Did state funds merely passed through a Louisiana foundation count toward its audit-reporting threshold?

Plain-English summary

The Louisiana Department of Economic Development sent $138,152 through the Washington Industrial Development Foundation to reimburse a company for employee training. The department's request letter described the foundation as a pass-through recipient with no authority to use the money for its own benefit. The Attorney General concluded that the transfer counted among the foundation's "revenues and other sources" for the reporting thresholds in LSA-R.S. 24:513.

Under the provisions quoted in the opinion, a local auditee receiving more than fifty thousand dollars but less than three hundred fifty thousand dollars in a fiscal year had to obtain an annual compilation of financial statements and an attestation report. The legislative auditor could require an audit at its discretion. The AG said the public money's passage through the foundation's accounts was enough to trigger the more detailed report. The department's request had also described Service Zone's separate audit duty under the workforce contract.

Currency note

This opinion was issued in 2002. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Did pass-through money count if the foundation kept none of it?
Yes. The AG said the state funds remained a source of public money received by the foundation despite being forwarded to the company.

What financial report did this transfer trigger under the opinion's statute?
The AG applied the provision requiring an annual financial-statement compilation and an attestation report for a local auditee in the stated revenue range.

Did the opinion say a full audit was automatically required?
No. The quoted statute let the legislative auditor require an audit at its discretion. The AG's conclusion was that the foundation owed the more detailed report under the cited threshold provision.

Why did the pass-through arrangement matter to the AG?
The opinion said the state retained an interest in monitoring the proper expenditure or transfer of public money, even where the intermediary received no direct benefit.

Background and statutory framework

The foundation received two payments under a workforce development and training contract and passed them to Service Zone for employee training costs. The opinion interpreted "revenues and other sources" in LSA-R.S. 24:513(I)(1)(c)(ii) according to its ordinary meaning and the state's interest in monitoring public funds. The issue date is damaged in the available extract, so this record leaves the exact date blank.

Citations and references

• LSA-R.S. 24:513(I)(1)(c)(ii), as quoted and applied in the opinion

Source

• Landing page: https://www.ag.state.la.us/Opinions
• Original PDF: https://www.ag.state.la.us/Opinion/Download/02-0204

Original opinion text

One American PJace
301 Mare Street, Sutte 600
DEPARTMENT OF JUSTICE
P.O. Box 94005
(~I~/IL DIVISION
TEL.: (225) 342-7013
FAX: (225) 342-2090
BATON ROUGE
RICHARD P. IEYOUB
708O4-90O5
ATTORNEY GENERAL

SEP g 0 2002
OPINION NUMBER 02-0204

62-B LEGISLATURE - Acts & Bills
90-A-1 PUBLIC FUNDS & CONTRACTS
Mr. Darryl K. Manning
LSA-R.S. 24:513

General Counsel
Washington Industrial Development Foundation, which
Department of Economic Development
received "pass through funds" from the Department of
Economic Development, is required to provide the P.O. Box 94185
Legislative Auditor with the financial report required by
Baton Rouge, Louisiana 70804-9185
LSA-R.S. 24:513(I)(1)(c)(ii).

Dear Mr. Manning:

Reference is made to your request for an opinion of this office regarding the application of LSA-R.S. 24:513(I), which pertains to audits, to the Washington Industrial Development Foundation ("WDIF"), which receives "pass through funds" from the Department of Economic Development ("LDED"), pursuant to a Workforce Development and Training Contract (the "Contract"). Your letter specifically references LSA-R.S.
24:513(I)(1)(c)(i)(aa) and 513(I)(1)(c)(ii), which pertinently provide as follows:

"Any local auditee that receives fifty thousand dollars or less in revenues and other sources in any one fiscal year shall not be required to have an audit, but must file a certification with the legislative auditor indicating that it received fifty thousand dollars or less in funds for the fiscal year. The auditee shall annually file with the legislative auditor sworn financial statements as required by R.S. 24:514. However, the legislative auditor, at his discretion, may require said local auditee to have an audit of its books and accounts". LSA-R.S. 24:513(I)(1)(c)(i)(aa).

"Notwithstanding the provisions of R.S. 24:514, any local auditee that receives more than fifty thousand dollars in revenues and other sources in any one fiscal year, but less than three hundred fifty thousand dollars, shall cause to be conducted an annual compilation of its financial statements, to be accompanied by an attestation report on the entity’s compliance with laws and regulations. Such attestation matters shall be in accordance with the Louisiana Governmental Audit Guide. However, the legislative auditor, at his discretion, may require said local auditee to have an audit of its books and accounts." LSA-R.S. 24: 513(I)(1)(c)(ii).
(Emphasis supplied).

It is our understanding that LDED entered into the Contract, effective November 1, 2000, with Service Zone, Incorporated ("Service Zone") and WIDF, the purpose of which

Page 2

Opinion Number 02-0204
Mr. Darryl K. Manning
General Counsel
Department of Economic Development
Page -2-

was to provide part of the cost of job training for new employees hired by Service Zone. All of the funding, in the sum of $138,152, was transferred by LDED to WDIF in order that the funds could be used to reimburse Service Zone for expenses related to employee training; none of the funds were to be used to benefit WlDF. Your letter states:

’~/VlDF received the funds only as a pass through mechanism...in trust, for the purpose of forwarding the funds to Service Zone. WlDF did not have the authority to spend or use any of the funds for its own benefit or pay any of its expenses."

"During WlDF’s fiscal year ending December 31, 2001, $138,152 was disbursed by LDED to WlDF and then forwarded to Service Zone. If these funds are considered ’revenues and other sources’, WlDF must provide the more detailed financial report required by 513(I)(1)(c)(ii), which will cost WlDF an additional $2,500.00. This additional cost would be solely to audit the receipt and disbursement of two payments...The Workforce Contract requires Service Zone to have an audit conducted on the receipt and expenditure of all funds related to the Workforce Contract...An audit by WlDF of these funds will provide no additional information...We therefore request your opinion as to whether the receipt, in trust, of the pass through funds described above are considered "revenues and other sources" and as such require WlDF to procure the additional audit procedures provided in 513(I)(1)(c)(ii)."

Please be advised that it is the opinion of this office that the funds in question, received by WIDF from LDED, fall within the rather broad category of "revenues and other sources", as referred to in LSA-R.S. 24: 513(I)(1)(c)(ii). We recognize that the funds in question were not intended to be "revenues" to WDIF, in the sense that WlDF received no direct benefit from those funds. However, the funds in question are a ’source’ of public money received by WDIF, even though the funds merely ’passed through’ WDIF’s accounts to Service Zone.

The State has a clear interest in monitoring and insuring the proper expenditure or transfer of public funds such as those received by WDIF. In our opinion, the fact that the funds merely ’passed through’ WDIF and were of no direct benefit to WDIF, does not lessen the State’s interest in monitoring or auditing WDIF. As such, it is the opinion of this office that WDIF is required to provide the more detailed financial report required by that provision of LSA-R.S. 24:513(I)(1)(c)(ii).

Our opinion in this regard is based upon the following rules of statutory construction: When a law is clear and unambiguous and its application does not lead to absurd consequences, the law shall be applied as written and no further interpretation may be

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Opinion Number 02-0204
Mr. Darryl K. Manning
General Counsel
Department of Economic Development
Page -~-

made in search of the intent of the legislature. LSA-C.C. Art 10. A statute should be given a construction according to the fair import of its words taken in their usual sense, in connection with the context, and with reference to the purpose of the provision. State v. Truby, 29 So.2d 758 (La. 1947). The object the legislature has in view should be ascertained, and the interpretation adopted should be that which best harmonizes with such object. Bradley v. Swift & Co., 119 So. 559 (La. 1928). Words and phrases shall be read with their context and shall be construed according to the common and approved usage of the language. LSA-R.S. 1:3. The law requires a fair and genuine construction of legislative acts, and a reasonable construction in light of the purpose of the act. Broussard v. F.A. Richard & Associates, Inc., 732 So.2d 578 (La. App. 3 Cir. 1999); writ denied, 744 So.2d 625.

We trust the foregoing to be helpful. If we can be of assistance to you or the Department of Economic Development in other areas of the law, please do not hesitate to contact us.

Yours very truly,

RICHARD P. IEYOUB
Attorney General

~. JE-~NNE-MAR1E ZEmNGUE BARHAM
~-A’~ista nt Attor~ey_Ge~’neral

RPI/JMZB/dam

cc: Mr. Grover C. Austin