Opinion
Opinion By: Jack Conway,Attorney General;Michelle D. Harrison,Assistant Attorney General
Open Records Decision
Terry J. Minuth initiated this appeal challenging the partial denial by Christian County Public Schools (CCPS) of his undated request for "a copy of the Munis reports of the Annual Financial Report (AFR) for all funds as well as the Munis reports of Balance Sheets (BS) for all funds" for the "school years ending June 20, 2014, 2013, 2012, and 2011[.]" A representative of CCPS provided Mr. Minuth with the "Audited AFR & Balance Sheets for FY2011, 2012, and 2013." However, CCPS advised that, "Our audit is currently underway for FY2014. It would not be appropriate to release AFR or Balance for FY2014 until we have completed our audit and subsequent adjustments." CCPS maintained that such records "are preliminary until the audit is complete and, therefore, exempted from disclosure under the Open Records Act, " specifically KRS 61.878(1)(i). On appeal Mr. Minuth asserted that KRS 61.878(1)(i) is not applicable to "basic financial information" simply because CCPS is undergoing its annual audit. Rather, the AFR and BS "should be provided to the board members at the end of July," when submitted to the Department of Education (DOE). Mr. Minuth noted that he already obtained the same record(s) from DOE upon request.
Upon receiving notification of Mr. Minuth's appeal from this office, legal counsel for CCPS responded on behalf of the agency. Quoting the language of KRS 61.878(1)(i), counsel asserted that, "Because the records Mr. Minuth seeks have not yet been audited, they are merely preliminary drafts that remain subject to adjustments resulting from the findings of a completed audit, and are thus exempt from disclosure under the plain language" of this exception. Relying upon prior decisions of this office, CCPS further argued that "preparation of final, audited versions of [CCPS'] Annual Financial Report and Balance Sheet involves the use of auditors not affiliated with [CCPS], and therefore is an example of a draft generated in connection with the preparation of a report by private persons and should be exempted from public disclosure. " CCPS lastly asserted that its unaudited 2014 AFR and BS "are similar in nature to official minutes that must be kept by an agency. The official minutes of an agency meeting are not final until they have been approved." Likewise, the AFR and BS for 2014 will not be final "until it has been audited and any necessary adjustments resulting from the audit have been made." Upon completion of the audit process, the agency concluded, CCPS will provide Mr. Minuth with access to its 2014 AFR and BS.
In resolving the question presented, this office is guided by the legislative statement of policy codified at KRS 61.871, declaring that "free and open examination of public records is in the public interest and the exceptions provided for by KRS 61.878 or otherwise provided by law shall be strictly construed," and the corollary judicial recognition that the Open Records Act "exhibits a general bias favoring disclosure. " Kentucky Board of Examiners of Psychologists v. Courier-Journal & Louisville Times Co., 826 S.W.2d 324, 327 (Ky. 1992). "Despite its manifest intention to enact a disclosure statute," however, "the General Assembly determined that certain public records should be excluded from disclosure. Among such records are [those identified at KRS 61.878(1)(i) and (j)]." 1 Beckham v. Board of Education of Jefferson County, 873 S.W.2d 575, 577 (Ky. 1994). See Courier-Journal and Louisville Times Co. v. Jones, 895 S.W.2d 6-8 (Ky. App. 1995). Both the courts and this office have applied the language of these statutory exceptions in various contexts. See City of Louisville v. Courier-Journal and Louisville Times Company, 637 S.W.2d 658-660 (Ky. App. 1982); Kentucky State Board of Medical Licensure v. Courier-Journal and Louisville Times Company, 663 S.W.2d 953 (Ky. App. 1983); University of Kentucky v. Courier-Journal & Louisville Times Co., 830 S.W.2d 373, 378 (Ky. 1992); 99-ORD-220; 02-ORD-86; 11-ORD-108. Guided by this evolving body of case law, the Attorney General has long recognized that public records which are preliminary in nature only forfeit having exempt status upon being adopted by the agency as a basis for its final action. See OAGs 83-405, 84-98, 88-2, and 89-69 and 12-ORD-075. The Court of Appeals reaffirmed this position as recently as 2013. See University of Louisville v. Sharp, 416 S.W.3d 313, 315 (Ky. App. 2013)("piecemeal disclosure along the path of the decision making process is not mandatory"); 14-ORD-074.
Regarding the underlying rationale of these statutory exceptions, the Attorney General has recognized that "KRS 61.878(1)[(i) and (j)] have been interpreted to authorize the nondisclosure of both interagency and intra-agency drafts and memoranda, and are designed to encourage frank discussion of matters of concern to the public agency or agencies." 93-ORD-125, p. 4. That rationale is deemed "equally compelling regardless of whether the communications are within an agency or between agencies." Id. Accordingly, this logic has been extended to reports and analyses prepared by outside agencies, as well as consultants, on behalf of a public agency, on numerous occasions. In 93-ORD-125, the Attorney General summarized the decisions to this effect, 2 affirming the denial by the Transit Authority of River City (TARC) of a request for a report prepared by Coopers & Lybrand evaluating the performance of Yellow Enterprise under its agreement with TARC, as a preliminary record upon which the TARC had not taken final action. 3 "While there can be little doubt that a final audit of a public agency is a public record" within the meaning of KRS 61.870(2), this office reasoned, "we do not believe that the document [in dispute] can be properly characterized as an audit, nor do we believe that it can be said to represent final action of a public agency. " 4 Id., 5. The Attorney General noted that said record was not an "audit" because it did not "consist of 'a systematic inspection of accounting records . . . reflect[ing] income and expenses of an operation.' OAG 91-72." 93-ORD-125, p. 6. This office rejected the argument that it could not be characterized as preliminary because there was no indication that Coopers & Lybrand intended to perform any further work on the report as the fact it was "final" relative to whoever prepared the report was irrelevant. Id., p. 7. Because the record in dispute was clearly "subject to revision and discussion," and was not final as to TARC, the public agency whose statutory obligations were at issue, this office found that it retained it preliminary unless or until it was adopted as part of the agency's final action. Id., pp. 7-8.
While this office has "consistently held that final audit reports are public documents and are therefore subject to inspection (see, for example, OAG 76-633, OAG 82-340, OAG 84-225, OAG 91-72, 93-ORD-125), this office has just as consistently held that 'a public agency cannot afford a requester access to a document which does not exist or which it does not have in its possession or custody [not argued here].'" 98-ORD-173, p. 2, quoting 93-ORD-51, p. 4. See 03ORD-240. In sum, these decisions confirm "that an audit report does not have to be made available for inspection until it has been finalized." 08-ORD-094, p. 7; 02-ORD-097. Mr. Minuth requested the Annual Financial Report (AFR) and Balance Sheet (BS) for the 2014 Fiscal Year, both of which are unquestionably subject to disclosure after necessary adjustments, if any, have been made in the course of the audit currently being conducted. However, those documents were preliminary as of the request date. In accordance with governing precedents applying KRS 61.878(1)(i), this office affirms the denial by CCPS. The relevant statutory publication requirements also weigh in favor of the agency's position though it failed to specify which provisions were implicated here. 5
Under KRS 424.220(1), "every public officer of any school district, city, . . . shall at the expiration of each fiscal year prepare an itemized, sworn statement of the funds collected, received, held, or disbursed by him during the fiscal year just closed, unless he has complied with KRS 424.230 ["Optional monthly or quarterly statements"]." Subsection (6)(a) provides that said financial statement must be published in full in a newspaper qualified under KRS 424.120, within sixty (60) days after the close of the fiscal year, except in a city publishing its audit per KRS 91A.040(6). It appears, based on its position, that CCPS is operating under KSR 424.220(8), pursuant to which the "appropriate officer of a county shall satisfy the requirements of subsection (6) of this section by publishing the county's audit . . . in the same manner that city audits are published in accordance with KRS 91A.040(6)." This provision specifies that, "Upon completion of an audit, each city [or in this case school district] may elect to publish the auditor's report [see KRS 91A.040(1), requiring completion of audit by February 1 immediately following the fiscal year being audited] in accordance with subsection (7) of this section, or publish a financial statement in accordance with subsection (8) of this section."
Subsection (8) of KRS 91A.040 provides that if the agency elects to publish the "financial statement" prepared in accordance with KRS 424.220, in lieu of publishing the "auditor's report," it shall publish the statement within 60 days after the completion of the audit per KRS Chapter 424. However, subsection (7) provides that if the agency elects to publish the "auditor's report" prepared in accordance with KRS 91A.040, in lieu of the financial statement required by KRS 424.220, it shall publish, among other things, the "combined balance sheet" and the "combined statement of revenues, expenses," etc. per KRS Chapter 424, and the advertisement "shall contain a statement that a copy of the complete auditor's report, including financial statements and supplemental information" is available for public inspection. It remains unclear which of these publication requirements the agency has opted to comply with in this case and, consequently, which timeline for publication (separate from disclosure under the Act), to the extent relevant, is applicable.
This office has recognized that a determination of whether a public agency has complied with KRS 91A.040(1) is beyond our scope of review under KRS 61.880(2)(a). 98-ORD-173; 03-ORD-240. Nevertheless, in 08-ORD-094 this office recognized that KRS 91A.040 was implicated from an Open Records perspective insofar as 91A.040(4) mandates that "[t]he completed audit and all accompanying documentation shall be presented to the city legislative body at a regular or special meeting" and KRS 91A.040(5) provides that "[a] copy of an audit report which meets the requirements of this section shall be considered satisfactory and final in meeting any official request to a city for financial data[.]" Id., p. 6. Although the agency's initial response violated the Open Records Act from a procedural standpoint in that case, its denial was substantively correct as the requested audit remained preliminary until it was "presented to the city legislative body. " Id. Subsection (4) of KRS 91A.040 is not implicated here. Regardless of which publication timeline is applicable on the facts presented, however, CCPS properly withheld the requested AFR and BS until completion of the ongoing audit per KRS 61.878(1)(i), and KRS 91A.040, though not dispositive, supports, rather than refutes that conclusion.
Either party may appeal this decision by initiating action in the appropriate circuit court under KRS 61.880(5) and KRS 61.882. Pursuant to KRS 61.880(3), the Attorney General should be notified of any action in circuit court, but should not be named as a party in that action or in any subsequent proceeding.
Footnotes
Footnotes
1 Among the public records that may be excluded from public inspection in the absence of a court order authorizing inspection are those identified at KRS 61.878(1)(i) and (j) as:
(i) Preliminary drafts, notes, correspondence with private individuals other than correspondence which is intended to give notice of final action of a public agency.
(j) Preliminary recommendations and preliminary memoranda in which opinions are expressed or policies formulated or recommended.
2 See OAG 88-60 (public official properly denied access to a draft audit prepared by the Environmental Protection Agency and sent to the City of Owensboro under KRS 61.878(1)(i) and (j)); see also OAG 82-450; OAG 84-337; OAG 85-96.
3 Since this office issued 93-ORD-125, the Attorney General has applied this reasoning, for example, to the report prepared, and recommendations made by, a private attorney retained by the City of Louisville for the purpose of evaluating the Louisville Policemen's Retirement Fund (96-ORD-38); a study prepared by an outside consultant hired by the Hardin County Schools to examine the organizational structure and compensation system of administrators, classified staff, and teachers (96-ORD-121; 96-ORD-122); an analysis prepared by a private corporation under contract with the Transportation Cabinet evaluating alternatives for the design of a connector road (98-ORD-70); a presidential performance review prepared by an outside consultant for Kentucky State University (00-ORD-46); a draft report relating to proposed rate increases by Sanitation District No. 1 prepared by Burton & Associates (00-ORD-139) and a study conducted by Buck Consultants pertaining to classified employees and containing job and salary evaluation data (00-ORD-195).
4 A review of the Public School District Records Retention Schedule reveals that Records Series L1807 refers to the "Annual Financial Report" and the "Annual Approved Audit" interchangeably. Series L1807 documents "the complete accounting of receipts and disbursements during the current school year." It must be retained permanently. A summary is reported to DOE.
5 See 10-ORD-035 (KRS 424.220 is a mandatory provision imposing additional duties on the specified public officers relative to publication of certain financial data that are separate and apart from their duties under the Open Records Act).