Wednesday, May 4, 2016

Parsing KRS 424.220 - Financial Statements 0.05

This is the fifth part of a series following after part four:

 Parsing KRS 424.220 - Financial Statements 0.04

"The officer shall procure and include in or attach to the financial statement, as a part thereof, a certificate from the cashier or other proper officer of the banks in which the funds are or have been deposited during the past year, showing the balance, if any, of funds to the credit of the officer making the statement." KRS 424.220(5)
 Funds collected go into a bank and funds expended come out. Simple.

The bank balance at the end of a reporting period can be compared to the balance shown on the Financial Statement from the prior period, and the net change can be calculated. Simple.

All funds collected or received from any source, including loan proceeds, are deposited in the bank and reported on the Financial Statement. The amount of the bank deposits should equal the funds reported as received.

The disbursements shown on the Financial Statement include all disbursements except for payments to vendors less than $1,000. This is the 21st Century. $1000 is nothing.

The plausibility test

If the net change in the bank balance from the end of one reporting period to the next is substantially different from the net difference between funds received and funds disbursed shown in the Financial Statement, the matter warrants closer examination.

Who are those small vendors that were not reported?

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Tom Fox, J. D.
Southern Specialty Law Publishing Company
Louisville, Kentucky

A division of Accountable Kentucky Incorporated
a Kentucky Non-profit corporation
AccountableKY.org

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This is not legal advice and I am not a lawyer.

Parsing KRS 424.220 - Financial Statements 0.04

This is the forth part of a series following after part three:

Parsing KRS 424.220 - Financial Statements 0.03


KRS 424.220(2)(b) and (3) relate to reporting the disbursement of public funds and must be read together:

The statement shall show:
(2)(b) "The total amount of funds disbursed during the fiscal year to each individual payee. The list shall include only aggregate amounts to vendors exceeding one thousand dollars ($1,000).
(3) Only the totals of amounts paid to each individual as salary or commission and public utility bills shall be shown. The amount of salaries paid to all nonelected county employees shall be shown as lump-sum expenditures by category, including but not limited to road department, jails, solid waste, public safety, and administrative personnel."
Breaking it down we can see the first sentence of KRS 424.220(2)(b) refers to "each individual payee" and the second sentence references "vendors." Nowhere is either term expressly defined. KRS 65.140 uses the word "vendor" in the context of imposing a 30 day payment requirement upon governmental units, "which receives goods or services from a vendor." KRS 65.140(1)

This is a common sense and ordinary definition of "vendor," which means a business that supplies goods or services.

Thus, all vendors are payees, but not all payees are vendors. Aggregate payments to an individual vendor are reported in the Financial Statement if the amount exceeds $1,000. All payments to non-vendors are reported regardless of the aggregate amount paid to each. Public utility bills must be shown.

For example, a $500 charitable donation to the American Red Cross paid from public funds would be included in the Financial Statement.  In this instance the American Red Cross is not a vendor, even if the American Red Cross also sometimes sells services, such as training, as a vendor. In part, the test is to determine the nature of each transaction and payment.

Payroll

1. Payroll payments to salaried or hourly non-elected employees are aggregated by category or department.

2. Payroll payments to elected officials are reported separately and individually.


Problem areas

Just as some payees can be vendors for some transactions and non-vendors for others, employees and officials also frequently receive payments other than and in addition to payroll compensation, such as:
  • Uniform allowances;
  • Purchase reimbursements;
  • Travel allowances or reimbursements
The way KRS 424.220 reads, these payments ought to be reported separately in the Financial Statement as a non-vendor payment. That does not necessarily make any sense.

Another problem is presented by the $1,000 limit on reporting vendor payments. That amount is in KRS 424.220, which is about annual Financial Statements. KRS  424.230 gives the option of monthly or quarterly Financial Statements, but does not specifically modify the $1,000 vendor limit. Should quarterly Financial Statements include each vendor receiving $250, or more, during the quarter?

With a little bit of good faith, basic honesty and the level of transparency required by Kentucky's Open Records Act, it's not a big problem. With public officials who are cheats, liars and slobs, it doesn't make a damn bit of difference what the law requires.


--------------------

Tom Fox, J. D.
Southern Specialty Law Publishing Company
Louisville, Kentucky

A division of Accountable Kentucky Incorporated
a Kentucky Non-profit corporation
AccountableKY.org

----------- oOo ----------

Self-help Law Books on Amazon
Subscribe to RSS Post feed

This is not legal advice and I am not a lawyer.