Request By:
Mr. Vic Hellard, Jr.
Director
Legislative Research Commission
Capitol Building
Frankfort, Kentucky 40601
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Robert L. Chenoweth, Assistant Deputy Attorney General and Chief Counsel
You have asked the Office of the Attorney General to consider the following question:
"Even though KRS 41.290 permits universities to keep private funds and not transfer those funds to the treasurer, does that also mean the purchasing procedures of KRS Chapters 45 and 45A do not apply either?"
It is the opinion of the Office of the Attorney General that state universities are generally not required to follow the procedures of KRS Chapters 45 and 45A in the expenditure of private funds or contributions so long as no germane provisions in the new universities management bill, House Bill 622, passed by the 1982 regular session of the General Assembly, are applicable. We will explain this qualified answer in detail below.
KRS 41.290 requires that "Every department, institution or other agency of the state government having private funds or contributions available for its support or for the purpose of defraying the expenses of any work done under its direction shall deposit such funds or contributions with the treasurer, and shall certify to the executive department for finance and administration the sources from which the funds or contributions were received, the terms and conditions under which, and the purpose for which, they were received, the names of the trustees or administrators of the funds or contributions, and the name of the person authorized to approve expenditures from each fund or contribution." Exempted from this requirement are the "private funds or contributions made and available to the governing board of the state supported institutions of higher learning." KRS Chapters 45 and 45A concern public funds of the Commonwealth such that these provisions are not applicable to the private funds and contributions covered in KRS 41.290. See for example KRS 45A.020 relative to the application of the procurement code, which states in part that "This code shall apply to every expenditure of public funds by this Commonwealth . . ."
Your opinion request, however, causes us to refer to several provisions in the new university's financial management bill, House Bill 622, passed by the 1982 regular session of the General Assembly. Most important to be understood, we believe, is the fact this legislation is not mandatorily applicable to the state supported institutions of higher education. Section 3 of this Act, codified as KRS 164A.560, has been entitled "Election by institution to perform in accordance with KRS 164A.555 to 164A.630 . . ." This provision, in pertinent part, reads:
(1) The governing boards of the public institutions of higher education electing to perform in accordance with this Act regarding the acquisition of funds, accounting, purchasing, capital construction and affiliated corporations shall do so by regulation. The responsibility for this election is vested with the governing boards, any other statute to the contrary notwithstanding. The governing board may delegate these responsibilities by regulation to appropriate officials of the institution. The anticipated investment earnings which have been credited to the general fund and the anticipated investment earnings on funds in the capital construction account, excluding revenue bonds, for fiscal years 1982-83 and 1983-84 may be deducted from the respective institution's trust and agency funds on deposit prior to the issuance of a check or transfer to the governing board.
(2) The governing boards of institutions may elect to receive, deposit, collect, retain, invest, disburse, and account for all funds received or due from any source including, but not limited to, state and federal appropriations for the support or maintenance of the general operations or special purpose activities of such institutions.
We believe from this language it is clear the state universities are at liberty to elect all, some of or none of the provisions of House Bill 622. If provisions of House Bill 622 are adopted by a state university, it is important to note that Section 19 of the Act (164A.630), in relevant part, states:
(1) In carrying out the provisions of this Act the governing boards shall be bound by the following statutes:
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(b) The Kentucky Model Procurement Code as set forth in KRS Chapter 45A.
See also Sections 6, 7 and 8 of House Bill 622, codified as KRS 164A.575, 164A.580 and amending KRS 164.410. However, we are still of the opinion the private funds and contributions received by a state university would not be subject to the State Model Procurement Code, as set out in Chapter 45A, if such procurement strictures were inconsistent with the terms attendant to receipt of the private funds or contributions. Section 15 of House Bill 622, KRS 164A.615, provides as follows:
Nothing contained in this Act shall be construed to prevent an institution or an affiliated corporation from enforcing or carrying out the bona fide terms of any gift, grant, conveyance, devise or bequest from any private person, corporation, foundation, estate or other entity contributing funds or any other thing of value to the institution or affiliated corporation, nor shall same be construed to prevent an affiliated corporation from awarding athletic scholarships or other scholarship, fellowship, assistantship or similar grants, loans or awards to students, faculty or other employes of an institution, or from performing such other functions as may be assigned by the institution's governing board.
We trust the above adequately responds to the question you have presented.