                                               May 261999



The Honorable Michael P. Fleming                      Opinion No. JC-0055
Harris County Attorney
1001 Preston, Suite 634                               Re: Whether the Harris County Auditor must audit
Houston, Texas 77002-1891                             the Harris County Department of Education;
                                                      reconsideration of Letter Opinion No. 93-83 (1993)
                                                      concerning reimbursement of county for expense of
                                                      audit (RQ-991)
Dear Mr. Fleming:

        You ask whether the Harris County Auditor must audit the Harris County Department of
Education (hereinafter “the Department”) annually pursuant to article 29198-l ofthe Revised Civil
Statutes. This question was left open in Attorney General Letter Opinion No. 93-83, which
concluded that the Department must reimburse the county for the expense of each audit, but did not
advise “whether the county should in the future continue to provide audit services, with
reimbursement, or simply stop providing the services.” We conclude that the statute requires the
county auditor to audit the Department annually. We also reconsider the conclusion of Attorney
General Letter Opinion No. 93-83, and conclude that the Department is not required to reimburse
the county for each audit.

        The Harris County Department of Education is one of the relatively few county school
administrations still existing in Texas. State funding for county school boards and county school
superintendents ended on December 3 1,1978, except in counties with common school districts and
rural high schools. The offices of county school superintendent, ex officio county school
superintendent, and the county school boards were terminated in counties not receiving state funding
unless they were supported by ad valorem tax revenue generated under former chapter
18 of the Education Code or by voluntary contract with the independent school districts of the
county. TEX. EDUC. CODE ANN. tit. 2 app. @ 17.94-.99 (Vernon 1996);’ see Tex. Att’y Gen. Op.
Nos. JM-651 (1987), H-1205 (1978), H-1104 (1977).

       The Department is governed by former chapter 17 of the Education Code and is supported
by ad valorem tax revenue collected pursuant to former chapter 18 of the Education Code, which
provides for the “county unit system” of taxation. TEX. EDUC. CODE ANN. tit. 2 app., chs. 17 & 18


        ‘Act of May 21,1975,64th   Leg., R.S., ch. 478,s   I, 1975 Tex. Gen. Laws 1275 (adopting   TEX. Eouc. CODE
ANN. 55 17.94-.99).
The Honorable Michael P. Fleming - Page 2




(Vernon 1996) (Former Chapters with Continued Application). Chapter 18 permits the voters of a
county to create a countywide school district to adopt a countywide equalization tax for the
maintenance of the public schools. Id. 5 18.01. Although chapters 17 and 18 of the Education Code
have been repealed, a county school administration system operating under those chapters on
May 1, 1995, “may continue to operate under the applicable chapter as that chapter existed on that
date.” TEX. EDUC.CODEANN. 5 11.301 (Vernon 1996) (preserving to a limited extent 17, 18 and
certain other chapters of the Education Code repealed by the 1995 amendments to title 2 of the
Education Code).’ You state that the Harris County Department of Education provides support
services to the twenty-four independent school districts in Harris County and that the Department
receives state and federal funds, as well as tinding from local taxes.

         You specifically ask whether the Harris County Auditor must audit the Department pursuant
to article 2919g-1 of the Revised Civil Statutes3 even though it is audited by an independent outside
auditor. Article 2919g-1 provides as follows:

                        Section 1. In any counties having a population of two million
                 (2,000,OOO)or more according to the last preceding federal census,
                 the county auditor is hereby authorized and required to audit all
                 books, accounts, reports, vouchers and other records relating to all
                 funds handled by the county department of education. The results of
                 such audit shall be made public by the county auditor.

                         Sec. 2.       The county auditor shall be reimbursed from the
                 funds of the county department of education for all expenses incurred
                 in performing the first audit. Thereafter, the county auditor shall
                 audit such books, accounts, reports, vouchers and other records of the
                 county department of education as often as is necessary to keep
                 himself informed of the condition thereof, but in no case shall the
                 interval between such audits exceed one (1) year.

                          Sec. 3. The county auditor of any county to which this Act
                  applies shall set up such methods and procedures as are necessary to
                  conduct audits effectively. The county department of education shall
                  comply with such methods and procedures for facilitating audits as
                  determined by the county auditor.



          ‘Act ofMay 30,1995,74th     Leg., R.S., ch. 260, $58,1995 Tex. Gen. Laws 2207,2498.    Chapters 17,18 and
the other chapters subject to section 11.301 of the Education Code arc found in the appendix following title 2 of the
code.

        ‘TEx. Eouc. Aux. LAWSart. 2919g-1 (Vernon 1999) [Act ofApr. 23, 1963,58tb Leg., R.S., ch. 87, 1963 Tex.
Gen. Laws 145,145-46,amendedbyActofMay28,1971,62dLeg.,          R.S., ch. 542,§ 113,197l Tex. Gen. Laws 1817,
1846, amended by Act of May 15, 1981,67th Leg., RX, ch. 237,§ 82, 1981 Tex. Gen. Laws 559, SSO-811.
The Honorable Michael P. Fleming - Page 3




                        Sec. 4. This Act shall not be construed as precluding other
                 government agencies or independent auditors from auditing certain
                 funds handled by county departments of education, in counties to
                 which this Act applies, in addition to the audit by county auditors as
                 provided for herein. (Emphasis added).

Id.

        Section 2 of article 2919g-1 expressly requires the county auditor to perform an annual audit
of the county department of education, and section 4 makes it clear that audits by other parties do
not replace the audit performed by the county auditor. In answer to your question, the Harris County
Auditor must audit the Department pursuant to article 29198-l of the Revised Civil Statutes, even
though it is audited by an independent outside auditor.

         We were informed in relation to Attorney General Letter Opinion No. 93-83 that the Hamis
County Auditor had “always audited the books and records of the Harris County Department         of
Education without compensation,“4 until a new Harris County Auditor questioned fhe practice
of performing the audit without compensation. Attorney General Letter Opinion No. 93-83
concluded that the Department must reimburse Harris County for each annual audit, even though
article 29198-l ofthe Revised Civil Statutes expressly requires reimbursement only for the expenses
of the first audit. Attorney General Letter Opinion No. 93-83 based its conclusion on article III,
section 52 of the Texas Constitution, which provides in part:

                           Except as otherwise provided by this section, the Legislature
                  shall have no power to authorize any county, city, town or other
                  political corporation or subdivision ofthe State to lend its credit or to
                  grant public money or thing of value in aid of, or to any individual,
                  association or corporation whatsoever.

This constitutional provision prohibits counties from making gratuitous transfers of money or any
other thing of value to corporations, but it does not prohibit the use of public funds or other items
of value to carry out a legitimate public purpose ofthe entity making the transfer. Edgewoodlndep.
Sch. Dist. v. Meno, 917 S.W.2d 717,740 (Tex. 1995). It applies to municipal corporations as well
as private corporations. Harris County Flood Control Dist. v. Mann, 140 S.W.2d 1098 (Tex. 1940).

       In our opinion, neither article III, section 52 of the Texas Constitution nor article 2919g-1
ofthe Revised Civil Statutes requires the Department to reimburse fhe county for each annual audit.
We will address the statute first.




         ‘Letter from Dr. Shirley E. Rose, Harris County Superintendent,   to Honorable   Dan Morales, Texas Attorney
General (Jan. 28, 1993) (on tile with Opinion   Committee).
The Honorable Michael P. Fleming - Page 4




        Article 29198-l requires the Department to reimburse the county only for the county
auditor’s first audit ofDepartment t?mds andnot for subsequent audits. Section 2 ofarticle 29198-l
provided that the county auditor “shall, as soon as practicable, audit all such books, accounts,
reports, vouchers and other records of the county department of education from the effective date
of this Act back to the last preceding audit made          by a county auditor” and required the
department to reimburse the auditor “for all expenses incurred in performing the first audit.” Act
of Apr. 23, 1963,58th Leg., R.S., ch. 87, 1963 Tex. Gen. Laws 145,146. The statute was silent as
to reimbursement for subsequent audits. The legislature may have decided that the first audit would
make an unusual demand on the resources of the auditor’s office, so that the Department should
reimburse the auditor for that, but that subsequent audits would be routine business for the county
auditor and not subject to additional compensation.

        If performing the audit served a legitimate public purpose of the county, it would not be a
gratuitous transfer ofpublic funds barred by article III, section 52. See Edgewood Zndep. Sch. Dist.,
917 S.W.2d at 740. Attorney General Letter Opinion No. 93-83, however, found no county interests
in auditing the Department that would support the transfer of valuable services. For example, it
pointed out that the Department was a political entity distinct from Harris County and not subject
to the control of the Commissioners Court of Harris County. Tex. Att’y Gen. LO-93-83, at 3; see
TEX. EDUC. CODE ANN. tit. 2 app. § 17.21(a) (Vernon 1996) (county board of education shall
constitute a body corporate, may acquire and hold real and personal property, sue and be sued, and
receive bequests, donations, and other funds). It also noted that Harris County and the Harris County
Department of Education occupied the same territory, stating that this relationship did not give the
county an interest in the Department’s business. Tex. Att’y Gen. LO-93-83, at 3. On
reconsideration, however, we have determined that the county has legitimate interests in the
department not addressed in Attorney General Letter Opinion No. 93-83.

          County officials, particularly the county judge, have historically had substantial authority
 over school district affairs. 36 DAVID B. BROOKS,COUNTYAND SPECIALDISTRICTLAW 4 30.1
 (Texas Practice 1989). The county’s statutory authority in the area of education has been
 significantly reduced, and in Harris County, much of the remaining county authority is exercised by
 the Department. See Tex. Att’y Gen. Op. No. V-51 (1947) at 3 (county school trustees vested with
 certain duties formerly performed by commissioners court). The title to any school property
 belonging to the county, which had been vested in the county judge and his successors in office,
 “shall vest in the county school trustees or the county board of education.” TEX. EDUC.CODEANN.
 tit. 2 app. $ 17.22 (Vernon 1996). The county school trustees or county boards of education are
 authorized by section 17.31(a) of the Education Code to “perform any          act consistent with law
for thepromotion of education in the county.” Id. 5 17.31 (emphasis added).

        The county and the Department are both involved in handling timds that go to the public
schools in the county. Funds received from the Central Education Agency are placed in the county
treasury, apportioned to school districts in the county by the county school superintendent, and paid
out to the school districts with the approval of the county superintendent. Id. 5 17.73. The county
depository shall “secure and handle” funds acquired through the operation of the county unit system
The Honorable Michael P. Fleming - Page 5




“in the same manner as other funds available for county school purposes.” Id. § 17.74. These funds
are distributed by the county department of education according to the provisions of section 18.14
of the Education Code. The county treasurer may not pay out any part of the school fund without
the approval of the county superintendent. Id. 5 17.73(c).

         The Department provides services for the benefit of the county that would otherwise be
performed by the county government, and the Department and the county cooperate in handling the
funds for the public school districts in the county. This is a close question, but we believe that the
county has an interest in the Department’s functions sufficient to support some expenditure ofcounty
resources for oversight of the Department’s finances. Accordingly, the Department is not required
by article III, section 52 ofthe Texas Constitution to reimburse the county for the auditor’s services
under article 2919g-1 of the Revised Civil Statutes. Attorney General Letter Opinion No. 93-83 is
overruled to the extent it is inconsistent with this opinion.

         We note that the Department believes the audit is unnecessary and that the county would like
to be reimbursed for the costs ofperforming it. These are concerns to be addressed to the legislature.
See Vaughan v. Southwestern Sur. Ins. Co., 206 S.W. 920,921 (Tex. 1918).
The Honorable Michael P. Fleming - Page 6




                                     SUMMARY

                      Pursuant to article 29198-1, TEX. EDUC.Aux. LAWS(Vernon
              1999), the Harris County Auditor is required to audit the books ofthe
              Harris County Department ofEducation. Article III, section 52 ofthe
              Texas Constitution does not require the Department to reimburse the
              county for the costs of the audit.




                                                     CORNYN
                                            Attorney General of Texas


ANDY TAYLOR
First Assistant Attorney General

CLARK RENT ERVIN
Deputy Attorney General - General Counsel

ELIZABETH ROBINSON
Chair, Opinion Committee

Prepared by Susan L. Garrison
Assistant Attorney General
