County of York v. Johnson
| Citation | 230 Neb. 403,432 N.W.2d 215 |
| Decision Date | 23 November 1988 |
| Docket Number | No. 87-102,87-102 |
| Parties | COUNTY OF YORK, Nebraska, Appellee, v. Ray A.C. JOHNSON, State of Nebraska Auditor of Public Accounts, Appellant. |
| Court | Supreme Court of Nebraska |
Syllabus by the Court
1. Declaratory Judgments: Appeal and Error. In an appeal from a declaratory judgment, the Supreme Court, regarding questions of law, has an obligation to reach its conclusion independent from the conclusion reached by the trial court.
2. Public Meetings: Counties: Actions. Under the Public Meetings Act, Neb.Rev.Stat. §§ 84-1408 et seq. (Reissue 1987), a county lacks capacity to maintain an action to declare its official conduct "void" for noncompliance with the act.
3. Public Officers and Employees: Counties: Fees. The state Auditor of Public Accounts, pursuant to Neb.Rev.Stat. §§ 23-1608 and 23-1613 (Reissue 1983) and 84-304(4) (Cum.Supp.1984), has authority to conduct an audit of a county's records and, on behalf of the State of Nebraska, charge for the services rendered in conjunction with that audit.
4. Public Officers and Employees: Counties: Contracts. Pursuant to Neb.Rev.Stat. §§ 23-104(6) and 23-106(1) (Reissue 1987), a county, through its county board, has the authority to enter an agreement with the state Auditor of Public Accounts to achieve a county audit required by Neb.Rev.Stat. § 23-1608 (Reissue 1983).
5. Contracts: Fees. When services are furnished to a party and knowingly accepted by that party, the law implies a promise to pay the reasonable value of the services rendered.
Robert M. Spire, Atty. Gen., and Charles E. Lowe for appellant.
Charles W. Campbell, York Co. Atty., and Vincent Valentino, for appellee.
As a political subdivision, County of York ("York County") brought a declaratory judgment action against Ray A.C. Johnson (State Auditor), the Auditor of Public Accounts of the State of Nebraska, to determine whether York County had to pay for an audit conducted by the State Auditor's office. The State Auditor appeals from the judgment that his audit agreement with York County is "void and has no force and effect" and that York County "is not liable for the cost of said audit."
As the result of stipulated facts, only questions of law are presented. In an appeal from a declaratory judgment, the Supreme Court, regarding questions of law, has an obligation to reach its conclusion independent from the conclusion reached by the trial court. Cornhusker Christian Ch. Home v. Dept. of Soc. Servs., 227 Neb. 94, 416 N.W.2d 551 (1987); Boisen v. Petersen Flying Serv., 222 Neb. 239, 383 N.W.2d 29 (1986).
Before 1985, the Nebraska Legislature appropriated funds for the State Auditor regarding audits of counties. Consequently, the State Auditor, without charge, had annually audited counties. However, during its 1985 session, the Legislature reduced the appropriation for the State Auditor relative to county audits. In view of the reduced appropriation, the State Auditor formulated a policy for county audits whereby counties were offered the alternative of contracting with the State Auditor or a private accounting firm licensed by the State of Nebraska.
On June 17, 1985, the State Auditor wrote the York County commissioners:
[The] Legislature has removed the funding for auditing County offices. As a result of this action, my office will no longer perform this service as we have done in the past.
Under my supervision, you are directed to obtain an audit of all of the County offices through the fiscal year ending June 30, 1985. This can be done by contracting with my office, or you can obtain the services of an accounting firm licensed to do business in Nebraska.
When the audit is completed, it will be filed with my office for review and approval by my staff.
Please advise my office whether you wish to contract with the Auditor's office or obtain the services of an accounting firm by July 1, 1985. This will assist me in determining the staff that will be necessary.
Guidelines will be provided for obtaining proposals from firms and for including statutory, compliance and single audit requirements.
Very truly yours,
/s/Ray A.C. Johnson
Ray A.C. Johnson
The agenda for the York County board's June 25 meeting did not include a prospective audit as an item of the board's business for the meeting. Nevertheless, on June 25, in response to the State Auditor's letter, the York County board voted "that the Board contract with the State Auditor's office to do an audit of all the County office [sic] through the fiscal year ending June 30, 1985." On June 26, the York County clerk wrote the State Auditor:
The York County Board of Commissioners did vote at their regular meeting on June 25, 1985, to contract with the State Auditor's office to do an audit of all of the County offices through the fiscal year ending June 30, 1985.
The Commissioners would like an estimate for budget purposes, of the number of hours it would take and the fee you will charge for auditing our county.
Sincerely,
/s/Evelyn M. Folts
Evelyn M. Folts, County Clerk
In his June 28 letter to the York County commissioners, the State Auditor answered the county clerk's letter of June 26:
You have requested that we audit the financial statements of York County as of and for the year ending June 30, 1985. We are pleased to confirm our acceptance and our understanding of this engagement by means of this letter.
....
Based upon our understanding of the engagement, we estimate our fee to be $10,065.00. However, this is an estimate and the actual cost may be less or may exceed this amount.
We agree to notify you if it becomes evident that the cost will exceed the above amount. Such notification shall include a statement of reasons why we will be unable to complete the services for $10,065.00 and a statement of the additional funds necessary to complete the services.
....
Sincerely,
/s/ Ray A.C. Johnson
Ray A.C. Johnson
At the bottom of the June 28 letter, the State Auditor inserted:
If the terms of this engagement, as set forth in this letter, are acceptable to you, please sign this copy of the letter and return it to us.
_________
_______
Without authorization from the York County board, Evelyn M. Folts, as county clerk, on July 1 signed the audit engagement contained in the State Auditor's letter of June 28.
The State Auditor then conducted an audit of York County's records, compiled and submitted a 28-page report containing specific comments and recommendations, and, on September 23, 1985, billed York County $10,065 for the audit and report.
According to the audit, on July 1, 1984, York County held $59,990 in trust for the state, received $739,820 on behalf of the state during the fiscal year 1984-85, disbursed $748,038 to the state throughout the fiscal year, and, on June 30, 1985, held $51,772 in trust for the state.
In addition to York County's collection of money for the state, whether remitted to the state or held in trust by the county, the audit reflected other monetary matters involving York County, such as over $8 million collected for and disbursed to school districts, nearly $2 million collected for and disbursed to municipalities within the county, and other moneys collected for and disbursed to other governmental units. The audit pointed out deficiencies in the fiscal conduct of certain county offices. One such instance was a failure to collect distress warrants, resulting in "a loss of tax dollars to various governmental subdivisions, which must be borne by other taxpayers of the County." The audit covered disposition of York County's own funds, including its general fund, special revenue funds, and the capital projects fund, and showed a balance of $2,346,490 in those funds on July 1, 1984. For those three funds during the fiscal year ending on June 30, 1985, the audit reflected receipts of $4,012,759, disbursements of $3,250,225, and a balance of $3,109,024 at the close of the fiscal year. The audit report gave a breakdown of receipts and disbursements pertaining to various county funds and accounts. The audit report also dealt with activities in the funds or accounts of various county officials.
Instead of paying the State Auditor's bill, York County filed a declaratory judgment action, seeking a declaration of the "rights, status and other legal responsibilities, relations or obligations of the parties" and requesting that the court "hold void or of no force and effect the agreement of July 1, 1985," concerning the audit rendered by the State Auditor. See the Uniform Declaratory Judgments Act, Neb.Rev.Stat. §§ 25-21,149 et seq. (Reissue 1985).
Neb.Const. art. XV, § 18, states:
The state or any local government may exercise any of its powers or perform any of its functions, including financing the same, jointly or in cooperation with any other governmental entity or entities, either within or without the state, except as the Legislature shall provide otherwise by law.
In 1985, statutes pertaining to county audits included:
An examination of the books, accounts, records and affairs of all county officers in every county in the state shall be made, by the direction and under the supervision of the Auditor of Public Accounts, at such times as the Auditor of Public Accounts shall determine. A complete and comprehensive audit of the books, accounts, records and affairs of all county officials in each county shall be made by the direction and under the supervision of the Auditor of Public Accounts. No notice of the examination or audit shall be given the officer or any person connected with the office to be examined or audited prior to its commencement.
Neb.Rev.Stat. § 23-1608 (Reissue ...
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