Legislature(2013 - 2014)HOUSE FINANCE 519

03/28/2013 05:30 PM House LEGISLATIVE BUDGET & AUDIT


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Audio Topic
05:39:20 PM Start
05:40:12 PM Approval of Minutes
05:40:45 PM Executive Session
05:57:15 PM Release of Audits
05:57:30 PM Other Business
05:58:38 PM Audit Request
06:09:20 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Audits - Executive Session
- State of AK Single Audit FY12: Final Release
+ Other Committee Business TELECONFERENCED
- Audit Request: Regional Economic Assistance
Fund by Rep. Hughes
                    ALASKA STATE LEGISLATURE                                                                                  
             LEGISLATIVE BUDGET AND AUDIT COMMITTEE                                                                           
                         March 28, 2013                                                                                         
                            5:39 p.m.                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Anna Fairclough, Chair                                                                                                  
Senator Kevin Meyer                                                                                                             
Senator Cathy Giessel                                                                                                           
                                                                                                                                
Representative Mike Hawker, Vice Chair                                                                                          
Representative Bob Herron                                                                                                       
Representative Andy Josephson                                                                                                   
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Click Bishop                                                                                                            
Senator Donald Olson                                                                                                            
Senator Mike Dunleavy (alternate)                                                                                               
                                                                                                                                
Representative Alan Austerman                                                                                                   
Representative Kurt Olson                                                                                                       
Representative Scott Kawasaki (alternate)                                                                                       
Representative Bill Stoltze (alternate)                                                                                         
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
APPROVAL OF MINUTES                                                                                                             
EXECUTIVE SESSION                                                                                                               
RELEASE OF AUDITS                                                                                                               
OTHER BUSINESS                                                                                                                  
AUDIT REQUEST                                                                                                                   
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
REPRESENTATIVE SHELLY HUGHES                                                                                                    
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Presented a request for an audit of the                                                                  
regional economic assistance program in the Department of                                                                       
Commerce, Community & Economic Development.                                                                                     
                                                                                                                                
KRISTIN CURTIS                                                                                                                  
Legislative Auditor                                                                                                             
Legislative Audit Division                                                                                                      
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Provided information on the audit request.                                                               
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
5:39:20 PM                                                                                                                    
                                                                                                                                
CHAIR  ANNA FAIRCLOUGH  called the  Legislative  Budget and  Audit                                                            
Committee meeting  to order at 5:39 p.m.   Representatives Herron,                                                              
Josephson,  and  Hawker,  and Senators  Fairclough,  Giessel,  and                                                              
Meyer were present at the call to order.                                                                                        
                                                                                                                                
^Approval of Minutes                                                                                                          
                       Approval of Minutes                                                                                  
                                                                                                                              
5:40:12 PM                                                                                                                    
                                                                                                                                
CHAIR  FAIRCLOUGH  announced  that  the first  order  of  business                                                              
would be approval of the minutes.                                                                                               
                                                                                                                                
REPRESENTATIVE  Hawker made  a motion  to approve  the minutes  of                                                              
March 11,  2013.  There being  no objection, the minutes  from the                                                              
meeting of March 11, 2013 were approved.                                                                                        
                                                                                                                                
^Executive Session                                                                                                            
                        Executive Session                                                                                   
                                                                                                                              
5:40:45 PM                                                                                                                    
                                                                                                                                
CHAIR FAIRCLOUGH announced  that the next order  of business would                                                              
be to move into Executive Session.                                                                                              
                                                                                                                                
5:40:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER  made a motion to move to  Executive Session                                                              
for the  purpose of  discussing confidential  audit reports  under                                                              
AS 24.20.301.   There being no objection, the  committee went into                                                              
executive session at 5:41 p.m.                                                                                                  
                                                                                                                                
5:41:04 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 5:41 p.m. to 5:57 p.m.                                                                       
                                                                                                                                
5:57:05 PM                                                                                                                    
                                                                                                                                
CHAIR  FAIRCLOUGH brought  the  committee back  to  order at  5:57                                                              
p.m.     Representatives  Herron,   Josephson,  and   Hawker,  and                                                              
Senators Fairclough,  Giessel, and Meyer were present  at the call                                                              
back to order.                                                                                                                  
                                                                                                                                
^Release of Audits                                                                                                            
                        Release of Audits                                                                                   
                                                                                                                              
5:57:15 PM                                                                                                                    
                                                                                                                                
CHAIR FAIRCLOUGH announced  that the next order  of business would                                                              
be the release of audits.                                                                                                       
                                                                                                                                
REPRESENTATIVE HAWKER  made a motion  for the final audit  for the                                                              
State of  Alaska Single Audit for  the Fiscal Year ended  June 30,                                                              
2012 to be  released to the public  for response.  There  being no                                                              
objection, it was so ordered.                                                                                                   
                                                                                                                                
^Other Business                                                                                                               
                         Other Business                                                                                     
                                                                                                                              
5:57:30 PM                                                                                                                    
                                                                                                                                
CHAIR   FAIRCLOUGH  expressed   her   intention   to  schedule   a                                                              
Legislative  Budget  and  Audit Committee  meeting  later  in  the                                                              
summer,   or   early   fall,   to   discuss   the   higher   level                                                              
recommendations   by  the  Legislative   Audit  Division   in  the                                                              
aforementioned  audit, and to  ask each  department to  testify to                                                              
the committee as to the implementation of these recommendations.                                                                
                                                                                                                                
5:58:02 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER  commended the efforts of the  auditors, and                                                              
endorsed the  recommendation by Chair  Fairclough for a  follow up                                                              
with the departments.                                                                                                           
                                                                                                                                
^Audit Request                                                                                                                
                          Audit Request                                                                                     
                                                                                                                              
5:58:38 PM                                                                                                                    
                                                                                                                                
CHAIR  FAIRCLOUGH  announced  that  the final  order  of  business                                                              
would  be  an  audit  request  by  Representative  Hughes  of  the                                                              
regional  economic   assistance  program  in  the   Department  of                                                              
Commerce, Community  & Economic Development (DCCED).  [Included in                                                              
members' packets]                                                                                                               
                                                                                                                                
5:58:50 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SHELLY  HUGHES, Alaska  State  Legislature,  noted                                                              
that, as  the committee was already  aware of the  Alaska Regional                                                              
Development Organizations  (ARDOR), she  would simply  explain her                                                              
reasons for the  audit request of the program.   She affirmed that                                                              
ARDOR  was generally  a good  program, but  expressed her  concern                                                              
for  the role  of the  state with  support and  assistance to  the                                                              
program.   She  had recently  been  made aware  that the  program,                                                              
established  in 1988,  had never  been audited.   She pointed  out                                                              
that  its current  annual fiscal  note was  about $800,000,  which                                                              
accounted for  millions of dollars  spent on the program  over the                                                              
years.   She referred  to her  written request,  which listed  her                                                              
concerns.   In  addition, she  noted that  two other  items had  a                                                              
"healthy  discussion" on  the floor  of the House.   She  reported                                                              
that the  re-authorization for the  program had been  shortened to                                                              
three years, with  the knowledge that the audit  request was going                                                              
to be presented  to the committee.  She pointed out  that a report                                                              
from the DCCED  on the statewide and regional  economic strategies                                                              
and projects  was now required,  as well.   She declared  that the                                                              
requested  audit was  also important.    Referring to  discussions                                                              
from the  House Finance Committee  and the House floor,  she asked                                                              
that the  salaries of the ARDOR  directors and staff  be reviewed,                                                              
and that  the role of  DCCED be further  defined to  "be proactive                                                              
in  their  assistance  to ARDORs  in  finding  additional  program                                                              
dollars as well as advancing projects."                                                                                         
                                                                                                                                
6:02:40 PM                                                                                                                    
                                                                                                                                
CHAIR FAIRCLOUGH  clarified that these additional  requests needed                                                              
to be in  writing in order  to appropriately capture  the requests                                                              
and ensure they were an auditable function.                                                                                     
                                                                                                                                
KRISTIN CURTIS,  Legislative Auditor, Legislative  Audit Division,                                                              
Alaska  State Legislature,  reported  that  committee members  had                                                              
previously added  to an audit request  as it was  being discussed,                                                              
so  that  both  the  notes and  the  committee  minutes  would  be                                                              
sufficient  to  incorporate  these additional  requests  into  the                                                              
audit.                                                                                                                          
                                                                                                                                
6:03:16 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON offered  his belief that this audit would                                                              
report  the  effectiveness of  the  programs.   He  expressed  his                                                              
assumption  that the auditor  would detail  other sources  for the                                                              
ARDOR directors'  salaries, which would  be beyond the  purview of                                                              
the legislature.   He asked  Representative Hawker to  clarify why                                                              
there had not been a previous audit of ARDOR.                                                                                   
                                                                                                                                
6:04:13 PM                                                                                                                    
                                                                                                                                
MS.  CURTIS, in  response to  Representative Josephson,  explained                                                              
that  sunset audits  were  required  by statute,  as  there was  a                                                              
termination date in  the statute.  She noted that  other agencies,                                                              
although set up  by the Legislature to be subject  to termination,                                                              
did  not contain  a requirement  for  audit.   She clarified  that                                                              
ARDOR  had  a   sunset  provision  but  did  not   have  an  audit                                                              
requirement.                                                                                                                    
                                                                                                                                
6:05:00 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HAWKER  extolled  that  this was  the  reason  for                                                              
state auditors.                                                                                                                 
                                                                                                                                
REPRESENTATIVE  JOSEPHSON asked  Ms. Curtis  if this  had been  "a                                                              
little  capricious,"   and  was  there  any  reasoning   for  some                                                              
programs to require an audit, while others did not.                                                                             
                                                                                                                                
MS. CURTIS replied,  "I never question what the  Legislature did,"                                                              
and that she never questioned its wisdom.                                                                                       
                                                                                                                                
REPRESENTATIVE HAWKER  stated that this  was a question  of policy                                                              
for the legislators.   He offered "his personal  perspective" that                                                              
these were  policy calls made  by the Legislature  over time.   He                                                              
declared that  it was desirous  to have  a sunset clause  for some                                                              
agencies, and  he referred  to a statute  for agencies  subject to                                                              
sunset  audits,  as   many  of  them  held  custodial   funds  for                                                              
regulated groups.   He noted that many of the  state boards, which                                                              
were  another  level  of  regulation   over  a  profession  or  an                                                              
industry,  needed  to  also  operate   in  accordance  with  state                                                              
statutes  in  an  effective,  efficient  manner  with  appropriate                                                              
levels of  funding.  He pointed  out that, as this  internal state                                                              
agency was  a part of the  recurring budget process, it  would not                                                              
normally  fall  into  the statutory  requirement  for  a  complete                                                              
sunset audit.                                                                                                                   
                                                                                                                                
6:06:58 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HERRON reported that  the House Special  Committee                                                              
on Economic Development,  International Trade and  Tourism had had                                                              
a  discussion  with the  ARDOR  directors,  and he  expressed  his                                                              
concern  with the  underperformance  of some  of those  directors.                                                              
He noted  that consolidation  for  some of the  ARDOR regions  had                                                              
also been  discussed.   He emphasized  that there  were also  some                                                              
outstanding role models among the ARDOR directors, as well.                                                                     
                                                                                                                                
6:07:42 PM                                                                                                                    
                                                                                                                                
CHAIR  FAIRCLOUGH  asked  Ms.  Curtis   if  this  audit  could  be                                                              
accommodated in the existing schedule.                                                                                          
                                                                                                                                
6:08:07 PM                                                                                                                    
                                                                                                                                
MS. CURTIS,  in response,  said Legislative  Audit Division  would                                                              
not  be   able  to  accomplish  the   audit  prior  to   the  next                                                              
legislative  session, but  would  be able  to  complete the  audit                                                              
prior to its sunset in three years.                                                                                             
                                                                                                                                
CHAIR FAIRCLOUGH  pointed out that  the majority of  the immediate                                                              
auditor  time would  be invested  in  the just  released State  of                                                              
Alaska Single Audit.                                                                                                            
                                                                                                                                
6:08:47 PM                                                                                                                    
                                                                                                                                
SENATOR  MEYER  applauded  the  audit  request,  as  he  had  also                                                              
questioned the ARDOR program.                                                                                                   
                                                                                                                                
6:09:01 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER  made a motion to approve  the audit request                                                              
for the  regional economic  assistance program  in the  Department                                                              
of Commerce,  Community &  Economic Development.   There  being no                                                              
objection, it was so ordered.                                                                                                   
                                                                                                                                
6:09:20 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There  being  no  further  business   before  the  committee,  the                                                              
Legislative Budget  and Audit Committee  meeting was  adjourned at                                                              
6:09 p.m.                                                                                                                       
                                                                                                                                

Document Name Date/Time Subjects
LB&A Agenda 3.28.13.pdf JBUD 3/28/2013 5:30:00 PM
LB&A Meeting Minutes 3.11.13.pdf JBUD 3/28/2013 5:30:00 PM
Audit Request- Rep. Hughes.pdf JBUD 3/28/2013 5:30:00 PM