Who controls school payroll in a Virginia city, the school board or the city treasurer?

Plain-English summary

Delegate Oder and Treasurer Eubank of Newport News asked the AG to sort out two overlapping questions that had been creating friction between the city school board and the city treasurer:

1. Who decides when school employees get paid, who runs the administrative process leading to payment, and who oversees employees who handle payroll?
2. Does § 22.1-116 require the treasurer to keep school funds in a separate bank account, or is separate accounting within a single bank account enough?

The AG split the answers along the line between authority over the funds (school board) and mechanics of moving the funds (treasurer).

Pay date authority. Section 22.1-296 says "[e]ach school board shall provide for the payment of teachers, principals, assistant principals and other employees monthly, semi-monthly or biweekly, as may be determined by the school board." That puts the pay-date choice with the school board. The choice must follow a regular monthly, semi-monthly, or biweekly timetable, but within those options the school board picks.

There is an asymmetry between cities and counties. County school boards have explicit authority to draw special warrants for compensation that has been earned, which lets a county school board deviate occasionally from the regular schedule. City school boards have no such authority. Because Virginia follows the Dillon Rule of strict construction (powers must be expressly granted, fairly implied, or essential), a city school board lacks the power to order the treasurer to disburse a salary advance.

Payment mechanics. Section 22.1-116 charges the treasurer with "the receipt, custody and disbursement of the funds of the school board." The treasurer therefore executes the payroll: running the direct-deposit ACH file to the bank, instituting internal controls to ensure payrolls are run correctly, communicating with the school division to avoid overdrafts. The school board decides how to spend the money; the treasurer disburses it.

Separate account. Section 22.1-116 says the treasurer must keep school funds in "an account or accounts separate and distinct from all other funds." The AG read this as requiring separate accounting, not a separate bank account. The opinion contrasts § 22.1-116 with other statutes that explicitly require a separate bank account. When the General Assembly wants a separate bank account, it says so.

The AG relied on a prior opinion of this Office that interpreted a similar phrase in the dog-license tax statute the same way: "separate account" means separate bookkeeping entries, not a separate bank account. The purpose of the separate-account requirement is to let the state audit and verify how funds are used, and that purpose is met as well by an appropriate bookkeeping entry as by a separate bank account.

Currency note

This opinion was issued in 2011. 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.

The statutes the AG construed (§§ 22.1-89, 22.1-116, 22.1-296) have been amended at various points and the Dillon Rule continues to evolve through Virginia Supreme Court decisions. Anyone designing a current city school payroll arrangement should look at the current text of these provisions and confirm that no later AG opinion or case has shifted the line.

Common questions

Why does a county school board get more flexibility than a city school board?

Because the General Assembly wrote the special-warrant authority only for county school boards. Under the Dillon Rule, what is not granted is not implied. The AG had to take the statute as written.

Can the school board pay employees weekly instead of biweekly?

Section 22.1-296 lists three options: monthly, semi-monthly, or biweekly. Weekly is not on the list. The school board can pick among the three statutory options but cannot invent a fourth.

What if the school board and treasurer disagree about a payroll process?

The line the AG drew is decision authority versus mechanics. The school board can decide that payroll runs on the 15th and last day of the month. The treasurer cannot override that. But the treasurer can decide how to execute the run, what bank channel to use, what internal controls to apply, and how communications between the school division and the treasurer's office work.

What if the locality finds the school board's pay-date choice expensive or inconvenient?

The AG noted that the board of supervisors or city council can take that into account when preparing the next school budget. The leverage is budget setting, not direct override.

Does the school division actually need its own bank account?

Per the opinion, no. Separate ledger entries within a single bank account are enough to satisfy § 22.1-116. The audit trail comes from the books, not from the bank account number.

Background and statutory framework

The constitutional anchor:

• Va. Const. art. VIII, § 7. Supervision of schools vested in a school board.
• Va. Const. art. VII, § 4. Creates the office of treasurer; duties prescribed by general law or special act.

The school board statutes:

• Va. Code Ann. § 22.1-28. Mirror of art. VIII, § 7.
• Va. Code Ann. § 22.1-89. Each school board manages and controls the funds made available to the school board.
• Va. Code Ann. § 22.1-296. Each school board provides for payment of teachers, principals, assistant principals, and other employees monthly, semi-monthly, or biweekly.
• County school boards have authority to draw special warrants for earned compensation (the opinion does not give a section number in the reproduced text).

The treasurer statutes:

• The general powers and duties of a local treasurer are set out in Title 58.1 (Article 2, Chapters 31 and 39), per the opinion.
• Va. Code Ann. § 22.1-116. Treasurer charged with receipt, custody, and disbursement of school board funds; funds kept in a separate and distinct account.

The Dillon Rule, as the opinion states it:

• Local governing bodies have only those powers expressly granted, fairly or necessarily implied, or essential and indispensable; any doubt is resolved against the locality, and the rule applies to school boards. The opinion states this principle without naming the cases.

The contrasting statutes: the opinion notes that other statutes do require a separate bank account, without listing specific section numbers in the reproduced text.

The prior AG opinion the AG relied on:

• A prior opinion of this Office construing a dog-license tax statute concluded that "separate account" without the word "bank" means separate bookkeeping entries, not a separate bank account.

Citations

• Va. Code § 2.2-505
• Va. Const. art. VIII, § 7
• Va. Const. art. VII, § 4
• Va. Code Ann. § 22.1-28
• Va. Code Ann. § 22.1-89
• Va. Code Ann. § 22.1-116
• Va. Code Ann. § 22.1-296

Source

• Landing page: https://www.oag.state.va.us/annual-reports-opinions/official-opinions
• Original PDF: https://www.oag.state.va.us/files/Opinions/2011/11-003-Oder.pdf

Original opinion text

COMMONWEALTH of VIRGINIA
Office of the Attorney General
Kenneth T. Cuccinelli, II
Attorney General

February 25, 2011

900 East Main Street
Richmond, Virginia 23219
804-786-2071
FAX 804-786-1991
Virginia Relay Services
800-828-1120
7-1-1

The Honorable G. Glenn Oder
Post Office Box 6161
Newport News, Virginia 23606

The Honorable Marty G. Eubank, Treasurer
City of Newport News
2400 Washington Avenue
Newport News, Virginia 23607-4388

Dear Delegate Oder and Treasurer Eubank:

I am responding to your request for an official advisory opinion in accordance with § 2.2-505 of the Code of Virginia.

Issues Presented

I am in receipt of two overlapping and interrelated official opinion requests addressing the authority of the City school board and the treasurer with respect to the handling of school division funds. Essentially, each opinion request raises two issues. First, with respect to paying school personnel, the letters ask whether the school board or the treasurer has the ultimate authority to establish the payroll dates for the school division, to direct the administrative processes leading to payment of school division employees, and to direct and oversee school division employees' administration of school division payrolls. The requests then inquire whether § 22.1-116 is satisfied if the treasurer maintains the funds of the City and of the school division in a single bank account, but separately accounts for and tracks the funds for accounting purposes, or if that Code provision requires separate bank accounts for school board funds.

Response

It is my opinion that the authority to establish payroll dates for school division employees rests with the school board, but that the Code of Virginia contemplates the establishment of regular payroll periods. It is further my opinion that the mechanics of making the payments to schools rests with the treasurer of the locality. Finally, it is my opinion that § 22.1-116 is satisfied if the treasurer maintains separate internal accounts of the funds of the City and of the school division for accounting purposes; the treasurer is not required to maintain a separate bank account for school board funds.

Applicable Law and Discussion

Article VIII, § 7 of the Constitution of Virginia and § 22.1-28 of the Code of Virginia provide that "[t]he supervision of schools in each school division shall be vested in a school board." Section 22.1-89 provides that "[e]ach school board shall manage and control the funds made available to the school board for public schools and may incur costs and expenses." The Code further provides that "[e]ach school board shall provide for the payment of teachers, principals, assistant principals and other employees monthly, semi-monthly or biweekly, as may be determined by the school board."

Article VII, § 4 of the Constitution of Virginia creates the office of treasurer and provides that a treasurer's duties "shall be prescribed by general law or special act." The powers and duties of a local treasurer are set out generally in Article 2, Chapters 31 and 39 of Title 58.1. Section 22.1-116 provides that the "treasurer . . . shall be charged with the responsibility for the receipt, custody and disbursement of the funds of the school board . . . ."

First, given the broad authority afforded to the school board under §§ 22.1-89 and 22.1-296 to manage school funds and to pay school division employees, I conclude that the ultimate authority to determine when school division employees are to be paid rests with the school board. The law expressly provides that "[e]ach school board shall provide for the payment of teachers, principals, assistant principals and other employees monthly, semi-monthly or biweekly, as may be determined by the school board." This authority, however, contemplates regular payments on a "monthly, semi-monthly, or biweekly basis." In other words, the school board can choose the date, but its choice must reflect a regularized timetable.

County school boards expressly are given the authority "for the drawing of special warrants in payment of compensation, when such compensation has been earned and is due." This provision effectively allows a county school board the discretion occasionally to deviate from the system of "monthly, semi-monthly or biweekly" payments. No such authority is given to the school boards in cities, who, therefore, must follow a system of "monthly, semi-monthly or biweekly" payments. Virginia adheres to the Dillon Rule of strict construction, which provides that "[local governing bodies] have only those powers which are expressly granted by the state legislature, those powers fairly or necessarily implied from expressly granted powers, and those powers, which are essential and indispensable." Any doubt as to the existence of a power must be resolved against the locality. The Dillon rule applies to school boards as well as localities. The City school board, therefore, is not statutorily empowered to order the treasurer to disburse a salary advance.

With regard to whether the treasurer or the school board can direct the administrative processes leading to payment of school division employees, and direct and oversee school division employees' administration of school division payrolls, § 22.1-116 provides that the "treasurer . . . shall be charged with the responsibility for the receipt, custody and disbursement of the funds of the school board . . . ." The school board's duty under § 22.1-89 to "manage and control" its funds "must be construed in the context of living within its budgetary limits and its authority to determine how public school monies should be spent within those limits." Therefore, although the school board can decide how to spend the funds, the mechanics of disbursing the funds rest with the treasurer. For example, the treasurer would be responsible for executing the school division's direct deposit ACH payroll file to the bank that facilitates the transmission of the file to the Federal Automated Clearing House. Similarly, the treasurer would be responsible for instituting internal controls to ensure that payrolls are executed in accord with the Code, and ensuring timely and proper communication of payroll needs to avoid any overdraft status.

The final question relates to the requirement that school funds be maintained in a separate account. Section 22.1-116 provides that the treasurer "shall be charged with the responsibility for the receipt, custody and disbursement of the funds of the school board and shall keep such funds in an account or accounts separate and distinct from all other funds." The question is whether this language refers to a separate account in accounting terms, or whether the statute requires a separate bank account for these funds. Section 22.1-116 does not contain language, as many statutes do, requiring that the funds be kept in a separate bank account. So long as the funds of the school division are separately tracked and maintained in a distinct "funding account," the mandate of a separate account is satisfied. In other words, a "separate account" is not necessarily a "separate bank account." Had the General Assembly wished to specify a separate bank account, it could have done so, as it has in a number of other statutes.

This conclusion is consistent with a prior opinion of this Office. A statute required the treasurer to "keep all money collected by him for dog license taxes in a separate account from all other funds collected by him." The opinion addressed whether this statute imposed a requirement of "a separate bank account for this tax money or whether a separate account maintained within the general fund itself" was sufficient. This Office reasoned that

[t]he language used is "separate account," not "separate bank account." Use of the latter terminology would require the establishment of a separate bank account for the deposit of monies collected in payment of dog license taxes. The absence of the word "bank" indicates that the General Assembly intended to require only separate bookkeeping entries be made by the Treasurer, so that the manner in which such funds were used would be traceable in case an audit or similar function had to be performed. The purpose of the separate account requirement is to guarantee that the State can apprise itself whether tax monies collected are used as [the law] specifies. This purpose is met as adequately by an appropriate bookkeeping entry as by establishing a separate bank account.

I find this reasoning persuasive in the present context. Because the General Assembly did not specify the need for a separate bank account for school division funds, it is sufficient for the treasurer to maintain separate accounts as an accounting matter.

Conclusion

Accordingly, it is my opinion that the authority to establish payroll dates for school division employees rests with the school board, but that the Code of Virginia contemplates the establishment of regular payroll periods. It is further my opinion that the mechanics of making the payments to schools rests with the treasurer of the locality. Finally, it is my opinion that § 22.1-116 is satisfied if the treasurer maintains separate internal accounts of the funds of the City and of the school division; the treasurer is not required to open a separate bank account for school board funds.

With kindest regards, I am

Very truly yours,

Kenneth T. Cuccinelli, II
Attorney General