Legislature(2013 - 2014)BELTZ 105 (TSBldg)
02/25/2014 06:00 PM House LEGISLATIVE BUDGET & AUDIT
| Audio | Topic |
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| Start | |
| Approval of Minutes | |
| Audits | |
| Executive Session | |
| Audit Requests | |
| Other Committee Business | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
LEGISLATIVE BUDGET AND AUDIT COMMITTEE
February 25, 2014
6:11 p.m.
MEMBERS PRESENT
Senator Anna Fairclough, Chair
Senator Kevin Meyer
Senator Click Bishop
Senator Cathy Giessel
Senator Donald Olson
Representative Mike Hawker, Vice Chair
Representative Alan Austerman
Representative Bob Herron
Representative Kurt Olson
Representative Andy Josephson
MEMBERS ABSENT
Senator Mike Dunleavy (alternate)
Representative Scott Kawasaki (alternate)
Representative Bill Stoltze (alternate)
COMMITTEE CALENDAR
APPROVAL OF MINUTES
AUDITS
EXECUTIVE SESSION
AUDIT REQUESTS
OTHER COMMITTEE BUSINESS
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
KRISTIN CURTIS
Legislative Auditor
Division of Legislative Audit
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Provided information and answered questions
regarding the Statewide Single audit report, the audit requests,
and the requests for contract funding.
LAURA PIERRE, Staff
Senator Anna Fairclough
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Answered questions during discussion of the
upcoming public hearing.
ACTION NARRATIVE
6:11:48 PM
CHAIR ANNA FAIRCLOUGH called the Legislative Budget and Audit
Committee meeting to order at 6:11 p.m. Senators Fairclough,
Olson, Giessel, Bishop, and Meyer, and Representatives Hawker,
Josephson, Herron, and Austerman were present at the call to
order. Representative Olson arrived as the meeting was in
progress.
^Approval of Minutes
Approval of Minutes
6:12:33 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
January 13, 2014. There being no objection, the minutes from
the meeting of January 13, 2014 were approved.
REPRESENTATIVE HAWKER made a motion to approve the minutes of
January 28, 2014. There being no objection, the minutes from
the meeting of January 28, 2014 were approved.
^Audits
Audits
6:13:38 PM
CHAIR FAIRCLOUGH announced that the next order of business would
be the Alaska State Legislature financial statements and audit
report for the fiscal year ending June 30, 2013.
KRISTIN CURTIS, Legislative Auditor, Division of Legislative
Audit, Alaska State Legislature, presented the independent audit
of the Alaska State Legislature schedule of appropriations,
expenditures, and encumbrances, as well as the schedule of the
revenues for the fiscal year ended June 30, 2013. She relayed
that this was an independent audit, conducted each year. She
reported that the independent auditor provided an unmodified
opinion, which indicated a belief that the schedules were free
from material misstatement. She directed attention to the
letter to those charged with governance, which was the standard
audit letter required to be issued along with the financial
statements. [Included in members' packets] She noted that, as
this included information on the Legislative Budget and Audit
Committee expenses and revenues, it was included for the
committee information.
^Executive Session
Executive Session
6:14:46 PM
CHAIR FAIRCLOUGH announced that the committee would move into
Executive Session to discuss confidential audit reports.
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 6:15 p.m.
6:37:17 PM
CHAIR FAIRCLOUGH brought the committee back to order at 6:37
p.m. Senators Fairclough, Olson, Giessel, Bishop, and Meyer,
and Representatives Hawker, Josephson, Herron, Olson, and
Austerman were present at the call to order.
6:37:45 PM
REPRESENTATIVE HAWKER made a motion for the preliminary audit
for the Statewide Single Audit for the Fiscal Year ended June
30, 2013 to be released to the appropriate agency for response.
There being no objection, it was so ordered.
^Audit Requests
Audit Requests
6:38:07 PM
CHAIR FAIRCLOUGH announced that the next order of business would
be audit requests from both Representative Austerman and
Representative Olson. She directed attention to a letter
submitted to the committee by Representative Austerman dated
February 12, 2014. [Included in members' packets].
6:38:35 PM
REPRESENTATIVE AUSTERMAN explained his request for an audit of
Department of Transportation & Public Facilities (DOT&PF) for
its contracting for ship repairs. He stated that the Alaska
ferry, M/V Tustumena, went into dry dock for its normal repairs,
a project which usually took six to eight weeks, but
subsequently took more than a year. He reported that his office
had requested information but had not received clear responses
for the reasons to the delay. He offered his belief that there
was a "breakdown in the procedures that the DOT[&PF] uses to get
to where they need to be." He directed attention to the three
areas of concern listed in the aforementioned letter. He
requested an audit of DOT&PF for its methods of contracting for
ship repairs.
6:39:36 PM
SENATOR MEYER expressed his understanding that the ferry
maintenance was performed in Ketchikan.
REPRESENTATIVE AUSTERMAN clarified that the statute established
that the work needed to be performed in-state, and that the
option was for either Ketchikan or Seward, as the two shipyards.
SENATOR MEYER asked how the choice was determined.
REPRESENTATIVE AUSTERMAN replied that he did not know.
CHAIR FAIRCLOUGH read the three items of the audit request from
Representative Austerman:
Determine whether the contract award to the Seward
Shipyard complied with federal and state procurement
laws and was in the State's best interest.
Determine if technical specifications that supported
the bid documents were adequate to allow for the
procurement of the expertise necessary to fully
address the refurbishment/overhaul.
Evaluate management of the M/V Tustumena
refurbishment/overhaul by DOTPF from start to finish.
Determine if the project was efficiently managed in
order to achieve the project in the most cost
effective and time sensitive manner.
CHAIR FAIRCLOUGH asked Ms. Curtis if this audit request was
possible, and, if so, when the finished report would be
available.
6:41:28 PM
MS. CURTIS, in response, said that it could be done and there
were staff available. She pointed out that it would be
necessary to do some preliminary work to determine any pending
litigation. She suggested that the usual recourse would be to
wait until the litigation was complete before commencing with an
audit.
6:42:21 PM
REPRESENTATIVE HERRON asked if the audit would be limited to the
points listed by Representative Austerman.
MS. CURTIS explained that her division tried "to stick with the
objectives," although the committee could add a request to
expand on anything that came to its attention during the audit.
REPRESENTATIVE AUSTERMAN shared that he and Ms. Curtis had
discussed the proposed audit and the breadth of its requests.
He declared that lawsuits were expected. He stated that the
larger question was to determine whether this was the best
system for contracting.
6:44:32 PM
REPRESENTATIVE HAWKER suggested adding another request for the
auditor to report to the Legislative Budget and Audit Committee
and the Alaska State Legislature on any other matters deemed to
be important.
CHAIR FAIRCLOUGH expressed agreement with incorporating this
into the audit request. She offered her belief that a
preliminary review could place the auditor in the way of the
law.
REPRESENTATIVE AUSTERMAN expressed his agreement and suggested
that an audit should be initiated, as a lawsuit would stop the
audit.
CHAIR FAIRCLOUGH asked why the actual DOT&PF processes for
putting ships into dry-dock was not being examined.
6:46:53 PM
MS. CURTIS explained that, as there had been an audit on the
overall process three years previously, there was a good
understanding for the procurement process for overhauls and
refurbishments. She shared that her division would build on
this knowledge.
CHAIR FAIRCLOUGH asked if there were any objections to moving
forward with an audit, with the understanding that litigation
would delay completion of the project.
6:47:33 PM
REPRESENTATIVE JOSEPHSON asked if any complaint had been filed,
and whether the audit request by Representative Austerman would
pre-date any formal complaint.
MS. CURTIS replied that she had contacted the DOT&PF and asked
for an update on the status of any litigation. She reported
that an administrative process was currently in play, although
no formal litigation had been filed as yet.
REPRESENTATIVE JOSEPHSON declared that it was best to avoid "the
perception of piling on." He shared that very often documents
in litigation became public when filed. He pointed out that
litigation could take years with trial and appeal.
6:48:54 PM
MS. CURTIS, in response, said that in the event of litigation
the audit could be tabled, and subsequently tracked and re-
visited for updates to its status. She opined that the
questions generating the audit would remain valid regardless of
any time period.
REPRESENTATIVE HERRON offered his belief that any litigation
could take time, and he encouraged moving forward with
preliminary work on the audit request.
6:50:16 PM
REPRESENTATIVE HAWKER made a motion for approval to the audit
request, as amended, of the Department of Transportation &
Public Facilities management of the M/V Tustumena refurbishment
and overhaul. There being no objection, it was so ordered.
6:51:08 PM
CHAIR FAIRCLOUGH announced that the next order of business would
be a request for an audit as described by a letter submitted by
Representative Olson, dated September 27, 2013. [Included in
members' packets]
REPRESENTATIVE OLSON offered to distribute additional
supplemental information for clarification to the audit request
dated February 25, 2014.
6:52:16 PM
The committee took a brief at-ease.
6:52:45 PM
CHAIR FAIRCLOUGH brought the committee back to order.
REPRESENTATIVE OLSON explained that there were new proposed
regulations for the reimbursement rate to private care
facilities by the Department of Health and Social Services which
substantially lowered these rates from $155 each day to $124
each day. He declared that, however, the proposed reimbursement
rate to the Pioneer Homes was increased from $155 each day to
$355 each day. He stated that implementation of this rate
change had been postponed until 2015. He reported that there
had not been an audit [of the Pioneer's Home of Alaska] since
1999.
MS. CURTIS expressed her agreement that the field work for the
previous audit had been conducted in 1999, with completion of
the audit in 2000.
REPRESENTATIVE OLSON listed his requests for the audit to
include the types of cost containment, a follow up on the
recommendations from the prior audit, and a review for the
current proposed rate setting to the Pioneer's Homes. He stated
that a reduction to the reimbursement rates by $31 each day to
private care facilities with a substantial increase to the
reimbursement rates of $200 each day to the Pioneer's Home
"appears to me to be a bit of a disparity, at best, and might be
something else." He asked for clarification regarding this
disparity, as it would have a severe impact on the smaller,
private care facilities and could lead to some of them going out
of business.
6:55:03 PM
CHAIR FAIRCLOUGH asked if the audit request was clear, if there
was the capacity for completion, and, if so, in what time frame
could completion of the audit be expected.
MS. CURTIS replied that the request was sufficiently clear to
move forward with an audit. She asked for clarification
regarding the time frame for reviewing cost containment and
suggested a review of the previous two or three years.
REPRESENTATIVE OLSON deferred to Ms. Curtis's judgment, "as she
has far more expertise than I do."
CHAIR FAIRCLOUGH asked the committee for any suggestions to a
time frame for the audit regarding cost containment.
REPRESENTATIVE HAWKER expressed his agreement for Ms. Curtis's
assessment for two to three years; however, he suggested there
should be the latitude to review further than two or three years
if it was deemed necessary for a more in depth review.
6:57:02 PM
CHAIR FAIRCLOUGH clarified that the review would be for two to
three years although there would be the flexibility to look
further if necessary.
SENATOR GIESSEL reported that the Administrative Regulatory
Review Committee held a hearing during the previous fall, which
revealed that the private care facilities had much higher
acuity, much sicker patients than the Pioneer's Homes. She
asked for the audit to consider this during its assessment of
the discrepancy for reimbursement rates.
6:58:26 PM
MS. CURTIS asked for clarification that, as it was more costly
to care for the sickest patients, the review should be for the
disparity to the lower rate for reimbursement to the private
care facilities.
SENATOR GIESSEL explained that Department of Health and Social
Services had plans to raise the reimbursement rate for the
Pioneer Home and reduce the reimbursement rate for private home
care. She reported that it had become evident during a hearing
on this [Administrative Regulatory Review Committee] that the
private care homes were caring for patients "of much higher
acuity, sicker folks, than the Pioneer Home and so that made the
disparity even greater in terms of the reimbursement rates."
MS. CURTIS, in response to Chair Fairclough, said that she would
draft an amendment adding this point and then post the audit
request with the approved amendment on record.
7:00:04 PM
REPRESENTATIVE JOSEPHSON asked if the institutions were required
to keep summaries of costs and income to use for comparison.
MS. CURTIS expressed her awareness of the rate setting process
through earlier work on federal compliance, which had provided a
good basis for review and "who to talk to and if necessary, we
will expand the time frame." She stated that this audit could
be assigned immediately, although it would be difficult to
determine a completion date.
7:01:28 PM
REPRESENTATIVE HAWKER made a motion for approval to the audit
request, as revised, of the Alaska Pioneers Homes operating
costs and cost containment. There being no objection, it was so
ordered.
^Other Committee Business
Other Committee Business
7:01:56 PM
CHAIR FAIRCLOUGH announced that the final order of business
would be a request for contract funding by the Division of
Legislative Audit.
MS. CURTIS requested consideration and approval for two
contractual items, as legislative procurement rules required
that any contract entered into by the division which exceeded
$35,000 be first approved by the Legislative Budget and Audit
Committee.
MS. CURTIS requested approval to solicit and award a contract
for not more than $100,000 for general audit services in support
of the Statewide Single Audit. She reminded the committee that
her division had asked for this approval in previous years, in
order to hire contract auditors to work under supervision by the
division to help finish the Statewide Single Audit. She pointed
out that, as the division had vacancies, this contract would
help control the work load.
MS. CURTIS asked that the Legislative Budget and Audit Committee
approve a second request, to solicit and award a contract not to
exceed $150,000 for an informational technology (IT) audit of
the Department of Health and Social Services' Medicaid
information system. She reported that this system interfaced
more than $1 billion into the State of Alaska accounting system
annually. She pointed out that, as this Medicaid system was
new, it was necessary for a comprehensive audit of its controls
to ensure its availability, confidentiality, and integrity. She
stated that her division did not have the IT expertise on staff
to conduct an audit of this magnitude in accordance with
auditing standards. She explained that the contract would allow
the necessary assurances to support the Comprehensive Annual
Financial Report in the Statewide Single Audit. She indicated
that there had been an increment of $100,000 in the Fiscal Year
14 budget to conduct IT audits, and she asked for this same
increment for FY 15, not to exceed $150,000, for the audit of
the Medicaid IT system.
CHAIR FAIRCLOUGH asked if there were any questions regarding the
first request [audit services for assistance with the FY 14
Statewide Single Audit] for $100,000.
7:04:20 PM
REPRESENTATIVE HAWKER asked for clarification that this
recurring request for the $100,000 for general audit services
had been sufficient in past years.
MS. CURTIS replied that the request amount was generated on a
per person basis, and would be for two or three people from a
private tax firm after the tax season.
REPRESENTATIVE HAWKER asked if Ms. Curtis felt that this was an
adequate amount to request.
MS. CURTIS replied that it was adequate.
REPRESENTATIVE JOSEPHSON asked how this contract was bid.
MS. CURTIS, in response, explained that the rules for small
procurement, under Legislative procurement rules, required that
at least three solicitations to firms in the state be submitted.
She noted that "honestly, most of the time we don't get much
response... maybe one or two will bid."
REPRESENTATIVE JOSEPHSON asked about the status for staff
vacancies in the Division of Legislative Audit.
MS. CURTIS, in response, stated "we have a very big problem with
vacancies right now. At our in-charge level, we have six budget
positions, one filled. A serious problem, and we're doing a lot
to fix it." She explained that these were lower level staff
positions, and that there were other resolutions proposed to
deal with the upper level vacancies. She stated that in-charges
were mid to high level audit staff, and that this was an attempt
to "fill the holes with what we know is out there." She pointed
out that "it's a help, but it doesn't fix our problem with
vacancies."
REPRESENTATIVE JOSEPHSON asked for clarification whether it
would still be necessary to request additional staff if the
current vacancies for five staff positions were filled.
MS. CURTIS acknowledged that she was unsure for the staffing
schedule if all the staff positions were filled. She declared
that the goal was to develop the current staff, and to promote
from within. She said that there was not usually a problem
filling the lower level staff positions; however, there was
attrition for the mid-level staff, once there was movement
toward attainment of the Certified Public Accountant (CPA)
license.
7:07:55 PM
REPRESENTATIVE JOSEPHSON asked whether the state salaries were
competitive with the private sector.
MS. CURTIS declared that there were many contributing factors,
and she offered her belief that the lower salaries and the heavy
workload in her division were not competitive with oil companies
or other executive branch agencies.
REPRESENTATIVE HAWKER made a motion for approval to the contract
solicitation request, not to exceed $100,000, by the Division of
Legislative Audit, for statewide single audit assistance. There
being no objection, it was so ordered.
7:09:06 PM
CHAIR FAIRCLOUGH directed attention to the second request by the
Division of Legislative Audit for an IT [information technology]
audit of the Department of Health and Social Services new
Medicaid system.
REPRESENTATIVE HAWKER asked for clarification that the request
was for outside contractual services to review the new Medicaid
Management Information Systems (MMIS) and whether this was a
one-time request for this contractual spending. He asked if
this was necessary for the background and detailed understanding
to complete the Comprehensive Annual Financial Report for the
coming year.
MS. CURTIS explained that this would yield baseline knowledge,
similar to the knowledge and understanding gained by audits for
earlier information service programs. She noted that there were
new audit standards and requirements for work between the group
auditor and the contract auditor. She offered her belief that
this would be a one-time contract request, although there were
expectations for large problems with the system, based on
earlier testimony to other legislative committees. She
expressed her belief that the initial understanding for the
system would allow annual follow up, based on this knowledge.
REPRESENTATIVE HERRON stated his support, declaring that the
MMIS "had a weak rollout" with a "huge potential for problems"
and that, therefore, the request was prudent. He shared that
Xerox was sending 400 people to reduce the backlog [with the
MMIS system].
7:11:45 PM
REPRESENTATIVE HAWKER made a motion for approval to the contract
solicitation request, not to exceed $150,000, by the Division of
Legislative Audit, for an audit of the new Medicaid Management
Information System. There being no objection, it was so
ordered.
7:11:58 PM
CHAIR FAIRCLOUGH appointed Senator Fairclough, Senator Olson,
Representative Josephson, Representative Austerman, and
Representative Hawker to the subcommittee in preparation for the
next performance review of the Department of Health and Social
Services (DHSS). She reminded the members of the subcommittee
for the performance review of the Department of Corrections,
Senator Fairclough, Senator Bishop, Representative Hawker,
Representative Herron, and Representative Kawasaki, about its
upcoming public hearing.
CHAIR FAIRCLOUGH, referencing an earlier request by Senator
French to hire an additional consultant for the gas tax, stated
that the consultant, Rick Harper, had been hired and his
contract was currently being finalized.
REPRESENTATIVE HAWKER asked how long the upcoming public hearing
for Department of Corrections would last.
7:13:24 PM
LAURA PIERRE, Staff, Senator Anna Fairclough, Alaska State
Legislature, in response to Representative Hawker, stated that
currently there had not been any requests to testify from the
public.
7:13:50 PM
CHAIR FAIRCLOUGH noted that the committee had maintained its
quorum in order to conduct business.
7:14:13 PM
ADJOURNMENT
There being no further business before the committee, the
Legislative Budget and Audit Committee meeting was adjourned at
7:14 p.m.
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