September 29, 1997


In re: Malcolm R. King/Hopkinsville Water Environment Authority

Open Records Decision

This is an appeal from the Hopkinsville Water Environment Authority’s response to Malcolm R. King’s July 22, 1997, request for copies of the Authority’s financial statements for the months of May and June, 1997. On July 25, 1997, the authority’s general manager, L. F. Hale, furnished Mr. King with copies of the May and June financial statements. Mr. King, a former employee of the Sewerage and Water Works Commission, and for eleven years the Authority’s general manager, objected that Mr. Hale failed to include the balance sheets for these months. The Authority responded that "beginning in May, 1997, at the advice of our financial consultants, we ceased producing a ‘balance sheet’ with the monthly financial report." Mr. Hale explained that "the new financial report contains a ‘profit and loss’ statement for each system and a comparison between the budget and actual revenues and costs." Mr. King counters:

An up to date report or Balance Sheet of all accounts receivable, payable, investments, cash on hand, deferred charges, bonded indebtedness, etc., has to be performed to close out the fiscal year which is June 30, 1997. The HWEA monthly depreciation schedule cannot be kept current without a balance of all accounts monthly.

It is his position that the balance sheet reflects the Authority’s financial condition on a monthly basis.

The question presented in this appeal is whether the Hopkinsville Water Environment Authority violated the Open Records Act in responding to Mr. King’s request. For the reasons which follow, we find that the Authority cannot be said to have violated the Act insofar as it cannot produce records which do not exist because they are not maintained. However, because this appeal raises records management issues, we have referred the matter to the Department for Libraries and Archives for review under Chapter 171 of the Kentucky Revised Statutes.

In a recent open records decision, the Attorney General observed:

This office has long recognized that a public agency cannot furnish access to records which do not exist. See, for example, OAG 83-111; OAG 87-54; OAG 91-112; OAG 91-203; 97-ORD-17. We have also recognized that it is not our duty to investigate in order to locate documents which do not exist or have disappeared. OAG 86-35. Thus, at page 5 of OAG 86-35 we observed, "This office is a reviewer of the course of action taken by a public agency and not a finder of documents . . . for the party seeking to inspect such documents."

In 1994 the Open Records Act was amended. The Act now provides "that to ensure the efficient administration of government and to provide accountability of government activities, public agencies are required to manage and maintain their records according to the requirements of [KRS 171.410 to 171.740, dealing with the management of public records, and KRS 61.940 to 61.957, dealing with the coordination of strategic planning for computerized information systems]." KRS 61.8715. The General Assembly has thus recognized "an essential relationship between the intent of [the Open Records Act]" and statutes relating to records management. Id.

Since these amendments took effect on July 15, 1994, the Attorney General has applied a higher standard of review to denials based on the nonexistence of the requested records. In order to satisfy its statutory burden of proof, an agency must, at a minimum, offer some explanation for the nonexistence of the records. See, for example, 94-ORD-140 (records of investigation not in sheriff’s custody because sheriff did not conduct investigation); 97-ORD-17 (evaluations not in university’s custody because written evaluations were not required by university’s regulations).

97-ORD-116, p. 1, 2. Noting that the public agency had failed to offer even a minimal explanation for the nonexistence of records which were apparently required by law, we concluded that we were unable to determine if the agency had established an adequate basis or explanation for the nonexistence of the disputed records and thus met its statutory burden of proof. KRS 61.880(2)(c). Accordingly, we referred the matter to the Department for Libraries and Archives "for a determination whether additional inquiries were warranted under Chapter 171, and in particular KRS 171.640 requiring adequate and proper documentation of essential transactions of the agency." See also, 97-ORD-103 (referring dispute to Department for Libraries and Archives where local health department denies existence of permit for disposal of septic tank pumpings without adequate explanation).

We believe that these decisions have a direct bearing on Mr. King’s appeal. KRS 96.320 provides that cities of the second class which own a waterworks may appoint a commission to operate the waterworks, and the commission "shall make full monthly reports to the city legislative body of the operation and condition of the water system, including all receipts and expenditures." The same requirement appears in Chapter 51 of the City of Hopkinsville Code of Ordinances at § 53.19(A) which provides, "Complete records and accounts of all matters affecting the sewerage and water works system, including receipts and disbursements of all funds, shall be kept by the Commission," and in Chapter 53 of the Code at § 53.19(A) which provides, "The Sewerage and Water Works Commission shall maintain financial records to accurately account for revenues generated by the treatment system and expenditures for operation and maintenance of the system, including normal replacement costs."

Acknowledging our lack of expertise in financial reporting requirements, we note that a cursory review of the definition of the terms "balance sheet" and "profit and loss statement" reveals a significant difference between the two. Black’s Law Dictionary 130 (West, 5th ed 1979) indicates that a "balance sheet" is "a statement of financial position of any economic unit, disclosing as at a given moment of time, assets, at cost, depreciated cost, or other indicated value, its liabilities, and the equity of the owners in conformity with generally accepted accounting principles." A "profit and loss statement," on the other hand, is "a statement showing the income and expenses of a business over a stated time; the difference being the profit or loss for the period." Black’s Law Dictionary at 1090. It appears that the terms are not synonymous, and that, in fact, each type of financial statement serves a different purpose. In other words, the profit and loss statement does not necessarily satisfy the requirements of the statute and ordinances by adequately reflecting revenues generated and expenditures for operation of the system.

We have consulted with both attorneys and accountants in the Attorney General’s Office who express concerns about the Authority’s apparent financial reporting methods. Given these concerns, and the Authority’s failure to explain its decision to discontinue the practice of maintaining monthly balance sheets with its monthly financial report, we believe it prudent to refer this appeal to the Department for Libraries and Archives for a determination whether additional inquiries are warranted, and specifically whether the Authority’s system of financial reporting satisfies the requirements of KRS 171.640 relative to adequate and proper documentation of the essential transaction of the Authority.

As noted in 97-ORD-116 and 97-ORD-103, cited above, ultimately we cannot afford Mr. King the relief he seeks, namely access to the monthly balance sheets for May and June, 1997. Nor can we declare the Authority’s failure to produce apparently nonexistent records a violation of the Open Records Act or compel disclosure of records which the Authority indicates were never created. However, because of concerns expressed by attorneys and accountants in this office and an unexplained change in its financial reporting methods, we have referred Mr. King’s appeal to the Department for Libraries and Archives for additional inquiries as the Department deems appropriate.

A party aggrieved by this decision may appeal it by initiating action in the appropriate circuit court pursuant to 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.




Amye L. Bensenhaver

Assistant Attorney General


Distributed to:

Malcolm R. King

114 Treasure Island Court

Hopkinsville KY 42240


L. F. Hale, General Manager

Hopkinsville Water Environment Authority

101 North Main Street

P.O. Box 628

Hopkinsville KY 42241-0628

Andrew C. Self

Deatherage, Myers & Self

701 South Main Street

Post Office Box 1065

Hopkinsville KY 42241-1065

Richard Belding, Director

Public Records Division

Department for Libraries and Archives

300 Coffee Tree Road

PO Box 537

Frankfort KY 40601