01/24/1994 09:00 AM Senate FIN

  SB 246:   An Act relating to reimbursable service agreements                 
            and  other agreements  between state  agencies for                 
            the purchase of services.                                          
                                                                               
            Randy  Welker,  Legislative Auditor,  testified in                 
            support  of  SB  246.    Nancy  Slagle,  Director,                 
            Division of Budget Review,  Office of Management &                 
            Budget, and  Tracy Cramer, Budget  Analyst, Office                 
            of  Management  &  Budget,  voiced their  concerns                 
            regarding SB  246.    In  addition,  Mike  Greany,                 
            Director, Legislative Finance Division, listed his                 
            concerns.    The bill  was  HELD in  committee for                 
            additional review.                                                 
                                                                               
  SENATE BILL NO. 246:                                                         
                                                                               
       An Act  relating to reimbursable service agreements and                 
       other  agreements   between  state  agencies   for  the                 
       purchase of services.                                                   
                                                                               
  Co-chair Frank  directed that SB  246 be brought  before the                 
  committee  and invited Randy Welker, Legislative Auditor, to                 
  speak to the bill.                                                           
                                                                               
  Randy Welker said that SB  246 dealt with RSAs (reimbursable                 
  service  agreements).     The   primary  impetus   for  this                 
  legislation was an auditor's report released last interim on                 
  the  commissioner's  office in  the  Department of  Health &                 
                                                                               
                                                                               
  Social Services.  The audit objected  to the manner in which                 
  the commissioner's office was using RSAs to bring money into                 
  the commissioner's office appropriation increasing the level                 
  of  expenditure authority  for  the Commissioner  after  the                 
  legislature and Governor had established a lower expenditure                 
  authority amount.   He did not  want to apply that  all RSAs                 
  were troublesome or  invalid but felt this  legislation will                 
  provide  some clarification in statute.   He did not believe                 
  it would add  any additional requirements that do  not exist                 
  in the system  at present.   It provides focus and  emphasis                 
  from the legislature  on the  appropriate use of  RSAs.   He                 
  said the statute  as amended would  state that an RSA  could                 
  not be  used to  transfer money  between appropriations  and                 
  provides several rules for the use of RSAs.  First, it would                 
  require legal  authority to  request the service  requested,                 
  secondly, legal authority to provide the  service requested,                 
  and  finally,  when  that  service  has been  provided,  the                 
  billing  for the service  is based on an  actual cost of the                 
  service provided.                                                            
                                                                               
  Co-chair Frank asked if the service had to be provided.  Mr.                 
  Welker answered  that unless  a service  has been  provided,                 
  there is no executed agreement, and no basis for billing.                    
                                                                               
  In  answer   to  Senator  Rieger's   question  whether  LB&A                 
  routinely peruses RSAs, Mr. Welker said that they did not go                 
  out of the way but staff is aware of the potential for abuse                 
  or misuse of RSAs.  In answer to another question by Senator                 
  Rieger, Mr. Welker reiterated that  SB 246 will help clarify                 
  what  the legislature believes  to be the  legitimate use of                 
  RSAs.                                                                        
                                                                               
  Senator  Jacko  asked  if  OM&B  had  a  position  statement                 
  available.  Co-chair  Frank invited Nancy  Slagle, Director,                 
  Division of Budget  Review, Office  of Management &  Budget,                 
  and Tracy  Cramer, Budget  Analyst, Office  of Management  &                 
  Budget to join the committee at the table.                                   
                                                                               
  NANCY SLAGLE  explained that  until the  mid-80s there  were                 
  such statutory requirements  in the  purchasing area of  the                 
  statutes.    The  administration feared  that  under  SB 246                 
  instances may occur where there may be the lack of statutory                 
  authority but some expertise  may be needed to  be purchased                 
  from another  agency.   Another area  of concern  is if  the                 
  legislature in  their budget  process decided  to put  money                 
  into  a certain  component  for accountability  purposes and                 
  approved the transfer of those  funds to other components to                 
  provide  the services, it  may be questionable  under SB 246                 
  whether there is  an actual contractual arrangement  between                 
  those components.                                                            
                                                                               
  In  answer  to Senator  Rieger,  Ms. Slagle  replied  that a                 
  written   agreement  has   historically   been  used   as  a                 
  contractual agreement  between agencies.   The  only problem                 
                                                                               
                                                                               
  would be if  the money is  placed in a particular  component                 
  but  the services  are not  provided in  that component  but                 
  provided elsewhere.   She  said that  OM&B provides  written                 
  procedures for RSAs to  the agencies.  It provides  not only                 
  the procedures  but oversight for those RSA agreements.  She                 
  assured the committee  that the  department is very  careful                 
  about what it approves and disapproves.                                      
                                                                               
  Senator  Sharp asked if  OM&B had the  authority to prohibit                 
  RSAs between divisions or sections within a department.  Ms.                 
  Slagle  answered that  OM&B  was able  to  oversee all  RSAs                 
  between divisions or departments.   Senator Rieger wanted to                 
  know if there was a technical definition of agency and if an                 
  agency  could  move appropriations  within  an agency.   Ms.                 
  Slagle believed there  was a definition of  agency but would                 
  provide that information to the committee.                                   
                                                                               
  Co-chair Frank requested OM&B, Randy  Welker and Mike Greany                 
  to  propose a mutually agreed  upon amendment that would not                 
  unduly restrict but  eliminate potential for abuse  of RSAs.                 
  Mike Greany cautioned the committee  that any amendment made                 
  should  not  effect the  legislature's  ability to  build in                 
  transfers within the budgeting process.                                      
                                                                               
  Co-chair  Frank  announced  that SB  246  would  be HELD  in                 
  committee.                                                                   
                                                                               
  ADJOURNMENT                                                                  
                                                                               
  The meeting was adjourned at approximately 10:00 a.m.