Legislature(2003 - 2004)

05/12/2003 09:12 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                                                                                                                                
     CS FOR HOUSE BILL NO. 243(STA)                                                                                             
     "An   Act  establishing   state  agency   program  performance                                                             
     management  and audit powers in the Office of  the Governor for                                                            
     the  evaluation  of  agency  programs;  and  providing  for  an                                                            
     effective date."                                                                                                           
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair Wilken stated  that this bill, sponsored by the House Rules                                                            
Committee at  the request of the Governor,  "reestablishes  an audit                                                            
function in the Office  of the Governor and funding will be provided                                                            
by reallocation of existing Office of the Governor funds."                                                                      
                                                                                                                                
JAY HOGAN, Deputy Director,  Office of Management and Budget, Office                                                            
of the Governor,  testified that he  began working for the  State in                                                            
1970 and  at that time  internal auditing  was conducted within  the                                                            
Department  of Administration.  In  1983,  he noted,  the Office  of                                                            
Management and  Budget was created and the internal  audit functions                                                            
were  assigned  to  it along  with  numerous  other  activities.  He                                                            
continued  that since  that time,  "the functions  have been  scoped                                                            
down"  with the  elimination  of the audit  function  in the  middle                                                            
1990s. Governor  Murkowski intends to "reemphasize,"  "recreate" and                                                            
"broaden" the  internal audit function, according  to Mr. Hogan. Mr.                                                            
Hogan explained  the expansion would include program  evaluations to                                                            
determine their current usefulness.                                                                                             
                                                                                                                                
Mr. Hogan stated  that the Governor's FY 04 budget  request includes                                                            
funds to undertake  the internal auditing  functions. He  noted that                                                            
the  House of  Representatives  and the  Senate have  approved  this                                                            
funding.                                                                                                                        
                                                                                                                                
Mr.  Hogan  expressed that  this  legislation  is  a result  of  the                                                            
"realization"  that although internal  audits had been conducted  in                                                            
the past, no statutory  direction exists to require  them. This bill                                                            
would create the statutory direction, he said.                                                                                  
                                                                                                                                
Mr. Hogan stated that in  the undertaking of an internal audit it is                                                            
appropriate that  the information is kept confidential.  He informed                                                            
that testimony relevant  to an audit is sometimes discovered but for                                                            
various   reasons  must   be  kept  confidential.   He  noted   this                                                            
legislation allows  access to this information by  auditors, similar                                                            
to the authority  granted to the Division  of Legislative  Audit. He                                                            
pointed  out a difference  in that  the information  secured  by the                                                            
Division  of  Legislative  Audit  is  kept  confidential  until  the                                                            
Legislative Budget  and Audit Committee and affected  State agencies                                                            
review  the audit, at  which time  the information  is released.  By                                                            
contrast, he explained  the information gathered in audits conducted                                                            
by the  Office of Management  and Budget  would remain confidential                                                             
until it is released by direction of the governor.                                                                              
                                                                                                                                
Mr. Hogan emphasized  the Office of  Management and Budget  would be                                                            
unable  to conduct  audits similar  to the Division  of Legislative                                                             
Audit, but  rather could  only conduct audits  on activities  within                                                            
the Executive Branch.                                                                                                           
                                                                                                                                
Senator  Hoffman saw  the need  for this  function;  however he  was                                                            
concerned  with the  absence of a  defined date  in which  completed                                                            
audits must  be released.  He surmised from  the witness'  testimony                                                            
that the governor  could determine whether the information  is never                                                            
released. Senator Hoffman  suggested language in the bill to provide                                                            
for timelines  for release to ensure the legislature  and the public                                                            
would have access to the outcome of the audits.                                                                                 
                                                                                                                                
Mr. Hogan pointed out that  no specific release date is required for                                                            
legislative audits.  He predicted situations in which  such releases                                                            
would not be advisable,  exampling a personnel audit  conducted as a                                                            
result of alleged  impropriety involving  "matters of delicacy".  He                                                            
expressed that it would  be conceivable that an audit might never be                                                            
completed although the problem itself was resolved.                                                                             
                                                                                                                                
Co-Chair Wilken clarified  the witness would prefer not to specify a                                                            
date certain in this bill.                                                                                                      
                                                                                                                                
Mr. Hogan  remarked  that "great  effort"  was taken  to follow  the                                                            
legislative  audit process,  which he opined  has worked well  since                                                            
statehood.  He  surmised  that  the Governor  would  prefer  to  use                                                            
discretion.                                                                                                                     
                                                                                                                                
Senator   Hoffman   countered   that   despite    information   held                                                            
confidential until release,  members of the legislature could review                                                            
that information. In contrast,  he stated this legislation would not                                                            
provide the same option.                                                                                                        
                                                                                                                                
Mr. Hogan relayed  that the House State Affairs Committee  discussed                                                            
the issue  and determined  that language  in Section  3 amending  AS                                                            
44.19.147.  Internal audit  records., on  page 2,  lines 5-9  of the                                                            
committee  substitute,  satisfied the  concerns of  the Division  of                                                            
Legislative Audit. This language reads as follows.                                                                              
                                                                                                                                
     …However,   internal  audit  work  papers  and   other  related                                                            
     supportive  material containing  information, data,  estimates,                                                            
     and  statistics   obtained  during  the  course   of  an  audit                                                            
     conducted  under AS 44.18.145(a) may be kept  confidential only                                                            
     to the  extent required  by law applicable  to the agency  from                                                            
     which the material is or was obtained.                                                                                     
                                                                                                                                
Senator Taylor  offered a motion to  report the bill from  Committee                                                            
with individual recommendations and accompanying fiscal note.                                                                   
                                                                                                                                
Without objection  CS HB  243 (STA) MOVED  from Committee with  zero                                                            
fiscal note #2 from the Office of the Governor.                                                                                 
                                                                                                                                

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