through the 16
promulgation of an administrative regulation, establish the specific financial 17
information that shall be filed to meet the requirements of this paragraph. 18
(4) The commission shall review the reports required for fire districts by this section 19
and, if the commission finds that a report submitted does not comply with the 20
requirements established by this section and regulations promulgated hereunder, the 21
commission shall notify the fire district in writing. The notification shall include a 22
description of the specific deficiencies identified, and shall describe the process the 23
fire district shall follow to correct the deficiencies, including the time within which 24
a response must be provided. 25
(5) The commission shall ensure that every fire district or nonprofit fire department 26
shall at least once every twelve (12) months be subject to a financial review that 27 UNOFFICIAL COPY 25 RS BR 284
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shall include procedures developed by the commission and approved by the Auditor 1
of Public Accounts in advance. Subsequent changes to these procedures shall also 2
be approved by the Auditor of Public Accounts prior to the period in which they are 3
performed. 4
(6) The commission may require any fire district or nonprofit fire department with the 5
higher of annual receipts from all sources or annual expenditures equal to or greater 6
than one hundred fifty thousand dollars ($150,000)[ one hundred thousand dollars 7
($100,000)] but less than seven hundred thousand dollars ($700,000)[five hundred 8
thousand dollars ($500,000)] to once every four (4) years be subject to an 9
independent audit in the manner specified in KRS 65A.030(2). 10
(7) The commission shall ensure that every fire district or nonprofit fire department 11
with the higher of annual receipts from all sources or annual expenditures equal to 12
or greater than seven hundred thousand dollars ($700,000)[five hundred thousand 13
dollars ($500,000)] for two (2) consecutive fiscal years is audited annually in the 14
manner specified in KRS 65A.030(2) until its annual revenues or expenditures are 15
less than seven hundred thousand dollars ($700,000)[five hundred thousand 16
dollars ($500,000)]. 17
(8) The Auditor of Public Accounts may, upon request, examine and review the reports 18
and all related work papers and documents relating to a financial review or audit 19
under this section. 20
(9) If a fire district or nonprofit fire department fails to comply with this section or 21
KRS 75.430, then the commission may withhold: 22
(a) Incentive pay to qualified firefighters under KRS 95A.250; 23
(b) Volunteer fire department aid, funds used to purchase workers' compensation 24
insurance for fire districts and nonprofit fire departments, and the low-interest 25
loans under KRS 95A.262; 26
(c) Funds from the thermal vision grant program under KRS 95A.400 to 27 UNOFFICIAL COPY 25 RS BR 284
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95A.440; and 1
(d) Any other funds that the commission controls. 2
(10) The commission shall report any irregularities relating to the finances or operations 3
of a fire district or nonprofit fire department that it identifies to the Attorney 4
General and Auditor of Public Accounts, and the commission may notify any other 5
public official with jurisdiction over fire districts or nonprofit fire departments for 6
further investigation and follow-up. 7
(11) The commission may prescribe corrective actions to bring fire districts or nonprofit 8
fire departments that are, as of July 15, 2016, not in compliance with KRS Chapter 9
65A into compliance with this section. Any sanctions imposed by the Department 10
for Local Government prior to July 15, 2016, shall be lifted upon notification by the 11
commission to the department that the fire district or nonprofit fire department in 12
question has complied with the corrective actions prescribed by the commission. 13
(12) The information reported by fire districts or nonprofit fire departments under this 14
section shall be considered public records under KRS 61.872 to 61.884. The 15
commission shall prominently post on its website[Web site] the availability of the 16
information required by this section and shall provide contact information and 17
procedures for obtaining copies of the information. 18
(13) The commission shall promulgate administrative regulations in accordance 19
with[under] KRS Chapter 13A [as soon as practicable after July 15, 2016, ]to 20
implement this section and KRS 75.430. 21
(14) [By October 1, 2016, and ]On or before[ each] October 1 of each year[ thereafter], 22
the commission shall file an annual report with the Legislative Research 23
Commission detailing the compliance of the fire districts or nonprofit fire 24
departments required to report under this section with subsection (3) of this section. 25
The Legislative Research Commission shall refer the report to the Interim Joint 26
Committee on Local Government for review. 27 UNOFFICIAL COPY 25 RS BR 284
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Section 4. This Act takes effect July 1, 2026. 1