Journal-Times (Grayson, KY)

Local News

October 17, 2012

Olive Hill audits reveal history of utility fund misuse

(Continued)

Oct. 17, 2012 —

“Until such an ordinance is enacted any surplus earnings shall be paid into the city treasury, to be expended for the general purposes of government in the city.”

Auditor Hatchett, however, determined that this provision does not apply to Olive Hill, because rate increases directly imply that the public utility company does not have profits or extra funds to contribute to the general fund.

Specifically, Hatchett make the following comments:

“While the Utility Fund continues to subsidize the General Fund with transfers, the necessity for utility rate increases clearly illustrates that excess funds do not exist. Therefore, the transfers are contrary to KRS 96.200 and an opinion of Kentucky’s highest court.”

Though this report is just over 12 years old, it appears that the administration in Olive Hill continues to use funds from utility accounts to subsidize the general fund, particularly in the event of a budget shortfall.

During last Monday’s special meeting regarding police salaries, Council member Linda Lowe cited concerns with any potential budget increases that might arise from a pay bump, stating that the city commonly has had to transfer money, “...sometimes as much as $50,000,” to cover budget deficits.

When asked specifically about the transfers, Lowe indicated that funds are placed in the general fund from the utility fund to cover such shortfalls – the very same practice that State Auditor Hatchett told the city to refrain from in both of his reports.

Also, City Clerk Cheri James is quoted in a Journal-Times article from 2007 as saying that she “...could generate $60,000 from the electric department” to offset a shortfall in the budget.

An attempt to verify that comment was unsuccessful. According to James, City Hall only keeps tapes from meetings back to 2008. 
During its August regular meeting, the Olive Hill Council unanimously voted in favor of requesting another audit by the state in response to mounting questions regarding the management of city utility funds. 

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