Request By:
Mr. Vic Hellard, Jr.
Director, Legislative
Research Commission
State Capitol
Frankfort, Kentucky 40601
Opinion
Opinion By: Frederic J. Cowan, Attorney General; Nathan Goldman, Assistant Attorney General
In your letter to the Attorney General you ask whether the Auditor of Public Accounts may enter into a contract for audit services for up to five (5) years, thus extending the contractual obligation beyond the period of a biennium.
KRS 154A.130(3), enacted at the 1988 Extraordinary Session, requires the Auditor of Public Accounts to be responsible for a postaudit of the Kentucky Lottery Corporation, as well as any other audits deemed necessary or desirable. The Auditor is to contract with an independent, certified public accountant to perform the corporation postaudit. The statute states, in part: "Contracts shall be entered into for audit services for a period not to exceed five (5) years and the same firm shall not receive two (2) consecutive audit contracts."
Section 230 of the Kentucky Constitution prohibits money from being drawn from the State Treasury except in pursuance of an appropriation made by law. An appropriation may only be made while the General Assembly is in session. OAG 82-154. The General Assembly meets in regular session every two years. Ky. Const., § 36. Appropriations are generally made for the biennium between regular sessions of the General Assembly.
In
Preston v. Clements, 313 Ky. 479, 232 S.W.2d 85, 91 (1950), the Court held that a lease agreement could not bind any future General Assembly to appropriate any money to pay the rentals for a period longer than any biennium for which an appropriation may be made by the General Assembly.
However, in
Miller Insurance Agency v. Porter, Mont., 20 P.2d 643 (1933), the Montana Supreme Court addressed the question of whether the state may enter into a three-year contract for insurance in light of a constitutional provision which stated that "no appropriation of public moneys shall be made for a longer period than two years." The court upheld the state's authority to enter into a three (3) year contract. It stated as follows:
"However, our Constitution contains no prohibitions against the making of contracts which are not to be performed within two years. In the absence of such a prohibition the Legislature may authorize the making of a contract for a longer period, as our Constitution is a limitation on and not a grant of power. . . .
The appropriation would expire in two years under the constitutional mandate; but, being valid during the biennium, insurance contracts for a term of three years and payments made therefore during that period from the funds so appropriated, would not violate this section of the Constitution."
Id. at 645. Similarly, the Kentucky Constitution is a limitation on and not a grant of power.
Hopkins v. Ford, Ky., 534 S.W.2d 792 (1976).
There is no constitutional provision of which we are aware that prohibits the state from entering into a contract for more than two years. However, one who contracts with the state is chargeable with the knowledge of the limitations imposed on any state contract. 72 C.J.S. Supp. Public Contracts § 4. Thus, the General Assembly is not required to appropriate funds after the biennium, if, in fact, general funds are required. However, in further support of our conclusion we note that the Lottery Corporation is required to pay the costs of the audit. KRS 154A.130(3). Since it is envisioned that the Lottery Corporation will be self-sufficient, that is, it will raise its operational funds independently of general fund appropriations, it would appear that no general fund appropriation will be required to pay the costs of the contract. In that case, we can find no constitutional restriction on the length of the contract.
In our opinion, the Auditor may enter into a contract for audit services for up to five (5) years.