Legislature(2017 - 2018)SENATE FINANCE 532

02/23/2017 12:00 PM LEGISLATIVE BUDGET & AUDIT

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Audio Topic
12:03:34 PM Start
12:04:20 PM Approval of the Agenda
12:04:37 PM Approval of the Minutes
12:04:51 PM Executive Session
12:31:16 PM Audit Contracts
12:33:08 PM Other Committee Business
12:46:04 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Teleconference <Listen Only> --
Audit Contracts - EXECUTIVE SESSION
Other Committee Business
- Legislature Audit
- Mental Health Trust Audit
- Oil & Gas Consultant Update
                    ALASKA STATE LEGISLATURE                                                                                  
             LEGISLATIVE BUDGET AND AUDIT COMMITTEE                                                                           
                       February 23, 2017                                                                                        
                           12:03 p.m.                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Gary Stevens, Chair                                                                                                     
Senator Cathy Giessel                                                                                                           
Senator Click Bishop                                                                                                            
Senator Lyman Hoffman                                                                                                           
                                                                                                                                
Representative Andy Josephson, Vice Chair                                                                                       
Representative Scott Kawasaki                                                                                                   
Representative Paul Seaton                                                                                                      
Representative Ivy Spohnholz                                                                                                    
Representative Jennifer Johnston                                                                                                
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Anna MacKinnon                                                                                                          
Senator Natasha von Imhof (alternate)                                                                                           
                                                                                                                                
Representative Dan Ortiz (alternate)                                                                                            
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
APPROVAL OF THE AGENDA                                                                                                          
APPROVAL OF THE MINUTES                                                                                                         
EXECUTIVE SESSION                                                                                                               
AUDIT CONTRACTS                                                                                                                 
OTHER COMMITTEE BUSINESS                                                                                                        
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
KRISTIN CURTIS                                                                                                                  
Legislative Auditor                                                                                                             
Legislative Audit Division                                                                                                      
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Provided information and updates on the                                                                  
audits currently being conducted by the Legislative Audit                                                                       
Division.                                                                                                                       
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
12:03:34 PM                                                                                                                   
                                                                                                                                
CHAIR  GARY  STEVENS  called the  Legislative  Budget  and  Audit                                                             
Committee  meeting to  order  at 12:03  p.m.   Senators  Stevens,                                                               
Giessel,  and Bishop,  and  Representatives Josephson,  Kawasaki,                                                               
Seaton,  Spohnholz, and  Johnston  were present  at  the call  to                                                               
order.  Senator Hoffman arrived as the meeting was in progress.                                                                 
                                                                                                                                
^Approval of the Agenda                                                                                                       
                     Approval of the Agenda                                                                                 
                                                                                                                                
12:04:20 PM                                                                                                                   
                                                                                                                                
CHAIR STEVENS  announced that the  first order of  business would                                                               
be approval of the agenda.                                                                                                      
                                                                                                                                
12:04:28 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  JOSEPHSON  made  a motion  that  the  Legislative                                                               
Budget and  Audit Committee approve  the agenda.  There  being no                                                               
objection, it was so ordered.                                                                                                   
                                                                                                                                
^Approval of the Minutes                                                                                                      
                    Approval of the Minutes                                                                                 
                                                                                                                                
12:04:37 PM                                                                                                                   
                                                                                                                                
CHAIR STEVENS announced that the  next order of business would be                                                               
approval of the minutes.                                                                                                        
                                                                                                                                
REPRESENTATIVE JOSEPHSON made a motion  to approve the minutes of                                                               
the Legislative Budget  and Audit Committee of  January 27, 2017.                                                               
There  being  no  objection,  the minutes  from  the  meeting  of                                                               
January 27, 2017 were approved.                                                                                                 
                                                                                                                                
^Executive Session                                                                                                            
                       Executive Session                                                                                    
                                                                                                                                
12:04:51 PM                                                                                                                   
                                                                                                                                
CHAIR STEVENS announced that the  next order of business would be                                                               
to move into Executive Session.                                                                                                 
                                                                                                                                
12:05:05 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  JOSEPHSON  made a  motion  to  move to  executive                                                               
session under  Uniform Rule 22(b)(1), discussion  of matters, the                                                               
immediate knowledge of which would  adversely affect the finances                                                               
of a government unit.                                                                                                           
                                                                                                                                
12:05:32 PM                                                                                                                   
                                                                                                                                
A roll  call vote was  taken.  Representatives  Kawasaki, Seaton,                                                               
Spohnholz,  Johnston,   and  Josephson,  and   Senators  Stevens,                                                               
Hoffman,  Giessel,  and Bishop  voted  in  favor of  moving  into                                                               
executive session.  Therefore, by a vote  of 9 yeas - 0 nays, the                                                               
committee moved into executive session at 12:06 p.m.                                                                            
                                                                                                                                
12:06:17 PM                                                                                                                   
                                                                                                                                
The committee took an at-ease from 12:06 p.m. to 12:31 p.m.                                                                     
                                                                                                                                
^Audit Contracts                                                                                                              
                        Audit Contracts                                                                                     
                                                                                                                                
12:31:16 PM                                                                                                                   
                                                                                                                                
CHAIR STEVENS brought  the committee back to  order and announced                                                               
that the next order of business would be for audit contracts.                                                                   
                                                                                                                                
REPRESENTATIVE  JOSEPHSON  made  a motion  that  the  Legislative                                                               
Budget and  Audit Committee authorize  the Chair,  as procurement                                                               
officer,  to  solicit  and  award a  contract  or  contracts  for                                                               
statewide  single audit  services for  a total  amount, including                                                               
all contracts, not to exceed $120,000.                                                                                          
                                                                                                                                
12:31:33 PM                                                                                                                   
                                                                                                                                
A roll  call vote was  taken.  Representatives  Kawasaki, Seaton,                                                               
Spohnholz,   Johnston,  and   Josephson  and   Senators  Stevens,                                                               
Hoffman, Giessel, and Bishop voted  in favor of the authorization                                                               
to  the Chair  to award  a  contract or  contracts for  statewide                                                               
single audit services.  Therefore,  this authorization was passed                                                               
by the  Legislative Budget  and Audit  Committee by  a vote  of 9                                                               
yeas - 0 nays.                                                                                                                  
                                                                                                                                
12:32:21 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  JOSEPHSON  made  a motion  that  the  Legislative                                                               
Budget and Audit  Committee approve an amendment  to the contract                                                               
with MBE CPAs,  in the amount of $15,000 for  audit services, not                                                               
to exceed $50,000.                                                                                                              
                                                                                                                                
12:32:34 PM                                                                                                                   
                                                                                                                                
A roll  call vote was  taken.  Representatives  Kawasaki, Seaton,                                                               
Spohnholz,   Johnston,  and   Josephson  and   Senators  Stevens,                                                               
Hoffman, Giessel,  and Bishop voted  in favor of an  amendment to                                                               
the  contract  with MBE  CPAs.    Therefore, this  amendment  was                                                               
passed by  the Legislative Budget  and Audit Committee by  a vote                                                               
of 9 yeas - 0 nays.                                                                                                             
                                                                                                                                
^Other Committee Business                                                                                                     
                    Other Committee Business                                                                                
                                                                                                                                
12:33:08 PM                                                                                                                   
                                                                                                                                
CHAIR STEVENS  announced that the  final order of  business would                                                               
be for other committee business.                                                                                                
                                                                                                                                
12:33:25 PM                                                                                                                   
                                                                                                                                
KRISTIN CURTIS, Legislative  Auditor, Legislative Audit Division,                                                               
Alaska  State Legislature,  directed attention  to the  financial                                                               
audit  of  the Alaska  State  Legislature  [Included in  members'                                                               
packets] and  explained that there  was a requirement  in statute                                                               
for this  to be  performed annually.   She  pointed to  the first                                                               
document  titled the  Schedule  of Appropriations,  Expenditures,                                                               
and  Encumbrances and  the Schedule  of  Revenues, and  explained                                                               
that this was  the financial statement for the  legislature.  She                                                               
referred  to  the  audit  opinion,  and  relayed  that  this  was                                                               
included  for  the  members'  information  but  did  not  contain                                                               
anything  of significance.   She  presented the  second document,                                                               
the  Letter  to  the  Members  of  the  Legislative  Council  and                                                               
Legislative  Budget  and Audit  Committee.    She explained  that                                                               
these two  entities were referenced by  the accounting profession                                                               
as "those  charged with governance"  and the letter  was required                                                               
by  auditing standards  for  every financial  audit.   She  added                                                               
that,  as the  format  of  the letter  was  dictated by  auditing                                                               
standards, there was  nothing unusual with the  section that said                                                               
Significant  Difficulties  Encountered  during the  Audit.    She                                                               
shared that  there was a  similar letter to the  Executive Branch                                                               
at the  end of the audit,  and she offered her  belief that there                                                               
were  no concerns  raised  in the  letter.   She  pointed to  the                                                               
representation   letter   from   the  financial   management   at                                                               
Legislative  Affairs  Agency   making  specific  representations,                                                               
which  was also  required by  auditing standards.   She  reported                                                               
that she provided this information  to the Legislative Budget and                                                               
Audit Committee every year.                                                                                                     
                                                                                                                                
12:35:00 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  SPOHNHOLZ referenced  page 3  of the  Schedule of                                                               
Appropriations,  Expenditures, and  Encumbrances and  asked where                                                               
the per diem would appear in the itemization.                                                                                   
                                                                                                                                
12:35:22 PM                                                                                                                   
                                                                                                                                
MS.  CURTIS, in  response, said  that per  diem would  be in  the                                                               
travel  line.    She  directed Representative  Spohnholz  to  the                                                               
Legislative  Budget  and Audit  Committee  listing,  then to  the                                                               
allocation of  committee expense,  and then  to the  travel line.                                                               
She explained that within each  allocation, the travel line would                                                               
include airfare, per diem, and rental cars.                                                                                     
                                                                                                                                
12:35:51 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE SPOHNHOLZ  referenced page 5 of  the same document                                                               
and  asked  about  the  line  item  titled  Restricted  Revenues,                                                               
Federal  Compliance  Audit.   She  said,  "we  have  appropriated                                                               
revenues of  $750,000 and  actual revenues  of $300,000"  and she                                                               
asked for an explanation.                                                                                                       
                                                                                                                                
12:36:10 PM                                                                                                                   
                                                                                                                                
MS.  CURTIS  replied  that,  traditionally,   there  was  an  RSA                                                               
(Reimbursable   Service  Agreement)   with   the  Department   of                                                               
Administration (DOA) to  pay for part of the cost  for the single                                                               
audit.   However,  during the  budget  cycle for  FY16, this  was                                                               
increased  to the  current $750,000  with the  idea that  DOA pay                                                               
more  for the  actual cost  of the  single audit.   She  reported                                                               
that, as  the department did not  have that money in  its budget,                                                               
in  FY   16  the   remaining  $450,000   was  requested   in  the                                                               
supplemental budget.   However, this  request was denied  and the                                                               
Legislative  Audit  Division only  received  the  $300,000.   She                                                               
opined that, as  the Legislative Audit Division  had lapsed money                                                               
in FY16, this may have been part  of the reason for denial of the                                                               
supplemental budget request.                                                                                                    
                                                                                                                                
12:37:08 PM                                                                                                                   
                                                                                                                                
CHAIR STEVENS moved on to discussion  of the audit for the Alaska                                                               
Mental Health  Trust Authority.   He asked Ms. Curtis  whether it                                                               
was possible to speed up the  process, as it was projected to not                                                               
start for another year.                                                                                                         
                                                                                                                                
12:37:58 PM                                                                                                                   
                                                                                                                                
MS.  CURTIS, in  response,  said  that the  audit  of the  Alaska                                                               
Mental Health Trust  Authority would be done by the  staff in the                                                               
Anchorage office of the Legislative  Audit Division.  She offered                                                               
her belief  that this  performance audit could  begin by  May, if                                                               
all went  smoothly.   She explained that  the 2008  audit request                                                               
for the Matanuska Maid dairy plant  had not been completed due to                                                               
the unfinished  disposition of  its assets.   The final  piece of                                                               
property  in this  disposition  had just  been  sold in  January,                                                               
which would  allow for this  audit to  be finished.   However, if                                                               
the Legislative  Budget and Audit  Committee asked  to prioritize                                                               
the audit of the Alaska  Mental Health Trust Authority, she would                                                               
re-visit the audit request for  the Matanuska Maid dairy plant at                                                               
a later  date.  She  added that there  were also two  other older                                                               
audits,  which included  an  audit  of the  Board  of Game  Local                                                               
Advisory Committees  and an  audit of  the MV  Tustumena Overhaul                                                               
and Refurbishment.   As  these audits  were Juneau  office based,                                                               
the  audit of  the Alaska  Mental Health  Trust Authority  by the                                                               
Anchorage office would not be impacted.                                                                                         
                                                                                                                                
12:39:51 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE KAWASAKI pointed out  that there were other audits                                                               
posted  in December  2016, including  the audit  of Medicaid  and                                                               
Children's Health  Insurance Program  Travel Costs and  the audit                                                               
of the Alaska  Gasline Development Corporation.  He  asked if the                                                               
audit  of   the  Alaska  Mental  Health   Trust  Authority  would                                                               
supersede these audit requests.                                                                                                 
                                                                                                                                
12:40:18 PM                                                                                                                   
                                                                                                                                
MS.  CURTIS replied  that,  as  all three  of  those audits  were                                                               
received at  the December Legislative Budget  and Audit Committee                                                               
meeting,  the first  audit started  would depend  on availability                                                               
and  location of  staff.   She relayed  that, although  direction                                                               
from the  committee could determine  to first start the  audit of                                                               
the  Alaska  Mental  Health  Trust  Authority,  as  there  was  a                                                               
competing priority for  the federal compliance audit  which had a                                                               
statutory time  line, it may be  necessary to "put it  [the audit                                                               
of  the Alaska  Mental Health  Trust Authority]  down to  address                                                               
those requirements, and  then pick it back up."   She stated that                                                               
she did not  have an estimate for completion of  the audit of the                                                               
Alaska Mental Health Trust Authority.                                                                                           
                                                                                                                                
12:41:09 PM                                                                                                                   
                                                                                                                                
SENATOR BISHOP asked when the  audit of the MV Tustumena Overhaul                                                               
and Refurbishment had been requested.                                                                                           
                                                                                                                                
MS. CURTIS  offered her belief that  it was a 2013  request.  She                                                               
explained that subsequent litigation  had delayed the audit, but,                                                               
as  this  litigation  was  now completed,  the  audit  would  now                                                               
proceed.                                                                                                                        
                                                                                                                                
CHAIR  STEVENS  asked the  committee  for  its approval  to  move                                                               
forward  on  the   audit  of  the  Alaska   Mental  Health  Trust                                                               
Authority, and  he acknowledged  that "things  may change  and we                                                               
find we can't complete it because of other issues."                                                                             
                                                                                                                                
12:42:07 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  JOSEPHSON offered  his belief  that the  audit of                                                               
the Alaska  Mental Health  Trust Authority  was more  urgent than                                                               
the 2008 audit request for the Matanuska Maid dairy plant.                                                                      
                                                                                                                                
12:42:32 PM                                                                                                                   
                                                                                                                                
MS. CURTIS asked that the  Legislative Budget and Audit Committee                                                               
members determine which  audit was more urgent.   She shared that                                                               
she  had not  reviewed  either  audit enough  to  comment on  the                                                               
urgency for  each, and that  she would  abide by the  decision of                                                               
the committee.                                                                                                                  
                                                                                                                                
12:43:05 PM                                                                                                                   
                                                                                                                                
SENATOR  GIESSEL stated  that she  advocated for  priority to  an                                                               
audit of  the Alaska Mental  Health Trust  Authority as it  was a                                                               
current  issue of  concern,  whereas the  audit  request for  the                                                               
Matanuska  Maid dairy  plant "was  sort of  a done  deal at  this                                                               
point."                                                                                                                         
                                                                                                                                
SENATOR HOFFMAN stated that he concurred.                                                                                       
                                                                                                                                
12:43:28 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE SEATON  expressed his agreement to  prioritize the                                                               
audit of the Alaska Mental  Health Trust Authority.  He suggested                                                               
that the  statute of limitations  could be nearing for  the audit                                                               
of the Matanuska Maid dairy plant.                                                                                              
                                                                                                                                
12:43:48 PM                                                                                                                   
                                                                                                                                
CHAIR  STEVENS  acknowledged that  there  were  no objections  to                                                               
prioritizing  the  audit  of  the   Alaska  Mental  Health  Trust                                                               
Authority.                                                                                                                      
                                                                                                                                
12:44:02 PM                                                                                                                   
                                                                                                                                
CHAIR STEVENS offered  an update for the consultants  for oil and                                                               
gas.   He reported  that earlier discussion  for a  contract with                                                               
Paul Morgan  had revealed  that Mr. Morgan  had taken  a position                                                               
with  Wood Mackenzie,  which  would have  created  a conflict  of                                                               
interest.   He  shared  that, after  discussions  with the  House                                                               
Finance  Committee and  the  House  Resources Standing  Committee                                                               
regarding the  hiring of another consultant  for this legislative                                                               
session, a contract had been  signed with Rich Ruggiero of Castle                                                               
Gap.  He reported that the  Senate was satisfied with its current                                                               
consultants, Roger Marks  and Nikos Tsafos.  He  declared that he                                                               
did not  anticipate the  hiring of any  other consultants  in the                                                               
near future.   He pointed out  that the contract with  Mr. Tsafos                                                               
had  been  extended  through  May  31,  2017  for  an  additional                                                               
$20,000,  and  the contract  with  Mr.  Marks had  been  extended                                                               
through  June 30,  2017 and,  as there  was money  still in  this                                                               
contract, there had not been a need for any additional funds.                                                                   
                                                                                                                                
CHAIR STEVENS stated that work had  begun for an RFP (Request for                                                               
Proposal) for  long term consultants.   He invited  the committee                                                               
members  for their  suggestions of  individuals and  companies to                                                               
send the RFP to, and on the scope of work language.                                                                             
                                                                                                                                
12:46:04 PM                                                                                                                   
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There  being  no  further  business  before  the  committee,  the                                                               
Legislative Budget  and Audit Committee meeting  was adjourned at                                                               
12:46 p.m.                                                                                                                      

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