STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 5660

February 29, 1980

COUNTIES:

Audits for federal revenue sharing purposes

TREASURER, STATE:

Audits of county accounts

Counties may contract with private certified public accountants to perform audits for federal revenue sharing purposes.

The State Treasurer may not use an audit performed by a private certified public accountant under contract with a county auditor or board of auditors as part of the state audit of the county.

Loren E. Monroe

State Treasurer

Department of Treasury

Treasury Building

Lansing, Michigan

You have requested my opinion as to whether counties may contract with private certified public accountants to perform audits for federal revenue sharing purposes. You further inquire whether these audits, if permitted, may be used by the Department of Treasury as part of the state audit.

The State and Local Fiscal Assistance Act of 1972 (also known as the Federal Revenue Sharing Act), 86 Stat 919 (1972); 31 USC 1221 et seq, as amended by 90 Stat 2347 (1976), requires each state and local government receiving assistance to submit to an independent audit at least every three years. 90 Stat 2354; 31 USC 1243(c)(1). An independent audit is defined as one 'conducted by independent public accountants, or, by independent qualified accountants or examiners from a state or local agency.' 31 CFR 51.101(b). There is, then, no federal requirement that a county receiving assistance under the Federal Revenue Sharing Act, supra, retain the services of a private certified public accountant to perform the required audit, nor is such a practice prohibited.

Counties are empowered to establish a board of auditors or a county auditor. 1931 PA 275, Sec. 1; MCLA 47.1; MSA 5.551. The board of auditors or the county auditor is expressly authorized to audit all county accounts. 1913 PA 275, Sec. 9; MCLA 47.9; MSA 5.559. While there is no explicit statutory authority, such as that given the State Treasurer by 1919 PA 71, Sec. 5; MCLA 21.45; MSA 3.595, to employ such auditors, examiners and assistants as deemed necessary, the power to employ personnel necessary is conferred by the Legislature. 1933 PA 228, Sec. 2; MCLA 47.22; MSA 5.622. Thus, a county board of auditors or a county auditor may employ auditors and the power to employ auditors contains the correlative power to contract with a private certified public accountant. See County Road Association of Michigan v State Highway Commission, 68 Mich App 390; 242 NW2d 786 (1976).

It is my opinion, therefore, that a county may contract with a certified public accountant to perform audits required by the Federal Revenue Sharing Act, supra.

Turning to your second question, the responsibility and the power to devise and implement a uniform system of accounting and auditing, possessed by the Auditor General prior to the 1963 Constitution, 1919 PA 71, supra, now belongs to the Department of Treasury. 1965 PA 380, Sec. 80; MCLA 16.180; MSA 3.29(80). Specifically, the State Treasurer has the responsibility for auditing county accounts. County Road Association of Michigan v State Highway Commission, supra, at pp 399-400. This responsibility may be met by utilizing the services of a private certified public accountant on an independent contractor basis, with approval of the Civil Service Commission. It is imperative, however, that the certified public accountant performing the audit be directly responsible to the State Treasurer and not to the county. . . .' OAG, 1975-1976, No 5139, p 710 (December 15, 1976). This conclusion was compelled by 1919 PA 71, Sec. 5, supra, which, in pertinent part, provides:

Thus, an independent audit furnished by the county could not be used in lieu of or as part of the required state audit.

It should be observed that the Legislature may amend 1919 PA 71, Sec. 5, supra, to authorize the State Treasurer to use audits conducted by private certified public accountants of counties subject to such restrictions as the Legislature may deem wise.

It is, therefore, my opinion, in answer to your second question, that the Department of Treasury may not use an audit performed by a private certified public accountant who contracted with a county as part of the state audit of the county.

Frank J. Kelley