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Hon. Robert S. Calvert Comptrollerof Public Accounts Austin, Texas Opinion No. V-1329.

Re: Authority of the Comptroller to issue warrants in favor of the revolvingfund used in connection

with the Repair

, Dear Sir: and WarehouseDepartmentof the A. & M. College System.

You have requestedan opinion of this office concerningthe legality of a proposedmethod of operationof the Repair and WarehouseDepartmentof the Agriculturaland MechanicalCollege of Texas.

The specificfact situationhere Involved and the proposed operationmay be summarizedas follows:

There are five separatebranches of the A. & M. College System located on the campus at College Station, each receivinga separateappropriation. The Board of Directors of A. & M. College has set up one centralRepair and WarehouseDepartment In an effort to prevent a duplicationof functions within its system, and as a means of securingmore economicalrepairs and replacements. The Board established a revolving fund to be used to purchase repair materials,to pay for labor, and to pay the necessary overhead expenses. Each of the separate branches Is billed for the actual cost of material and labor used on a repair job, plus 10% of the labor and 20% of the materials. The percentagesare the pro rata part of the overheadallocated to each repair job, and are set at a point which keeps the Departmentfunctioning,but which yields no profit.

The revolvingfund is placed in a local bank. Materialsare purchasedthrough the Board ofHon. Robert S. Calvert, Page 2 (V-1329)

Control, but since purchased out of the revolving fund placed in a local bank, the Comptrollerhas no knowledge that the purchasesare made through the Board of Control.

The proposed plan of operation is for the Repitlr and WarehouseDepartmentto bill each of the separateA. & M. branches for the actual cost of material and labor used on a given repair job, plus 10% of the labor and 20% of ,the material as overhead. The responsibleofficer at A. & M. Collegewould then attach a certificatestating that the material had been purchasedthrough the Board of Control and billed at the proper price. The bill and certificate would then be forwarded to the Board of Control, and the Board, after satisfyingItself that the material chargewas correct and that the materialhad bean purchasedas required by statute,would certify the same to the Comptroller. The Comptroller would then issue a warrant in favor of the revolvingfund, and charge it against the appropriation of the proper A. & M. branch.

Based on the above, you have asked the following questions:

(1) Does the Comptroller have authorityto issue warrants to reimbursethe revolving fund of the Repair and Warehouse Departm6ntand charge these warrants against funds appropriatedfor the operationof the various parts of the A. & M. Collage System and from the funds appropriated to A. & M. College?

(2) Is the proposedmethod of certification of the purchase of materialsa proper one?

(3) Is it proper for the Repair and Warehouse Departmentto charge 10% on labor and 20% on materials to defray overhead expenses?

There is no general statute settingup the mechanics for the operationof either warehouse or repair departmentsfor the A. & M. College System. In the General Provisions of the "Higher Education" section of the general appropriation bill, it is provided:

"The said Governln Board fif each educationallnstitutio xi?Is held strictly accountableto the Legislaturefor spending the appropriations herein made wisely,Hon. Robert S. Calvert, Page 3 (V-1329)

economically,

and for the best interests of the several institutionsof higher learning and the State.” Art. V, Sec. 15, H.B. 426, Acts 52nd Leg., R.& 1951, ch. 499, p. 1228, at pa

. However, such a policy statementis not sufficient to allow a warrant to be drawn In favor of a revolving fund and charged to an appropriation made for labor and materials. In deciding that the Comptroller could not draw a warrant against an appropriation to A. & M. College to reimbursea revolving fund used to ay laborers,this office held in Att’y Gen. Op. o-6962 (1945) that the warrant must be issued in favor of the person performingthe labor, because the appropriation

was made for that purpose. It was then stated:

“We note the statementIn your letter that the method suggestedby you was authorizedby the Legislaturein 1927. We think, however, that the continuous failure of the Legislature since t at time to enact simil r provisions

w.7 evolving fund provlsio in subsequentappropriations indicatesthat it did not want the practice continued. We think such action, or rather inaction,on the part of the Legislature is particularlysignificant in view of the fact that for the past severalyears, the departmentalconstructionon the part of the Comptroller has been that payrollwarrants must be made payable to the employees.”
Apparentlythe Legislaturehad the above opinion In mind when it placed the follcnving riders in the general appropriation bill for the biennium ending August 31, 1953:

‘l(e) Appropriations to the Agricultural and MechanicalCollege of Texas or any other parts of the Texas Agricultural and MechanicalCollege System, except funds appropriatedexclusivelyfor salaries may be used to reimburseany revolving knd operated for the benefit of oneHon. Robert S. Calvert, Page 4 (V-1329)

or more parts of said system, such as a motor pool, a feed supply center, an office supply or laboratorysupply center,
or any other operation of a similarnature established

by authority of the Board of Directors of the Agricultural and MechanicalCollege of Texas.” (Art. V, Sec. 4, H.B. 426, Acts 52nd Leg. R.S. 1951, ch. 499, p. 1228, at p. 1463.)

“Each institutionaffected by this Section is hereby authorizedto set up a Revolving Fund to facilitatethe payment of nominal expenses,to pay bills within cash discountperiods, and to pay day and weekly payroll claims, etc. Disbursements from the revolving funds are to be reimbursed from the respectiveappropriations made herein, the State Comptrollerbeing hereby authorizedto make such reimbursements on claims filed with him by the institutionsunder his regularlyprescribed proceduresexcept that one (1) voucher and
one (1) warrant may cover any number of claims for this purpose. These reimbursement claims shall meet the same requirements as other claims against State appropriations,and each Institutionshall prepare such a reimbursement claim as at the close of business on the last day of each month and as many times during each month

as may be expedient in order to make unnecessary the maintainingof an unreasonably large revolving fund.

“The respectivegoverningboards shall determine, subject to the fp;;zval of the LegislativeBudget Board, amounts of the revolving funds to be set up for each institution, and may increase
or decrease the amounts in the same manner if necessary. Such Board shall designate a depositorybank for each revolving fund, and shall specify the officersand/or employeesto sign checks drawn on each such

J./ This function of the LegislativeBudget Board
was declaredunconstitutional in Att’y Gen. Op, V-1254 (1951).Hon. Robert S. Calvert, Page 5 (V-1329)

fund. The revolvingfund for each institution may be set up from State appropriationsherein made for General Operating Expenses, or from local funds on hand at August 31, 1951. The depositorybank for each revolvingfund shall be required to secure the deposit as provided by law.” (Art.V, Sec. 31, H.B. 426 Acts 52nd Leg., R.S. 1951, ch. 499, p. 1228, at p. 1472.)

The above provisionsdo not specifically authorizea revolving fund for a Repair and Warehouse Department,but the terms used are sufficiently broad to allow this particularfund to be set up. These riders clearly give authority to the Comptroller to Issue a warrant in favor of the revolving fund instead of the individualor firm that does the work
or furnishes the materials. The warrant may be &arged against State appropriations made from the General Revenue Fund, except those made exclusivelyfor salaries, or against appropriations made from local funds in the Treasury belongingto A. & M. College or belonging to any part of the A. & M. College System. Thus, the riders make possible the use of a revolving fund. Further, these riders merely detail the manner of using the appropriation, are necessarilyconnected with and incidentalto the appropriation and are thereforevalid. Att’y Gen. op. v-1254 11951). You
are thereforeadvised in answer to your first question that the Comptrollerhas authorityto issue warrants from the proper funds in favor of the revolvingfund.

Before issuing a warrant involvinga purchase of materials,the Comptrollermust be satisfied that the purchaseshave been properly made. The procedure proposedhere, whereby the Board of Control certifies that the purchaseshave been properlymade and the Comptrollerreceives the certificate prior to lssuing a warrant in favor of the revolvingfund, is adequate to assure the Comptrollerthat the purchasing statutesare being compliedwith. Your second question, therefore, is answered in the affirmative.

Your third question concerns the method of charging the overhead expense among the various parts of the A. & M. System receiving the advantagesof the Repair and ~Warehouse Department. In authorizing the
use of revolving funds for operations such as the one.

Hon. Robert S. Calvert, Page 6 (V-1329)

in question,the Legislaturecertainly envisioned that each benefitedmember would pay its pro rata share of the necessary expenses incidentto such an operation. The method of allocationis one to be left to the discretionof the proper administrative officials. There is no legal objectionto the method proposed for the allocationof these expenses if it properly divides the expenses,and we have no reason to believe that it does not.

The riders In the general appropriation bill for the biennium ending August 31 1953 Grt. v., Sec. 4 Par. (e), and Adi V. Sec. 31 H.B. 428 Acts 52nd Leg., R.S. l&l, ch. 449, p. 1228, at pp. 1463 and l&72), authorizingthe use of revolving funds by the Texas Agriculturaland MechanicalCollege System are sufficiently broad to allow the Board of Directors of the A. & M. College System to set up a Repair and Warehouse Departmentfor the use of all units of the System. The Comptroller is authorizedto issue warrants against the funds appropriated to the various parts of the System in favor of the revolving fund. The Comptrollermust be satisfied that the purchasing statuteshave been compliedwith prior to issuing a warrant, and the proposedmethod whereby the Board of Control certifiesto the Comptroller that the purchases In questionhave been properlymade is adequa to assure him of compliance

with the

Yours very truly,

APPROVED

:

C. K. Richards Trial & AppellateDivision

Jesse P. Luton, Jr. Reviewing Assistant

Charles D. Mathews First Assistant PRICE DANIEL AttorneyGeneral

BY r, w,$J- &b-U E. Wa e Thode Assistant

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