CHAPTER 24
HOUSE BILL No. 2038
An Act concerning the Kansas lottery; amending K.S.A. 74-8702,
74-8706 and 74-8722 and
K.S.A. 2000 Supp. 74-8705, 74-8707, 74-8710, 74-8718 and 74-8723
and repealing the
existing sections.
Be it enacted by the Legislature of the State of Kansas:
Section 1. K.S.A. 2000 Supp.
74-8723 is hereby amended to read as
follows: 74-8723. (a) The Kansas lottery and the office of
executive di-
rector of the Kansas lottery, established by K.S.A. 74-8703, and
amend-
ments thereto, and the Kansas lottery commission, created by K.S.A.
74-
8709, and amendments thereto, shall be and hereby are abolished on
July
1, 2002 2008.
(b) This section shall be part of and
supplemental to the Kansas lot-
tery act.
Sec. 2. K.S.A. 74-8706 is hereby
amended to read as follows: 74-
8706. The executive director shall have the duty to:
(a) Make and keep books and records which
accurately and fairly
reflect each day's transactions, including but not limited to: The
distri-
bution of tickets and shares to lottery retailers; receipt of
funds, prize
claims, prize disbursements made by the Kansas lottery or otherwise
or
prizes liable to be paid by the Kansas lottery; expenses and other
financial
transactions of the Kansas lottery necessary so as to permit daily
account-
ability.
(b) Make quarterly and annual financial
reports to the commission,
the governor, the state treasurer and the legislature. Such reports
shall
be based upon generally accepted accounting principles and include
a full
and complete statement of lottery revenues, prize disbursements,
ex-
penses, net revenues and other financial transactions for the
reporting
period.
(c) Make available for inspection by the
commission, upon request,
all books, records, files and other information and documents of
the Kan-
sas lottery.
(d) Engage, in accordance with
K.S.A. 74-8705 and amendments
thereto, an independent firm experienced in security
procedures, includ-
ing but not limited to computer security and systems
security, to peri-
odically conduct a comprehensive study and evaluation of
all aspects of
security in the operation of the Kansas
lottery.
(e) (d) Engage,
in accordance with K.S.A. 74-8705, and amendments
thereto, an independent firm experienced in marketing research and
anal-
ysis to periodically conduct periodically
an evaluation to determine the
effectiveness of marketing, promotion and public information
programs
used by the Kansas lottery and make recommendations which will
en-
hance such programs.
(f) (e) Prepare
and submit budgets and proposals for the operation
of the Kansas lottery.
(g) (f) Operate
the Kansas lottery in such a manner that, after the
initial state appropriation, it is self-sustaining and
self-funded.
(h) (g) Make
available at the point of sale of any lottery tickets or
shares a list of the odds of winning such game, based upon the
number
of tickets or shares projected to be sold.
(i) (h) Make
provision for the timely and efficient transfer of funds
due from lottery retailers to the lottery operating fund, including
the use
of electronic funds transfers whenever possible.
Sec. 3. K.S.A. 2000 Supp. 74-8707
is hereby amended to read as
follows: 74-8707. (a) The accounts and transactions of the
Kansas lottery
and the Kansas lottery commission shall be subject to an annual
financial-
compliance audit, and such other audits as directed by the
legislative post
audit committee, under the legislative post audit act. The annual
audit
shall be conducted as soon after the close of the fiscal year as
practicable.
The auditor to conduct this audit work shall be specified in
accordance
with K.S.A. 46-1122, and amendments thereto. If the
legislative post audit
committee specifies under such statute that a firm, as defined by
K.S.A.
46-1112, and amendments thereto, is to perform all or part
of such audit
work, such firm shall be selected and shall perform such audit work
as
provided in K.S.A. 46-1123, and amendments thereto,
and K.S.A. 46-1125
through 46-1127, and amendments thereto.
The post auditor shall
annually compute annually the reasonably
an-
ticipated cost of providing audits pursuant to this
section subsection, sub-
ject to review and approval by the contract audit committee
established
by K.S.A. 46-1120, and amendments thereto. Upon such
approval, the
Kansas lottery shall reimburse the division of post audit for the
amount
approved by the contract audit committee. The furnishing of audit
serv-
ices pursuant to this section subsection
shall be a transaction between the
post auditor and the Kansas lottery and shall be settled in
accordance
with the provisions of K.S.A. 75-5516, and amendments
thereto.
(b) On or before December 31, 2004,
and at least once every three
years thereafter, there shall be conducted a security audit of
the Kansas
lottery. A security audit shall include a comprehensive study
and evalu-
ation of all aspects of security in the operation of the Kansas
lottery. The
auditor to conduct a security audit shall be specified in
accordance with
K.S.A. 46-1122, and amendments thereto. If the legislative post
audit com-
mittee specifies under such statute that a person, as defined by
K.S.A. 46-
1112, and amendments thereto, other than the post auditor is to
perform
all or part of such audit work, such person shall be selected
and shall
perform such audit work as provided in the applicable provisions
of K.S.A.
46-1123, and amendments thereto, and K.S.A. 46-1125 through
46-1127,
and amendments thereto. The person selected to perform a
security audit
shall be experienced in security procedures, including, but not
limited to,
computer and systems security. A contract to conduct a security
audit
required by this subsection, shall be considered a major
procurement con-
tract as defined by K.S.A. 74-8702, and amendments thereto, and
shall
not be awarded until a background investigation is conducted on
the per-
son or firm selected to perform the audit. Such background
investigation
shall be subject to the requirements of subsection (c) of K.S.A.
74-8705,
and amendments thereto.
For the purpose of conducting a security
audit under this subsection,
a person or a firm selected to perform the security audit shall
not be
limited to a legal entity permitted by law to engage in practice
as a cer-
tified public accountant.
The post auditor shall compute the
reasonably anticipated cost of pro-
viding audits pursuant to this subsection, subject to review and
approval
by the contract audit committee established by K.S.A. 46-1120,
and
amendments thereto. Upon such approval, the Kansas lottery shall
re-
imburse the division of post audit for the amount approved by
the contract
audit committee. The furnishing of audit services pursuant to
this sub-
section shall be a transaction between the post auditor and the
Kansas
lottery and shall be settled in accordance with the provisions
of K.S.A.
75-5516, and amendments thereto.
Sec. 4. K.S.A. 2000 Supp. 74-8705
is hereby amended to read as
follows: 74-8705. (a) Major procurement contracts shall be awarded
in
accordance with K.S.A. 75-3738 through 75-3744, and amendments
thereto, or subsection (b), as determined by the director, except
that:
(1) The contract or contracts for the
initial lease of facilities for the
Kansas lottery shall be awarded upon the evaluation and approval of
the
director, the secretary of administration and the director of
architectural
services;
(2) The commission shall designate
certain major procurement con-
tracts or portions thereof to be awarded, in accordance with rules
and
regulations of the commission, solely to minority business
enterprises.
(b) The director may award any major
procurement contract by use
of a procurement negotiating committee. Such committee shall be
com-
posed of: (1) The executive director or a Kansas lottery employee
desig-
nated by the executive director; (2) the chairperson of the
commission or
a commission member designated by the chairperson; and (3) the
director
of the division of purchases or an employee of such division
designated
by the director. Prior to negotiating a major procurement contract,
the
committee shall solicit bids or proposals thereon. The division of
pur-
chases shall provide staff support for the committee's
solicitations. Upon
receipt of bids or proposals, the committee may negotiate with one
or
more of the persons submitting such bids or proposals and select
from
among such persons the person to whom the contract is awarded.
Such
procurements shall be open and competitive and shall consider
relevant
factors, including security, competence, experience, timely
performance
and maximization of net revenues to the state. If a procurement
negoti-
ating committee is utilized, the provisions of K.S.A. 75-3738
through 75-
3744, and amendments thereto, shall not apply. Meetings conducted
by
the procurement negotiating committee shall be exempt from the
pro-
visions of the Kansas open meeting act, K.S.A. 75-4317 through
75-4320a,
and amendments thereto.
(c) Before a major procurement contract
is awarded, the executive
director shall conduct a background investigation of: (1) The
vendor to
whom the contract is to be awarded; (2) all officers and directors
of such
vendor; (3) all persons who own a 5% or more interest in such
vendor;
(4) all persons who own a controlling interest in such vendor; and
(5) any
subsidiary or other business in which such vendor owns a
controlling
interest. The vendor shall submit appropriate investigation
authorizations
to facilitate such investigation. The executive director may
require, in
accordance with rules and regulations of the commission, that a
vendor
submit any additional information considered appropriate to
preserve the
integrity and security of the lottery. In addition, the executive
director
may conduct a background investigation of any person having a
beneficial
interest in a vendor. The secretary of revenue, securities
commissioner,
attorney general and director of the Kansas bureau of investigation
shall
assist in any investigation pursuant to this subsection upon
request of the
executive director. Whenever the secretary of revenue, securities
com-
missioner, attorney general or director of the Kansas bureau of
investi-
gation assists in such an investigation and incurs costs in
addition to those
attributable to the operations of the office or bureau, such
additional costs
shall be paid by the Kansas lottery. The furnishing of assistance
in such
an investigation shall be a transaction between the Kansas lottery
and the
respective officer and shall be settled in accordance with K.S.A.
75-5516,
and amendments thereto.
Upon the request of the chairperson, the
Kansas bureau of investiga-
tion and other criminal justice agencies shall provide to the
chairperson
all background investigation information including criminal history
record
information, arrest and nonconviction data, criminal intelligence
infor-
mation and information relating to criminal and background
investiga-
tions of a vendor to whom a major procurement contract is to be
awarded.
Such information, other than conviction data, shall be confidential
and
shall not be disclosed, except as provided in this section. In
addition to
any other penalty provided by law, disclosure of such information
shall
be grounds for removal from office or termination of
employment.
(d) All major procurement contracts shall
be subject to approval of
the commission.
(e) The executive director shall not
agree to any renewal or extension
of a major procurement contract unless such extension or renewal
is
awarded in the manner provided by this section.
Sec. 5. K.S.A. 74-8702 is hereby
amended to read as follows: 74-
8702. As used in this the Kansas lottery
act, unless the context otherwise
requires:
(a) ``Commission'' means the Kansas
lottery commission.
(b) ``Executive director'' means the
executive director of the Kansas
lottery.
(c) ``Gaming equipment'' means any
electric, electronic or mechani-
cal device or other equipment unique to the Kansas lottery used
directly
in the operation of any lottery and in the determination of winners
pur-
suant to this act.
(d) ``Kansas lottery'' means the state
agency created by this act to
operate a lottery or lotteries pursuant to this act.
(e) ``Lottery retailer'' means any person
with whom the Kansas lottery
has contracted to sell lottery tickets or shares, or both, to the
public.
(f) ``Lottery'' or ``state lottery''
means the lottery or lotteries operated
pursuant to this act.
(g) ``Major procurement'' means any
gaming product or service, in-
cluding but not limited to facilities, advertising and promotional
services,
annuity contracts, prize payment agreements, consulting services,
equip-
ment, tickets and other products and services unique to the Kansas
lot-
tery, but not including materials, supplies, equipment and services
com-
mon to the ordinary operations of state agencies.
(h) ``Person'' means any natural person,
association, corporation or
partnership.
(i) ``Prize'' means any prize paid
directly by the Kansas lottery pur-
suant to its rules and regulations.
(j) ``Share'' means any intangible
manifestation authorized by the
Kansas lottery to prove participation in a lottery game.
(k) ``Ticket'' means any tangible
evidence issued by the Kansas lottery
to prove participation in a lottery game.
(l) ``Vendor'' means any person who has
entered into a major pro-
curement contract with the Kansas lottery.
(m) ``Returned ticket'' means any ticket
which was transferred to a
lottery retailer, which was not sold by the lottery retailer and
which was
returned to the Kansas lottery for refund by issuance of a credit
or oth-
erwise.
(n) ``Video lottery machine'' means any
electronic video game ma-
chine that, upon insertion of cash, is available to play or
simulate the play
of a video game authorized by the commission, including but not
limited
to bingo, poker, black jack and keno, and which uses a video
display and
microprocessors and in which, by chance, the player may receive
free
games or credits that can be redeemed for cash.
(o) (1) ``Lottery machine''
means any machine or device that allows
a player to insert cash or other form of consideration and may
deliver as
the result of an element of chance, regardless of the skill
required by the
player, a prize or evidence of a prize, including, but not
limited to:
(A) Any machine or device in which the
prize or evidence of a prize
is determined by both chance and the player's or players' skill,
including,
but not limited to, any machine or device on which a lottery
game or
lottery games, such as poker or blackjack, are
played;
(B) any machine or device in which the
prize or evidence of a prize
is determined only by chance, including, but not limited to, any
slot ma-
chine or bingo machine; or
(C) any lottery ticket vending
machine, such as a keno ticket vending
machine, pull-tab vending machine or an instant-bingo vending
machine.
(2) ``Lottery machine'' shall not
mean:
(A) Any food vending machine defined
by K.S.A. 36-501, and amend-
ments thereto;
(B) any nonprescription drug machine
authorized under K.S.A. 65-
650, and amendments thereto;
(C) any machine which dispenses only
bottled or canned soft drinks,
chewing gum, nuts or candies; or
(D) any machine excluded from the
definition of gambling devices
under subsection (d) of K.S.A. 21-4302, and amendments
thereto.
Sec. 6. K.S.A. 2000 Supp. 74-8710
is hereby amended to read as
follows: 74-8710. (a) The commission, upon the recommendation of
the
executive director, shall adopt rules and regulations governing the
estab-
lishment and operation of a state lottery as necessary to carry out
the
purposes of this act. Temporary rules and regulations may be
adopted by
the commission without being subject to the provisions and
requirements
of K.S.A. 77-415 through 77-438, and amendments thereto, but shall
be
subject to approval by the attorney general as to legality and
shall be filed
with the secretary of state and published in the Kansas register.
Tem-
porary and permanent rules and regulations may include but shall
not be
limited to:
(1) Subject to the provisions of
subsection (b) (c), the types of
lottery
games to be conducted, including but not limited to instant
lottery, on-
line and traditional games, but not including games on video
lottery ma-
chines or lottery machines.
(2) The manner of selecting the winning
tickets or shares, except that,
if a lottery game utilizes a drawing of winning numbers, a drawing
among
entries or a drawing among finalists, such drawings shall always be
open
to the public and shall be recorded on both video and audio
tape.
(3) The manner of payment of prizes to
the holders of winning tickets
or shares.
(4) The frequency of the drawings or
selections of winning tickets or
shares.
(5) The type or types of locations at
which tickets or shares may be
sold.
(6) The method or methods to be used in
selling tickets or shares.
(7) Additional qualifications for the
selection of lottery retailers and
the amount of application fees to be paid by each.
(8) The amount and method of compensation
to be paid to lottery
retailers, including special bonuses and incentives.
(9) Deadlines for claims for prizes by
winners of each lottery game.
(10) Provisions for confidentiality of
information submitted by ven-
dors pursuant to K.S.A. 74-8705, and amendments thereto.
(11) Information required to be submitted
by vendors, in addition to
that required by K.S.A. 74-8705, and amendments thereto.
(12) The major procurement contracts or
portions thereof to be
awarded to minority business enterprises pursuant to subsection (a)
of
K.S.A. 74-8705, and amendments thereto, and procedures for the
award
thereof.
(b) No new lottery game shall commence
operation after the effective
date of this act unless first approved by the governor or, in the
governor's
absence or disability, the lieutenant governor.
(c) The lottery shall adopt rules and
regulations concerning the game
of keno. Such rules and regulations shall require that the
amount of time
which elapses between the start of games shall not be less than
four
minutes.
Sec. 7. K.S.A. 2000 Supp. 74-8718
is hereby amended to read as
follows: 74-8718. (a) It is unlawful for:
(1) Any person To sell a
lottery ticket or share at a price other than
that fixed by rules and regulations adopted pursuant to this
act;
(2) for any person other than a
lottery retailer authorized by the Kan-
sas lottery to sell or resell any lottery ticket or share;
or
(3) any person to sell a
lottery ticket or share to any person, knowing
such person to be under 18 years of age.;
or
(4) to sell a lottery ticket at retail
by electronic mail, the internet or
telephone.
(b) (1) Violation of this section
is a class A nonperson misdemeanor
upon conviction for a first offense; and
(2) violation of this section is a
severity level 9, nonperson felony upon
conviction for a second or subsequent offense.
Sec. 8. K.S.A. 74-8722 is hereby
amended to read as follows: 74-
8722. (a) The Kansas lottery shall not recruit for
employment or as a
volunteer any person under 18 years of age for the purpose of
appearing,
being heard or being quoted in any advertising or promotion of any
lottery
in any electronic or print media.
(b) The unsolicited advertisement or
promotion of any lottery by the
Kansas lottery through electronic mail or telephone is
prohibited.
(c) All advertising and marketing
practices of the Kansas lottery shall
meet or exceed the standards of the North American association
of state
and provincial lotteries (NASPL) which are in effect on July 1,
2001, or
any later version as adopted by the commission in rules and
regulations.
Sec. 9. K.S.A. 74-8702, 74-8706 and 74-8722 and
K.S.A. 2000 Supp.
74-8705, 74-8707, 74-8710, 74-8718 and 74-8723 are hereby
repealed.
Sec. 10. This act shall take effect and be in
force from and after its
publication in the statute book.
Approved March 20, 2001.
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