The public is entitled to scrutinize the records of private entities doing business with the state to the extent they become the “functional equivalent” of government agencies, the Tennessee Supreme Court said Thursday in a decision addressing two significant right-to-know issues.
The unanimous opinion, authored by Justice Adolpho A. Birch, Jr., said the records of Cherokee Children & Family Services, Inc., of Memphis fall under the state’s Public Records Act and also are subject to an audit by State Comptroller of the Treasury John Morgan. The decision stems from two cases consolidated for review by the court. The Supreme Court ruling reversed a Court of Appeals decision that the records are not public and not subject to a state audit.
“. . . The public’s fundamental right to scrutinize the performance of public services and the expenditure of public funds should not be subverted by government or by private entity simply because public duties have been delegated to an independent contractor,” Birch wrote. “When a private entity’s relationship with the government is so extensive that the entity serves as the functional equivalent of a governmental agency, the accountability created by public oversight should be preserved.”
In one case - Memphis Publishing Company, et al., v. Cherokee Children & Family Services, Inc., et al. - The Commercial Appeal sought to inspect Cherokee’s records under the Tennessee Public Records Act. The newspaper, published by Memphis Publishing Co. (MPC), contended the records were public property because Cherokee derived virtually all of its revenues from the government through contracts with the Tennessee Department of Human Services. Also, MPC claimed, Cherokee should be deemed a state agency subject to the Public Records Act because of the services it performed between 1990 and 2000. The state contracted with Cherokee to administer a government-subsidized child care program.
In the second case - John Morgan v. Cherokee Children & Family Services, Inc. - the state comptroller filed suit asking the court to require the non-profit corporation to submit to a state audit.
Morgan said state law and contracts between Cherokee and TDHS provided authority to conduct an audit of Cherokee’s records.
In both cases, trial courts found that Cherokee was not a government agency, but that all records in its possession were state property. The trial court also found in the Morgan case that an audit was authorized under state law. The Court of Appeals reversed the orders granting access to the records.
“After thorough review of the record and relevant authority, we hold that all of Cherokee’s records are subject to access by the public and the comptroller under the terms of the Tennessee Public Records Act,” Birch wrote for the Supreme Court.
Birch said the Public Records Act “serves a crucial role in promoting accountability in government through public oversight of governmental activities.” Birch cited the law which says it should be “?broadly construed so as to give the fullest possible public access to public records.’”
With privatization, or contracting out, increasingly used to provide services formerly provided by the government, Birch said attention has become focused on accountability to the public. He said courts in other states also have “examined how public records laws should apply in a climate of increased privatization to ensure that public access, and hence governmental accountability, is preserved.”
The Court of Appeals has taken a “narrow approach” in defining records subject to the Public Records Act, Birch wrote. Citing a previous decision, he said the Court of Appeals denied access to records because a non-profit corporation had not been established by the legislature “regardless of its public function, public oversight and public funding.”
He said the “agency” analysis used in that case to determine whether records should be subject to the Public Records Act is not appropriate because of “the growing trend toward privatization of governmental functions and services.” He said the state’s contracts with Cherokee called for the non- profit corporation to provide a service previously provided by the government or on behalf of the government.
“Our review of authority from other jurisdictions persuades us that the functional equivalency approach . . . provides a superior means for applying public records laws to private entities which perform ?contracted out’ government services,” Birch wrote.
But, he added, the decision “is not intended to allow public access to the records of every private entity which provides any specific, contracted-for services to governmental agencies.” Only those private entities providing services to the extent that they become the “functional equivalent” of a government agency are subject to the Public Records Act, he said.