Journal-Times (Grayson, KY)

December 5, 2012

Auditor’s office fixing report errors

By Ronnie Ellis - CNHI News Service
Journal-Times

Dec. 5, 2012 —     Local agencies funded through special taxing districts have complained some of them were unfairly labeled as non-compliant with financial reporting requirements by a review of taxing districts by the state Auditor of Public Accounts.
  

    But the problem may be how data was reported to the auditor and which year’s data was used to determine compliance.


    Auditor Adam Edelen’s report revealed more than 1,200 special taxing districts collect $1.5 billion in fees and taxes with little oversight. He characterized the system as a “ghost government.” More than 1,000 statutes govern the “muddled morass” and Edelen wants lawmakers to require more standard reporting, accountability and transparency.


    Stephenie Steitzer, spokeswoman for Edelen, said his office has tried mightily to correct any errors, some caused by inaccurate data. Edelen relied in part on data from the Department of Local Government which annually collects the data but has no enforcement authority over them.


    DLG officials say the problem was not with the submitted data but which year the auditor used to determine whether districts were compliant.


    “One of the major sources of confusion was that the auditor’s office chose to use 2011 as the compliance year,” said Andrew Hartley, general counsel for DLG. He said an agency might have submitted a 2012 audit to DLG rather than 2011 and thus would be technically out of compliance.


    Steitzer and an auditor on Edelen’s staff, Nathan Crowder, confirmed they chose 2011 — and for a specific reason. That was the most recent year which auditors could use to compare an agency’s budgeted expenditures against its actual, audited expenditures.


    Crowder also pointed out that a note explaining that was shown on each page of the website along with a request that any agency which believed the data listed for it was inaccurate to contact the auditor’s office by email to have the entry corrected.


    Other methods to determine how many districts existed included poring over county audits to see if they referenced entities funded by county governments, surveys to local county officials and surveys of the known taxing districts.


    Given so many sources of information and the number of districts it’s not surprising there were some errors.


    The website incorrectly listed the Madison County Ambulance District, also known as the Madison County EMS, as non-compliant.


    Director Jimmy Cornelison showed the Richmond Register, a CNHI paper, documentation of its budget submitted to fiscal court and an audit but MCEMS continued to be listed as non-compliant on the website set up by Edelen’s office.


    Edelen told CNHI News such errors had been corrected, but as of Friday the Madison County Ambulance District continued to be shown out of compliance. After a Register story, Edelen’s staff corrected the entry and Edelen personally called Cornelison.


    “Adam called me Sunday and said it was a glitch and that it had been corrected,” Cornelison said. “He apologized and was very gracious and that’s good enough for me.”


    Many districts were created after passage of a late-1970s law known as HB 44 which limits the amount of property tax increases. They were designed to provide needed services which local governments could not afford to fund from their general funds. Others evolved into taxing districts.


    The Barren-Metcalfe County Ambulance Service was at one time a local service. But it later began serving multiple jurisdictions through inter-local agreements between Barren County, the cities of Glasgow and Cave City, the T.J. Samson Community Hospital and Metcalfe County, all of which subsidize the service’s annual operating deficit.


    Only Metcalfe County has a taxing district.


    “We’re not a taxing district,” said Tim Gibson, assistant director of the ambulance service. “Metcalfe County is a taxing district, but Barren County isn’t.”


    Gibson, Barren County Judge/Executive Davie Greer and Metcalfe County Treasurer Vickie Stephens confirmed the ambulance service has submitted all required budgets, audits and financial forms.


    The other three partners pay their portion of the deficit from their general funds. So the district, which was initially listed under Barren County on the auditor’s website now appears only under Metcalfe County with a link to Barren County.


    House Speaker Greg Stumbo, D-Prestonsburg, has said he will sponsor a bill to reflect Edelen’s recommendations and designate it House Bill 1, usually reserved for the speaker’s top legislative priority.


    Steitzer said the bill will make taxing districts subject to audit by the state auditor, require centralized reporting by the districts and create a central website to post the information for public view. She said it will not address governance or taxing power of the districts.


    Stumbo spokesman Brian Wilkerson said the legislation “is designed to make districts more accountable and transparent, not to tinker with the tax laws.”


    But when Edelen reported on his review to legislative committees recently, some lawmakers suggested the legislation should require the districts to secure annual approval from fiscal court for their tax rates.


    That could lower the agencies’ bond ratings because they would no longer have a guaranteed revenue stream to reassure investors. It might in turn affect county bond rates if the counties become responsible for those debts.


    The idea that districts would have to have approval for taxes or fees also concerns library boards.


    Edelen reported that all 160 library districts were in full compliance. After Edelen announced he was reviewing the districts but before he issued his report. Some citizens in Pulaski County started a petition drive to dissolve the county’s library board but last week ended the petition drive.


    Lynn Andrew, the director of the Mary Wood Weldon Library in Glasgow, said that library is not a taxing district. It was created by voter referenda in 1951 and 1954 under KRS 173.10 and a companion statute, KRS 173.360, which requires the library to be funded by a set levy of 5 cents of $100 of assessed value.


    Interestingly, Barren County has never funded the library more than 2.9 cents on $100 of property, and the library contends the Barren Fiscal Court is not meeting is legal responsibility.


    Steitzer said the new legislation would attempt to place all taxing districts “under one definition.”


    To see which districts in each county are compliant, go to citizenauditor.ky.gov and click on the interactive map for each county.


    Ronnie Ellis writes for CNHI News Service and is based in Frankfort. Reach him at rellis@cnhi.com. Follow CNHI News Service stories on Twitter at www.twitter.com/cnhifrankfort.