Auditor of State v. an Unnamed Local Gov't Risk Pool
| Docket Number | 21-1765 |
| Decision Date | 07 April 2023 |
| Citation | 988 N.W.2d 705 |
| Parties | Auditor of the State of Iowa, Rob SAND, Appellant, v. AN UNNAMED LOCAL GOVERNMENT RISK POOL, Appellee. |
| Court | Iowa Supreme Court |
Brenna Bird, Attorney General, and Matthew S. Rousseau (argued), Assistant Attorney General, for appellant.
Andrew Tice (argued) and Kristine Stone of Ahlers & Cooney, P.C., Des Moines, for appellee.
The legislature has vested the Iowa Auditor of State with the authority to conduct audits, reaudits, and financial examinations of the state, state departments, state officers, and certain governmental subdivisions. Iowa Code chapter 11 (2021). In this case, the state auditor initiated a reaudit of the Iowa Communities Assurance Pool (ICAP), a local government risk pool. To facilitate the reaudit, the state auditor issued a subpoena to ICAP for certain financial records. Without conceding the state auditor's authority to proceed, ICAP voluntarily supplied some, but not all, of the requested records. The state auditor then applied to the district court to enforce the subpoena and obtain the remainder of the documents. The district court held ICAP was not a "governmental subdivision" within the meaning of Iowa Code section 11.1(1)(c ) and thus was not subject to the state auditor's authority. The district court denied the application to enforce the subpoena. The state auditor timely filed this appeal.
A local government risk pool is a form of risk management in which local government entities join together to share and mitigate the risk of loss to the individual members. The Iowa Code provides statutory authority for certain government entities to form a local government risk pool. Iowa Code section 174.8A provides that "[the] association of Iowa fairs, or a fair, shall have the power to join a local government risk pool." Section 296.7 provides school districts may "establish and maintain a local government risk pool." Id. § 296.7(1)(a )(3). Other provisions of the Code provide similar authority to other government entities. See, e.g. , id. § 331.301(11) (); id. § 347.13(10) (); id. § 364.4(5) (). Most relevant here, Iowa Code section 670.7(1) provides that a "governing body of a municipality may join and pay funds into a local government risk pool to protect the municipality against any or all liability, loss of property, or any other risk associated with the operation of the municipality."
Iowa Communities Assurance Pool (ICAP) is a local government risk pool formed in 1986 pursuant to Iowa Code section 670.7. ICAP has continuously operated as an unincorporated nonprofit association authorized under section 670.7 since its formation. ICAP has nearly 800 members, all of whom are local government bodies, including "cities, counties, townships, 28E organizations, emergency management agencies, empowerment boards, county fairs, transit authorities, and more." ICAP is audited annually by an independent, private auditor. ICAP's audited financial statements and independent auditor's reports are publicly available on ICAP's website. ICAP's audited financial statements are also provided to and reviewed by the Government Finance Officers Association of the United States and Canada. Since ICAP was formed in 1986, the state auditor had never attempted to assert any authority over ICAP.
That changed in 2019. In 2019, a news article called into question certain out-of-state travel expenses incurred by ICAP board members. In response, the state auditor initiated an investigation into ICAP's expenses. The state auditor contacted ICAP and sought certain financial records, including payroll, travel, reimbursement, and claims information. The state auditor contended he was entitled to the requested information because ICAP was a governmental subdivision subject to the state auditor's authority. As a conciliatory gesture, ICAP supplied some, but not all, of the requested information. ICAP maintained it was not a governmental subdivision subject to the state auditor's authority.
In late 2019, the state auditor followed up on the initial request by issuing a subpoena to ICAP. ICAP then filed a petition in the district court seeking a declaration that it was not a governmental subdivision subject to the state auditor's authority. The district court dismissed the action without prejudice because Agency process did not resolve the dispute.
In May 2020, the state auditor sent ICAP an open records request pursuant to Iowa Code chapter 22. ICAP agreed to supply some of the requested documents if the state auditor paid $150, the cost of producing the documents. The parties had some back and forth regarding the scope and cost of production. Throughout the process, however, ICAP maintained it was not subject to the state auditor's authority.
In January 2021, the state auditor served ICAP with the subpoena at issue here. The subpoena ordered ICAP to provide records regarding travel expenses for ICAP board members and nontravel reimbursements to ICAP board members. The subpoena also ordered ICAP to produce records regarding travel expenses incurred by ICAP board members but paid by someone other than ICAP, settlement agreements over $50,000, reimbursements to ICAP board members, agendas and board meeting materials, and information related to certain contracts with five specified entities. ICAP voluntarily produced some, but not all, of the documents. Throughout, ICAP maintained it was not a governmental subdivision subject to the state auditor's oversight.
The state auditor then filed an application to enforce the subpoena, and the district court denied the application. The district court correctly stated that "[t]he auditor is only empowered to audit entities as permitted by its statutory authority." The district court concluded that no statute granted the state auditor the authority to oversee local government risk pools. The district court further concluded ICAP was not a governmental subdivision subject to the state auditor's authority. Iowa Code § 11.1(1)(c ).
This case presents a question of the state auditor's statutory authority. Our review of the district court's decision on questions of statutory interpretation is for the correction of errors at law. State v. Watkins , 914 N.W.2d 827, 837 (Iowa 2018). On questions of statutory interpretation, "[w]e begin with the plain language of the statute." Little v. Davis , 974 N.W.2d 70, 75 (Iowa 2022). Our task is "to determine the ordinary and fair meaning" of the statute. Doe v. State , 943 N.W.2d 608, 610 (Iowa 2020). "In determining the ordinary and fair meaning of the statutory language at issue, we take into consideration the language's relationship to other provisions of the same statute and other provisions of related statutes." Landowners v. S. Cent. Reg'l Airport Agency , 977 N.W.2d 486, 495 (Iowa 2022) (quoting Doe , 943 N.W.2d at 610 ). "If the ‘text of a statute is plain and its meaning clear, we will not search for a meaning beyond the express terms of the statute or resort to rules of construction.’ " Doe , 943 N.W.2d at 610 (quoting Voss v. State (In re Est. of Voss ), 553 N.W.2d 878, 880 (Iowa 1996) ).
"The auditor of state is not empowered to audit every entity."
Sand v. Doe , 959 N.W.2d 99, 109 (Iowa 2021). The state auditor's authority is determined by statute. The state auditor has certain authority over "governmental subdivisions." Iowa Code §§ 11.6 –.23. With some exceptions not applicable here, chapter 11 provides that governmental subdivisions shall, at their own expense, be audited annually. Id. § 11.6(1)(a )(1), (2). Governmental subdivisions can choose to have the audits performed by either the state auditor or a certified public accountant. Id. § 11.6(1)(a )(2). If the annual audit is performed by a certified public accountant, the resulting audited financial statements must be provided to the state auditor. Id. § 11.6(1)(c )(2)(a).
Chapter 11 also provides that the state auditor may perform "a complete or partial reaudit of the financial condition and transactions of any governmental subdivision." Id. § 11.6(4)(a ). The state auditor can initiate a complete or partial reaudit only when specific conditions are met. This includes: (1) on the state auditor's finding of "probable cause to believe such action is necessary in the public interest because of a material deficiency in" the annual audited financial statements, (2) by written request from an elected official or employee of the governmental subdivision, or (3) by petition, if joined by at least one hundred eligible electors. Id. § 11.6(4)(a )(1)–(3).
The state auditor's authority to conduct an audit or reaudit can be enforced through the subpoena power. Id. § 11.51. Iowa Code section 11.51 provides that "in all matters pertaining to an authorized audit or examination, [the auditor shall] have power to issue subpoenas of all kinds." The statute does not grant the state auditor free-floating subpoena power. Instead, the state auditor has the authority to issue a subpoena as an auxiliary aid only while performing an authorized audit or reaudit. See Sand , 959 N.W.2d at 106 (). Where, as here, a party refuses to comply with the auditor's subpoena, the auditor may seek enforcement from a district court. Iowa Code § 11.52. "A district court will grant a motion to enforce an agency's subpoena if the subpoena is: ‘(1) within the statutory authority of the agency, (2) reasonably specific, (3) not unduly burdensome, and (4) reasonably relevant...
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