Auditor Adam Edelen has unveiled a public database and report that purport to shine light on special districts, a $2.7 billion layer of government in the Commonwealth that he says has “operated in the shadows for decades.”
The auditor’s office has identified more than 1,200 special districts – unelected entities such as libraries, and public health departments – that have the ability to tax but operate with little oversight and accountability.
Edelen called it a “scandal that for generations no Kentuckian has been able to determine how many special districts exist, how much money flows through them, where they are located and whether they are compliant with state law.”
Forty percent of the special districts that should have submitted budgets to their fiscal courts did not; 15 percent that should have submitted Uniform Financial Information Reports – required by the Department of Local Government – did not.
The database rates each district on whether it responded to a survey sent out by Edelen’s office, submitted a budget to the appropriate supervisory body, submitted financial reports if required and undergone an audit.
But the database itself contained errors that were uncovered by the very agencies that were dubbed “non-compliant.”
Four local entities were shown to be noncompliant, when in fact, they had fulfilled their legal obligations.
LaRue County has five special districts: Soil Conservation, Extension, Library, Public Health and Water.
When the database was released, it showed only one, the library, was in full compliance with the state’s requirements. The other four entities had not submitted a budget, according to the website.
Representatives from the four “non-compliant” agencies requested corrections from Edelen’s office.
Michelle Ogden, who works with the LaRue County Soil Conservation District, said her office meets with Fiscal Court, submits a budget “every year to the County Clerk, and also reports monthly to Division of Conservation with a monthly treasurer’s report, employee timesheet and state cost share.”
“We also send the DOC quarterly budget revisions, annual financial reports and participate in a report card-type ‘District in Good Standing’ the DOC has set up, requiring us to fulfill obligations ... before we are funded with DOC funds. It is unfortunate the results of the state audit are misrepresented to this point,” said Ogden, “ but I understand their difficulty in coordinating with other government entities to receive the information they need.”
The status on the database was corrected almost immediately after Ogden contacted Edelen’s office.
The LaRue County Extension Office sent “all information that was wanted by the auditor’s office on time, but somehow it took awhile for them to get our listing correct,” said Theresa Howard, agent for family and consumer sciences.
Steve Gardner, supervisor of LaRue County Water District No. 1, said he “hand-delivered his budget” to LaRue and Nelson county clerks. He is required to submit dual reports because the district supplies water in both counties.
Gardner said the District is required to provide financial information to the Public Service Commission and other agencies.
“They need to investigate why (these agencies) aren’t talking to each other,” he said.
Stephenie Steitzer, communications director for the Edelen’s office, said the database was changed to reflect compliance after LaRue County Judge/executive Tommy Turner intervened.
“The change was made after Judge Turner demonstrated to us that the entities had filed their 2011 budgets with the Fiscal Court,” Steitzer wrote in an email. “To make the determination of whether a district was compliant with budget requirements, we relied on the state Department for Local Government to provide us a list of special districts for which it had received budgets from fiscal courts (state law requires districts to submit their budgets to fiscal court and in turn, fiscal court is required to submit those to DLG). It is unclear why DLG didn’t have the budgets.”
Steitzer said the situation “points to the need for reforming this system and this issue is something our proposed legislation seeks to fix."
Under House Bill 1, which was filed when the legislature returned in February, fiscal courts will no longer be responsible for collecting budgets from special districts to send to DLG. Instead, special districts will input the budget data into an online centralized registry maintained by DLG. That will allow the public, local officials and other local and state agencies to access that information from one public database.
Turner said the local agencies could be counted on to submit their budgets to Fiscal Court. The Conservation District, in particular, is “a stickler on the paperwork.”
Edelen’s database and “Ghost Government: A Report on Special Districts in Kentucky” are the results of a six-month long effort to identify special districts and examine more than 1,000 statutes that govern them.
Special districts collect $1.5 billion in taxes and fees and another $1 billion in grants, corporate sponsorships and fundraising, according to the report. In all but three counties, taxpayers pay more to special districts in property taxes than to their county governments.
Special districts spend $2.7 billion a year, which is about $5 less per capita than the state spends on primary and secondary education. They hold another $1.3 billion in reserves – twice the contingency funds of all 174 school districts.
The online database is at www.citizenauditor.ky.gov.