Frequently asked questions for county clerks.
The County Clerk’s Cost Fund, established by Act 1765 of 2003, has not been the topic of as much discussion as other cost funds or automation funds – because as a general rule the County Clerk’s office does not generate as much revenue. No Attorney General Opinions have been issued concerning the County Clerk Cost Fund – and there have been no court cases involving this fund as of late 2011.
Although this fund is probably handled differently from county to county – here is what the law says concerning the County Clerk’s Cost Fund.
Fees collected by the County Clerk pursuant to A.C.A. 21-6-413, 21-6-415 and 16-20-407 are to be paid into the county treasury to the credit of the “county clerk’s cost fund”. In strict accordance with the law 100% of these fees are to be credited to the fund – even though only 35% of the fees are restricted and considered “special revenues”.
Many counties probably credit 35% of the fees to the County Clerk’s Cost Fund and 65% of the fees to County General. To be in full compliance with the law 100% of the fees should be credited to the County Clerk’s Cost Fund with 65% then transferred to County General as an appropriated transfer or the 65% can actually be appropriated and expended from the County Clerk’s Cost Fund for “any legitimate county purpose.”
A.C.A. 21-6-413(e)(1)(A) says that the county clerk fees “shall be paid into the county treasury to the credit of the fund to be known as the county clerk’s cost fund.” The law goes on to say in subsection (e)(1)(B) that “with the exception of those funds referred to in subdivision (e)(2) of this section, all funds deposited into the county clerk’s cost fund are general revenues of the county and may be used for any legitimate county purpose.”
The funds referred to in subdivision (e)(2) are the 35% “special revenue” funds. These funds, in accordance with A.C.A. 21-6-413(e)(2)(A)(B) “shall be used to purchase, maintain, and operate an automated records system. The acquisition and update of software for the automated records system shall be a permitted use of these funds.”
Normally “special revenues” or “restricted funds” are just that – they can be used only for the purposes set out in law…..unless there is an exception laid out in the law. In this case the exception is espoused in A.C.A. 21-6-413(e)(2)(C) which says, “Funds set aside for automation may be allowed to accumulate from year to year or at the discretion of the clerk may be transferred to the county general fund by a budgeted appropriated transfer.
Special Notes concerning the County Clerk’s Cost Fund:
I will preface the answer to this question with the statement that a county should not get in the situation of having to pay penalties because of the late payment of a bill. County government should exercise diligence in taking care of tax payer money – including timely payment of claims so as to avoid the wasteful payment of penalties.
However, if a county finds itself in the position of paying an overdue invoice to which a penalty has been applied – I do not believe there is any law that forbids the payment of an actual “penalty”.
Some people tend to view “interest” and “penalty” in the same light – when, in fact they are different animals. A county cannot pay interest (except in certain instances)….but there is no state law prohibition against paying a penalty.
“Interest” is legally defined as “the compensation fixed by agreement or allowed by law for the use of money”. Article 16, Section 1 of the Arkansas Constitution says, “Neither the State nor any city, county, town or other municipality in this State shall ever lend its credit for any purposes whatever; nor shall any county, city or town or municipality ever issue any interest bearing evidences of indebtedness, except such bonds as may be authorized by law…….”. Amendment 78, Article 2 of the Arkansas Constitution provides for short-term financing for counties and cities allowing the payment of interest. Amendments 62, 65 and 72 also allow various types of bond issues and debt obligations, which entail interest.
However, a “penalty” is legally defined as “an extra charge against a party who violates a contractual provision.” When a county makes a purchase from a vendor they automatically agree to the terms of payment. If those terms are not met then the county is subject to paying the penalty just like anyone else. I have found no law or AG Opinion to the contrary.
The prevailing Arkansas code that establishes the framework for the division of costs associated with District Court is A.C.A. 16-17-115 [County’s, town’s and city’s portion of district court expenses – Appropriation.]. A.C.A. 16-17-115(a) deals with the county portion of expense and says, “except as authorized otherwise, the county wherein a district court is held shall pay one-half (1/2) of the salaries of the district judge and each chief court clerk of any district court organized in that county under the provisions of A.C.A. 16-17-901 et seq and the quorum court shall make an appropriation of a sum sufficient to pay the county’s proportion of the expenses of any such district court. These payments shall be made out of the district court cost fund and general revenues of the county.” So, in many cases, the county is only legally responsible for one-half of the salary of both the district court judge or judges and the chief district court clerk(s).
There are Attorney General Opinions that say the county is not responsible for other expenses of the district court – other than outlined in law. For many counties those opinions opine that the county is not responsible for salaries of deputy district court clerks. They go as far as to say that the county is not responsible for paying fringe benefits for the judge and clerk – fringe benefits like health insurance, retirement, etc. Arkansas Attorney General Opinion No. 1996-207 is a concise opinion that covers this topic.
However, notice the first four words of A.C.A. 16-17-115(a) – “except as authorized otherwise”. Arkansas Code Annotated 16-17-108 is a state law that establishes the salaries or the perimeters for salaries of personnel and other requirements of various district courts. This code may or may not establish the proportion of salaries paid in accordance with A.C.A. 16-17-115(a) – but it is a state law that normally has the blessing of local officials concerning the division of district court expenses before it is enacted by the legislature. There are a few other state code sites that are specific to individual district courts and the cost division thereof.
The local political subdivisions may also have local agreements concerning the division of district court expenses in accordance with A.C.A. 16-17-115(b)(1)(A)(ii).
To synopsize the division of expense for district courts in Arkansas the fall back position according to A.C.A. 16-17-115 is that county government is responsible only for one-half (1/2) of the salaries of the district court judge and each chief court clerk [subdivision (a)] and towns and cities are responsible for the other one-half of the salaries of the district court judge and each chief court clerk in addition to the operational expense of the district court [subdivision (b)(1)(A)(i)(ii)]. According to Attorney General Opinion No. 1999-207 the salaries of deputy court clerks would be included in “operational expense”. However, the division of expense for district court can be otherwise if delineated for a specific district court(s) in state law or by local agreement of the political subdivisions.
Until January 1, 1998 county government had full responsibility for the financial operation of public defender offices – including salaries. That changed with the passage and enactment of Act 1341 of 1997 to phase in the transfer of funding of the state trial court system from county government to the State of Arkansas. This act of the legislature made public defenders state employees, but left counties with some financial responsibility for the funding of public defender operations.
With the passage of Act 1341 of 1997 county government had to relinquish 85% of the amount certified as having been collected during calendar year 1994 for the purpose of funding the office and operation of the public defender. This money had been available each year in the County Administration of Justice Fund for use in funding the public defender. County government gave up 85% of this funding source for the State to take over the salaries for public defender offices and counties retained the other 15% to pay for office operations.
Section 12 of Act 1341 of 1997 [Funding of Public Defenders.] was codified as A.C.A. 16-87-302 and breaks down the responsibility for the funding of public defenders.
The State of Arkansas is responsible for: (1) salaries of public defenders; (2) salaries of secretaries and other support staff of the public defender’s office; and (3) the payment of the costs of certain expenses. Those expenses are outlined in A.C.A. 16-87-212 which are expenses regarding the defense of indigents and include, but are not limited to, fees for appointed counsel, expert witnesses, temporary investigators, testing, and travel.
County government is responsible for the payment of the following for public defenders: (1) the cost of facilities, equipment, supplies, and other office expenses necessary to the effective and efficient operation of the public defender’s office; and (2) the compensation of additional personnel within the office of the public defender, when approved in advance by the quorum court.
One final note – read Arkansas Attorney General Opinion No. 2004-079 for some insight on the transition of funding for public defenders from counties to the State.
The general answer to the question is “no” – but there are some exceptions to the rule. There is no state law that specifically says you can transfer from General to Road but not vice versa. The law is “unwritten” and is a conclusion of deductive reasoning using the laws that are written concerning county government accounting practices, Attorney General Opinions, and case law.
The premise is this – the County General Fund is made up of “general” or unrestricted revenues of the county. General revenues of the county can be spent for any legal expenditure of the county. Therefore general funds of the county can be transferred through an appropriated transfer to the Road & Bridge Fund or any other fund of the county where those funds can then be appropriated and spent for whatever purpose the receiving fund is established for.
However, the Road Fund and many other funds on the books of the county are “Special Revenue” funds – which mean they are restricted use funds. They are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specific purposes. Even general funds of the county that are transferred to a “special revenue” fund take on the persona and expenditure restrictions of that fund. Therefore, “special” or “restricted” revenue funds cannot, as a general rule, be transferred to County General for general purpose expenditures.
The only legal way that Road & Bridge funds (or other special revenue funds) could be transferred to County General would be in the event of an error. Here is an example: A legitimate road expense was inadvertently paid with general fund revenues. Upon discovery of the error a county court ordered transfer from Road to County General could be made to reimburse the general fund for the legitimate road fund expenditure. The court order should actually be written in such fashion to accomplish a reduction of expenditures in the general fund and an increase of expenditures in the road fund.
As mentioned earlier, there are a few exceptions to the rule. Normally “special revenues” or “restricted funds” are just that – they can be used only for the purposes set out in law. But, in the case of some special revenue funds the law establishing the fund(s) allows for an exception. State law allows an appropriated transfer of funds from a few of the county official special revenue funds to the general fund at the discretion of the official for whom the fund was established. Those exceptions include the:
This practice of reconciliation makes perfect sense since both the offices of County Clerk and County Treasurer are involved in the expenditure of county funds. Reconciliation would be the monthly culminating step for check and balance. However, you will not find a state law in the Arkansas Code Annotated that specifically requires this financial reconciliation tool. But, that is not the end of the discussion.
The Division of Legislative Audit was mandated by the General Assembly through the provisions of Act 122 of 1981 [A.C.A. 14-21-101] to develop a comprehensive financial management system for county government. The Comprehensive Financial Management System was developed and the counties of Arkansas were required to implement it on or before January 1, 1983. This manual IS law. Even the preface of the manual says, “the accompanying manual codifies and formalizes the components of the financial management system……”
The Financial Management System manual [both the original and the revised version] contains a section called “Other General Information” that includes a subsection entitled “Reconciliation of Expenditures – Clerk’s and Treasurer’s Records”. This section of the manual says, “As the County Clerk maintains the County Court Claims Docket/Warrant and Transfer Register as supporting records, it is imperative that the warrants or check/warrants evidencing these expenditures as recorded in the Claims Docket/Warrant and Transfer Register be reconciled with the warrants or check/warrants issued and/or redeemed by the Treasurer, who acts as the financial custodian of county funds. The reconciliation is necessary to substantiate the recorded expenditures – by warrant or check/warrant – of county funds between the Clerk’s records and the Treasurer’s records and to determine the Treasurer’s cash balance for each operating fund based on the warrants or check/warrants issued and redeemed.”
The answer then is “yes”. The law requires a monthly reconciliation of the Clerk and Treasurer records for county expenditures as required by the current Comprehensive Financial Management Manual [as required by A.C.A. 14-21-101] and the revised manual which must be implemented by the counties of Arkansas on or before January 1, 2014.