The association that sells and manages insurance programs for Kentucky’s 120 counties operates with a “self-serving culture” that has resulted in millions of dollars in questionable spending the past three years, according to a critical report by the state auditor.

State Auditor Crit Luallen today released a special examination of the Kentucky Association of Counties (KACo), which found that as KACo’s revenues increased 75 percent from 2003 through 2008 to more than $5.7 million, the level of discretionary spending by the organization also increased dramatically– on parties, adult entertainment, expensive meals, sporting events, some employee retirement benefits, even condo rentals for executives.

KACo, a public, non-profit association primarily funded by public dollars and governed by county officials, offers lobbying and financing services and sells insurance to member counties, which pay insurance premiums and membership dues.

The majority – more than 90 percent– of KACo’s revenue comes from fees paid by the insurance and financial programs administered by KACo staff. The insurance portion of the organization is regulated and audited by the Kentucky Department of Insurance. County membership dues are not a large source of income for KACo, having averaged only about $130,000 each year since 2003.

The state auditor’s report claims that a culture of overspending flourished as board members, management and staff spent funds on lavish dinners, alcohol, sports and entertainment tickets, staff birthday meals, adult entertainment, and fancy Christmas parties.