AUDITOR OF THE STATE OF IOWA, ROB SAND, Appellant, vs. AN UNNAMED LOCAL GOVERNMENT RISK POOL, Appellee.
No. 21–1765
IN THE SUPREME COURT OF IOWA
April 7, 2023
Submitted January 18, 2023
Appeal from the Iowa District Court for Polk County, Jeffrey Farrell, Judge.
The state auditor appeals from a district court order denying an application to enforce a subpoena. AFFIRMED.
McDonald, J., delivered the opinion of the court, in which all justices joined.
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.
I.
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 Communities Assurance Pool (ICAP) is a local government risk pool formed in 1986 pursuant to
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,
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 could, at least in the theory, resolve the dispute. If, on the other hand, the dispute continues and the parties are back in court, it will be with a better-developed record.” Agency process did not resolve the dispute.
In May 2020, the state auditor sent ICAP an open records request pursuant to
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.
II.
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.”
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.”
The state auditor‘s authority to conduct an audit or reaudit can be enforced through the subpoena power.
This case involves the state auditor‘s statutory authority to conduct a complete or partial reaudit of ICAP. The primary issue on appeal is whether ICAP is a “governmental subdivision” within the meaning of the Code subject to the state auditor‘s authority to conduct a complete or partial reaudit. The Code defines a “governmental subdivision” as:
cities and administrative agencies established by cities, hospitals or health care facilities established by a city, counties, county hospitals organized under chapters 347 and 347A, memorial hospitals organized under chapter 37, entities organized under chapter 28E, community colleges, area education agencies, and school districts.
We think it clear ICAP is not an entity organized under chapter 28E. “Chapter 28E permits state and local governments in Iowa to combine for the stated purposes of ‘[making] efficient use of their powers by enabling them to provide joint services and facilities with other agencies and to co-operate in other ways of mutual advantage.’ ” Allis–Chalmers Corp. v. Emmet Cnty. Council of Gov‘ts, 355 N.W.2d 586, 588 (Iowa 1984) (en banc) (alteration in original) (quoting
Neither ICAP nor its members followed the statutory requirements to create an entity under chapter 28E because ICAP was formed under
The state auditor concedes ICAP is not an entity organized under chapter 28E, but he argues ICAP is a de facto 28E entity that ought to be subject to his authority. The state auditor‘s argument proceeds in four steps. First, the state auditor argues there is no statute explicitly authorizing government entities to create a local government risk pool. Second, because no statute explicitly authorizes government entities to create a local government risk pool, all local government risk pools must be created pursuant to chapter 28E, which does allow government entities to exercise powers jointly. Third, because all local government risk pools must be created pursuant to chapter 28E, the state auditor ought to have authority over local government risk pools without regard to whether they were actually organized under chapter 28E. Fourth, and finally, the state auditor contends that public policy considerations require he have the authority to audit local government risk pools.
The state auditor‘s argument is unavailing. His initial two premises—that there is no authority for the formation of a local government risk pool outside chapter 28E and that a local government risk pool therefore must be organized under chapter 28E—are incorrect. As noted above, multiple provisions of the Code allow government entities to establish, join, and pay funds into a local government risk pool. See, e.g.,
With respect to the state auditor‘s third argument, even if the state auditor were correct that ICAP should have been created as an entity organized under chapter 28E, it does not follow that the state auditor has authority over ICAP as a de facto 28E entity. The state auditor relies on City of Windsor Heights v. Spanos, 572 N.W.2d 591 (Iowa 1997). In that case, a city attorney and county attorney alleged they had entered a 28E agreement whereby one could prosecute charges only the other could otherwise prosecute. Id. at 592–93. A defendant collaterally attacked the city attorney‘s authority to pursue charges. Id. at 592. Even though the attorneys had no written agreement of their arrangement, the court held the city attorney had de facto authority to prosecute the charges notwithstanding the absence of an actual written agreement. Id. at 594. That case dealt with the officer‘s de facto authority and not the status of a separate legal entity. Spanos does not support the state auditor‘s position.
The state auditor also argues Hawkeye Foodservice Distribution, Inc. v. Iowa Educators Corp. supports his de facto 28E entity theory. 812 N.W.2d 600 (Iowa 2012). In Hawkeye Foodservice, the plaintiff, Hawkeye, challenged the establishment of a corporation jointly created by area education agencies to purchase goods and services at volume and for a lower price. Id. at 602. The plaintiff argued the area education agencies, by creating a corporation rather than a 28E entity, “improperly exceed[ed] their authority granted by statute.” Id. at 606 n.3. Hawkeye sought a declaration that “the establishment, existence, and operation of [the corporation] was unauthorized and in violation of chapter[] . . . 28E of the Iowa Code.” Id. at 602. Hawkeye requested the court enjoin the corporation “from further operation in violation of Iowa law.” Id. This court held Hawkeye stated a viable claim and should be allowed to proceed on the merits to enjoin the corporation‘s conduct as unlawful. Id. at 612. Under Hawkeye Foodservice, a party with standing might be able to enjoin the operation of an illegally created entity, but that is it. See also Landowners, 977 N.W.2d at 500 (“A fundamental requirement for the enforcement of a municipal contract is that the municipality must have exercised its authority to enter into the contract within the scope of the powers conferred by statute. If a municipality fails to appropriately exercise its authority or comply with statutory procedures, the contract is void.“) (quoting Miller v. Marshall County, 641 N.W.2d 742, 750–51 (Iowa 2002)). The case cannot be read to allow this court to recategorize ICAP and subject it to the state auditor‘s authority.
In addition to not being supported by precedents, the state auditor‘s de facto 28E entity argument is contrary to the statutory text. The relevant statute gives the state auditor the authority only over “[g]overnmental subdivisions.”
Related to this, in his fourth point, the state auditor raises a public policy concern. He argues ICAP has public entity members and uses public funds and that ICAP should thus be subject to his oversight. The state auditor had never attempted to assert authority over ICAP in the thirty-three years prior to this case, and it is not as if ICAP is some fly-under-the-radar operation. ICAP has almost 800 government entity members all subject to the state auditor‘s authority. In addition, as ICAP‘s independent auditor‘s report notes, “[t]he Iowa League of Cities, the Iowa State Association of Counties, and the Association of Iowa Fairs endorse and promote the pool.” Of course, we recognize that no claim of estoppel can lie against the government. However, the state auditor‘s historical treatment of ICAP is informative.
In any event, while it might be good policy to subject local government risk pools to some oversight, it does not follow that the state auditor is the person who should be vested with such authority. Other jurisdictions vest oversight authority of local government risk pools with different government officials. See, e.g.,
The question presented in this case is not whether a government official should be vested with oversight of local government risk pools. The question presented in this case is whether the relevant statute vests the state auditor with the authority to audit and issue a subpoena to ICAP. The plain language of the statute, as relevant here, vests the state auditor with the authority over governmental subdivisions, including entities “organized under chapter 28E.”
III.
We hold that ICAP, a local government risk pool organized as an unincorporated nonprofit association under
AFFIRMED.