KACo implements spending reforms, creates code of ethics

FRANKFORT — The Kentucky Association of Counties implemented 18 new policies Wednesday to cap travel costs, regulate spending more closely and create a code of ethics for its board members.

The organization's board unanimously approved the package of reforms, which represents the third round of new policies put in place during the term of KACo President J. Michael Foster, the Christian County Attorney.

It is the second set of policies approved since the Herald-Leader reported in June that the organization's top five staff members spent $600,000 in two years on KACo-issued credit cards. Among the more controversial expenses were $450-a-night hotel rooms, a $10,000 room cancellation fee, $1,000 gifts, and expenses at two strip clubs and a Lexington escort service.

"In my opinion, if we had these policies in place we wouldn't have had the problems that we had," said Rick Smith, a Clark County magistrate and KACo's president-elect.

Fallout from the spending scandal included last month's resignation of KACo's executive director, Bob Arnold. Also, past president David Jenkins, the Spencer County judge-executive, stepped down from KACo's executive committee because of the strip-club and escort-service charges on his KACo-issued credit card.

In July, KACo sold the BMW SUV it had provided for Arnold and replaced it with a 2009 Ford Explorer.

The newest 22 pages of procedures closely follow a set of recommendations issued earlier this year by state Auditor Crit Luallen that are aimed at providing better oversight of non-profit groups. Luallen's office is now auditing KACo.

"We are encouraged that the KACo board has taken these steps," Luallen said in a statement. "Our work on the KACo audit continues, and that audit will provide additional recommendations that will further strengthen accountability."

KACo offers services such as legal advice and lobbying for county governments, and sells insurance and provides financing.

Foster said it was essential for KACo to "acknowledge our missteps and commit ourselves to a clear course of action designed to avoid the mistakes of the past by developing a road map that will lead to a better way of doing business."

Foster has said he was concerned about the level of spending, particularly on travel expenses.

Denny Nunnelley, KACo's acting executive director, told the board that KACo has spent just 5 percent of its $345,000 travel budget during the first two months of this fiscal year.

Key points of the new policies include:

■ Limiting the amount spent on meals. Staff and board members can be reimbursed for breakfasts and lunches up to $20 and $30, respectively, on in-state trips involving overnight stays. They can be reimbursed up to $50 for dinners on trips or on business outside of their county if it's after 7 p.m.

Those limits go up to $30 for breakfasts, $45 for lunches and $75 for dinners on out-of-state trips.

■ Barring consumption of alcohol during the work day.

■ Setting procedures for booking hotels and airfare, including limiting bellhop tips to $2 and requiring employees who miss the deadline for terminating a reservation to pay room cancellation fees.

■ Outlining specific credit card rules. KACo cards can't be used for personal expenses, and statements will be reviewed by the chief financial officer, the cardholder and KACo's three-member audit committee, which Foster created in July.

■ Barring board members and employees from accepting gifts, other than food or entertainment such as golf tournaments, worth more than $100.

■ Providing new board members with orientation presentations and a policy manual.

■ Requiring board members to disclose any potential conflicts of interest or outside investments.

■ Establishing protections for whistle blowers.

KACo paid about $2 million since 2004 in court settlements, legal fees and a jury award stemming from lawsuits brought by former employees who said they were fired for raising concerns about a hostile work environment in 2000.

Also at KACo's board meeting, Foster announced an eight-member search committee to sort through applications for Arnold's replacement. The search committee will meet Tuesday to outline the process, Foster said. No deadline has been set to make a hire.

"We don't want to be in a hurry to hire someone," Foster said. "We want the right person."

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