Bob Ferguson
Other LanguagesAGLO 1970 No. 128 -
Attorney General Slade Gorton
- - - - - - - - - - - - -
October 6, 1970
Honorable R. Frank Atwood
State Senator, 42nd District
317 Park Ridge
Bellingham, Washington 98225
Cite as: AGLO 1970 No. 128
Dear Sir:
By letter previously acknowledged, you have requested the opinion of this office on the following two questions concerning the authority of the state auditor:
(1) "Does the State Auditor possess the statutory authority to conduct so-called performance or management audits of state agencies under either RCW 43.88 or RCW 43.09 [[chapters 43.88 and 43.09 RCW]], or any other pertintent [[pertinent]]statute?"
(2) "If the State Auditor possesses such statutory authority, does he, in turn, have the power and authority to incorporate audit exceptions relating to agency or management practices in his reports of post audits, as required by RCW 43.09.310?"
A major problem in answering these questions has been the absence of a definition in any general statute or any reference to any audit function by the specific name of "performance" or "management" audit. In searching for an acceptable definition of these terms, we have reviewed various publications, proposed bills, and other materials. However, these do not provide any single, clear definition and are sometimes subject to several interpretations.
Accordingly, we have found that the only satisfactory way to approach this problem is to analyze the constitutional and statutory powers of the state auditor and explain as clearly as possible what those powers are and their limitations.
[[Orig. Op. Page 2]]
ANALYSIS
The state auditor is a constitutional officer and a member of the executive department. Article III, § 1, Washington State Constitution. Article III, § 20 of the Constitution provides in pertinent part as follows:
"The auditor shall be auditor of public accounts and shall have such powers and perform such duties in connection therewith as may be prescribed by law. . . ."
In Yelle v. Bishop, 55 Wn.2d 286, 347 P.2d 1081 (1959), the supreme court of this state construed this provision to mean that the only powers which may be exercised by the state auditor are those which are vested in him by statutes enacted by the legislature. Therefore, the auditor is governed by the same general rules applicable to other public officers, namely, he may exercise only those powers which are expressly granted to him by statute and those which are necessarily implied from the granted powers. State ex rel. Eastvold v. Maybury, 49 Wn.2d 533, 304 P.2d 663 (1956).
As recognized by your questions, the basic statutory authority of the state auditor is to be found in chapters 43.09 and 43.88 RCW, respectively. The statutes particularly relating to post-auditing of state departments are RCW 43.09.290 through RCW 43.09.330 and RCW 43.88.160 (3).
RCW 43.09.290 provides in pertinent part as follows:
"For the purposes of RCW 43.09.290 through 43.09.340 post-audit means an annual audit of the books, records, funds, and financial transactions of a state department for a complete fiscal period; . . ."
RCW 43.09.310 provides:
"The state auditor, through the division of departmental audits, shall make a post-audit of every state department at least once each year. A report of each post-audit upon completion thereof, shall be made in quintuplicate, and one copy shall be transmitted to the governor, one to the director of budget, one to the attorney general, one to the state department audited, and one shall be kept on file in the office of the state auditor."
Notably, the foregoing statutorily imposed responsibilities and duties have been long performed by the state auditor. Furthermore, in its enactment of the 1959 budget and accounting act (now codified as chapter 43.88 RCW), and [[Orig. Op. Page 3]] specifically RCW 43.88.160, the legislature imposed the following additional specific duties upon the auditor:
"(3) The state auditor shall:
"(a) Report to the legislature the results of current post audits that have been made of the financial transactions of each agency; to this end he may, in his discretion, examine the books and accounts of any agency, official or employee charged with the receipt, custody or safekeeping of public funds.
"(b) Give information to the legislature, whenever required, upon any subject relating to the financial affairs of the state.
"(c) Make his official report on or before the thirty-first of December which precedes the meeting of the legislature. The report shall be for the last complete fiscal period and shall include at least the following:
"(i) Determinations as to whether agencies, in making expenditures, complied with the will of the legislature; and
"(ii) Such plans as he deems expedient for the support of the state's credit, for lessening expenditures, for promoting frugality and economy in agency affairs and generally for an improved level of fiscal management.
"(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 budget director. It shall be the duty of the budget director to cause corrective action to be taken promptly, 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."
[[Orig. Op. Page 4]]
These statutes embody the legal powers and duties of the state auditor insofar as they relate to the subject matter of your inquiry.
In exploring the statutory powers and duties of the state auditor, like those of any public officer, it is helpful to bear in mind that they include express powers and those which may be found by necessary implication from the powers expressly granted. State ex rel. Eastvold v. Maybury, supra. Furthermore, because these powers, whether express or implied, are statutory, the problem is essentially one of statutory construction. Thus, your inquiry calls for a consideration of the basic rules of statutory construction. One such rule which is pertinent here is that all related statutes and parts of statutes dealing with the same subject should be construed as one organic whole. Tacoma v. Cavanaugh, 45 Wn.2d 500, 275 P.2d 933 (1954); State v. Rinkes, 49 Wn.2d 664, 306 P.2d 205 (1957). Statutes should be construed, if possible, so that no clause, sentence or word shall be superfluous, void or insignificant. Group Health Etc. v. King Co. Med. Soc., 39 Wn.2d 586, 237 P.2d 737 (1951). It is also fundamental that words should be given their ordinary meaning unless the legislature has indicated in some manner that a meaning other than the ordinary meaning was intended. State v. Vosgien, 82 Wash. 685, 144 Pac. 947 (1914). Of course, it must be presumed that the legislature in enacting a statute had knowledge of existing statutes on the subject, Benn v. Grays Harbor Cty., 102 Wash. 620, 173 Pac. 632 (1918), and the legislature is presumably also familiar with court decisions construing its former enactments. In re Levy, 23 Wn.2d 607, 161 P.2d 651 (1945).
As a starting point, it may be noted that in RCW 43.88.160 the legislature gave the auditor the duty to report to the legislature ". . . the results of current post audits that have been made of the financial transactions of each agency; . . .". The term "post audits" is not defined in that statute; the basic duty and its definition is found in chapter 43.09 RCW, the provisions of which have been quoted earlier in this opinion.
When, under applicable rules of statutory construction, we read all of these statutes on the subject together, it becomes clear that the legislature envisioned two principal functions of the "post audit." The first major function, as we derive from chapter 43.09 RCW and certain portions of chapter 43.88 RCW, is to make a report to the audited agency, to enforcement officers, and to the general public, concerning the financial condition of the [[Orig. Op. Page 5]] agency and its compliance with certain standards. The second function, as expressed in RCW 43.88.160 (3) (a) through (c), is a report to the legislature which is to include several specified categories of information.
The first of these two audit functions, and its object, is described in general terms in RCW 43.09.330, as follows:
". . .
"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." (Emphasis supplied)
The phrase "malfeasance, misfeasance, or nonfeasance" appears also in the corresponding statute relative to examinations of municipal affairs by the state auditor, RCW 43.09.260. These terms are defined in State v. Miller, 32 Wn.2d 149, 152, 201 P.2d 136 (1948), as follows:
". . . Misfeasance means the improper doing of an act an officer might lawfully do; or, in other words, it is the performance of a duty in an improper manner. Nonfeasance means the total omission or failure of an officer to enter upon the performance of some distinct duty or undertaking required by his office. Malfeasance has been defined as follows:
"'"Evil doing; ill conduct; the commission of some act which is positively unlawful; the doing of an act which is wholly wrongful and unlawful; the doing of an act which the person ought not to do at all; the doing of what one ought not to do; the performance of some act [[Orig. Op. Page 6]] which ought not to be done; the unjust performance of some act which the party had no right, or which he had contracted not, to do." 38 C.J. [[C.J.S.]]344.
"'"The terms malfeasance and neglect of duty are comprehensive terms and include any wrongful conduct that affects, interrupts, or interferes with the performance of official duty." State v. Ward, 163 Tenn. 265, 43 S.W.2d 217.' State ex rel. Knabb v. Frater, 198 Wash. 675, 89 P.2d 1046."
The legislature in enacting subsequent statutes on the same subject must be presumed to have had this judicial interpretation in mind. Benn v. Grays Harbor Cty., supra, and In re Levy, supra.
It seems clear then, that under RCW 43.09.330, it is the duty of the state auditor to determine, in each post audit of an agency, whether the agency's officers and employees have either (1) performed unlawful acts; (2) performed lawful acts in an illegal or negligent manner; or (3) failed to perform a legal duty. Stated another way, the scope of the post audit is sufficiently broad to cover violations by officers or employees of any legally recognizable standard of conduct, either by way of act or omission.
When this is clearly understood, then the meaning of chapter 43.88 RCW on the same subject becomes also clear. RCW 43.88.160 (3) (d) and (3) recite 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 budget director. It shall be the duty of the budget director to cause corrective action to be taken promptly, such action to include, as appropriate, the withholding of funds as provided in RCW 43.88.110.
"(e) . . . promptly report any irregularities to the attorney general."
[[Orig. Op. Page 7]]
In our opinion these subdivisions are clearly related and connected with each other. An auditor cannot logically take exception to any expenditure or practice, or find "irregularities," except upon some legally recognizable ground, or the violation of some legally recognizable standard, and no such ground is expressly stated in either subdivision (d) or (e). Reference must then be made to standards which have been expressly or impliedly recognized by the legislature. These include constitutional and statutory requirements, administrative regulations, prescribed or generally recognized accounting practices, and other standards of care, the violation of which may amount to negligent or worse conduct in the administration of the state's business.1/
We may seem to be saying, in effect, that the auditor's present duty of reporting remains, as it has always been, to report malfeasance, misfeasance or nonfeasance, and that therefore chapter 43.88 RCW added nothing to the auditor's post audit powers. However, a more accurate interpretation would be that this post audit power was always meant to consist of more than a cash count and mathematical analysis. The results of the enactment of chapter 43.88 RCW were, in our opinion, two-fold, as described earlier in this opinion.
The legislature's first purpose was to set out in greater detail and emphasize the auditor's duty to determine and report whether or not all enforceable standards have been observed in the conduct of an agency's business; also to add the budget director (OPPFM) as an enforcement agency. The second purpose of chapter 43.88 RCW, which we will now proceed to describe, was to provide a better means of informing and advising the legislature itself concerning the conduct of state business, both past, present and prospective. This second purpose is expressed in RCW 43.88.160, directing the auditor to provide to the legislature the following categories of information:
[[Orig. Op. Page 8]]
(a) Current post audit findings (RCW 43.88.160 (3) (a));
(b) General information as necessary relating to financial affairs of the state (RCW 43.88.160 (3) (b));
(c) An official report for a complete fiscal period preceding each meeting of the legislature (RCW 43.88.160 (3) (c)). The content of this official report to the legislature is to include, as an express minimum requirement:
(i) Determinations as to whether agencies, in making expenditures, complied with the will of the legislature; and
(ii) Such plans as the auditor may submit for improvement in an agency's affairs, including increased frugality and economy.2/
Turning now to your second question, beyond the specifics that we have described earlier in this opinion, the legislature has not detailed the exact manner in which the auditor shall make his findings known. Presumably, therefore, the legislature intended the auditor to use a certain measure of judgment as to the form and content of his audit reports. Like all officers, the auditor is bound to exercise his discretion in a reasonable manner and in compliance with ascertainable legislative intent. From our analysis of chapters 43.09 and 43.88 RCW, we derive a legislative intent that the auditor must direct certain exceptions and irregularities to the attention of the agency, to the budget director, and to the attorney general.3/
[[Orig. Op. Page 9]]
The auditor must include these same findings in one or more reports to the legislature itself including at least one "official" report covering an entire fiscal period and containing at least two specific categories of information. RCW 43.88.160 (3) (c). Thus, in the absence of specific direction to the contrary, we must conclude that all of the auditor's findings and information as to each agency ‑ with exceptions to be noted later ‑ may be included in a single report. However, each finding or exception should be properly directed to its intended recipient, as contemplated by statute, and should be sufficiently identified and distinguished so as to avoid confusion, deception or unfairness to any agency or person.
An exception must be made, as indicated, in connection with the two categories of information which are to be the primary substance of the auditor's periodic report to the legislature. These are clearly meant to be contained in a separate legislative report under RCW 43.88.160 (3) (c). That is not to say that the auditor cannot indicate in his post audit report of an agency that certain conditions or findings will become the basis of recommendations to the legislature. What we do conclude is that the post audit report of the agency is not the contemplated statutory vehicle for an official report of the auditor's actual legislative critique, proposals and recommendations.
In summary, then, it is our opinion:
(1) The state auditor possesses the statutory authority and duty to conduct "post audits" of state agencies under both chapters 43.09 and 43.88 RCW. The scope of the post audit under both chapters is to encompass (a) an analysis of the agency's financial condition, together with a determination of whether or not the agency, its officers and employees, complied with all legally recognizable standards of conduct in the management of the agency's business, and (b) an analysis for subsequent reporting to the legislature (i) the agency's overall compliance with legislative intent, (ii) legislative proposals for improvement in the agency's financial affairs and fiscal management.
(2) There is no legal requirement that the auditor report his findings as to a single agency in separate reports or in any particular manner. However, he must exercise reasonable discretion and properly direct and label his findings and conclusions so as to avoid confusion, deception or unfairness. One exception to this general conclusion is that those matters which are expressly required by statute to be reported to the legislature in the form of an official report to that body must be reported [[Orig. Op. Page 10]] separately and not indirectly through the agency's post audit examination report. While the post audit report may indicate areas in which legislative proposals will be made, the proposals themselves should be finalized in the periodic report to the legislature contemplated by RCW 43.88.160 (3) (c).
We trust the foregoing will be of assistance to you.
Very truly yours,
FOR THE ATTORNEY GENERAL
Robert J. Doran
Deputy Attorney General
Robert F. Hauth
Assistant Attorney General
*** FOOTNOTES ***
1/This enumeration is not intended to suggest any limitation on the scope of the auditor's inquiry in his conduct of a post audit. What may seem to be merely bad judgment, inefficiency or waste on first impression may, after careful examination, be reportable to the attorney general as negligence, gross negligence, or worse. Furthermore, it is necessary under chapter 43.88 RCW for the auditor in conducting his post audit to inquire into such areas as frugality, economy and efficiency in order for him to comply ultimately with the legislative direction in chapter 43.88 RCW to formulate and present "Such plans as he deems expedient for the support of the state's credit, for lessening expenditures, for promoting frugality and economy in agency affairs and generally for an improved level of fiscal management." (RCW 43.88.160 (3)).
2/See footnote 1.
3/We find in this connection no substantial difference between the terms "exceptions" and "irregularities." The emphasis in subdivisions (b) and (c) of RCW 43.88.160 (3) appears to be to direct to the specific attention of the appropriate enforcement agency such violations as it may be the peculiar function of that enforcement agency to correct. Otherwise, a number of absurdities would result. For instance, to say that the legislature intended substantially different meanings to be ascribed to the words "exception" and "irregularities" would be to conclude that exceptions should be made public and should be reported to the agency and to the budget director but not to the attorney general; but that "irregularities" which are of sufficient importance to direct to the attorney general must not be made public and must not be reported to the agency or the budget director.