Legislature(2021 - 2022)ANCH LIO DENALI Rm

11/09/2021 02:00 PM Senate LEGISLATIVE BUDGET & AUDIT

Note: the audio and video recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.

Download Mp3. <- Right click and save file as

Audio Topic
02:04:24 PM Start
02:04:45 PM Approval of Minutes
02:05:12 PM Executive Session
03:48:50 PM Final and Preliminary Audit Releases
03:51:58 PM Other Committee Business
04:40:28 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Executive Session TELECONFERENCED
a. Final Audit Report
1. Board of Chiropractic Examiners (Sunset)
b. Preliminary Audit Report
1. Regulatory Commission of Alaska (Sunset)
2. Alcoholic Beverage Control Board (Sunset and
Special Audit)
3. Council on Domestic Violence and Sexual
Assault (Sunset)
c. Progress on FY21 Annual Comprehensive
Financial Report Audit and FY21 Statewide Single
Audit
Other Committee Business
a. Audit Requests:
1. Technical Vocational Education Program (TVEP)
2. Office of Information Technology (OIT)
b. Finalize: Audit Oversight Framework
                    ALASKA STATE LEGISLATURE                                                                                  
             LEGISLATIVE BUDGET AND AUDIT COMMITTEE                                                                           
                       Anchorage, Alaska                                                                                        
                        November 9, 2021                                                                                        
                           2:04 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Natasha von Imhof, Chair                                                                                                
Senator Peter Micciche                                                                                                          
Senator Lyman Hoffman                                                                                                           
Senator Click Bishop (alternate)                                                                                                
                                                                                                                                
Representative Chris Tuck, Vice Chair                                                                                           
Representative Ivy Spohnholz                                                                                                    
Representative Andy Josephson                                                                                                   
Representative Neal Foster (via teleconference)                                                                                 
Representative James Kaufman                                                                                                    
Representative Dan Ortiz (alternate, via teleconference)                                                                        
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Lora Reinbold                                                                                                           
Senator Bert Stedman                                                                                                            
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                                
Senator Mia Costello                                                                                                            
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
APPROVAL OF MINUTES                                                                                                             
EXECUTIVE SESSION                                                                                                               
FINAL AND PRELIMINARY AUDIT RELEASES                                                                                            
OTHER COMMITTEE BUSINESS                                                                                                        
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
KRIS CURTIS, Legislative Auditor                                                                                                
Division of Legislative Audit                                                                                                   
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Responded to questions and offered an                                                                    
update regarding audit oversight.                                                                                               
                                                                                                                                
ERIN SHINE, Staff                                                                                                               
Senator Click Bishop                                                                                                            
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Discussed an audit of TVEP.                                                                              
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
2:04:24 PM                                                                                                                    
                                                                                                                                
CHAIR NATASHA VON  IMHOF called the Legislative  Budget and Audit                                                             
Committee meeting to order at  [2:04] p.m.  Representatives Tuck,                                                               
Josephson,  Spohnholz, Kaufman,  and Foster  (via teleconference)                                                               
and  Senators  Micciche,  Hoffman, Bishop  (alternate),  and  von                                                               
Imhof  were present  at  the call  to order.    Also present  was                                                               
Senator Costello.                                                                                                               
                                                                                                                                
^APPROVAL OF MINUTES                                                                                                            
                      APPROVAL OF MINUTES                                                                                   
                                                                                                                              
2:04:45 PM                                                                                                                    
                                                                                                                                
CHAIR VON IMHOF announced that  the first order of business would                                                               
be the approval of minutes.                                                                                                     
                                                                                                                                
2:04:53 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  moved that the Legislative  Budget and Audit                                                               
Committee approve  the minutes of  the August 27,  2021, meeting,                                                               
as presented.  There being  no objection, the minutes from August                                                               
27, 2021, were approved.                                                                                                        
                                                                                                                                
^EXECUTIVE SESSION                                                                                                              
                       EXECUTIVE SESSION                                                                                    
                                                                                                                              
2:05:12 PM                                                                                                                    
                                                                                                                                
CHAIR VON IMHOF  announced that the next order  of business would                                                               
be an  executive session to  consider the final audit  report for                                                               
the  Board  of  Chiropractic   Examiners  and  preliminary  audit                                                               
reports  for  the  Regulatory Commission  of  Alaska  (RCA),  the                                                               
Alcoholic  Beverage  Control  Board,   and  Council  on  Domestic                                                               
Violence and  Sexual Assault.   Progress on fiscal year  2021 (FY                                                               
21) annual  comprehensive financial  report audit  and the  FY 21                                                               
statewide audit.                                                                                                                
                                                                                                                                
2:05:46 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  moved that the Legislative  Budget and Audit                                                               
Committee go into executive session  under Uniform Rule 22(e)(3),                                                               
for the  discussion of matters that  may, by law, be  required to                                                               
be confidential.   He asked that the following  persons remain in                                                               
the room or online:   the legislative auditor and necessary staff                                                               
for the auditor; any legislators  not on the committee; and staff                                                               
for legislators  who are members  of the committee.   There being                                                               
no objection, it was so ordered.                                                                                                
                                                                                                                                
2:06:23 PM                                                                                                                    
                                                                                                                                
The committee  took an at-ease  from 2:06  p.m. to 3:48  p.m. for                                                               
the purpose of executive session.                                                                                               
                                                                                                                                
3:48:21 PM                                                                                                                    
                                                                                                                                
CHAIR  VON   IMHOF  called  the  Legislative   Budget  and  Audit                                                               
Committee back to order at [3:48]  p.m.  Present at the call back                                                               
to  order   were  Representatives  Tuck,   Josephson,  Spohnholz,                                                               
Kaufman, and  Ortiz (alternate, via teleconference)  and Senators                                                               
Micciche,  Hoffman,  Bishop  (alternate)  and von  Imhof.    Also                                                               
present was Senator Costello.                                                                                                   
                                                                                                                                
^FINAL AND PRELIMINARY AUDIT RELEASES                                                                                           
              FINAL AND PRELIMINARY AUDIT RELEASES                                                                          
                                                                                                                              
3:48:50 PM                                                                                                                    
                                                                                                                                
CHAIR VON IMHOF  announced that the next order  of business would                                                               
be final and preliminary audit  releases.  She said the committee                                                               
would consider  the following  four motions:   One for  the final                                                               
release of  an audit;  one for the  preliminary release  of three                                                               
audits discussed;  one for a  personnel wage adjustment;  and one                                                               
for a personal 40-hour work week.                                                                                               
                                                                                                                                
3:49:14 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  moved that the Legislative  Budget and Audit                                                               
Committee  release  the  final  audit  report  of  the  Board  of                                                               
Chiropractic  Examiners.   There being  no objection,  it was  so                                                               
ordered.                                                                                                                        
                                                                                                                                
3:49:33 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  moved that the Legislative  Budget and Audit                                                               
Committee move  the following preliminary audits  to the agencies                                                               
for  response:     the  Regulatory  Commission   of  Alaska;  the                                                               
Alcoholic  Beverage  Control  Board;   the  Council  of  Domestic                                                               
Violence and  Sexual Assault.   There being no objection,  it was                                                               
so ordered.                                                                                                                     
                                                                                                                                
3:49:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK moved  that the pay range  of the legislative                                                               
auditor be  set at  a Range  30, Step  Q, effective  November 15,                                                               
2021, with  no change to  the merit  anniversary date, as  per AS                                                               
39.27.011(h),  with   the  understanding  that   the  legislative                                                               
auditor wage  adjustment and other  planned wage  adjustments for                                                               
audit staff  will be absorbed  into the existing budget  and that                                                               
no increases to the FY 22 or  FY 23 budgets are needed to provide                                                               
the adjustments.                                                                                                                
                                                                                                                                
REPRESENTATIVE JOSEPHSON asked how  the committee could know that                                                               
extra appropriation is not needed for FY 23.                                                                                    
                                                                                                                                
3:51:00 PM                                                                                                                    
                                                                                                                                
KRIS CURTIS, Legislative Auditor,  Division of Legislative Audit,                                                               
responded that although not a  certainty, it is difficult to hire                                                               
in  the upper  ranges, and  "you can  only absorb  so many  lower                                                               
ranges."  She  confirmed she would have available  cushion in her                                                               
budget to absorb the adjustments.                                                                                               
                                                                                                                                
3:51:28 PM                                                                                                                    
                                                                                                                                
CHAIR  VON IMHOF  announced that  there being  no objection,  the                                                               
motion was approved.                                                                                                            
                                                                                                                                
3:51:33 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  moved that the Legislative  Budget and Audit                                                               
Committee  authorize a  40-hour  work week  for  the Division  of                                                               
Legislative   Audit   Data   Processing   Supervisor   II,   with                                                               
[commensurate] increases to  compensation, effective November 15,                                                               
2021.  There being no objection, it was so ordered.                                                                             
                                                                                                                                
^OTHER COMMITTEE BUSINESS                                                                                                       
                    OTHER COMMITTEE BUSINESS                                                                                
                                                                                                                              
3:51:58 PM                                                                                                                    
                                                                                                                                
CHAIR VON IMHOF  announced that the next order  of business would                                                               
be  Other Committee  Business.   She  indicated  the first  topic                                                               
would be regarding two pending audit requests.                                                                                  
                                                                                                                                
3:52:39 PM                                                                                                                    
                                                                                                                                
SENATOR BISHOP introduced  his chief of staff, who  would give an                                                               
overview of the first audit request.                                                                                            
                                                                                                                                
3:52:54 PM                                                                                                                    
                                                                                                                                
ERIN   SHINE,  Staff,   Senator   Click   Bishop,  Alaska   State                                                               
Legislature, stated  that last  session, a  letter of  intent was                                                               
attached  to HB  100,  which she  described  as legislation  that                                                               
reauthorized the  Technical Vocational Education  Program (TVEP).                                                               
The letter of  intent requested an audit of TVEP  to be completed                                                               
by the legislative  auditor, and that audit is  what is currently                                                               
before the committee.   She said TVEP continues  to be authorized                                                               
each  sunset period;  however,  during  the legislative  process,                                                               
there  have  been  questions  raised that  go  unanswered.    She                                                               
explained that  the concerns  are never about  the merits  of the                                                               
program but about  the participants and distribution  list of the                                                               
funds.  She stated  that the goal of the audit  is to provide the                                                               
legislature  with  data  to  use   during  the  next  legislative                                                               
process.                                                                                                                        
                                                                                                                                
3:53:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KAUFMAN  spoke  about transparency  as  an  issue                                                               
considered when  determining the reauthorization of  TVEP, and he                                                               
asked how  easy it is  for a customer  to determine the  value of                                                               
TVEP.  He  queried, "Would this look  ... at any of  that, as far                                                               
as the ... user interface with the system?"                                                                                     
                                                                                                                                
MS.  SHINE indicated  she  could not  answer  regarding the  user                                                               
interface,  but she  said the  audit is  attempting to  get broad                                                               
data regarding  funds being distributed  and participants  on the                                                               
list.  She  said the list is in statute;  the distribution is not                                                               
a competitive  process.   She allowed that  what she  knows about                                                               
TVEP may not be up to date.   She explained that this issue arose                                                               
during the  last days of  session.   She estimated that  TVEP had                                                               
not been audited for 20 years.   She said Senator Bishop's office                                                               
staff worked on  the TVEP issue its last two  sunsets, as well as                                                               
worked with Ms. Curtis and  her staff to consider which questions                                                               
to ask  in order  to provide the  legislature with  concrete data                                                               
for the next reauthorization process.                                                                                           
                                                                                                                                
3:55:50 PM                                                                                                                    
                                                                                                                                
CHAIR VON  IMHOF relayed that one  of the things being  looked at                                                               
is  how programs  are  spending money.   In  terms  of whether  a                                                               
program is  or is not good,  she said it is  the marketing effort                                                               
that  attracts people  to a  program.   Regarding  considerations                                                               
about TVEP,  she said  one factor  was how  many people  got jobs                                                               
after completing TVEP and how long those people kept their jobs.                                                                
                                                                                                                                
3:56:42 PM                                                                                                                    
                                                                                                                                
SENATOR MICCICHE  said he was  a spectator during the  last round                                                               
of reauthorization  consideration for TVEP but  has been involved                                                               
in other programs as they  have been assessed by the legislature,                                                               
and he likened  discussions on these topics as playing  a game of                                                               
[telephone] where  what is being  said changes as  the discussion                                                               
circles.  He expressed appreciation  for the information that the                                                               
audit would  bring.  He  said better  decisions can be  made when                                                               
defensible data is made available.                                                                                              
                                                                                                                                
3:57:40 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SPOHNHOLZ  expressed support  for the audit.   She                                                               
asked  that there  be consideration  during the  audit that  when                                                               
looking  at jobs  for post-high  school  programs "we're  talking                                                               
about jobs  that are  in fields for  which they've  been trained"                                                               
not  "a job  at McDonalds,  which is  not, in  fact, relevant  to                                                               
workforce  training."   She  said TVEP  programs  vary; some  are                                                               
created for  high school level,  while others focus on  "a career                                                               
right at age 18."                                                                                                               
                                                                                                                                
3:58:41 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  moved that the Legislative  Budget and Audit                                                               
Committee  approve  the  TVEP  audit   request  to  look  at  the                                                               
following  objectives:   identifying reports  on the  use of  the                                                               
TVEP funding  for the period of  FY 19 through FY  22 to include,                                                               
by  institution,  the types  of  training  provided, the  age  of                                                               
students, the  number of  students, as  well as  any non-training                                                               
spending such as  capital improvements; evaluate the  way TVEP is                                                               
structured  to  effectively  meet the  technical  and  vocational                                                               
training needs  by the  region and/or  by industry;  evaluate the                                                               
program's  performance  measures  and  determine  whether  TVEP's                                                               
training   institutions  are   consistently  reporting   reliable                                                               
performance  information and  whether alternative  measures would                                                               
be more useful in measuring  the degree training institutions are                                                               
successfully  meeting the  intent of  the programs;  evaluate the                                                               
efficiency  of  the  accountability  and oversight  of  the  TVEP                                                               
training institutions  identified in AS 23.15.835,  and determine                                                               
how  those procedures  differ from  training grantees;  determine                                                               
whether TVEP  funds are  awarded in an  equitable manner  and, if                                                               
warranted, recommend  an alternative  funding mechanism  for many                                                               
of the  intents of TVEP;  and follow  up on any  related concerns                                                               
the legislative auditor identifies during the audit.                                                                            
                                                                                                                                
4:00:33 PM                                                                                                                    
                                                                                                                                
CHAIR  VON IMHOF  announced that  there being  no objection,  the                                                               
motion passed.                                                                                                                  
                                                                                                                                
4:01:01 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SPOHNHOLZ  addressed the next audit  request.  She                                                               
reported  that the  last time  the Legislative  Budget and  Audit                                                               
Committee did an information technology  (IT) audit was 2008, and                                                               
since  then  there  are  more  services  on  line  and  increased                                                               
security attacks on the state's  IT system, including breaches of                                                               
the IT  systems of the  Department of Health and  Social Services                                                               
and the  Alaska Court System.   She  relayed there have  been two                                                               
attacks on the  Division of Elections, one by  Russian hackers in                                                               
2016, and  while both  the division  and the  lieutenant governor                                                               
have  said neither  of  the attacks  undermined  the security  of                                                               
Alaska's elections, she is deeply  concerned that people have had                                                               
their  personal information  stolen:   113,00 Alaskans  had their                                                               
personal information  stolen from the Division  of Elections, and                                                               
up  to 700,000  Alaskans  had their  personal information  stolen                                                               
from  the  Department  of  Health and  Social  Services.    These                                                               
attacks  have broad  effects, including  to contractors  with the                                                               
State of Alaska and in the realm of public safety.                                                                              
                                                                                                                                
REPRESENTATIVE SPOHNHOLZ said she has  worked with Kris Curtis in                                                               
the Division of  Legislative Audit to request an IT  review.  She                                                               
said an  IT security audit  would be  the most rigorous  and most                                                               
expensive, while  an IT  review would be  a more  modest approach                                                               
allowing  a  broader  range  of consultants  to  respond  to  the                                                               
request for  proposals (RFP).   She said  Ms. Curtis  would offer                                                               
more  details, but  she  noted  that the  review  could look  for                                                               
systems  most at  risk, prioritize  them, and  then identify  the                                                               
resource policies and procedures  and infrastructure necessary to                                                               
prevent  [future attacks].   She  indicated  that those  involved                                                               
should  work with  the state's  Office of  Information Technology                                                               
(OIT),  within the  Department of  Administration.   She remarked                                                               
that the  department had  been "somewhat  reluctant to  engage in                                                               
the process."   She stated her belief that "this  will be a cost-                                                               
saving  measure for  the state  moving forward."   She  explained                                                               
that to-date,  the State of Alaska  has spent over $1  million in                                                               
response  to emergency  crisis  situations  [related to  security                                                               
breaches].  She noted that there  is a sum of $11 million related                                                               
to the American  Infrastructure and Jobs Act for  which the State                                                               
of Alaska would be eligible  for the purpose of state information                                                               
technology  security  infrastructure.    She  offered  to  answer                                                               
questions.                                                                                                                      
                                                                                                                                
4:04:55 PM                                                                                                                    
                                                                                                                                
CHAIR  VON IMHOF  described OIT  as "a  behemoth," and  she asked                                                               
whether  the focus  would be  on just  security or  whether there                                                               
would be  any other  focus, such  as how  the ARIES  and Medicaid                                                               
systems are working.                                                                                                            
                                                                                                                                
4:05:25 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SPOHNHOLZ  answered that "that's a  very expensive                                                               
project," and she emphasized the  need for urgent response rather                                                               
than  waiting several  years for  a comprehensive  review of  the                                                               
state's overall IT  system.  She indicated the focus  would be on                                                               
security,  and she  said  the state  does  not want  to  be in  a                                                               
situation in which  it would have to pay ransom.   She noted that                                                               
people have  been "providing  services and  not getting  paid for                                                               
them," which is problematic.                                                                                                    
                                                                                                                                
4:07:11 PM                                                                                                                    
                                                                                                                                
SENATOR  MICCICHE asked  whether  Representative Spohnholz  would                                                               
consider a motion  that would support the audit  but also support                                                               
the Legislative Budget and Audit  Committee to allow the Division                                                               
of Legislative  Audit "to come  back with  an analysis of  what a                                                               
further audit would look like on functionality."                                                                                
                                                                                                                                
REPRESENTATIVE SPOHNHOLZ responded,  "Absolutely."  She expressed                                                               
the need for  Alaska's system to be  modernized, but reemphasized                                                               
her focus on security at present.                                                                                               
                                                                                                                                
4:08:04 PM                                                                                                                    
                                                                                                                                
CHAIR  VON  IMHOF  remarked  that the  committee  is  asking  the                                                               
Division of  Legislative Audit  to do  a lot,  and she  asked for                                                               
confirmation that outside expertise would be sought.                                                                            
                                                                                                                                
4:08:22 PM                                                                                                                    
                                                                                                                                
KRIS CURTIS, Legislative Auditor,  Division of Legislative Audit,                                                               
answered yes, but  said work would need to be  done to figure out                                                               
what has already been done "in  order to feel good about tracking                                                               
the  procurement."   She  said  she assumes  OIT  has ranked  its                                                               
system  in terms  of  vulnerability  and risk,  and  if that  has                                                               
already been  done, then  the Division  of Legislative  Audit can                                                               
figure out  what to request; if  not, then the division  may have                                                               
to conduct  a mini IT  review and then go  from there.   She said                                                               
anything  over  $30,000   would  need  to  be   approved  by  the                                                               
Legislative Budget and Audit Committee.                                                                                         
                                                                                                                                
CHAIR VON  IMHOF indicated  that the committee  may not  have the                                                               
capability  to address  the division  coming back  with a  bigger                                                               
proposal.                                                                                                                       
                                                                                                                                
MS. CURTIS  talked about the many  layers of an audit  and echoed                                                               
Representative  Spohnholz'  remarks  about the  key  issue  being                                                               
security.  She talked about asking  questions as related to a few                                                               
high-risk  systems,   and  pointed  out  that,   in  theory,  the                                                               
vulnerabilities  with those  will be  the same  as would  be seen                                                               
"across the board."   She said she anticipates  figuring out what                                                               
lessons can be  learned and from there deciding what  needs to be                                                               
done next.                                                                                                                      
                                                                                                                                
4:10:42 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KAUFMAN questioned how  to determine the scope and                                                               
ensure the right steps are being  followed so that the end result                                                               
is "a product that addresses the problem."                                                                                      
                                                                                                                                
CHAIR  VON IMHOF  asked Ms.  Curtis and  Representative Spohnholz                                                               
whether they have a plan "to find out what the scope is."                                                                       
                                                                                                                                
4:11:44 PM                                                                                                                    
                                                                                                                                
MS. CURTIS said there is  a limited ability to demand information                                                               
from  OIT without  an approved  [audit]  request.   She said  she                                                               
assumes OIT will  be cooperative.  She said she  may need to seek                                                               
expert advice.  She asked  whether the committee would be meeting                                                               
again before next session.                                                                                                      
                                                                                                                                
CHAIR VON IMHOF  said the Legislative Budget  and Audit Committee                                                               
would meet again mid-December.                                                                                                  
                                                                                                                                
MS. CURTIS indicated she would not  have time by then but perhaps                                                               
the  committee could  meet once  more  before start  of the  next                                                               
session [which begins January 18, 2022].                                                                                        
                                                                                                                                
CHAIR VON  IMHOF indicated there is  a motion to get  the process                                                               
going  wherein Ms.  Curtis would  be able  to approach  OIT "with                                                               
something tangible" in her hands.                                                                                               
                                                                                                                                
4:12:58 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  reviewed the points  that he would  cover in                                                               
his upcoming motion related to the audit.                                                                                       
                                                                                                                                
REPRESENTATIVE SPOHNHOLZ  pointed out  that due to  the sensitive                                                               
nature  of the  topic, the  report  that results  from the  audit                                                               
would not  be made  public; IT issues  would be  discussed during                                                               
executive session.                                                                                                              
                                                                                                                                
4:15:12 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  moved that the Legislative  Budget and Audit                                                               
Committee  approve  the   information  technology  systems  audit                                                               
request as  presented by Representative Spohnholz,  to facilitate                                                               
a  review  of  the  State   of  Alaska's  information  technology                                                               
systems,  particularly  the  public-facing  systems,  those  that                                                               
contain  Alaskans' personal  information and  those necessary  to                                                               
pay grantees  or contractors of the  State of Alaska.   He stated                                                               
the objective would be to identify  all state IT systems and rank                                                               
the systems in  terms of significance and risk.   A comprehensive                                                               
security review of the most  significant systems most at risk for                                                               
infiltration  should be  conducted.   The review  should identify                                                               
what  is needed  to  prevent future  security breaches  including                                                               
resources,  policies and  procedures, staff  training, expertise,                                                               
or infrastructure.   Additionally, the review  should analyze the                                                               
State of  Alaska's IT security  training policies  and procedures                                                               
aimed at  reducing the effectiveness of  phishing schemes whereby                                                               
an  employee may  inadvertently allow  incursion of  the security                                                               
system.   A  further objective  would be  to get  recommendations                                                               
from the Division of Legislative  Audit or suggestions for future                                                               
follow-up audits.   He stated  that due to its  sensitive nature,                                                               
neither the audit  nor discussions about the audit  would be made                                                               
available to the public.                                                                                                        
                                                                                                                                
CHAIR  VON IMHOF  announced that  there being  no objection,  the                                                               
motion was approved.                                                                                                            
                                                                                                                                
4:17:11 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 4:17 p.m. to 4:26 p.m.                                                                       
                                                                                                                                
4:26:27 PM                                                                                                                    
                                                                                                                                
CHAIR VON IMHOF  announced the committee would  address the final                                                               
item under other committee business  regarding an audit oversight                                                               
framework for  following up  on audit  findings, as  presented by                                                               
Representative Kaufman  during the  Legislative Budget  and Audit                                                               
Committee meeting  on August  27, 2021.   She advised  that under                                                               
the framework,  the auditor identified  the top ten  audit issues                                                               
from  the  prior  fiscal  year  and  asked  that  the  applicable                                                               
executive  branch  agencies  provide  the  status  of  corrective                                                               
action.  Chair  Von Imhof said agencies  formally communicate the                                                               
status in writing to the  legislative auditor who then summarizes                                                               
the  results and  presents  them to  the  Legislative Budget  and                                                               
Audit Committee, at which point,  the findings would be forwarded                                                               
to  the  appropriate   Finance  subcommittees  for  consideration                                                               
during the  budget process.   She stated that this  new oversight                                                               
framework  encourages  resolution  and helps  identify  ways  the                                                               
legislature can partner with agencies to address audit findings.                                                                
                                                                                                                                
CHAIR VON IMHOF noted that the public and the committee members                                                                 
were asked to review the top ten audit findings noted during the                                                                
August 27 meeting and make recommendations.  She stated the goal                                                                
for this meeting is to consider the top ten audit findings and                                                                  
authorize the legislative auditor to move forward with the new                                                                  
audit oversight framework.  Chair Von Imhof invited Kris Curtis                                                                 
to summarize her original presentation to the committee,                                                                        
including the top ten findings, after which she said she would                                                                  
invite questions and discussion from the committee.                                                                             
                                                                                                                                
4:27:57 PM                                                                                                                    
                                                                                                                                
MS.  CURTIS remarked  that Chair  Von  Imhof had  covered in  her                                                               
opening remarks what she had planned  to say.  She said she would                                                               
like  to give  the  Legislative Budget  and  Audit Committee  the                                                               
opportunity  to add  to  or subtract  from the  list  of top  ten                                                               
findings.                                                                                                                       
                                                                                                                                
CHAIR VON IMHOF  opined that the list was a  good one, because it                                                               
comprised big issues that could also address "smaller things."                                                                  
                                                                                                                                
MS.  CURTIS relayed  that she  had  drafted the  letters, and  in                                                               
doing  so, she  noted  that  she had  to  approach the  financial                                                               
statement   assuming   qualifications    differently   than   she                                                               
approached the letters to the rest  of the departments.  She said                                                               
there  were  two  reasons  she   qualified  the  opinion  on  the                                                               
financial statements.  She continued:                                                                                           
                                                                                                                                
     First has to do with  revenues eligible for transfer to                                                                    
     the constitutional  budget reserve  fund.  As  a result                                                                    
     of   FERC   [Federal  Energy   Regulatory   Commission]                                                                    
     decisions, these monies were  not transferred ... in FY                                                                    
     18  and  FY  19   to  the  CBR  [constitutional  budget                                                                    
     reserve], and  fund balances that should  have remained                                                                    
     in the CBR were moved to the general fund.                                                                                 
                                                                                                                                
     ... Second  is related to  DNR   Department  of Natural                                                                    
     Resources   not transferring  to the permanent fund all                                                                    
     the dedicated  ... mineral lease revenues  that are due                                                                    
     to the permanent fund, and  that's for just FY 18 [and]                                                                    
     FY 19.                                                                                                                     
                                                                                                                                
MS. CURTIS said  the division has gone "back and  forth" with the                                                               
departments on this  issue, and the Legislative  Budget and Audit                                                               
Committee has discussed  what next steps to take.   She indicated                                                               
that [the Division of Legislative  Audit and the departments] are                                                               
at an impasse because of  a difference of opinion in interpreting                                                               
the Constitution  of the State of  Alaska.  She said  her letters                                                               
served  to ask  the commissioners  of the  Department of  Natural                                                               
Resources (DNR) and the Department  of Revenue (DOR) whether they                                                               
are   willing   to   make  an   adjustment   to   correct   these                                                               
misstatements.   Further, she asked  whether the  departments had                                                               
any suggestions for resolving these  issues absent direction from                                                               
the Alaska  Court System.   Finally, she asked  the commissioners                                                               
whether they are  willing to work with the legislature  to seek a                                                               
court  ruling  to  resolve  the   audit  findings  to  facilitate                                                               
corrective action.   She expressed her plan to  let the committee                                                               
know what response she receives from the departments.                                                                           
                                                                                                                                
4:31:36 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON  pointed to  the second bullet  point on                                                               
the  list  of ten  issues  [included  in the  committee  packet],                                                               
regarding  DNR's failure  to transfer  all  funds from  dedicated                                                               
lease  revenues.   He  remarked  that Ms.  Curtis  is asking  the                                                               
department whether it agrees it did  that and how it will fix the                                                               
issue; however, he pointed out  that that revenue could have gone                                                               
to the general fund (GF) and been spent.                                                                                        
                                                                                                                                
MS. CURTIS  responded that  regardless of  whether the  money has                                                               
been spent,  the GF  owes the  permanent fund  approximately $200                                                               
million, which  is a  liability and is  the adjustment  sought by                                                               
the Division of Legislative Audit.                                                                                              
                                                                                                                                
REPRESENTATIVE JOSEPHSON asked how the department would do that.                                                                
                                                                                                                                
MS.  CURTIS   answered  that  the   department  would   book  the                                                               
liability.   She  said in  terms  of a  financial statement,  the                                                               
department  would state  that the  GF  has a  liability, and  the                                                               
permanent fund was "recorder receivable."                                                                                       
                                                                                                                                
CHAIR VON  IMHOF reviewed the  process of the letter  being sent,                                                               
and if  the department  were to disagree  with the  assessment in                                                               
the letter,  then a court  process would begin.   She highlighted                                                               
that the Legislative  Budget and Audit Committee may  be asked to                                                               
take steps  to engage in that  process, and that she  had invited                                                               
Ms. Curtis  to speak today  to make  the committee aware  of that                                                               
potential.                                                                                                                      
                                                                                                                                
4:33:42 PM                                                                                                                    
                                                                                                                                
MS.  CURTIS  noted that  this  issue  originated with  the  prior                                                               
administration;  therefore,  it  is  possible  that  the  current                                                               
administration,  faced  with the  issue,  may  be on  board  with                                                               
getting  a  court  interpretation  -  a  "clean  opinion."    She                                                               
explained that  a court opinion  that the funds either  belong or                                                               
do not belong in the permanent  fund is the evidence she needs to                                                               
resolve the issue.  She emphasized  the importance of moving as a                                                               
team toward resolution.                                                                                                         
                                                                                                                                
REPRESENTATIVE  JOSEPHSON said  he  agrees but  pointed out  that                                                               
this could be a three- to four-year process.                                                                                    
                                                                                                                                
MS. CURTIS  responded that she  does not know anything  about the                                                               
process  but if  it takes  three or  four years  to resolve,  she                                                               
expressed, she wishes the process  had been started three or four                                                               
years ago.   She added,  "It's already  been three years  since I                                                               
initially qualified the opinion."                                                                                               
                                                                                                                                
4:35:12 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KAUFMAN  shared that  his awareness of  this issue                                                               
began  even   before  he  became   politically  active,   and  he                                                               
emphasized the  importance of  working through  it transparently.                                                               
He stated  that the problem could  be in the execution  or in the                                                               
requirement.   He said, "I  think as we  go through this,  it's a                                                               
quality management process, and it's  sort of like the chips fall                                                               
where they may, and we just approach it on that basis."                                                                         
                                                                                                                                
4:36:30 PM                                                                                                                    
                                                                                                                                
SENATOR   BISHOP  remarked   that  the   former  chair   [of  the                                                               
Legislative Budget  and Audit Committee] had  suggested this plan                                                               
of action three years ago.                                                                                                      
                                                                                                                                
4:36:37 PM                                                                                                                    
                                                                                                                                
SENATOR  MICCICHE observed  that  he  and Representative  Kaufman                                                               
come from a background where  audit findings were required by law                                                               
to  be  resolved  immediately,  and  he  expressed  he  finds  it                                                               
disconcerting  that  some  of the  same  agencies  that  required                                                               
immediate compliance  "don't seem to  find it as important."   He                                                               
said he  supports the  recommended process and  hopes it  will be                                                               
well-received by the administration.                                                                                            
                                                                                                                                
4:37:45 PM                                                                                                                    
                                                                                                                                
CHAIR VON IMHOF  invited Ms. Curtis to speak to  "the second type                                                               
of letter" that  had been written to address numbers  3-10 on the                                                               
list.                                                                                                                           
                                                                                                                                
4:37:53 PM                                                                                                                    
                                                                                                                                
MS.  CURTIS responded  that the  letter is  "pretty generic"  and                                                               
asks about corrective  action and the timing of such  action.  In                                                               
response  to questions  from Chair  Von Imhof,  she said  she had                                                               
planned  to give  the departments  three weeks  to respond.   She                                                               
said  she had  not  planned  to report  back  to the  Legislative                                                               
Budget  and  Audit Committee  at  its  upcoming meeting  in  mid-                                                               
December but rather at the  following meeting currently scheduled                                                               
for  January  17,  2022.   In  further  response,  she  expressed                                                               
amenability to a January 1, 2022, deadline.                                                                                     
                                                                                                                                
4:39:02 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  moved that the Legislative  Budget and Audit                                                               
Committee  authorize the  legislative  auditor to  carry out  the                                                               
formal audit  oversight framework as  described at the  August 7,                                                               
2021, meeting.  There being no objection, the motion passed.                                                                    
                                                                                                                                
4:39:27 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KAUFMAN  thanked  the committee  for  considering                                                               
this issue and Ms. Curtis for her work.                                                                                         
                                                                                                                                
CHAIR   VON  IMHOF   thanked  Representative   Kaufman  for   his                                                               
involvement  and for  encouraging the  committee to  consider the                                                               
issue.  She expressed thanks in general to everyone involved                                                                    
with the issues addressed during the day's meeting.                                                                             
                                                                                                                                
4:40:28 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business before the committee, the                                                                       
Legislative Budget and Audit Committee meeting was adjourned at                                                                 
[4:40] p.m.                                                                                                                     

Document Name Date/Time Subjects
11 9 21 LBA Agenda FINAL.pdf JBUD 11/9/2021 2:00:00 PM
LBA 11 9 21 Agenda final
LBA 082721 minutes.pdf JBUD 11/9/2021 2:00:00 PM
LBA 8 27 21 Minutes for approval
LBA IT Security Request 11.1.21.pdf JBUD 11/9/2021 2:00:00 PM
LBA OIT Audit Request 11.1.21
LBA Audit Oversight Framework.pdf JBUD 11/9/2021 2:00:00 PM
LBA Oversight Framework
LBA TVEP Audit Request NOV 2021.pdf JBUD 11/9/2021 2:00:00 PM
LBA TVEP Audit Request 11.21