Fort Thomas City Council held a special meeting to discuss a $277,000 payment made to the County Employee Retirement System (CERS/KPPA) tied to pension "spiking" that occurred in prior years, and to review how interest and audit adjustments affected this year’s net cost.

Interim Finance Director Linda Chapman told the council that an audit adjustment recorded as of June 30, 2023 established a payable of $169,000 against the liability and that the 2024 payment of $277,000 effectively produced a net expense of about $108,000 for the current year. Linda said the city’s review of KPPA records found only one other small instance (a roughly $300 entry involving a crossing guard) and that the core issue dated to changes in state law and practices around 2013–2018.

Chapman explained the mechanics the council heard: historically some retirements used a city employee’s highest months to annualize pay, creating a larger "high-three" basis for pension calculations; state changes capped excess earnings at 10 percent to limit future spiking and shifted how any excess is handled. "There had to be some communication between the previous finance director and the auditor," Chapman said about the 06/30/2023 accrual, and she told council she could not find complete documentation for why portions of the liability were handled earlier.

Council members pressed staff on two related concerns: why interest accumulated over several years without clearer notice from KPPA and why the $277,000 payment was posted without prior council approval. The city manager said there were intermittent contacts and gaps in mailing/emailing from KPPA and that earlier letters to the mayor could not be located in his email. Several council members said the payment appeared to have been made administratively and that the timing and entries should have been communicated to the finance committee and full council.

Members and staff also discussed internal-control weaknesses exposed during the review. The council heard that an apparent duplicate entry and a lack of clarity about who committed journal entries in the accounting software contributed to confusion; staff described plans to tighten permissions so each user’s entries and commits are auditable. "If we're an accounting software and we're trying to clean this up, no one should be using somebody else's username," one council member said.

Council members discussed investigatory options. The group noted that personnel and disciplinary matters fall under the mayor’s authority but that the council can direct or request an investigation under KRS 83A.130. The council also discussed pursuing ethics complaints or, where appropriate, consulting the commonwealth attorney or a grand jury if criminal conduct is suspected. A council member summarized the options: mayoral review, a statutory investigation under KRS 83A.130, or referral to prosecuting authorities when warranted.

Public commenters urged the council to pursue a thorough investigation, argued the RFP for HR services should be issued promptly, and asked for the full file the council had received. One resident told the council, "You cannot let this go. You've got to go back, find the person or persons responsible. They must have consequences," and asked that records and correspondence be made public to restore trust.

The council directed staff to place the pension-spiking materials at the top of the Finance Committee agenda for the next meeting, to have the city auditor attend, and to continue assembling the documentation already provided to council members. No formal disciplinary action or formal resolution was recorded during the meeting; members discussed options and next steps for investigation and oversight.

Clarifying details discussed at the meeting included: the $277,000 payment that the city recorded and reported to CERS/KPPA; a June 30, 2023 audit adjustment of $169,000 that reduced the current-year net expense to about $108,000; multiple years of partial or intermittent communications from KPPA to the city; and a duplicate or miscoded ledger entry that contributed to a larger apparent variance in an amended budget line.

The council asked staff to return to the Finance Committee with full documentation, to review internal controls and user permissions in the accounting system, and to determine whether further legal or forensic review is warranted.