HOUSE BILL No. 2038
K.S.A. 2000 Supp. 74-8705, 74-8707, 74-8710, 74-8718 and 74-8723 and repealing the existing sections.
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-
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-
(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
(c) Make available for inspection by the commission, upon request,
all books, records, files and other information and documents of the Kan-
(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
(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,
(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,
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
(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
(a) ``Commission'' means the Kansas lottery commission.
(b) ``Executive director'' means the executive director of the Kansas
(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
(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-
(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-
(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
(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
(4) The frequency of the drawings or selections of winning tickets or
(5) The type or types of locations at which tickets or shares may be
(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
(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
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
(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, 2000.
Date Composed: 09/25/2001 Date Modified: 09/25/2001