Could a Louisiana public university hire its own CPA firm for a financial examination?

Plain-English summary

Louisiana's commissioner of higher education asked who could retain independent certified public accountants to examine university financial transactions and accounts. The 1998 attorney general opinion answered at three levels. A university management board could commission an independent audit. It could reasonably delegate hiring authority to an institution it supervised. An institution also had authority to hire an independent CPA firm for its financial management in the absence of a contrary board policy, provided it followed state procurement law.

These additional examinations did not replace audits required of the legislative auditor. The statute quoted in the opinion required independent auditors to have no financial interest in the system's activities or conflicting employment or retainer, required at least one responsible firm member to be a CPA, and required a detailed report to be sent to the governor and legislative auditor.

Currency note

This opinion was issued in 1998. 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.

Higher education management boards at the time

The office said the boards could retain independent CPAs for financial examinations of their systems or institutions. It also said they could delegate that function within a reasonable degree of management delegation.

University administrators at the time

The opinion gave institutions authority to hire independent CPAs when no board policy said otherwise. It made that authority subject to board control and supervision and to state procurement law.

Legislative auditors at the time

The opinion said a separately commissioned CPA examination did not eliminate audits required by law of a public auditing agency. It described transmission of the independent report to the legislative auditor.

Common questions

Q: Could a university board order an independent financial audit?
A: Yes. The opinion read LSA-R.S. 17:3354 as expressly allowing a board to arrange one for its system or an institution.

Q: Did each university need an individual delegation before hiring a CPA?
A: The office said a board could delegate hiring authority, and it separately found that an institution could hire an independent CPA absent contrary board policy, subject to board supervision.

Q: Could the private CPA examination replace the legislative auditor's audit?
A: No. The opinion said independent examinations did not substitute for the audits required by law of the legislative auditor.

Q: Did the opinion dispense with procurement rules?
A: No. It said the institution's hiring authority had to be exercised in accordance with the state procurement laws.

Background and statutory framework

The opinion quoted LSA-R.S. 17:3354's independent-audit authorization and safeguards. It read LSA-R.S. 17:3351(A) as supporting reasonable delegation by management boards and LSA-R.S. 17:3218 as extending board management authority to their institutions. Its conclusion also referred to the procurement requirements in LSA-R.S. 39:1481 et seq. and the legislative auditor's duties under LSA-R.S. 24:513.

Citations and references

• LSA-R.S. 17:3354 (independent audits by management boards)
• LSA-R.S. 17:3351(A) (board management authority)
• LSA-R.S. 17:3218 (management of universities in the system)
• LSA-R.S. 39:1481 et seq. (procurement law cited in the opinion)
• LSA-R.S. 24:513 (required legislative-auditor audits)
• Baker v. Southern University, 604 So.2d 699 (La. App. 1’t Cir. 1992), cited for a management board's power to delegate appointment authority.
• State ex reL Bourgeois v. Board of Supervisors of Louisiana State University and Agricultural and Mechanical College, 17 So.2d 25 (La. 1944), cited for a university president's authority to conduct university affairs under board review.

Source

• Landing page: https://www.ag.state.la.us/Opinions
• Original PDF: https://www.ag.state.la.us/Opinion/Download/98-0323

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain; the linked PDF is authoritative.

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One American Place
301 Ma~n Street, Suite 600
DEPARTMENT OF JUSTICE
P.O Box 94005
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TEL.: (504) 342-7013
BATON ROUGE
FAX: (504) 342-2090

RICHARD P. IEYOUB
70804-9005
ATTORNEY GENERAL

September 23, 1998

OPINION NUMBER 98-323

22-B - EDUCATION - Colleges & Other Institutions of Higher Learning
90-A-1 - PUBLIC FUNDS & CONTRACTS

LSA-R.S. t7:3218 LSA-R.S. 17:3351(A) LSA-R.S. 24:513 LSA-R.S. 39:1481 et seq.
LSA-R.S. 17:3354

1) Higher Education management boards have the authority to employ independent CPA’s to perform examinations of university financial transactions or accounts.
2) Higher education management boards, in exercising a
Mr. E. Joseph Savoie
reasonable degree of delegation of management authority
Commissioner of Higher Education to the institutions under their control, have the authority
Louisiana Board of Regents
to allow institutions under their supervision to employ
independent CPA’s to conduct financial and accounting
150 Third Street, Suite 129
examinations.
Baton Rouge, LA 70801-1389
3) Higher education institutions have the unilateral
authority to employ independent CPA’s to conduct financial and accounting examinations.
Dear Commissioner Savoie:

This office is in receipt of your recent opinion request regarding the authority of the higher education management boards and their institutions to employ independent certified public accounting firms to perform certain financial examinations. Specifically, your request raises the following issues:

(1) Do the management boards have the authority to employ independent CPA’s in accordance with the procurement laws of the state to perform examinations of university financial transactions or accounts, provided they are not intended to substitute for the financial examinations required by law of the Legislative Auditor?

(2) Do higher education management boards, in exercising a reasonable degree of delegation of management authority to the institutions under their control, have the authority to allow institutions under their supervision to employ independent CPA’s in accordance with the procurement laws of the state to conduct financial and accounting examinations, provided they are not intended to substitute for the financial examinations required by law of the Legislative Auditor?

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Commissioner E. Joseph Savoie
OPINION NUMBER 98-323
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(3) Do higher education institutions, for purposes of effectively discharging their own responsibility to insure appropriate and sound financial management of their operations, have unilateral authority to employ independent CPA’s in accordance with the procurement laws of the state to conduct financial and accounting examinations, provided they are not intended to substitute for the financial examinations required by law of the Legislative Auditor?

In response to your request, I direct your attention to LSA-R.S. 17:3354, which provides:

(A) Any board may from time to time cause to be made an independent audit of the financial transactions and accounts of its university system or of any college or university therein.
(B) For the performance of an independent audit a board shall employ auditors who have no financial interest in the activities of its university system and who are under no contract of employment or retainer with the university system or any department or division of the state government for purposes other than independent audit.
At least one responsible member of the auditing firm or group selected shall be qualified to practice as a certified public accountant.
(C) Upon completion of an independent audit, a complete and detailed report of the findings and recommendations of the auditors shall be printed by the board and copies thereof transmitted to the governor and the legislative auditor. The expense of the audit and report shall be borne by the university system out of appropriations.
(D) Nothing herein contained shall be construed to eliminate the necessity of an audit required by law to be made by any public auditing agency.

This statute authorizes higher education management boards to have independent audits of its university system or any of the institutions within its system. The clear wording of the statute indicates that the independent audit does not eliminate the necessity for any audit required by law. In accordance with the provisions of LSA-R.S. 17:3354, the management boards have the authority to employ independent CPA’s to perform examinations of university financial transactions or accounts.

Concerning your second question, I direct your attention to LSA-R.S. 17:3351(A), which states, "each management board as a body corporate shall have authority to exercise all power to direct, control, supervise and manage the

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Commissioner E. Joseph Savoie
OPINION NUMBER 98-323
Page -3-

institutions of higher education under its control." In Baker v. Southern University, 604 So.2d 699 (La. App. 1’t Cir. 1992), the court interpreted this grant of authority to include the power to delegate appointing authority to the president of a university system. In accordance with LSA-R.S. 17:3351(A) and the jurisprudence interpreting it, the authority to employ independent CPA’s given in LSA-R.S. 17:3354 may also be delegated by the management boards to institutions under their control. Therefore, higher education management boards, in exercising a reasonable degree of delegation of management authority to the institutions under their control, have the authority to allow institutions under their supervision to employ independent CPA’s to conduct financial and accounting examinations.

Lastly, in response to the third issue raised, I direct your attention to LSA-R.S. 17:3218 which provides:

The corporate authority, internal and otherwise, vested in the Board of Supervisors of Louisiana State University and Agricultural and Mechanical College, the Board of Supervisors of Southern University, and the Board of Trustees for State Colleges and Universities to supervise and manage the university system under the jurisdiction of each, extends to all the colleges and universities, branches, centers of learning, or extensions of such university now existing or hereafter established.

This provision extends the corporate authority of the higher education management boards to supervise and manage to each institution under their control. Further, in State ex reL Bourgeois v. Board of Supervisors of Louisiana State University and Agricultural and Mechanical College, 17 So.2d 25 (La. 1944), the court stated that the president of a state university has the authority to conduct all affairs of the university, subject to the board of supervisor’s review. The affairs of a university include financial management. Subject to the control and supervision of the management board, a president has the authority to take the necessary steps to conduct the financial management affairs of the university. The authority to employ an independent CPA would be within the responsibility to conduct the financial management affairs of the university. Therefore, it is the opinion of this office that higher education institutions have the unilateral authority to employ independent CPA’s, in the absence of any board policy to the contrary. This authority must be exercised in accordance with the state procurement laws, LSA-R.S. 39:1481 et seq.

In conclusion, it is the opinion of this office that higher education management boards have the authority to employ independent CPA’s to perform examinations of university financial transactions or accounts, higher education management

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Commissioner E. Joseph Savoie
OPINION NUMBER 98-323
Page -4-

boards may delegate the authority to employ independent CPA’s to the institutions under their control, and higher education institutions have the unilateral authority to employ independent CPA’s to perform examinations of university financial transactions. The examinations performed by the independent CPA’s do not substitute for the audits required to be performed by the legislative auditor in LSA-R.S. 24:513.

Should you have any further questions, please contact this office.

Very truly yours,

RICHARD P. IEYOUB
ATTORNEY GENERAL

BY:
¯ HRDLICKA
ASSISTANT ATTORNEY GENERAL

RPI/JCH/KJL