Oregon Advisory Opinions October 04, 1979: OAG 79-114 (October 4, 1979)

OAG 79-114.

Oregon Laws 1977, ch 836 created a "dollar check-off" fund for the benefit of Oregon political parties. Section 2 of the Act provides:

"(1) An individual whose state income tax liability for a taxable year is $1 or more may designate that $1 shall be paid to the Oregon political party fund for payment to the political party designated. . . ."

The money thus designated is paid into the Oregon political party fund established in the General Fund of the State Treasury. Section 3. Money in the fund is paid to the political treasurers of the designated political parties at least once each calendar quarter. In turn, the political treasurers of the major political parties distribute not less than half of the money received from the Oregon political party fund to the political treasurers of the county central committees of the party. Section 4.(fn1)

We are asked whether the Secretary of State is authorized to audit such funds under ORS 297.210 which states:

"(1) The Secretary of State, as State Auditor, shall have the accounts and financial affairs of all state departments, boards, commissions, institutions and state-aided institutions and agencies to the state examined and audited. . . ."

We conclude that the audit is not only authorized but required.

Political parties have been characterized by the Oregon Supreme Court as ". . . voluntary associations, pure and simple, while the functions they perform relate in the main to public concerns." Ladd v. Holmes, 40 Or 167, 184, 185, 66 P 714 (1901). See also 39 Op Atty Gen 759, which reached the same conclusion that a political party is a voluntary association.

But although a political party is a private organization and not a state agency, it clearly is a state-

aided institution under ORS 297.210.

This statute, quoted above, specifically requires the Secretary of State to examine and audit the "accounts and financial affairs" of all state-aided institutions and agencies. Even if it did not do so, the Secretary of State as the constitutional "auditor of public accounts" (Or Const art VI, sec 2) has the right and duty to audit any funds in the hands of private bodies to the extent that they remain "public accounts."

The dollar check-off funds are clearly public funds. They come from taxes duly paid to the state and held in the State Treasury. Once paid to the political parties under Oregon Laws 1977, ch 836, sec 4, they remain subject to other provisions of the Act; the parties cannot simply use them as they see fit. So far as the major parties are concerned (Republican and Democratic), one-half of the amount received must be sent off to their county central committees. And ch 836, section 6, applicable to both state and county central committees, prohibits use of the fund to support or oppose any candidates for the parties' nominations, or to reduce the deficit of any candidate after the election.

Other statutes ( e.g. ORS ch 248) indicate a legislative judgment that organized political parties play a major if not essential role in our form of government; although private in nature, they carry out a public purpose. Oregon Laws 1977, ch 836 constitutes a specific legislative finding that parties are to have access to public funds in order to carry out some - but not all - of their purposes, which are to that extent deemed to be public purposes. In these circumstances we conclude that the check-off fund remains a "public account" in party hands until it is spent for the permitted purposes.

Similarly, in 38 Op Atty Gen 2105 (1978) and 39 Op Atty Gen 505 (1979) the Oregon Parks Foundation and the Coos-Curry Fair Association, respectively, were both held to be subject to audit as custodians of public funds, although both were also held to be state-aided institutions and subject to ORS 297.210. As stated in 38 Op Atty Gen 2105, supra at 2111:

"Aside from ORS 297.210, the Secretary of State's constitutionally mandated function as 'Auditor of Public Accounts,' and the duties arising from that function, would require audit by the Secretary of State of 'public accounts' even in the hands of private bodies, if they are in fact 'public accounts.' "

Thus, although the Oregon Democratic and Republican parties are private in character, to the extent that they receive public funds for public purposes, subject to statutory control of their use, those funds are subject to a constitutional audit requirement. In addition, ORS 297.210 provides in effect that as a condition of receipt of state funds for their mixed private-public purposes, the accounts of private institutions thus aided by the state shall be subject to audit. And ORS 297.230 goes on to provide:

"(1) The cost and expense of each and every audit authorized by ORS 297.210 shall be paid pro rata from the appropriation for, or funds under the control of, the office, department, board, commission or institution audited."

In this context, this means that the check-off fund money in the

hands of the party central committee, state or local, should be the source of the required payment. Of course, the organization may, if it wishes, pay the cost of the audit from other funds.

We are able to answer the second question only in the most general terms. The Secretary of State has established billing rates for its audits, based upon the usual costs of the Audit Division in carrying out its audit. This billing rate is based upon auditor-hours spent, plus additional out-of-pocket costs specifically attributable to a particular audit.

If this billing procedure reasonably reflects actual costs, this is sufficient, although an exact cost may not be discoverable.

ORS 297.230, in its first year after enactment (Gen Laws of Oregon 1929, ch 153, sec 2), gave rise to a question when the Secretary of State was unable to attribute the exact cost of audit of each of several boards and commissions to them, but instead prorated the audit cost between them in proportion to the expenditures of each. It was held in 14 Op Atty Gen 419 (1929) that this was permissible:

"It has frequently been held in decisions of our Supreme Court that exact equality can seldom be attained, especially in matters of taxation and finance, and that therefore an approximation is all that is required."