Reep v. Board of County Commissioners

LEONARD H. LANGE, District Judge, sitting in place of MR. JUSTICE SHEEHY, delivered the opinion of the Court. Petitioner, the Missoula County auditor, brought this action seeking a writ of mandate compelling respondent, county commissioners, to include in the final county budget funding for a larger staff for the auditor’s office than was proposed in the preliminary county budget. Following the quashing of petitioner’s original writ, and amended writ was filed and the cause heard by the court sitting without a jury in a trial which lasted five days. The District Court heard testimony from 13 witnesses, amounting to over 400 pages of transcript, admitted over 35 exhibits into evidence, and then made findings of fact and conclusions of law, the relevant portions of which are now set forth verbatim: “FINDINGS OF FACT “2. A majority of the commissioners determined that the auditor as conducting examinations of the books and records of the — 164 — county broader in scope than contemplated by the statutes defining the auditor’s duties. “3. A majority of the commissioners objected to certain audits termed by them as ‘management’ audits, which the auditor defined as ‘compliance’ audits. These audits included opinions by the auditor or her staff on whether county policies were in compliance with applicable statutes or regulations, or whether these policies were in the best interest of the county in a financial sense. All opinions were delivered in connection with the procurement, investment or use of county funds. “4. A majority of the commissioners as a matter of deliberate policy budgeted the auditor to prevent her from conducting audits they deemed overly broad in scope. “5. Audits of the sort found improper by the commissioners are conducted by private auditors and accountants in the general and normal course of their business. These audits of necessity require the exercise of judgment and the statement of conclusions broaching on the rendering of legal opinions. These audits do not include studies of the management efficiency of administrative practices, and efficiency audits were not conducted by the auditor. “6. A majority of the commissioners desired to limit the auditor’s examinations to bookkeeping and account balancing, and they budgeted the auditor accordingly. “7. The budget amounts requested by the auditor attributable to all audits reasonably provides for their performance. “8. The auditor was and is now qualified to conduct audits of the scope and type to which the commissioners have objected, and any audits customarily and usually conducted by a Certified Public Accountant. All the disputed audits were done in a regular manner consistent with these standards. “9. The auditor has necessarily expended attorney fees and costs in this suit, the amount being not yet known.” “CONCLUSIONS OF LAW “2. The term ‘examination of the book and accounts . . .’ contained in MCA 7-6-2409(1) includes audits of broad scope con — 165 — ducted in the manner and to the extent countenanced by generally accepted accounting and auditing principles and methods applicable to an independent auditor. It is within the discretion of the auditor to determine the scope and extent of audits within the limits set by generally accepted auditing accounting principles and methods. Under MCA 7-6-2408(2) auditors have broad discretionary powers of investigation. “3. The term ‘full and complete statement of the money received and disbursed . . .,’ MCA 7-6-2409(2), is a minimum requirement, not a limitation on the scope of the examinations by the auditor. “4. The commissioners have a clear legal duty to fund the county auditor to carry on examinations of books and records, including audits of the scope and extent objected to. “5. Failure to fund these audits was a failure to perform a clear legal duty and an abuse of discretion. “6. Mandamus lies to compel the performance of a clear legal duty and to correct an abuse of discretion. “7. The commissioners may either accept the budgeting requested by the auditor for the auditing functions they wished to prevent or hold further hearings and thereafter reasonably provide funds to allow their performance. “8. The auditor should receive attorney’s fees in a reasonable amount and costs.” Later the District Court made supplemental findings of fact and conclusions of law, the relevant portions of which are set forth verbatim: “SUPPLEMENTARY FINDINGS OF FACT “1. A majority of the commissioners caused funds to be subtracted from the budget of the auditor to limit her ability to conduct audits of any scope beyond that of bookkeeping and account balancing.” “SUPPLEMENTARY CONCLUSIONS OF LAW “2. An elected county auditor is an agent of the people, having important official duties for the faithful discharge of which she is — 166 — directly responsible to the people. Under MCA 7-6-2408(2) auditors have broad discretionary powers of investigation. In performing her duties, the auditor must have sufficient independence from the commissioners to permit her to determine which offices to audit, at what time, and what the scope of such audits should be, within the limits set by generally accepted auditing and accounting principles and methods. “3. Failure to fund audits of scope and extent objected to was a failure to perform a clear legal duty and such an abuse of discretion as to amount to no exercise of discretion at all. “4. Although the commissioners have discretionary powers to set budgets, and although they may set a budget limit for an official, they cannot use the budget to prevent another elected official from fulfilling a statutory duty. The commissioners may adopt a budget which has the incidental effect of causing a budgeted office to reduce its activity in some area, even if that activity is one necessary to a statutory duty; but, the commissioners may not single out an activity necessary to a statutory duty and preclude it by budgetary restriction.” In accordance with the findings of fact and conclusions of law the District Court then ordered that mandamus issue. From that order the board of county commissioners appeals. The proper standards to be met before issuance of a writ of mandamus are set forth in Cain v. Department of Health, etc. (1978), 177 Mont. 448, 582 P.2d 332, 334, 35 St.Rep. 1056, 1058: “A writ of mandate will issue only where the person seeking to invoke it is entitled to have the defendant perform a clear legal duty and there is no speedy or adequate remedy in the ordinary course of law. State ex rel. Swart v. Casne (1977), 172 Mont. 302, 564 P.2d 983, 34 St.Rep. 347. Ordinarily mandamus will not lie to compel the performance of a discretionary function. State ex rel. Butte Youth Service Center v. Murray (1976), 170 Mont. 171, 551 P.2d 1017, 33 St.Rep. 610. However, if there has been such an abuse of discretion as to amount to no exercise of discretion at all, mandamus will lie to compel to proper exercise of powers granted. — 167 — Barnes v. Town of Belgrade (1974), 164 Mont. 467, 524 P.2d 1112.” It is clear that the county commissioners had a clear legal duty to fund the office of the county auditor so that she could adequately perform her duties at the minimum level imposed by the state legislature under sections 7-6-2407 through 7-6-2412, MCA. Therefore we shall first address ourselves to this issue. Section 7-6-2407, MCA, requires a county auditor to audit and investigate claims against the county, and section 7-6-2408, MCA, authorizes the auditor to administer oath or affirmation and to issue process to compel attendance of witnesses in order to cary out these duties with respect to claims. However, the auditor’s duties under sections 7-6-2407 and 7-6-2408 are not in issue in this lawsuit. Respondent’s right to mandamus is grounded in the interpretation to be given to section 7-6-2409, MCA, which provides that it is the duty of the county auditor to examine the books and accounts of the county treasurer and certain other designated county officers within 15 days prior to the first regular session of the board of county commissioners in March, June, September, and December of each year unless a longer time is granted to the auditor by the board. Subsection (2) of section 7-6-2409 provides that the quarterly report shall contain a full and complete statement of the money received and disbursed by each of the officers since the last examination and report. For the purpose of this section the county auditor has free access to all books and papers in each of the offices. We hold that the District Court erred in concluding that the county auditor is required to perform the broad duties described in the District Court’s conclusions of law. The Montana Supreme Court has already decided the obvious — the terms “audit” and “examine” are not synonymous. An audit is more extensive than an examination and an audit includes an examination, Judith Basin Co. v. Livingston, et al. (1931), 89 — 168 — Mont. 438, 298 P. 356. The fact that the legislature chose not to use the term “audit” in section 7-6-2409, MCA, is significant. We hold that the legislature intended the county auditor to examine the books and report a statement of money received and disbursed. Nothing more is required. A detailed audit is not required to report receipts and expenditures. The legislature clearly intended the auditor to perform a bookkeeping and account balancing function under section 7-6-2409, MCA. This interpretation is reinforced by an examination of the Legislative Audit Act (sections 5-13-101 et seq., MCA) and the Reports and Audits Act (sections 2-7-101 through 2-7-105 and 2-7-501 through 2-7-521, MCA). The language of the Legislative Audit Act leaves no room to doubt that an audit, and not an examination, is required under that Act. Furthermore, the Legislative Audit Act specifically authorizes the legislative auditor to report possible penal violations to the attorney general, and instances of misfeasance, malfeasance and nonfeasance to the governor. The authority to conduct broad management and compliance audits is clearly specified. The Reports and Audits Act also indicates the county auditor’s function under section 7-6-2409, MCA, are limited to bookkeeping and account balancing duties. Section 2-7-503, MCA, requires the Department of Community Affairs to audit all counties annually. The term “audit” is used consistently throughout the Act. Sections 2-7-505 and 2-7-513, MCA, specify that the audit must be “comprehensive” and must include comments and opinions concerning: (1) balance sheets; (2) results of operations; (3) compliance with state statutes and regulations; (4) recommendations for improvement; (5) the adequacy of financial presentation; and (6) how previously noted deficiencies have been addressed. Remaining provisions of the Reports and Audits Act require that an exit interview be conducted (section 2-7-512, MCA), that audits be conducted in accordance with generally accepted accounting principles (section 2-7-505, MCA), and that certain procedures be — 169 — followed in preparing and publishing the audit reports (section 2-7-504, 2-7-506, 2-7-515 and 2-7-521, MCA). In short, the legislature has expressly conferred authority to conduct detailed management and compliance audits of county governments on the Department of Community Affairs. On the other hand, the duties of the county auditor are confined to bookkeeping and account balancing functions under section 7-6-2409, MCA, which provides: “Examination of County Books and Accounts. (1) It is the duty of the county auditor to examine the books and accounts of the county treasurer, the county clerk and recorder, the sheriff, the clerk of the district court, and all other county and township officers within 15 days prior to the first regular session of the board of county commissioners in March, June, September, and December of each year unless a longer time is granted to the auditor by the board. “(2) The quarterly report shall contain a full and complete statement of the money received and disbursed by each of the officers since the last examination and report. For the purpose of this section, the county auditor has free access to all books and papers in each of the offices.” The District Court’s supplementary conclusions of law invoke the “strict accountability” provision of the Montana Constitution to justify a finding that a county auditor is required to perform broad management and compliance audits. However, there is no factual or legal basis for the District Court’s conclusion. Art. VIII, Section 12, 1972 Montana Constitution, reads: “Strict accountability. The legislature shall by law insure strict accountability of all revenue received and money spent by the state and counties, cities, towns, and all other local governmental entities.” The Constitution indicates that the strict accountability function is not self-executing. The legislature is directed to insure strict accountability of all public funds. The legislature has responded by passing laws requiring the Department of Community Affairs to conduct “comprehensive audits” of counties and all local govern — 170 — ment entities (section 2-7-501 through 2-7-521, MCA). This expansive audit authority was pased in 1974 (Laws of Montana (1974), Ch. 348) and recodified in 1975 (Laws of Montana (1975), Ch. 380). As stated in section 2-7-502, MCA: “The purpose of the audit of the affairs of the governmental entities as set forth in this part shall be to insure constituent interests by determining that compliance with all appropriate statutes and regulations is accomplished, that the financial condition and operation of the entities are reasonably conducted and reported, that the stewardship of such entities is conducted in such a manner as to preserve and protect the public trust, and to accomplish, with economy and efficiency, the duties and responsibilities of the entities in accordance with the legal requirements imposed and the desires of the public.” The legislature has responded to the mandate of Art. VIII, Section 12, 1972 Montana Constitution, by expanding the powers of the Department of Community Affairs and not the county auditor. We have still further grounds for our holding. There are no professional qualifications that must be satisfied to serve as a county auditor. The only qualifications for this officer are that he be of voting age and a resident of the county for two years (section 7-6-2403, MCA). Thus a person with no accounting or auditing experience can be a county auditor. The legislature certainly could not have intended the county auditor to perform broad management and compliance audit functions unless the legislature were willing to impose professional qualifications for the office. This conclusion is reinforced by the fact that the legislature has imposed strict professional requirements for the person selected to serve as legislative auditor. The legislative auditor must have a degree from an accredited university with a major in accounting or a similar field. Furthermore the legislative auditor must have at least two years experience in governmental accounting and auditing (section 5-13-302, MCA). — 171 — Furthermore the county auditor has no authority under Montana law to increase the duties of her office beyond that described in the statute. Only the board of county commissioners may do this. (Section 7-6-2412, MCA, provides that the county auditor shall also perform such other duties, clerical or otherwise, as he may be directed to perform by the county commissioners.) We hold that the legal duty of the appellant was to adequately fund the county auditor’s office so that she can perform the minimum duties required by law. The board of county commissioners, in their discretion, may enlarge the duties of the county auditor (section 7-6-2412, MCA), and if this should occur, it would follow that the board should provide additional funding. This Court has the duty to scrutinize the manner in which the decision of the District Court was made and to determine if the judge acted arbitrarily. We hold that the District Court erred in its conclusions of law. Likewise the court erred in its findings of fact insofar as the same are inconsistent with the law as expressed in this opinion. We hold that our ruling with respect to the minimum level duties of the county auditor should be sufficient to cause petitioner’s petition for writ of mandate to be dismissed. Finding of fact No. 6 would indicate that the county commissioners, in fact, have budgeted sufficient funds for the county auditor to perform her duties in accordance with this opinion. However, this Court cannot make a finding of fact nor can it direct the District Court to make such a finding. Its jurisdiction is strictly appellate. This cause is remanded to the District Court to make amended findings of fact and conclusions of law in accordance with this opinion. MR. CHIEF JUSTICE HASWELL and JUSTICES HARRISON and SHEA concur.