March 9, 1981
Mr. Gordon K. Milbrandt
Auditor General
Department of Legislative Audit
State Capitol
Pierre, South Dakota 57501
Official Opinion No. 81-9
Criteria For Causing Audits of Municipalities
Dear Mr. Milbrandt:
You have requested an official opinion from this office in regard to the following factual situation:
FACTS:
Statute requires that audits be caused of municipalities of the first and second class twice in any five year period. Third class municipalities may submit an annual report in lieu of audit. Generally, population and form of government clearly indicate the class of municipality for audit purposes. However, some municipalities have experienced a decrease in population to 500 or fewer (the population criterion for third class) but have retained the form of government of a second class municipality.
Based on the foregoing facts, you have asked the following questions:
QUESTIONS:
1. May audits of municipalities as required by SDCL 4-11-4 be determined on the basis of the most recent federal census population data?
2. Must such audits be dictated in part by the form of government a municipality has decided to maintain regardless of any decline in population?
It is clear that the Auditor General is authorized to conduct audits of the records of a municipality of the first or second class at least twice in any five-year period or to accept an annual report of a municipality of the third class in lieu of an audit. (SDCL 4-11-4).
It is also expressly stipulated in SDCL 9-2-2, that for the purpose of classification, the population of each municipality shall be determined by the last preceding federal census. Such classification, based on population, determines the form of government applicable to a particular municipality. (SDCL 9-2-1 and 9-2-3).
The factual situation you describe indicates that according to the recent federal census, certain municipalities have fallen below the five hundred to five thousand population criterion necessary for classification as a municipality of the second class. According to SDCL 9-2-1, such municipalities would now be classified as towns, and it would therefore appear that the Department of Legislative Audit need only accept an annual report from such municipalities in accordance with SDCL 4-11-4.
However, SDCL 9-11-2 states:
Whenever the population of a city of the second class shall fall below five hundred inhabitants, as shown by the last preceding federal census, such city may be classed as a municipality of the third class and denominated a town. (Emphasis added.)
The language of the above-cited statute indicates that municipalities which have lost sufficient population to cause a change in classification may choose to continue the form of government in effect prior to the population loss. SDCL 9-11-3 and 9-11-4 outline the procedure municipalities may undertake if the choice is made to change the status of a city or downgrade a city to a town. Again, the language appears to indicate a choice in the form of government:
In order so to change its status such city as described in § 9‑11-2 may through its governing body apply to the circuit court having jurisdiction, for a judgment authorizing such change. SDCL 9-11-3. (Emphasis added.)
It is therefore my opinion that the Department of Legislative Audit must continue to conduct audits of certain municipalities of the second class even though the most recent federal census data indicates that such municipalities have fallen below the five hundred to five thousand population criterion necessary for classification as municipalities of the second class, provided that such municipalities have not instituted the procedures in SDCL 9-11-2 through 9-11-4 to reclassify themselves as municipalities of the third class.
If the procedure outlined in SDCL 9-11-2 through 9-11-4 has been undertaken by a municipality, then of course after the reclassification, the Department of Legislative Audit need only accept an annual report in lieu of an audit as provided by statute.
Respectfully submitted,
Mark V. Meierhenry
Attorney General
