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04/05/76 COUNTY ROAD ASSOCIATION MICHIGAN v. STATE

April 5, 1976

COUNTY ROAD ASSOCIATION OF MICHIGAN
v.
STATE HIGHWAY COMMISSION



Appeal from Ingham, Thomas L. Brown, J.

N. J. Kaufman, P. J., and T. M. Burns and M. F. Cavanagh, JJ.

SYLLABUS BY THE COURT

1. Constitutional Law -- Counties -- State Treasurer -- Audits -- Statutes.

The constitution requires a specific grant of power by the Legislature to any governmental entity seeking to audit another entity, and the state treasurer is the sole governmental unit given the duty to formulate a uniform system of accounts for counties and the responsibility to audit those accounts (Const 1963, art 9, § 21; MCLA 21.45; MSA 3.595).

2. Highways -- Counties -- State Highway Commission -- County Road Commissions -- State Treasurer -- Motor Vehicle Highway Fund -- Audits -- Statutes.

The duty of the State Highway Commission to account for the expenditure of motor vehicle highway funds requires it to be only a clearing house for the annual reports of the county road commissions, and any auditing of the expenditure of such funds by county road commissions is to be done by the state treasurer (MCLA 224.27, 247.651 et seq.; MSA 9.127, 9.1097[1] et seq.).

3. Highways -- Motor Vehicle Highway Fund -- Counties -- State Highway Commission -- Statutes.

The motor vehicle highway fund is established as a separate fund in the state treasury, and monies to counties and municipalities are transferred directly from that fund; the State Highway Commission has no general supervisory power over highway fund recipients, and its only duty in connection with distributions to counties and municipalities is that of computing the amounts to be given each recipient in connection with state trunk line highways (MCLA 247.660; MSA 9.1097[10]).

The opinion of the court was delivered by: Kaufman

Complaint by the County Road Association of Michigan, the Oakland County Road Commission, W. W. Intermill, J. Charles Raap, Mark Jenema, G. Harry Jacox, and Raymond L. Roch against the State Highway Commission for an injunction to prevent the State Highway Commission from conducting audits of county road commissions. Preliminary injunction granted and defendants motion for summary judgment denied. Defendant State Highway Commission appeals by leave granted.

Defendant State Highway Commission filed this interlocutory appeal, by leave granted, of two Ingham County Circuit Court orders, one granting plaintiffs' request for a preliminary injunction and the other denying defendant's motion for summary judgment.

The catalyst for this litigation was an attempt by defendant to conduct an "Act 51 audit" of the plaintiff Oakland County Road Commission. Act 51, 1951 PA 51; MCLA 247.651 et seq.; MSA 9.1097(1) et seq., inter alia, created the motor vehicle highway fund and established a pattern for the distribution and use of monies collected. At the time the audit was attempted, the act provided that the fund be apportioned as follows:

"(a) 44.5% thereof to the department of state highways, (b) 35.7% thereof to the several county road commissions of the state, and (c) 19.8% thereof to the incorporated cities and villages of the state".

The act prescribes formulas for determining the amount to be allocated to each county, city and village. See MCLA 247.660a; MSA 9.1097(10b), MCLA 247.662; MSA 9.1097(12), MCLA 247.663; MSA 9.1097(13). It also explicitly details the purposes for which the money may be spent and the amounts to be expended for each purpose by counties, MCLA 247.662; MSA 9.1097(12), and by cities and villages, MCLA 247.663; MSA 9.1097(13). The failure by any county road commission, city or village to apply the funds as prescribed shall result in the forfeiture of all fund allocation for one year. MCLA 247.666; MSA 9.1097(16).

Defendant adopted the Act 51 audit as a method of insuring that the funds are expended as the act requires. Since 1971, some 21 audits have been conducted on a random, "spot-check" basis. Plaintiff Oakland County Road Commission objected to such an audit being conducted. The commission recognized the defendant's right of access to its books and records but objected to the formal audit.

In resisting the audit, the commission raised three objections. First, it argued that within the past year, it had been audited by both a private CPA firm and the Michigan Department of Treasury, and that the additional audit proposed by the defendant constituted an unnecessary interference with the day-to-day operations of the commission. Second, the commission contended that the defendant and its individual auditors were using the Act 51 audits as a financial blackmail tool to exert administrative control over the local commissions beyond that authorized by the Constitution of 1963 and the various legislative enactments. The commission's final argument, and the one which concerns us most, was ...


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