Legislature(2017 - 2018)SENATE FINANCE 532

01/27/2017 11:30 AM LEGISLATIVE BUDGET & AUDIT

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Audio Topic
11:32:55 AM Start
11:33:45 AM Election of the Chair
11:35:26 AM Election of the Vice Chair
11:35:51 AM Approval of Minutes
11:36:24 AM Legislative Finance Division
11:38:55 AM Legislative Audit Division
11:53:26 AM Executive Session
12:57:16 PM Consultant Contracts
01:01:35 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Teleconference <Listen Only> --
Time: Immediately Following Session
Election of Chairman & Vice Chairman
David Teal, Legislative Finance Director
- Interaction with LB&A - RPLs
Kris Curtis, Legislative Auditor
- Handbook & Duties
- Procedures & Confidentiality
- Status of Audits
- Travel
Consultant Contracts - EXECUTIVE SESSION
- enalytica, Inc.
- Hart Energy Publishing LLLP
- Roger Marks
                    ALASKA STATE LEGISLATURE                                                                                  
             LEGISLATIVE BUDGET AND AUDIT COMMITTEE                                                                           
                        January 27, 2017                                                                                        
                           11:32 a.m.                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Gary Stevens, Chair                                                                                                     
Senator Anna MacKinnon                                                                                                          
Senator Cathy Giessel                                                                                                           
Senator Click Bishop (via teleconference)                                                                                       
Senator Lyman Hoffman                                                                                                           
Senator Natasha von Imhof (alternate)                                                                                           
                                                                                                                                
Representative Andy Josephson, Vice Chair                                                                                       
Representative Scott Kawasaki                                                                                                   
Representative Paul Seaton                                                                                                      
Representative Ivy Spohnholz                                                                                                    
Representative Jennifer Johnston                                                                                                
Representative Dan Ortiz (alternate)                                                                                            
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
ELECTION OF THE CHAIR                                                                                                           
ELECTION OF THE VICE CHAIR                                                                                                      
APPROVAL OF MINUTES                                                                                                             
LEGISLATIVE FINANCE DIVISION                                                                                                    
LEGISLATIVE AUDIT DIVISION                                                                                                      
EXECUTIVE SESSION                                                                                                               
CONSULTANT CONTRACTS                                                                                                            
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
DAVID TEAL, Legislative Fiscal Analyst                                                                                          
Legislative Finance Division                                                                                                    
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Provided information on the role of the                                                                  
Legislative Finance Division.                                                                                                   
                                                                                                                                
KRISTIN CURTIS, Legislative Auditor                                                                                             
Legislative Audit Division                                                                                                      
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:   Provided information  on the  role of  the                                                             
Legislative Audit Division.                                                                                                     
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
11:32:55 AM                                                                                                                   
                                                                                                                                
SENATOR  MACKINNON  called  the   Legislative  Budget  and  Audit                                                             
Committee  meeting to  order  at 11:32  a.m.   Senators  Stevens,                                                               
MacKinnon,  Giessel, Hoffman,  Bishop  (via teleconference),  and                                                               
Von Imhof  (alternate), and Representatives  Josephson, Kawasaki,                                                               
Seaton,  and  Johnston  were  present   at  the  call  to  order.                                                               
Representatives Spohnholz  and Ortiz  (alternate) arrived  as the                                                               
meeting was in progress.                                                                                                        
                                                                                                                                
^Election of the Chair                                                                                                        
                     Election of the Chair                                                                                  
                                                                                                                                
11:33:45 AM                                                                                                                   
                                                                                                                                
SENATOR  MACKINNON announced  that  the first  order of  business                                                               
would be nominations  for the chairman of  the Legislative Budget                                                               
and Audit Committee.                                                                                                            
                                                                                                                                
SENATOR  HOFFMAN nominated  Senator Gary  Stevens as  chairman of                                                               
the Legislative  Budget and Audit  Committee for the  30th Alaska                                                               
State  Legislature,  and he  asked  that  nominations be  closed.                                                               
There being no objection, it was so ordered.                                                                                    
                                                                                                                                
11:34:22 AM                                                                                                                   
                                                                                                                                
CHAIR  STEVENS offered  opening comments,  explained the  role of                                                               
the alternates  on this  committee, and  announced that  the next                                                               
order of business would be nominations for the vice chair.                                                                      
                                                                                                                                
^Election of the Vice Chair                                                                                                   
                   Election of the Vice Chair                                                                               
                                                                                                                                
11:35:26 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE SEATON nominated  Representative Andy Josephson as                                                               
vice chairman of  the Legislative Budget and  Audit Committee for                                                               
the 30th Alaska State Legislature,  and he asked that nominations                                                               
be closed.  There being no objection, it was so ordered.                                                                        
                                                                                                                                
^Approval of Minutes                                                                                                          
                      Approval of Minutes                                                                                   
                                                                                                                                
11:35:51 AM                                                                                                                   
                                                                                                                                
CHAIR STEVENS announced that the  next order of business would be                                                               
approval of the minutes.                                                                                                        
                                                                                                                                
11:36:04 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE JOSEPHSON made a motion  to approve the minutes of                                                               
the Legislative Budget  and Audit Committee of  January 13, 2017.                                                               
There  being  no  objection,  the minutes  from  the  meeting  of                                                               
January 13, 2017 were approved.                                                                                                 
                                                                                                                                
^Legislative Finance Division                                                                                                 
                  Legislative Finance Division                                                                              
                                                                                                                                
11:36:24 AM                                                                                                                   
                                                                                                                                
CHAIR STEVENS announced that the  next order of business would be                                                               
a presentation from  David Teal, Legislative Fiscal  Analyst.  He                                                               
asked  that   Mr.  Teal  explain  the   interaction  between  the                                                               
Legislative Finance Division and the committee.                                                                                 
                                                                                                                                
11:36:48 AM                                                                                                                   
                                                                                                                                
DAVID  TEAL,  Legislative  Fiscal  Analyst,  Legislative  Finance                                                               
Division,  Alaska State  Legislature, introduced  himself as  the                                                               
director of the  division and explained that the  division was "a                                                               
non-partisan  group of  fiscal  analysts."   He  shared that  the                                                               
division's primary  interaction with  the committee would  be for                                                               
revised  program  - legislative  (RPLs),  which  he described  as                                                               
interim  requests for  additional authorization  to spend  money,                                                               
mostly federal  receipts, although this could  also include other                                                               
funds.    He  relayed  that  the  administration  would  ask  the                                                               
committee for  the authority to  spend any additional  funds, and                                                               
that  the   Legislative  Finance  Division  would   review  those                                                               
requests,  send them  to  the  committee, and  post  them on  the                                                               
website.  He  reported that he would typically  review these RPLs                                                               
with the committee  at the committee meeting.  He  noted that the                                                               
division  was  also  available   to  the  full  Legislature  upon                                                               
request.  In response to Chair  Stevens, he estimated that he had                                                               
been in his position for 20 years.                                                                                              
                                                                                                                                
^Legislative Audit Division                                                                                                   
                   Legislative Audit Division                                                                               
                                                                                                                                
11:38:55 AM                                                                                                                   
                                                                                                                                
CHAIR STEVENS announced that the  next order of business would be                                                               
a presentation from  Kris Curtis, Legislative Auditor.   He asked                                                               
that Ms.  Curtis explain the interaction  between the Legislative                                                               
Audit Division and the committee.                                                                                               
                                                                                                                                
11:39:13 AM                                                                                                                   
                                                                                                                                
KRISTIN CURTIS, Legislative  Auditor, Legislative Audit Division,                                                               
Alaska  State Legislature,  explained  her role  as the  auditor,                                                               
noting that she  had been with the division for  almost 25 years,                                                               
and in  her current role for  more than 5 years.   She introduced                                                               
other members of her staff,  noting that her division operated as                                                               
the fiscal staff  to the Legislative Budget  and Audit Committee,                                                               
and maintained the committee website.   She directed attention to                                                               
the  memo  [Included  in members'  packets]  which  outlined  the                                                               
responsibilities  of the  committee, and  declared that  the main                                                               
function of  the committee  was to  provide the  legislature with                                                               
fiscal analysis,  budget reviews, and  audits.  She  relayed that                                                               
statutes  gave the  committee several  powers which  included the                                                               
broad  power   to  review   revenue  projections,   state  agency                                                               
appropriation requests  and expenditure  of state funds,  and the                                                               
fiscal  policy  and procedures  of  the  state government.    She                                                               
stated  that  the committee  could  make  recommendations to  the                                                               
governor and the legislature, as  appropriate.  She declared that                                                               
statutes  also  gave  the committee  oversight  responsibilities,                                                               
and, in some  instances, designated the committee  as the primary                                                               
representative  of the  legislature.   She pointed  out that  the                                                               
aforementioned memo  summarized some  of the lesser  known powers                                                               
and  responsibilities,  and  noted  that,  over  the  years,  the                                                               
committee had exercised these powers  to different degrees at the                                                               
discretion of the  chair.  She introduced  the Legislative Budget                                                               
and  Audit  Committee  handbook [Included  in  members'  packets]                                                               
which  detailed the  authorizing statutes  for the  committee and                                                               
identified  the two  permanent  staff  agencies, the  Legislative                                                               
Audit  Division  and  the  Legislative   Finance  Division.    As                                                               
provided for  in statute, the  committee was authorized  to adopt                                                               
rules  for the  conduct of  its business  and procedures  per its                                                               
functions.   She directed  attention to page  39 of  the handbook                                                               
which listed the  formal rules as well as the  dates of adoption.                                                               
She offered her  belief that the more  significant areas included                                                               
the approval  and release  of the audit  reports and  approval of                                                               
the audit  requests, as well  as contracts and  reimbursement for                                                               
travel.                                                                                                                         
                                                                                                                                
MS. CURTIS  discussed the confidential report  release procedures                                                               
outlined  on  page 47  of  the  handbook.   She  emphasized  that                                                               
statute   made  the   audit   and   performance  review   process                                                               
confidential and that it was  important for committee members and                                                               
staff  to   take  the  necessary   precautions  to   protect  the                                                               
confidentiality  of these  documents.   She  proclaimed that  the                                                               
reports should not be copied  or distributed.  She explained that                                                               
the reports were first brought  to the committee as a preliminary                                                               
report  and  distributed  for  discussion  during  the  executive                                                               
session at a  committee meeting.  At this time,  she would review                                                               
the  recommendations and  conclusions  presented  in the  report.                                                               
When the committee comes out  of executive session, it would vote                                                               
whether to  release the report  to the agency being  reviewed for                                                               
that agency's  formal comments.   These formal comments  would be                                                               
forwarded   to  Ms.   Curtis  for   review,   and  would   remain                                                               
confidential.   She would add  these comments to  the preliminary                                                               
report  and return  it to  the committee  as a  final report,  at                                                               
least  two  days  prior  to  the  Legislative  Budget  and  Audit                                                               
Committee meeting.  These reports  would be delivered in a sealed                                                               
envelope,  marked  Confidential, and  would  be  printed on  blue                                                               
paper  in order  to distinguish  this confidential  document from                                                               
other documents.   She  stated that these  reports would  then be                                                               
discussed  during an  executive  session and,  after exiting  the                                                               
executive session,  a vote would  be taken to release  the report                                                               
as a  final public document.   In response to Chair  Stevens, she                                                               
clarified  that confidentiality  would  end  after the  committee                                                               
released the report as a public document.                                                                                       
                                                                                                                                
11:44:41 AM                                                                                                                   
                                                                                                                                
MS. CURTIS  reported on the  current status  of audit work.   She                                                               
directed attention to  the matrix of current  audits [Included in                                                               
members'  packets].   She  relayed that  currently  there were  6                                                               
performance  audit  requests,  11  sunset audits,  and  the  FY16                                                               
federal and financial audit to  be completed.  She explained that                                                               
the audits  were prioritized by  statutory or  legal requirement,                                                               
and that performance audits were  conducted as resources allowed.                                                               
She stated that there were  11 entities with termination dates in                                                               
2018 which had to be completed  in the year prior to termination.                                                               
Although it was  unusual to have so many  entities terminating in                                                               
one  year, accommodations  had been  made to  ensure that  all of                                                               
these  audits would  be released  by the  end of  the year.   She                                                               
reported  that the  oldest of  the six  performance audits  was a                                                               
2008 audit request  related to the [Matanuska  Maid dairy plant],                                                               
in   which  the   division  had   been  asked   "to  follow   the                                                               
dispossession of assets and report  on whether they were disposed                                                               
in accordance  with laws, regulations."   She noted that,  as the                                                               
final piece of property in Palmer  had just been sold, this audit                                                               
request could now be finished.   She relayed that the next oldest                                                               
audit  was   requested  in   2014  by   Representative  Austerman                                                               
regarding  the MV  Tustumena overhaul  and  refurbishment.   This                                                               
audit was  15 percent complete, but  had been placed on  hold, as                                                               
litigation  had begun.   She  shared that  she had  been informed                                                               
during the  past week  by Department  of Transportation  & Public                                                               
Facilities that  this litigation  had been  concluded; therefore,                                                               
the audit could now be completed.   She moved on to list the 2016                                                               
audit request  on the  Board of Game  Advisory Committee  and the                                                               
three  audits requested  during  December,  2016, which  included                                                               
audit requests for  the Alaska Mental Health  Trust Authority and                                                               
the Alaska Gasline Development Corporation.   She reiterated that                                                               
these  audits would  begin when  resources allowed,  offering her                                                               
belief that  performance audits would  not be started  until late                                                               
fall,  2017.   She moved  on to  discuss the  FY16 financial  and                                                               
federal compliance audits, reporting that,  in May, 2016, she had                                                               
sent  a letter  to the  Director of  the Office  of Management  &                                                               
Budget,  the Commissioner  of Department  of Administration,  and                                                               
the Director of  the Division of Finance to inform  them that she                                                               
anticipated  these  audited  statements "would  be  significantly                                                               
late" and  the legislators  would not  know the  audited balances                                                               
when  they arrived  for session.   When  the legislative  session                                                               
began,  she  had sent  a  letter  to the  legislative  leadership                                                               
updating the  status of  the audits.   She stated  that, although                                                               
she had not  received the draft financial statements  in order to                                                               
start the  audit, other audit  work without draft  statements was                                                               
progressing.  She explained that  implementation of the new state                                                               
accounting  system had  made it  difficult  to prepare  financial                                                               
statements.   She  expressed her  anticipation  for reception  of                                                               
these financial statements  in the next few days,  after which it                                                               
would take about two and a half months to complete the audit.                                                                   
                                                                                                                                
11:48:38 AM                                                                                                                   
                                                                                                                                
SENATOR HOFFMAN asked,  regarding the audit on  the MV Tustumena,                                                               
whether the substantial  delay due to the  subsequent lawsuit had                                                               
affected the  premise for the  need of  the audit.   He suggested                                                               
that this question be placed to Representative Austerman.                                                                       
                                                                                                                                
MS. CURTIS,  in response,  explained that  the audit  request was                                                               
based  on  the  challenges  by  the  state  for  getting  the  MV                                                               
Tustumena back  into the water  after its refurbishment,  and the                                                               
problems with the vendor responsible  for the work.  She proposed                                                               
to review the  results of the litigation and then  respond to the                                                               
committee,  noting that  there were  now new  issues with  the MV                                                               
Tustumena.   She offered to discuss  at a later date  whether the                                                               
committee  desired  to continue  with  the  audit, terminate  the                                                               
request, or alter it.                                                                                                           
                                                                                                                                
CHAIR  STEVENS expressed  his desire  to  further the  discussion                                                               
when Ms. Curtis was prepared.                                                                                                   
                                                                                                                                
11:50:47 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE KAWASAKI  asked about the process  to terminate an                                                               
audit.                                                                                                                          
                                                                                                                                
MS. CURTIS,  in response,  said that  there were  formal, adopted                                                               
rules  of   procedure  for  termination  of   an  audit  request,                                                               
explaining  that it  would take  a vote  of the  committee.   She                                                               
shared that, historically, once an  audit was requested, it would                                                               
take something  more significant than  a change in  leadership to                                                               
terminate.                                                                                                                      
                                                                                                                                
REPRESENTATIVE  KAWASAKI   asked  when   the  post   audits  were                                                               
available for members.                                                                                                          
                                                                                                                                
MS.  CURTIS  replied  that  she did  not  perform  those  audits,                                                               
although with  some outside corporations,  she did  approve their                                                               
hired  auditors.   She  said  that the  final  drafts of  outside                                                               
audits were  typically available  by mid-October,  although there                                                               
had  been a  delay in  several  outside audits  during this  year                                                               
which had  further contributed to  the problems of  the financial                                                               
statements.                                                                                                                     
                                                                                                                                
SENATOR BISHOP,  in response  to Chair  Stevens, opined  that the                                                               
original discussion around the MV  Tustumena had centered on some                                                               
of the  welding procedures,  and that,  after the  due diligence,                                                               
the audit would no longer be necessary.                                                                                         
                                                                                                                                
^Executive Session                                                                                                            
                       Executive Session                                                                                    
                                                                                                                                
11:53:26 AM                                                                                                                   
                                                                                                                                
CHAIR STEVENS announced that the  next order of business would be                                                               
to move into Executive Session.                                                                                                 
                                                                                                                                
11:53:41 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  JOSEPHSON  made a  motion  to  move to  executive                                                               
session  under   Uniform  Rule  22(b)(1)   for  the   purpose  of                                                               
discussing  matters,  the  immediate  knowledge  of  which  would                                                               
adversely affect  the finances of  a government unit  and Uniform                                                               
Rule  22(b)(3), discussion  of  a  matter that  may,  by law,  be                                                               
required  to be  confidential.   There  being  no objection,  the                                                               
committee went into executive session at 11:54 a.m.                                                                             
                                                                                                                                
11:54:11 AM                                                                                                                   
                                                                                                                                
The committee took an at-ease from 11:54 a.m. to 12:57 p.m.                                                                     
                                                                                                                                
12:57:07 PM                                                                                                                   
                                                                                                                                
CHAIR STEVENS brought the committee back to order at 12:57 p.m.                                                                 
                                                                                                                                
^Consultant Contracts                                                                                                         
                      Consultant Contracts                                                                                  
                                                                                                                                
12:57:16 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE JOSEPHSON  moved that  the Legislative  Budget and                                                               
Audit Committee approve Amendment  1 to the professional services                                                               
contract with  Enalytica, Inc. in  the amount of $20,000  for the                                                               
period  of February  1,  2017  - May  31,  2017  and the  Section                                                               
04.08.1   exemption  per   the  Alaska   Legislature  procurement                                                               
procedures.                                                                                                                     
                                                                                                                                
CHAIR  STEVENS explained  that,  as the  end  of these  contracts                                                               
approached,  he wanted  to ensure  that advisement  was available                                                               
until there were additional contracts.                                                                                          
                                                                                                                                
CHAIR  STEVENS,  in response  to  Senator  MacKinnon, added  that                                                               
these  contracts  were only  as  needed  and  there was  not  any                                                               
automatic monthly stipend.                                                                                                      
                                                                                                                                
A roll  call vote was  taken.  Representatives  Kawasaki, Seaton,                                                               
Spohnholz,  Johnston,  and   Josephson  and  Senators  MacKinnon,                                                               
Giessel, Hoffman, and Stevens voted  in favor of the amendment to                                                               
the contract with  Enalytica, Inc.  Therefore,  the amendment was                                                               
reported out of  the Legislative Budget and Audit  Committee by a                                                               
vote of 9 - 0.                                                                                                                  
                                                                                                                                
12:59:25 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE JOSEPHSON  moved that  the Legislative  Budget and                                                               
Audit Committee approve Amendment  1 to the professional services                                                               
contract  with Hart  Energy  Publishing LLLP  for  the period  of                                                               
February  1,  2017  -  June  30, 2017  and  the  Section  04.08.1                                                               
exemption per the Alaska Legislature procurement procedures.                                                                    
                                                                                                                                
CHAIR  STEVENS  reiterated  that  these contracts  were  only  as                                                               
needed and  to ensure that  advisement was available  until there                                                               
were additional contracts.                                                                                                      
                                                                                                                                
1:00:02 PM                                                                                                                    
                                                                                                                                
A roll  call vote was  taken.  Representatives  Kawasaki, Seaton,                                                               
Spohnholz,  Johnston,  and   Josephson  and  Senators  MacKinnon,                                                               
Giessel, Hoffman, and Stevens voted  in favor of the amendment to                                                               
the contract  with Hart Energy  Publishing LLLP.   Therefore, the                                                               
amendment was  reported out of  the Legislative Budget  and Audit                                                               
Committee by a vote of 9 - 0.                                                                                                   
                                                                                                                                
1:00:43 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON  moved that  the Legislative  Budget and                                                               
Audit Committee approve Amendment  1 to the professional services                                                               
contract with  Roger Marks for the  period of February 1,  2017 -                                                               
June 30, 2017.                                                                                                                  
                                                                                                                                
CHAIR  STEVENS  reiterated  that  these contracts  were  only  as                                                               
needed and  to ensure that  advisement was available  until there                                                               
were additional contracts.                                                                                                      
                                                                                                                                
1:01:03 PM                                                                                                                    
                                                                                                                                
A roll  call vote was  taken.  Representatives  Kawasaki, Seaton,                                                               
Spohnholz,  Johnston,  and   Josephson  and  Senators  MacKinnon,                                                               
Giessel, Hoffman, and Stevens voted  in favor of the amendment to                                                               
the  contract with  Roger Marks.   Therefore,  the amendment  was                                                               
reported out of  the Legislative Budget and Audit  Committee by a                                                               
vote of 9 - 0.                                                                                                                  
                                                                                                                                
1:01:35 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There  being  no  further  business  before  the  committee,  the                                                               
Legislative Budget  and Audit Committee meeting  was adjourned at                                                               
1:01 p.m.                                                                                                                       

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