Bob Ferguson
Other LanguagesAGLO 1974 No. 58 -
Attorney General Slade Gorton
FAIRS ‑- EXPO '74 ‑- AUDITS ‑- AUTHORITY OF STATE AUDITOR TO AUDIT
Expo '74, Inc. is not a state agency at the present time; however, to the extent that it receives public funds from, or otherwise transacts business with, the state or any of its agencies or municipal corporations, its records relative to such transactions are subject to examination by the state auditor.
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May 24, 1974
Honorable Robert V. Graham
State Auditor
Legislative Building
Olympia, Washington 98504 Cite as: AGLO 1974 No. 58
Dear Sir:
By letter previously acknowledged, you have requested our opinion on several questions pertaining to the audit responsibilities of your office with respect to the financial records and activities of Expo '74, Inc. Specifically, you have asked:
"1. Is Expo '74, Inc. a state agency and therefore subject to an audit of its financial operations by the State Auditor's Office under the provisions of RCW 43.09.290, et seq.?
"2. If the answer to (1) above is in the negative, what audit responsibility does the State Auditor's Office have, if any?
"3. To what extent are monies paid directly to Expo '74, Inc. by state agencies subject to audit by the State Auditor's Office?"
We answer your questions as follows:
Expo '74, Inc. is not a state agency at the present time; however, to the extent that it receives public funds from, or otherwise transacts business with, the state or any of its agencies or municipal corporations, its records relative to such transactions are subject to examination by the state auditor.
Our reasoning in support of the foregoing conclusions is set forth below.
ANALYSIS
Each of your questions involves the extent to which the financial records and activities of Expo '74, Inc. are auditable by your office under the provisions of existing state law ‑ as set forth in the several statutes to be noted later in this opinion. First, however, let us attempt, as best we can from the information available to us, [[Orig. Op. Page 2]] to establish the present legal status of this nonprofit corporation which is currently involved in the operation of what thus far appears to be a most successful international exposition in the city of Spokane.
The status of Expo '74, Inc. was previously considered by this office in an opinion dated September 22, 1971, to State Representative Margaret Hurley [[an Informal Opinion AIR-71610]], a copy of which we are herewith enclosing for your immediate reference. In that opinion, we first noted the enactment by the 1971 legislature of chapter 1, Laws of 1971, 1st Ex. Sess., making provision for the conduct of an exposition, to be known as "Expo '74", in the city of Spokane during 1974. We then identified the governing body of this exposition as the Expo '74 Commission, a state agency provided for in § 4 of the act1/ which reads as follows:
"There is created the Expo '74 commission to consist of fifteen members to be selected as follows: Five by the governor, of whom one shall be designated by the governor as chairman of the commission, three by the president of the senate (lieutenant governor) and three by the speaker of the house of representatives to serve until April 30, 1975, the lieutenant governor, the speaker of the house of representatives, one member of the board of county commissioners of Spokane county to be appointed by such board, and one member of the Spokane city council to be appointed by such council. The commission shall serve without compensation and shall meet at such time as it is called by the governor or by the chairman of the commission."
Thereupon, we went on to indicate that in conducting the exposition, this commission was directed by the legislature to act through a nonprofit corporation organized under the provisions of chapter 24.03 RCW, in accordance with the following provisions of § 5 of the act:2/
"The members of the exposition commission may become directors of Expo '74, a nonprofit coproration organized under the provisions of chapter 24.03 RCW and may remain [[Orig. Op. Page 3]] directors of the corporation as long as they are members of the commission or until their successors are appointed and qualified. The exposition commission through the nonprofit corporation shall stage an exposition in the city of Spokane during the year 1974 or as soon thereafter as deemed practical by the commission and shall carry out the purposes of the exposition by suitable exhibits."
With these statutes in mind, we next considered the question of whether this corporation ‑ Expo '74, Inc. ‑ was, itself, a "state agency" within the meaning of so much of the state environmental policy act, chapter 109, Laws of 1971, 1st Ex. Sess., as requires all state agencies, municipal and public corporations, and counties to prepare environmental impact statements in connection with ". . . major actions significantly affecting the quality of the environment, . . ." We answered this question in the affirmative, saying,
". . . At first blush, it might appear that this organization is merely a private corporation and thus is not covered by the environmental impact requirements of chapter 109. However, close examination of the relationship between this corporation and the Expo 74 commission leads us to conclude that the corporation serves, in effect, as an alter ego of the commission for the purpose as expressed in § 5, chapter 1, Laws of 1971, 1st Ex. Sess., of staging the exposition to which this act refers. This section, it will be recalled, provides in material part that:
"'. . . The exposition commission through the nonprofit corporation shall stage an exposition in the city of Spokane during the year 1974 or as soon thereafter as deemed practical by the commission and shall carry out the purposes of the exposition by suitable exhibits.' (Emphasis supplied.)"
Accordingly, we concluded that as of that date the activities of Expo '74, Inc. insofar as they had any environmental impact within the meaning of chapter 109, Laws of 1971, 1st Ex. Sess., supra, were to be regarded as subject to the requirements of § 3 thereof ‑ just as if they were activities of the Expo '74 commission itself. At least, that [[Orig. Op. Page 4]] was the picture which we then saw on the basis of what then appeared to be the relationship between the commission and the corporation.
Subsequently, however, the situation has been significantly altered. In most basic terms, unlike what we then viewed as the analogous situation at Century 21 in Seattle,3/ in which the Washington State Commission actually staged a "World's Fair",4/ "Expo '74" is now a "World Exposition" that is being presented by the United States Government in accordance with regulations promulgated by the Bureau of International Expositions (BIE).
The dramatic difference in responsibilities for staging this fair was precipitated in 1967 when President Johnson submitted for ratification by the United States Senate the "Treaty for International Exhibitions Convention, With Protocols," hereinafter referred to as the "BIE Treaty." This treaty, originally entered into by some 26 nations in 1928, contains an international agreement regarding the creation and operation of "International Exhibitions."5/ After its approval by the Senate, the full Congress adopted Public Law 91-269 on May 27, 1970, by which the United States implemented its resulting treaty obligations and established the procedures for staging "International Expositions" in this country. As a consequence, no International Exposition involving federal participation can now be held in the United States without approval by the President, registration of the Exposition by the Bureau of International Expositions created by the BIE Treaty, a finding by the President that such federal recognition is proper, and preparation of a plan for federal participation by the United States Secretary of Commerce.6/
None of these aforementioned conditions precedent to the staging of an International Exposition involving the United States government's participation, however, had been met by the operators of "Expo '74" when chapter 1, Laws of 1971, 1st Ex. Sess., supra, was enacted in 1971 ‑ or even by the time our opinion of September 22, 1971, was written. But as you are [[Orig. Op. Page 5]] well aware, the United States government is now participating in Expo '74. Hence, the Washington State Commission for Expo '74 created by chapter 1, supra, has since been largely preempted insofar as its statutory duty to "stage an exposition in the city of Spokane" is concerned.7/
The nature of this "preemption" is best exemplified by Article 4 of the General regulations of the Spokane World Exposition, hereinafter referred to as the "General Regulations." Drawing authority from Article 8 of the BIE Treaty,8/ Article 4 of the General Regulations provides:
"The Exposition is in accordance to the demands of the Public Law No. 91-269 approved on May 27, 1970, regarding international expositions officially recognized in the U.S. as well as regarding conditions established by the regulations of the government of the United States.
[[Orig. Op. Page 6]]
"The 1974 Spokane Exposition shall be under the general authority of the U.S. Department of Commerce, acting through the Commissioner General of the Government, which shall exercise the U.S. Government's responsibility and assure the carrying out of all legal and material acts required for this purpose."
Acting pursuant to Article 5 of the same General Regulations on June 25, 1973, President Nixon appointed Mr. Wells Henderson as Commissioner General.9/ This is another event that has clearly resulted in total federal control of the "staging" of Expo '74, for Article 5 of the General Regulations grants to the U.S. Commissioner General total control of the Exposition, as follows:
"The Commissioner General of the Government shall be responsible for assuring that the commitments entered into with participants are duly honored and for supervising the application of the program in compliance with the provisions of the General Regulations, alone represent the Government in all matters related to the Exposition, exercise full disciplinary powers over the entire Exposition and in this capacity, ex-officio suspend at any time, end any activity, or request the withdrawal of goods of any origin incompatible with the proper handling of the Exposition."
[[Orig. Op. Page 7]]
In summary, then, the Spokane World Exposition, commonly known as Expo '74, is now under the lawful direction of the United States government in accordance with the terms of the BIE Treaty and regulations promulgated by the Treaty's Bureau of International Expositions. The methods of exhibition, exhibitor conduct, building codes applicable to exhibits, commercial concession regulations, the sales of goods and materials, insurance, site usage, power rates, and construction methods, which are just some of the elements involved in the "staging of an exposition," are now thoroughly and precisely regulated by the BIE‑approved General Regulations and Special Regulations for the conduct of the "Spokane World Exposition."10/ As a result, the Washington State Commission for Expo '74 has literally not only done nothing to stage the "Exposition" that it is charged to accomplish by RCW 43.96B.050, but that commission has in fact confined itself merely to the responsibilities of presenting the Washington State Exhibit at the "Spokane World Exposition" as well as assisting in the construction of the Pan-African Foundation's Afro-American Pavilion.11/
Federal preemption of the control of Expo '74 has also altered the role of the Expo '74 nonprofit corporation. It is now confining itself to the status of "the organizer" of the Spokane World Exposition and is directly responsible to the Commissioner General of the United States for the conduct of the Exposition.12/ Treaty authority for this role of Expo '74, Inc. is drawn from Article 16 of the BIE Treaty, which provides:
[[Orig. Op. Page 8]]
"The Governments of participating countries shall appoint commissioners or delegates to represent them and to see that the regulations of the exhibition are observed."
Accordingly, it can no longer be said that Expo '74, Inc. is a state agency through which the Washington State Commission for Expo '74 is conducting an exposition. RCW 43.96B.050 has been largely superseded by the exercise of the treaty power of the United States government and the federal supremacy clause.13/ The Washington State Commission for Expo '74 is not staging an exposition at Spokane in 1974; the United States government is.
That the BIE Treaty can have just as much preemptive effect as a federal law inconsistent with a state statute is well established in Asakura v. City of Seattle, 265 U.S. 332, S.Ct. 515, 68 L.Ed. 332 (1924). In that case, the United States Supreme Court interpreted a Japan-United States Treaty and ruled that this treaty had just as much preemptive effect on a Seattle municipal ordinance as any provision of the federal Constitution or United States laws. The court there noted that a treaty:
[[Orig. Op. Page 9]]
". . . stands on the same footing of supremacy as do the provisions of the Constitution and laws of the United States. It operates of itself, without the aid of any legislation, state or national; and it will be applied and given authoritative effect by the courts. . . ."
Thus, insofar as the operational and legal authority for the staging of the Spokane World Exposition is concerned, the Washington State Commission for Expo '74 has been preempted by a contrary exercise of the United States treaty power and implementing federal law. This conclusion is a necessary result of the explicit declaration of the federal Constitution regarding the treaty power, i.e., that when there is a conflict between a treaty and the provisions of a state statute, the treaty will control.14/ U.S. v. Belmont, 301 U.S. 324, 57 S.Ct. 758, 81 L.Ed. 1134 (1937); see annotation at 134 ALR 885. That the regulations promulgaged pursuant to the BIE Treaty are to be given the same "preemptive effect" as provisions of the treaty itself is dictated by the general rule that treaties are to be liberally construed so as to carry out the intention and purposes of the parties. U.S. v. Pink, 315 U.S. 203, 62 S.Ct. 552, 86 L.Ed. 796 (1942); 52 Am.Jur. Treaties § 4.
However, the "preemptive impact" of a treaty upon a state statute is tempered if the language of the treaty can be construed so as not to override state laws or to impair rights arising under them. Guaranty Trust Company of N.Y. v. United States, 304 U.S. 126, 58 S.Ct. 785, 82 L.Ed. 1224 (1938); Todok v. Union State Bank, 281 U.S. 449, 50 S.Ct. 363, 74 L.Ed. 956 (1930). Thus, although BIE recognition and U.S. control of the staging of the "Spokane World Exposition" no longer justifies the conclusion that Expo '74, Inc. is merely an alter ego of the Washington State Commission, this does not totally exclude the state auditor from any post-audit responsibilities with regard to its financial records and activities, as we shall now see.
RCW 43.09.310 provides that:
[[Orig. Op. Page 10]]
"The state auditor, through the division of departmental audits, shall make a post-audit of every state department at such reasonable periodic intervals as he shall determine but in each case an audit shall be conducted every two years. A report of each post-audit upon completion thereof, shall be made in sextuplet, and one copy shall be transmitted to the governor, one to the director of the office of program planning and fiscal management, one to the attorney general, one to the state department audited, one to the legislative budget committee, and one shall be kept on file in the office of the state auditor."
The term "post-audit," as used in this statute, is defined in RCW 43.09.290 as meaning:
". . . an annual audit of the books, records, funds, and financial transactions of a state department for a complete fiscal period; pre‑audit means all other audits and examinations; state department means elective officers and offices, and every other office, officer, department, board, council, committee, commission, authority, or agency of the state government now existing or hereafter created, supported, wholly or in part, by appropriations from the state treasury or funds under its control, or by the levy, assessment, collection, or receipt of fines, penalties, fees, licenses, sales of commodities, service charges, rentals, grants-in-aid, or other income provided by law, and all state educational, penal, reformatory, charitable, eleemosynary or other institutions, supported, wholly or in part, by appropriations from the state treasury or funds under its control."
RCW 43.88.160(3), a part of the state budget and accounting act, also provides, in pertinent part, that the state auditor shall:
"(d) Be empowered to take exception to specific expenditures that have been incurred by any agency or to take exception to other practices related in any way to the agency's financial transactions and to cause such exceptions to be made a matter of public record, including disclosure to the agency concerned and to the director of program planning and fiscal [[Orig. Op. Page 11]] management. It shall be the duty of the director of program planning and fiscal management to cause corrective action to be taken promtly, such action to include, as appropriate, the withholding of funds as provided in RCW 43.88.110.
"(e) Shall promptly report any irregularities to the attorney general."
The auditor is further required by another statute to make periodic examinations or audits of the financial transactions of every municipal corporation and public office or officer of this state. RCW 43.09.260 provides, in pertinent part, as follows:
"The state auditor, the chief examiner, and every state examiner shall have power by himself or by any person legally appointed to perform the service, to examine into all financial affairs of every public office and officer.
"The examination of the financial affairs of townships, cities and towns, and school districts shall be made at least once in every two years; all other examinations shall be made at least once a year.
"On every such examination, inquiry shall be made as to the financial condition and resources of the taxing district; whether the Constitution and laws of the state, the ordinances and orders of the taxing district, and the requirements of the division of municipal corporations have been properly complied with; and into the methods and accuracy of the accounts and reports."
By these enactments the state legislature has clearly authorized and directed your office to audit "all financial affairs" of every public office and officer and every municipal corporation; and "financial transactions" of all state agencies. RCW 43.09.260 and RCW 43.09.290, supra. Those statutes, together with RCW 43.09.330,15/ further authorize the auditor and his [[Orig. Op. Page 12]] appointees to issue subpoenas to compel the production of records from "any person" in aid of that purpose. Those statutes, in our opinion, clearly empower your office to examine all records relative to financial transactions between the state and its political subdivisions, on the one hand, and persons or corporations doing business with such public agencies, on the other. Such financial transactions would include, for instance, the lease agreement relative to the Washington State Pavilion executed between the Washington State Commission for Expo '74 and Expo '74, Inc., as well as other incidents of liaison between the corporation and the state commission.
[[Orig. Op. Page 13]]
Therefore, in summary, it is our opinion that while Expo '74, Inc. is not a state agency at the present time, nevertheless, to the extent it receives public monies from or otherwise transacts business with the state or its political subdivisions, its records relevant to such transactions (like those of any other corporation doing business with such agencies) are subject to audit by your office in connection with your examinations of the corresponding public agencies.
We trust that the foregoing will be of some assistance to you.
Very truly yours,
SLADE GORTON
Attorney General
ROBERT F. HAUTH
Assistant Attorney General
D. ROGER REED
Assistant Attorney General
*** FOOTNOTES ***
1/RCW 43.96B.040.
2/RCW 43.96B.050.
3/I.e., the 1962 Seattle World's Fair.
4/See, chapter 308, Laws of 1955; chapter 109, Laws of 1959.
5/See, Article I, BIE Treaty. The BIE Treaty is enclosed for your reference.
6/See, 40 U.S.C.A. §§ 2802 and 2803; also see, Article 4 of the BIE Treaty.
7/See, RCW 43.96B.050.
8/This Article of the BIE Treaty provides, in part:
"Any country which proposes to hold an exhibition to which the present convention applies must, at least six months before the commencement of the intervals prescribed in article 5 for the issue of invitations, address to the International Bureau an application for the registration of the exhibition. Such application shall state the title of the exhibition and its duration, and shall be accompanied by the classification of exhibits, copies of the general regulations, the jury regulations, and all documents necessary to show the measures proposed to ensure the safety of persons and property, the protection of industrial property and copyright, and to satisfy the conditions prescribed below in Sections IV and V. The Bureau shall not register an exhibition unless such exhibition fulfills all the conditions required by the present convention."
9/Accord, Article 15 of the BIE Treaty which provides:
"Any Government which issues invitations to an international exhibition shall appoint a Government commissioner or delegate, authorized to represent it and to guarantee the fulfillment of its obligations towards the foreign participants. Such commissioner or delegate shall see that all necessary measures are taken for the material safety of the goods exhibited."
See, also, 40 U.S.C.A. § 2802 insofar as it permits federal participation only if the United States Secretary of State can report that the proposed exposition qualifies for BIE registration.
10/See, General Regulations and Special Regulations, copies of which are enclosed with this opinion.
11/The responsibilities of the commission insofar as the Pan-African Foundation are concerned arise from § 33 of the 1974 appropriation act, chapter 142, Laws of 1974, 1st Ex. Sess.
12/Accord, Article 6 of the General Regulations, which provides:
"In accordance with Public Law 91-269 dated May 27, 1970, governing officially recognized expositions, the United States, and in view of the approval given May 5, 1971, by the Secretary of State of the state of Washington, U.S.A., the preparation, the organization and the functioning of the Exposition are the responsibility of Expo '74, Inc., which has agreed specifically to accomplish under the control of the Commissioner General of the Government all legal financial and material acts necessary for the fulfillment of its mission. This body shall hereafter be referred as the 'ORGANIZER.'
"The President of the Corporation shall assume management functions within the framework of the general principles listed by the Board of Directors of EXPO '74, Inc.
"The Organizer (EXPO '74, Inc.) is charged with the following functions:
"A. Seek public and private financial assistance and manage funds which are collected for the purpose of preparing and insuring the pertinent operation of the Exposition.
"B. Supervise the planning, acquire land, prepare the development of the Exposition, and monitor construction works.
"C. Enter into contracts of participation with official participants and private exhibitors insofar as concerns their site locations, and items listed in 'D' below.
"D. Determine rentals, admittance fees, concessions rates, and any and all other dues and conditions for operation, as well as conditions for the procurement of essential services.
"E. Establish appropriate Special Regulations.
"F. Exercise all normal and essential activities involved in general management."
13/See, Article VI, § 2 of the United States Constitution.
14/Ibid.
15/RCW 43.09.330:
"The state auditor, the chief examiner, and every state examiner of the division of departmental audits, for the purpose of making post-audits, may issue subpoenas and compulsory process and direct the service thereof by any constable or sheriff to compel the attendance of witnesses and the production of books and papers before him at any designated time and place, and may administer oaths.
"If any person summoned neglects or refuses to appear, or neglects or refuses to answer any question that may be put to him touching any matter under audit, or to produce any books or papers required, the person making such audit shall apply to a superior court judge of the county where the hearing arose to issue a subpoena for the appearance of such person before him; and the judge shall order the issuance of a subpoena for the appearance of such person forthwith before him to give testimony; and if any person so summoned fails to appear, or appearing refuses to testify or to produce any books or papers required, he shall be subject to like proceedings and penalties for contempt as witnesses in the superior court. Wilful false swearing in any such examination shall be perjury and punishable as such.
"If any audit discloses malfeasance, misfeasance, or nonfeasance in office on the part of any public officer or employee, within thirty days from the receipt of his copy of the report, the attorney general shall institute and prosecute in the proper county, appropriate legal action to carry into effect the findings of such post-audit. It shall be unlawful for any state department or the responsible head thereof, to make a settlement or compromise of any claim arising out of such malfeasance, misfeasance, or nonfeasance, or any action commenced therefor, or for any court to enter upon any compromise or settlement of such action without the written approval and consent of the attorney general and the state auditor."