Special Reports

KLC adopts new policies on ethics and credit cards

LOUISVILLE — The Kentucky League of Cities adopted a sweeping new set of ethics and spending rules at a meeting Wednesday that included a three-hour closed-door discussion of personnel matters.

Shortly after the League's executive board went into closed session, executive director Sylvia Lovely came out in tears but would not discuss what happened.

Richmond Mayor Connie Lawson, the executive board chairwoman, wouldn't comment, except to say that the board had taken no action.

"We had a great deal of discussion but no action," Lawson said. "Personnel is very sensitive."

Other members referred all questions to Lawson after the meeting, which took place at the annual Governor's Conference on Local Issues.

The League provides lobbying and training services to 382 member cities across the state, but the bulk of its work — and revenue — comes from the insurance and financial services it provides to cities.

The League's executive board formed a task force to look at policies and procedures after the Herald-Leader reported that in three years, the League's top three executives, including Lovely, spent $300,000 on travel, meals and items such as sports tickets, mostly using their League credit cards.

Under the new rules, credit cards will be returned to the executive director and other staff members as approved by the executive board.

The cards will be used for expenses such as air fare, hotels, car rentals and conference registrations. All credit card statements will be reviewed each month by the League's chief financial officer.

Travel expenses such as air fare and hotels will be pre-paid by an office credit card, but all other personal travel expenses, such as meals, will be paid with expense reimbursements according to a federal per diem rate for the city involved. League executives spent $77,448 on meals with staff members and business associates in three years, the Herald-Leader found. League executives dined at restaurants including New Orleans' Galatoire's and San Antonio's Morton's Steak House.

The policy of paying the travel expenses of spouses will end except for special situations, the new rules state. The League paid at least $19,000 over three years for travel for spouses. In the future, spousal travel will be reimbursed if advance approval is given by either executive management or the finance committee.

Before the meeting, the League had made other changes, including suspending the use of all executive credit cards, including Lovely's. Lovely herself stopped League-paid travel for executive spouses and any League functions at Azur, a Lexington restaurant co-owned by her husband, Bernard Lovely, and she has stopped driving a League-provided BMW.

Last week, the board stopped using a Lexington law firm where Sylvia Lovely's husband is a partner. In the past decade, the League had paid $2.3 million to two law firms where Bernard Lovely was a partner.

The board also approved its first written conflict-of-interest policy.

Under the new rules, board members and staff will have to reveal any potential conflicts. In addition, employees must avoid taking any action that would "result in or create the appearance of using a KLC position for private gain."

Employees may not take gifts worth more than $100 from vendors without the consent of the executive director.

Paying for alcohol

The board had a lengthy discussion on whether the League should pay for alcohol in any situation. Board member Arthur Byrn, Mayfield's mayor, said the League allowed alcohol as a reimbursable expense because it often holds receptions where alcohol is served.

Fort Mitchell Mayor Tom Holocher said that, because mayors make such small salaries, it was unfair to ask them to pay for their own drinks when traveling on the League's behalf.

"To have to turn around and pay for things I do in my real life is a lot to ask," he said.

But several other mayors, including Lexington mayor Jim Newberry, objected, and the board agreed to suspend all reimbursements for alcohol until next month, excluding any alcohol at the League's convention in September.

The task force is considering its fleet of 10 cars. Lawson said the plan was to have only Toyotas, GMs and Fords in the League's fleet. "Safe, but not extravagant," she said.

'The right direction'

Several board members said they were pleased with the adopted changes.

"I think things are moving in the right direction," Frankfort City Manager Anthony Massey said. "Quite frankly, they should have been in place a long time ago; maybe all this could have been avoided."

Byrn said the new rules would strengthen the multimillion-dollar organization.

Several cities, including Lexington and Henderson, have stopped paying their annual membership dues to KLC in light of the problems.

State Auditor Crit Luallen is auditing the League. League officials said that audit would probably cost the League about $96,000. The auditor's office charges agencies for audits that it performs.

"Of course, there will be a loss in that budget year," deputy director Neil Hackworth said. "We weren't accounting for that."

League officials will appear before the General Assembly's Local Government Committee on Aug. 26.

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