{"data":{"id":"us-ky/krs-91a.040","jurisdiction":"us-ky","citation":"KRS 91A.040","heading":"Annual and biennial city audits -- Exemption -- Agreed-upon procedures","body":"engagement -- Financial statement -- Publication -- Contents -- Enforcement\naction -- Penalties -- Extension -- Withholding of state funds for\nnoncompliance -- Audit expenses to be billed to audited city.\n(1) Except as provided in subsections (2) and (3) of this section and KRS 91A.044,\neach city shall, after the close of each fiscal year, cause each fund of the city to be\naudited by the Auditor of Public Accounts or a certified public accountant. The\naudit shall be completed by March 1 immediately following the fiscal year being\naudited. The city shall forward an electronic copy of the audit report to the\nDepartment for Local Government for information purposes by no later than April 1\nimmediately following the fiscal year being audited.\n(2) In lieu of the annual audit requirements in subsection (1) of this section, a city with\na population equal to or less than three thousand (3,000) based upon the most recent\nfederal d ecennial census may elect to have an audit performed every other fiscal\nyear in the following manner:\n(a) For a city that is not performing an agreed -upon procedures engagement\nunder KRS 91A.044, after the close of each odd-numbered fiscal year, the city\nshall for that odd -numbered year cause each fund of the city to be audited by\nthe Auditor of Public Accounts or a certified public accountant. The audits\nshall be completed by March 1 immediately following the fiscal year to be\naudited. The city shall forwa rd an electronic copy of the audit report to the\nDepartment for Local Government for information purposes by no later than\nApril 1 immediately following the fiscal year being audited; and\n(b) After the close of each even -numbered fiscal year, the city shal l not be\nrequired to complete an annual audit but shall forward an electronic copy of\nits financial statement prepared in accordance with KRS 424.220 to the\nDepartment for Local Government by no later than October 1 immediately\nfollowing the close of the even-numbered fiscal year.\n(3) Any city, which for any fiscal year receives and expends, from all sources and for\nall purposes, less than five hundred thousand dollars ($500,000), and which has no\nlong-term debt, whether general obligation or revenue debt, shall not be required to\naudit each fund of the city for that particular fiscal year. In addition, each city\nexempted in accordance with this subsection shall:\n(a) Annually prepare a financial statement in accordance with KRS 424.220 and\nshall, not later t han October 1 following the conclusion of the fiscal year,\nforward one (1) electronic copy to the Department for Local Government for\ninformation purposes; and\n(b) If exempted under this subsection for more than four (4) consecutive fiscal\nyears after July  1, 2022, have performed an agreed -upon procedures\nengagement covering the fifth fiscal year in which the city qualified for an\nexemption under this subsection. An agreed -upon procedures engagement\nrequired under this paragraph shall be completed in accord ance with KRS\n91A.044(3) to (9) and any other requirements established by the Auditor of\nPublic Accounts through the promulgation of administrative regulations in\naccordance with KRS Chapter 13A.\n(4) If a city is required by another provision of law to audit its funds more frequently or\nmore stringently than is required by this section, the city shall also comply with the\nprovisions of that law.\n(5) The Department for Local Government shall, upon request, make available\nelectronic copies of the audit repor ts and financial statements received by it under\nsubsections (1) to (3) of this section to the Legislative Research Commission to be\nused for the purposes of KRS 6.955 to 6.975 or to the Auditor of Public Accounts.\n(6) Each city required to conduct an audi t under subsection (1) or (2) of this section\nshall enter into a written contract with an auditor, who shall be a certified public\naccountant or the Auditor of Public Accounts. The contract shall set forth all terms\nand conditions of the agreement which sh all include but not be limited to\nrequirements that:\n(a) The auditor be employed to examine the basic financial statements, which\nshall include the financial statements prepared in accordance with the basis of\naccounting used by the city;\n(b) The auditor shall include in the city audit report an examination of l ocal\ngovernment economic assistance funds granted to the city under KRS 42.450\nto 42.495. The auditor shall include a certification with the audit report that\nthe funds were expended for the purpose intended;\n(c) All audit information be prepared in accord ance with generally accepted\ngovernmental auditing standards which include tests of the accounting records\nand auditing procedures considered necessary in the circumstances. Where the\naudit is to cover the use of state or federal funds, appropriate state o r federal\nguidelines shall be utilized;\n(d) The auditor shall prepare a printed report embodying:\n1. The basic financial statements and accompanying supplemental and\nrequired supplemental information;\n2. The auditor's opinion on the basic financial stateme nts or reasons why\nan opinion cannot be expressed; and\n3. Findings required to be reported as a result of the audit;\n(e) The completed audit and all accompanying documentation shall be presented\nto the city legislative body at a regular or special meeting; and\n(f) Any contract with a certified public accountant for an audit shall provide that\nthe Auditor of Public Accounts shall have the right to review the certified\npublic accountant's work papers upon request.\n(7) A copy of an audit report which meets th e requirements of this section shall be\nconsidered satisfactory and final in meeting any official request to a city for\nfinancial data, except for statutory or judicial requirements, or requirements of the\nLegislative Research Commission necessary to carry out the purposes of KRS 6.955\nto 6.975.\n(8) Each city shall, within thirty (30) days after the presentation of an audit to the city\nlegislative body, publish an advertisement in accordance with KRS Chapter 424\ncontaining:\n(a) The auditor's opinion letter;\n(b) A budget-to-actual comparison schedule for the general fund;\n(c) A statement that a copy of the complete audit report, including financial\nstatements and supplemental information, is on file at city hall and is available\nfor public inspection during normal business hours;\n(d) A statement that any citizen may obtain from city hall a copy of the complete\naudit report, including financial statements and supplemental information, for\nhis or her personal use; and\n(e) A statement which notifies citizens requ esting a personal copy of the city\naudit report that they will be charged for duplication costs at a rate that shall\nnot exceed twenty-five cents ($0.25) per page.\n(9) Any resident of the city or owner of real property within the city may bring an\naction in the Circuit Court to enforce the provisions of this section. Any person who\nviolates any provision of this section shall be fined not less than fifty dollars ($50)\nnor more than five hundred dollars ($500). In addition, any officer who fails to\ncomply with any of the provisions of this section shall, for each failure, be subject\nto a forfeiture of not less than fifty dollars ($50) nor more than five hundred dollars\n($500), in the discretion of the court, which may be recovered only once in a civil\naction brought by any resident of the city or owner of real property within the city.\nThe costs of all proceedings, including a reasonable fee for the attorney of the\nresident or property owner bringing the action, shall be assessed against the\nunsuccessful party.\n(10) In the event of extenuating circumstances that prevent a city from completing and\nsubmitting a required audit or financial statement in compliance with the applicable\ndeadlines in subsections (1) to (3) of this section, the city may submit a written\nrequest for an extension of time to the Department for Local Government on a form\nprescribed by the Department for Local Government. The Department for Local\nGovernment shall approve the request if, in the judgment of the Department for\nLocal Government, the request is warranted by extenuating circumstances beyond\nthe control of the city or other factors that justify the city's noncompliance with the\nrequired deadlines. The Department for Local Government may consider any\nevidence it deems appropriate, inc luding but not limited to proof of the city's\nprogress towards compliance. Extensions granted under this subsection shall not\nexceed eighteen (18) months from the original due date of the audit or financial\nstatement. If the Department for Local Government approves an extension for a city\nand the city fails to complete and submit the required audit or financial statement in\ncompliance with that extended deadline, then the provisions of subsection (11) of\nthis section shall apply.\n(11) If a city fails to com plete an audit or financial statement and submit it to the\nDepartment for Local Government as required in subsections (1) to (3) and (10) of\nthis section, the Department for Local Government shall notify the Finance and\nAdministration Cabinet that the city  has failed to comply with the audit\nrequirements of this section and that any funds in the possession of any agency,\nentity, or branch of state government shall be withheld from the city until further\nnotice. The Department for Local Government shall immediately notify the Finance\nand Administration Cabinet when the city complies with the requirements of\nsubsections (1) to (3) and (10) of this section for all prior fiscal years it has failed to\ncomply with the audit requirements of this section, and the Fi nance and\nAdministration Cabinet shall direct the reinstatement of payments to the city,\nincluding any funds that were withheld due to the noncompliance. This subsection\nshall not be interpreted or construed to permit the state to withhold any\nnondiscretionary payments to a city that are due the city for the provision of\nservices by the city to the state or any of its agencies, including for the use of city\nutilities.\n(12) Within a reasonable time after the completion of a special audit or examination\nconducted pursuant to KRS 43.050, the Auditor shall bill the city for the actual\nexpense of the audit or examination conducted. The actual expense shall include the\nhours of work performed on the audit or examination as well as reasonable\nassociated costs, including but not limited to travel costs. The bill submitted to the\ncity shall include a statement of the hourly rate, total hours, and total costs for the\nentire audit or examination.\n(13) A city shall provide a copy of any audit report completed pursuant to  this section to\nthe Auditor of Public Accounts upon request.","path":["KRS Chapter 91A"],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=57562","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:49:49Z","sha256":"f0bfc40c4496c02b8259f360f88b78c105fa2a778f27a63f5bc2396be7e1d8e6","source_id":"us-ky","stale":false,"prev":"us-ky/krs-91a.030","next":"us-ky/krs-91a.041"},"notice":"GroundRules: Original legal text. Not legal advice."}