Special Reports

KACo, KLC reform at their own paces

Leaders of the Kentucky League of Cities and Kentucky Association of Counties spent the summer trying to recover from scandals involving excessive spending and lax oversight.

Both have made changes in policies and procedures. But KLC has gone a step further than KACo

Sylvia Lovely, executive director of the League, which provides services to cities, stepped down last week and, in a statement, took responsibility for "the loss of credibility that my organization has suffered."

At KACo, no change in leadership has taken place — something that concerned several lawmakers after KACo and KLC leaders appeared before a legislative committee last week.

"I think the consensus after the committee meeting is that KACo has not gone far enough and there's a level of frustration among legislators that KACo has not moved swiftly and as boldly as the League has," said state Sen. Damon Thayer, R-Georgetown. "Consequently, it could take KACo longer to regain its legislative footing."

Both KACo and KLC lobby the legislature on behalf of local governments. The groups also provide legal advice and sell insurance to cities and counties.

Several legislators — Democrats and Republicans — told KACo president J. Michael Foster that they expected "consequences" for those who spent lavishly or allowed controversial expenses, such as charges to strip clubs and a Lexington escort service.

"I think it's an embarrassment, not only to KACo but to the commonwealth," said Rep. Ron Crimm, R-Louisville.

After the meeting, Rep. Adam Koenig, R-Erlanger and a former Kenton County commissioner, became the first official to publicly call for KACo executive director Bob Arnold to step down.

Other than conceding that he hasn't been perfect, Arnold has remained defiant, even urging local officials in a speech in July to "get over it" and "quit dwelling on it."

Until Foster recently appointed a chief financial officer, the responsibility for approving all KACo spending had rested with Arnold.

Foster created a new chain of command for approving employee expenses before the Herald-Leader reported that the group's top five staff members spent $600,000 in two years on meals, travel, entertainment and other expenses.

Foster told the committee that KACo commissioned Richmond lawyer Robert "Bobby" Russell to conduct a management review. That and the results of state Auditor Crit Luallen's special audit will help in determining the next steps, Foster said. (Luallen is auditing both groups.)

"We feel like the management review will help us make the right decisions," Foster said in an interview. "I want to do it in a timely manner and don't want to be in a hurry."

League officials, on the other hand, said they want to fix weaknesses and erase stains on KLC's credibility as soon as possible.

"We're going to continue moving forward," KLC president Connie Lawson, the Richmond mayor, told the committee last week. "We're not going to wait for the audit."

League fixes

After the Herald-Leader's articles in June detailed the $300,000 in expenses spent by KLC's top three officials, the League's board started making changes.

Conflict-of-interest and ethics policies were created or updated. And Lawson appointed a task force to suggest further changes.

The board:

■ After initially taking credit cards away from officials, allowed credit card use by select employees, but with more oversight.

■ Required employees to pay for certain expenses, such as meals, which will be reimbursed according to a federal per diem rate.

■ Stopped paying for employee and board members' spouses to travel except in certain situations.

■ Stopped providing gifts and sports tickets to local officials, other than KLC board members.

■ Ended certain conflicts of interest, such as having meals at Azur, which is co-owned by Lovely's husband, Bernard Lovely. The KLC's insurance board also severed its relationship with Bernard Lovely's law firm. And the insurance board told its claims administrator, Collins & Co., to move out of a building that the firm leased from the League's insurance administrator, William Hamilton.

KACo moves more slowly

Foster, KACo's president, outlined to lawmakers his methodical, albeit slower, plan for changing his group's structure and policies.

Foster and the board have taken some steps, such as canceling staff credit cards, stopping advertisements at University of Kentucky sports events and, as of April, requiring out-of-state travel reports to be provided to KACo's executive committee.

But other recommendations have remained in limbo.

In fact, KACo board member Tommy Turner, the Larue County judge-executive, offered four pages of suggestions in July. He said KACo's expense policies should mirror those of most county governments. Turner's recommendations weren't even discussed at KACo's July 24 board meeting.

Last week, legislators made it clear that they want to see more done at KACo and said they would call Foster back for an update this fall.

Foster and other KACo board members have been quick to defend top staff members for their work in bolstering the financial condition of KACo's services, such as the insurance division.

The top officials who have come under fire for mistakes are the "same team that has been creative and effective in creating strategies in providing superior member services," Foster said.

Still, Thayer said the organization must take strong steps to reassure a frustrated public that it is serious about cleaning up its act.

"I would say, right now, the credibility of both of these organizations hangs in the balance," Thayer said. "And the actions they take in the next few weeks and months will determine their success ... with the General Assembly and their members and the public at large, who ultimately fund both organizations."

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