KRS 43.070: Audit of accounts of county officers and special purpose governmental

entities -- Agreed-upon procedures engagement for county clerks and sheriffs -

- Audit expenses.

(1) (a) To determine whether any unauthorized, illegal, irregular, or unsaf e handling

or expenditure of revenue or other improper practice of financial

administration has occurred and to assure that all proper items have been duly

charged, taxed, and reported, the Auditor shall audit annually:

1. The funds contained in each county's budget;

2. The books, accounts, and papers of all county clerks and sheriffs, which

includes receipts paid to county clerks from the collection of:

a. Motor vehicle and motorboat registration fees, motor vehicle and

motorboat licenses, and other receip ts due the clerk pertaining to

motor vehicles and motorboats as provided in KRS Chapters 186,

186A, and 235;

b. The motor vehicle usage tax as provided in KRS 138.460; and

c. The ad valorem tax on motor vehicles and motorboats as provided

in KRS 134.800.

County clerks shall transmit a copy of the portion of the audit relating to the

receipts set out in subparagraph 2.a. to c. of this paragraph to the Department

of Revenue and the Kentucky Transportation Cabinet.

(b) The Auditor shall not conduct an audit pursuant to this subsection if the fiscal

court or the elected official notifies the Auditor that a certified public

accountant has been employed to audit the books, accounts, and papers of the

county or the fee office, in accordance with KRS 64.810.

(c) 1. If any county clerk or sheriff meets the criteria established in this

subsection and any additional criteria established in administrative

regulations promulgated by the Auditor, that county clerk's or sheriff's

audit required by this section may, in the discretion of the Auditor, be

conducted by an agreed -upon procedures engagement performed by the

Auditor. If, in the discretion of the Auditor, an agreed -upon procedures

engagement in progress will not provide suffic ient oversight of the

county clerk's or sheriff's office, the Auditor may at any time convert the

engagement to an audit performed under paragraph (a)2. of this

subsection. A county clerk or sheriff shall not be eligible for the agreed -

upon procedures enga gement as allowed in this paragraph for the first

audit period after election if the county clerk or sheriff is serving in

office for the first time, or is assuming the office after experiencing a

break in sequential service in that position.

2. The Audito r and the county clerk or sheriff shall establish specific

procedures for any agreed -upon procedures engagement. If the Auditor

and the county clerk or sheriff cannot agree to the specific procedures

for an agreed -upon procedures engagement, the audit of t he county

clerk's or sheriff's office shall be conducted under paragraph (a)2. of this

subsection for that year subject to the audit.

3. At a minimum, the county clerk or sheriff shall meet the following

criteria in order to be eligible to have the county clerk's or sheriff's

annual audit in any particular year conducted using agreed -upon

procedures:

a. The county clerk or sheriff applies to the Auditor to have an

agreed-upon procedures engagement for the year subject to the

audit on a form provided by the Auditor and by the application

deadline established by the Auditor;

b. The county clerk's or sheriff's office did not have any reported

audit comment or finding in its most recent audit report;

c. The county clerk or sheriff and the Auditor agree to specif ic

procedures for the agreed-upon procedures engagement; and

d. Any additional criteria that may be determined by the Auditor.

4. The publication requirements related to an agreed -upon procedures

engagement shall be the same as those required for audits of the county

clerks and sheriffs performed under paragraph (a)2. of this subsection,

except that the Auditor may provide a summary of the agreed -upon

procedures engagement report, and publication of the summary shall

satisfy the statutory requirements to pu blish the audit report, opinion

letter, and transmittal letter.

5. The billing and expense provisions of subsection (3) of this section shall

apply to any agreed -upon procedures engagement performed under this

section.

6. The Auditor may promulgate adminis trative regulations that set forth

additional criteria to qualify for agreed -upon procedures engagements,

the application procedures, and the standards, procedures, guidelines,

and reporting requirements for agreed -upon procedures engagements

under this section.

7. In exercising discretion regarding whether a county clerk or sheriff who

otherwise meets the minimum requirements may have an agreed -upon

procedures engagement in lieu of an audit for any particular year subject

to an engagement, and in exercisin g discretion regarding the proposed

procedures for the agreed -upon procedures engagement for any

particular year subject to an audit, the Auditor may consider factors

including but not limited to past audit comments or agreed -upon

procedures engagement fin dings, assessment of risks, complaints,

financial statements, the number of consecutive agreed -upon procedures

engagements performed of the county clerk or sheriff, and other factors

relevant to oversight of the county clerk's or sheriff's office.

(2) The Auditor may audit:

(a) The books, accounts and papers of all county judges/executive, county

attorneys, coroners and constables; and

(b) The books, accounts, papers, and performance of all special purpose

governmental entities as defined in KRS 65A.010. Th e expense of any audit

or examination performed pursuant to this paragraph shall be borne by the

entity audited or examined.

(3) (a) The county shall bear one -half (1/2) of the actual expense of the audit

conducted pursuant to subsection (1)(a)1. of this s ection and shall bear the

total actual expense of the audit conducted pursuant to subsections (1)(a)2.

and (2)(a) of this section. No county shall be required to bear the expense for

more than one (1) audit of the same fund or office annually pursuant to

subsection (1)(a)1. or 2. of this section, except as provided in KRS 64.810(4).

(b) The Kentucky Transportation Cabinet shall bear the cost of the portion of the

audit of receipts from motor vehicles and motorboats required in subsection

(1)(a)2. of this se ction, regardless of whether the Auditor prepared the audit

required under this section or the county made other arrangements for the

audit under subsection (1)(b) of this section and KRS 64.810.

(4) Within a reasonable time after the completion and distri bution of the audit reports

authorized by subsection (1) of this section, the Auditor of Public Accounts shall

bill the county for the expenses incurred pursuant to subsection (3) of this section.

A copy of this bill shall be forwarded to the secretary of the Finance and

Administration Cabinet. Should the fiscal court within sixty (60) days following

receipt of said bill determine the charge to be excessive or otherwise improper it

shall submit its objection to the secretary of the Finance and Administration Cabinet

and to the State Treasurer for resolution of the controversy in accordance with

subsection (5) of this section. If the amount billed has not been paid within sixty

(60) days from date of billing, and no objection has been filed, the Auditor shall

notify the secretary of the Finance and Administration Cabinet and the secretary of

revenue who shall cause said amount to be deducted from the next payment or

return of moneys provided by KRS 47.110 by the state to the county or counties.

Deductions shall continue until the total amount due the Auditor's office has been

paid. All moneys received pursuant to this section shall be credited to the trust and

agency account of the Auditor of Public Accounts. When an objection to the bill

has been filed with the secretary of the Finance and Administration Cabinet and the

State Treasurer in accordance with subsection (5) of this section the amount found

to be equitable and just shall become payable immediately upon the entry of the

final decision.

(5) Any controversy over the amount of the bill for the actual expenses incurred shall

be submitted by the fiscal court to the secretary of the Finance and Administration

Cabinet and the State Treasurer for a decision as to the proper amount. In the event

that these two (2) arbitrators fail to agree, then the controversy shall be submitted to

the Attorney General, whose decision shall be final.