Fayette County

Lexington frees $13 million from unnecessary fund

Since at least 2000, Lexington has set aside nearly $13 million total in a "working capital fund" for no reason other than that money had been put into that account the year before.

Each year, the city has used a formula to determine how much money needs to be added to the working capital reserve. The contribution for the fiscal year that ended June 30 was determined to be $2.4 million.

But when the need was questioned this year, officials discovered it wasn't a requirement of city law or of national accounting standards.

Since the working capital reserve isn't tied to a law or accounting requirement, that means the city has an additional $12.9 million to spend this year.

Mayor Jim Newberry has already decided how to spend that windfall. He plans to use the $12.9 million to offset deficits in two accounts.

When the fiscal year ended, the city's health insurance fund had a shortfall of $4 million and the risk management fund, which pays out claims such as worker's compensation against the city, had a deficit of $8.9 million, said Kyna Koch, the city's finance commissioner.

Urban County Council members were shocked to learn the city had accumulated $12.9 million in an account it did not need. They also questioned why they didn't know the working capital fund existed.

"I am always glad we have more money than less," said Councilman Chuck Ellinger II. "Is this something we should have known about?"

"It concerns me we had been putting money into a fund the public never knew about," said Councilman David Stevens.

The council wasn't aware of it because the working capital fund appears on the city's balance sheet, which the council doesn't usually review, Koch said.

The working capital fund line item was also reported each year in the city's comprehensive annual financial report, she said.

The account was apparently created because of the way a national accounting standard was interpreted locally, said Susan Straub, Newberry's spokeswoman.

It's unclear when the working capital fund was started.

A review of the city's audits show that the working capital fund has been on the city's balance sheet since at least 2000.

Since the discovery of the unnecessary fund, all of the other funds have been checked to make sure there is a legal reason for their existence, said Mary Fister, the city's Director of Accounting.