FRANKFORT, Ky. (KT) - The Kentucky State Auditor’s office on Wednesday released the results of a financial statement audit of Kentucky Retirement Systems and included three findings in their report.
“Our audit details issues regarding millions in overpayments by employers to KRS and the lack of policies regarding the waiver by KRS of more than $100,000 in penalties for late payments due to the system from employers,” said State Auditor Mike Harmon. “We also found issues with KRS not following generally accepted accounting principles in preparing their financial statements.”
Specifically, the report details:
--Between Fiscal Years 2012 and 2014, employers overpaid KRS $2.37 million due to the system not properly monitoring and resolving overpayments on employer invoices. KRS told auditors employers may not be seeking refunds of overpayments because they may not have an adequate way to repay employees who overpaid into the system. The report also cites employees who overpaid in the system may not be aware they did so.
The KRS responded it has changed internal processes to address outstanding balances, but have some limitations, one being they cannot send refunds directly to employees who have overpaid. It must go through their employer for proper W-2 reporting.
--The system’s management waived delinquent penalty payments for 95 employers, which totaled more than $104,000 during Fiscal Year 2018. Auditors could not determine if KRS had the legal authority to waive penalties and found that the waivers are not reported to the KRS board. Also, auditors found there are no policies outlining the criteria being used for waiving late penalties.
The KRS responded they would seek clean-up legislation during the 2019 session to more clearly define their power to waive penalties and would establish a written policy and procedure on waiving penalties.
--Harmon’s office says KES financial statements did not identify instances of departures from generally accepted accounting principles or were in conflict with standards by the Governmental Accounting Standards Board.
The KRS stated they would comply with the recommendation.
The financial statement audit of KRS is performed by the State Auditor’s office every five years as required by law. But Harmon says the audit is not the end of the work being done by his office.
“We are currently conducting a separate examination relating, in part, to the compliance by Kentucky’s retirement systems to Senate Bill 2, passed during the 2017 session of the General Assembly,” Harmon said. “Once our work is complete, we will release that examination including any potential findings to the public and legislators.”