A newly appointed Kentucky Public Pensions Authority (KPPA) Audit Committee met on Tuesday morning to discuss the implementation of House Bill 587. Legislators passed the KLC initiative in the 2023 Regular Session to put the KPPA internal auditor under the supervision of the KPPA Board. The committee reviewed what changes it needs to make before the law takes effect on June 29, 2023, and debated the full intent of the legislation.

The committee consists of County Employees Retirement System (CERS) representatives Bill O’Mara and Betty Pendergrass and Kentucky Retirement System (KRS) representatives Lynn Hampton and William Summers. It will make recommendations to the KPPA Board, which will need to ratify any action.

Much of Tuesday’s conversation centered around an April 4, 2023, memo from KPPA Office of Legal Services Executive Director Michael Board to CERS and KRS trustees and chief executive officers. In the memo, Board questioned how the new reporting structure would work for such things as approving the internal auditor’s timesheet and leave requests. In the memo Board states, “The most efficient and effective way to handle these approvals is for the KPPA Board or Audit Committee to delegate this limited authority to the KPPA executive director.”

However, he voiced concern about that tactic at Tuesday’s meeting. “It is my understanding that the intent of this bill was to remove the executive director from the supervision of the internal auditor and put that with the board,” Board stated. “If that is the case, and this board chose to delegate back that day-to-day oversight, I would anticipate additional legislation instructing that not to be done.”

CERS Executive Director Ed Owens and Pendergrass, chair of the CERS Board of Trustees, also voiced concern about the suggestion. Pendergrass noted that the bill says, “Report directly to the board.” She added, “It seems to be that when they passed this bill, they were looking for something different from what we were doing.”

Owens remarked that he attended every hearing on House Bill 587, and passage was unanimous. “It was completely and totally bipartisan,” he said. “Every legislator knew at the time they cast his or her vote what our current situation was. There would have been no need for the passage of this legislation if they intended for that to stay the same.”

He called the bill “a mandate” to move away from how they previously operated. “The one entity that has authority over this body spoke unanimously,” Owens added.  

Ultimately, the committee asked Board to contact the bill’s sponsor, Representative Russell Webber (R-Shepherdsville), to determine his intent.

The group will meet again at 2:00 p.m. EDT on May 15.