Legislature(1993 - 1994)

03/01/1994 08:00 AM STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
  SB 128 - LEGISLATIVE AUDITS                                                  
                                                                               
  Number 340                                                                   
                                                                               
  SHELBY STASTNY, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET                    
  (OMB), offered his concerns on CSSB 128.  He said CSSB 128                   
  requires the Division of Audit and Management Services                       
  (AMS), OMB, to follow up legislative audit reports.  He felt                 
  this should be done, however, in a cooperative manor between                 
  the AMS and the Division of Legislative Audits (DLA) to                      
  agree which audits should be followed up on.                                 
                                                                               
  MR. STASTNY said statutorily requiring a follow up will                      
  completely redirect the efforts of the AMS.  The AMS has                     
  only eight to ten auditors, whereas the DLA has nearly 30                    
  working year round.  He felt the appropriate function of the                 
  AMS was to work primarily on audits under the executive                      
  branch and redirecting the AMS to the DLA would not be                       
  proper.  The executive branch does, however, feel the DLA                    
  audits should be followed up.                                                
                                                                               
  MR. STASTNY stated the function of the auditors is to sell                   
  their recommendations to the agencies.  The subject matter                   
  is very familiar to those who did the audit, and the OMB                     
  feels those people ought to be working on the acceptability                  
  and implementation of the recommendations.  Another entity                   
  added to the process would require them to be duly informed                  
  of the recommendations, of which it would require an                         
  overview of almost the entire audit.  He felt this would be                  
  an inefficient process to use the AMS.  If the                               
  recommendation is not good enough for the agency to follow,                  
  even the executive branch would have the same difficulty as                  
  the DLA in convincing an agency.                                             
                                                                               
  MR. STASTNY noted the DLA has an Anchorage office where many                 
  of the audits are performed.  The OMB sends people to                        
  Anchorage sometimes, but requiring follow up on these                        
  reports may result in significant amounts of travel.                         
                                                                               
  MR. STASTNY said the OMB is concerned that, with the                         
  additional work load, they would have to hire more                           
  employees.  He felt three people would be required to carry                  
  out the current work load and distribute the additional work                 
  load.  The AMS currently regularly follows up their reports                  
  after six months to determine whether or not the agencies                    
  have accepted their recommendations.  He felt this was a                     
  good idea for the DLA also.  He noted the AMS would be                       
  willing to work with recommendations where the governor's                    
  office, for example, agrees there is a good idea which an                    
  agency is reticent to follow.                                                
                                                                               
  (REPRESENTATIVE SANDERS left the meeting at 8:30 a.m.)                       
                                                                               
  Number 424                                                                   
                                                                               
  CHAIR VEZEY stated he had difficulty interpreting the                        
  wording.                                                                     
                                                                               
  CHAIR VEZEY asked MR. STASTNY to clarify if he was implying                  
  that on page 2 the OMB will be at the direction of the                       
  Legislative Budget and Audit Committee (LB&A)?  He commented                 
  that he did not interpret page 2 in this way.                                
                                                                               
  Number 435                                                                   
                                                                               
  MR. STASTNY responded that the words do not say it, but they                 
  believe it will be the result.  The words say the OMB shall                  
  monitor the implementation and recommendations made by the                   
  LB&A.  He stated Mr. Welker wrote a letter to Senator Steve                  
  Frank basically saying through some administrative                           
  procedures they would be able to take care of some of the                    
  OMB's concerns.  He believed the letter also mentioned the                   
  legislative auditor will work in concert with OMB to balance                 
  the resources reasonably available; the legislative auditor                  
  will prioritize items according to significance; and                         
  basically the legislative auditor and OMB will work with the                 
  resources available.                                                         
                                                                               
  Number 453                                                                   
                                                                               
  CHAIR VEZEY asked if MR. STASTNY stated that the LB&A                        
  currently has 30 auditors working.                                           
                                                                               
  Number 454                                                                   
                                                                               
  MR. STASTNY replied around 30.                                               
                                                                               
  Number 455                                                                   
                                                                               
  CHAIR VEZEY thought they only had two to three.  He asked                    
  how many auditors the AMS had.                                               
                                                                               
  Number 459                                                                   
                                                                               
  MR. STASTNY answered the AMS has eight to ten.                               
                                                                               
  Number 461                                                                   
                                                                               
  CHAIR VEZEY clarified the AMS would have to add                              
  approximately four people to keep up the work load.                          
                                                                               
  Number 462                                                                   
                                                                               
  MR. STASTNY corrected that their fiscal note stated three.                   
                                                                               
  Number 466                                                                   
                                                                               
  CHAIR VEZEY noted CSSB 128 mandates additional work will be                  
  done; however, there is a question as to whether additional                  
  people are required.  This was of concern to him considering                 
  the current budget pressures.  He wondered how much work                     
  could be created with two agencies cyclicly deriving work                    
  for each other to keep checking on.                                          
                                                                               
  Number 480                                                                   
                                                                               
  MR. STASTNY agreed with CHAIR VEZEY.  He stated the DLA                      
  operates at the direction of the legislature on larger tasks                 
  and the AMS primarily works at the request of the governor's                 
  office or an agency if a department has asked for an audit                   
  of their procedures.                                                         
                                                                               
  Number 497                                                                   
                                                                               
  REPRESENTATIVE ULMER asked if MR. STASTNY had an alternative                 
  recommendation.  She believed the Senate State Affairs                       
  Committee meant for LB&A, after an audit, analysis and                       
  recommendation, to see action because LB&A and the                           
  legislature cannot really enforce the recommendation.  She                   
  stated the LB&A has the option of withholding funds to an                    
  agency.                                                                      
                                                                               
  CHAIR VEZEY asked if withholding funds would be the                          
  "ultimate hammer."                                                           
                                                                               
  Number 505                                                                   
                                                                               
  REPRESENTATIVE ULMER said yes, but the "ultimate hammer" may                 
  also hurt the LB&A, as well as the agency.  The legislature                  
  often chooses between not giving the agency money, even                      
  though they want them to do the work.  She believed CSSB 128                 
  would involve the AMS in the work while being one step short                 
  of withholding all funds.  The executive branch could                        
  implement the agency in direction.  She said CSSB 128 states                 
  that recommendations will be directed to the AMS to either                   
  implement or respond why they would rather not.                              
                                                                               
  Number 520                                                                   
                                                                               
  MR. STASTNY stated the recommendations of the LB&A are                       
  heard; however, they are not always agreed with.  He said                    
  the OMB would like to work with LB&A to find things they                     
  agree on.  He felt the AMS should not be put in the middle                   
  of the auditor and the audited agency.  He felt if the                       
  agencies were not on task they should be dealt with through                  
  the budget or legislative process.  Procedural detail is up                  
  to the executive branch and there may be differences of                      
  opinion as to how policy is carried out.                                     
                                                                               
  Number 545                                                                   
                                                                               
  CHAIR VEZEY asked if the LB&A and the legislature has been                   
  frustrated with this problem in the past.                                    
                                                                               
  Number 548                                                                   
                                                                               
  REPRESENTATIVE ULMER responded that the chair of the Senate                  
  State Affairs Committee introduced a bill to deal with                       
  frustrations he or the LB&A feels.  She said SENATOR                         
  PHILLIPS, Chair of LB&A, would have to answer why the bill                   
  was introduced.  REPRESENTATIVE ULMER said generally the                     
  executive branch responds positively to the recommendations                  
  of LB&A.  Sometimes an audit uncovers a practice which                       
  frustrates the will, then if the people get mad enough, they                 
  turn to the budget process and try to take away funding.                     
                                                                               
  Number  573                                                                  
                                                                               
  MR. STASTNY replied the alternative proposal would be to                     
  possibly meet on a regular basis to discuss concerns not                     
  currently voiced.  He said the OMB values the efficient                      
  management of their departments and prefers an informal form                 
  of action.                                                                   
                                                                               
  Number 587                                                                   
                                                                               
  REPRESENTATIVE ULMER asked if MR. STASTNY ever meets with                    
  RANDY WELKER.                                                                
                                                                               
  Number 588                                                                   
                                                                               
  MR. STASTNY did not know how regularly, but thought GARY                     
  ANDERSON, DIRECTOR OF OMB AUDIT DIVISION, meets with MR.                     
  WELKER.                                                                      
                                                                               
  Number 589                                                                   
                                                                               
  CHAIR VEZEY asked REPRESENTATIVE ULMER, member of LB&A, why                  
  she had not introduced this type of legislation.                             
                                                                               
  Number 591                                                                   
                                                                               
  REPRESENTATIVE ULMER did not feel it was a big problem.  She                 
  said the agencies had generally been responsive in terms of                  
  responding to the initial audit and in implementing                          
  reasonable requests.  She stated Senator Phillips may be                     
  aware of something she was not.                                              
                                                                               
  Number 598                                                                   
                                                                               
  CHAIR VEZEY asked if the demand on services would influence                  
  REPRESENTATIVE ULMER's decision.  A zero fiscal note from                    
  Senate Rules and the House State Affairs Committee was                       
  before the committee, as was a modest fiscal note from OMB                   
  of about $206,000 a year, escalating every year of three                     
  people.  He stated auditors create a lot of work and, with                   
  the offices working together, there could be a lot of jobs                   
  created.  These jobs would have to be funded.                                
                                                                               
  Number 610                                                                   
                                                                               
  REPRESENTATIVE ULMER felt it would be appropriate to ask                     
  RANDY WELKER how many times there has been a problem, and if                 
  CSSB 128 was necessary.                                                      
                                                                               
  Number 614                                                                   
                                                                               
  CHAIR VEZEY stated zero fiscal note bills have been known to                 
  show impacts.  He asked how much work would be driven by                     
  CSSB 128.                                                                    
                                                                               
  Number 622                                                                   
                                                                               
  MR. STASTNY responded that the submitted fiscal note was                     
  prepared by the AMS, which indicated possibly 20 percent of                  
  the recommendations of LB&A would be followed up.  This                      
  would amount to about 3,600 hours for the AMS, which would                   
  take three auditors.                                                         
                                                                               
  Number 633                                                                   
                                                                               
  REPRESENTATIVE KOTT questioned how many audited agencies                     
  agree with the recommendations of the LB&A.  He noted, if                    
  the audited agency agrees with the recommendation, the AMS                   
  will be responsible for monitoring the implementation.  He                   
  wondered what it would take to follow up the implementation.                 
                                                                               
  Number 640                                                                   
                                                                               
  MR. STASTNY said he did not know, but he could possibly find                 
  out from RANDY WELKER.                                                       
                                                                               
  Number 642                                                                   
                                                                               
  REPRESENTATIVE KOTT asked if there were a lot of                             
  disagreements.                                                               
                                                                               
  Number 645                                                                   
                                                                               
  MR. STASTNY said not really; LB&A does good work and the                     
  agencies generally agree with their work.                                    
                                                                               
  Number 647                                                                   
                                                                               
  REPRESENTATIVE KOTT clarified that 80-90 percent could                       
  perhaps be in agreement with recommendations by LB&A,                        
  therefore, the AMS would have to implement these                             
  recommendations.                                                             
                                                                               
  MR. STASTNY said the AMS would have to become familiar with                  
  the implementation, and this is why he felt the DLA would be                 
  better to do the implementation because they prepared the                    
  audit.                                                                       
                                                                               
  Number 658                                                                   
                                                                               
  CHAIR VEZEY stated there does not seem to be any recourse,                   
  and the LB&A would be free to request services from another                  
  branch of government's budget without restraint.  He said                    
  government would drive government in cost.  He asked for a                   
  recommendation to temper this effect, perhaps a set number                   
  of auditors who would respond to the LB&A requests.  The                     
  legislature could choose whether or not to fund those                        
  auditors.                                                                    
                                                                               
  Number 671                                                                   
                                                                               
  MR. STASTNY recommended there be monthly meetings with DLA,                  
  as an informal method, and not statutory requirements.                       
                                                                               
  Number 676                                                                   
                                                                               
  REPRESENTATIVE G. DAVIS asked if "monitoring" was an                         
  auditing term with specific meaning.                                         
                                                                               
  Number 679                                                                   
                                                                               
  MR. STASTNY believed "monitoring" was used just in general                   
  English language.                                                            
                                                                               
  Number 681                                                                   
                                                                               
  REPRESENTATIVE G. DAVIS stated CSSB 128 directed the AMS to                  
  "monitor," and it could have different meanings to different                 
  people.                                                                      
                                                                               
  Number 685                                                                   
                                                                               
  MR. STASTNY replied that "monitor" does not have special                     
  meaning.                                                                     
                                                                               
  Number 686                                                                   
                                                                               
  CHAIR VEZEY introduced RANDY WELKER as the next person to                    
  testify.                                                                     
                                                                               
  Number 692                                                                   
                                                                               
  RANDY WELKER, LEGISLATIVE AUDITOR, LEGISLATIVE AUDIT                         
  DIVISION, LEGISLATIVE AFFAIRS AGENCY, answered questions on                  
  CSSB 128.  He addressed CHAIR VEZEY and said there is not an                 
  urgent need for CSSB 128, but SENATOR PHILLIPS was primarily                 
  interested because there could be a better success rate on                   
  LB&A recommendations.                                                        
                                                                               
  TAPE 94-18, SIDE B                                                           
  Number 000                                                                   
                                                                               
  MR. WELKER believed SENATOR PHILLIPS was looking for a long                  
  term mechanism to not only improve implementation rate, but                  
  also keep significant recommendations before the LB&A.  He                   
  said a formal mechanism provides a systematic review.                        
                                                                               
  MR. WELKER addressed REPRESENTATIVE KOTT and said he did not                 
  know the specific number of agreements because it was                        
  constantly changing.  The DLA has a high success rate in                     
  getting agencies to agree with recommendations, but their                    
  follow up in implementation does not always match.  The                      
  agencies may have a matter of priority within their shop or                  
  they may not have the resources to implement the                             
  recommendations.  He suspected some agencies may even agree                  
  with the recommendation to have the audit come to a smooth                   
  end.  Some agencies simply disagree.  He stated CSSB 128 is                  
  designed to involve the OMB and the recommendations the LB&A                 
  thinks are important for policy matters.  To create                          
  continuity, the LB&A would like the perspective of the                       
  governor's office on recommendations it decides to forward                   
  to the OMB.                                                                  
                                                                               
  Number 077                                                                   
                                                                               
  REPRESENTATIVE G. DAVIS asked what sort of responses from                    
  the OMB does the DLA get.                                                    
                                                                               
  Number 097                                                                   
                                                                               
  MR. WELKER responded that the current DLA involvement with                   
  the OMB implementations is limited.  A copy of all DLA audit                 
  reports is supplied to the OMB for their files.  Currently,                  
  the DLA and the AMS are working on different things;                         
  however, they do communicate to make sure work is not                        
  duplicated.                                                                  
                                                                               
  Number 100                                                                   
                                                                               
  REPRESENTATIVE ULMER asked MR. WELKER's reaction to MR.                      
  STASTNY's recommendation to have informal meetings.                          
                                                                               
  Number 107                                                                   
                                                                               
  MR. WELKER thought MR. STASTNY's idea would eliminate a                      
  formal mechanism to bring recommendations before the LB&A.                   
  With a concern for administration changes, CSSB 128 would                    
  assure a continued program.                                                  
                                                                               
  Number 128                                                                   
                                                                               
  CHAIR VEZEY asked MR. WELKER to comment on the fiscal notes,                 
  feeling CSSB 128 obviously has the potential of creating                     
  more work.  He asked, Would the administration have to hire                  
  more people and appropriate money to allow for this, or                      
  would the legislature address it as though, since extra                      
  money was not appropriated, they do not expect the OMB to                    
  respond to the bill this year?                                               
                                                                               
  Number 144                                                                   
                                                                               
  MR. WELKER responded that Senate State Affairs discussed                     
  this issue and resolved it with a zero fiscal note.  He                      
  stated the current fiscal note is similar to the 1993                        
  version and Senate State Affairs felt there would be                         
  flexibility in dealing with the resource limitations.  He                    
  thought three people, present or additional, were not                        
  necessary.  He said AMS would have to adjust and communicate                 
  with the DLA on the amount of work they receive.  Since the                  
  majority of the recommendations received will have the                       
  affected agencies in agreement, he felt the agencies would                   
  have to be monitored, not intensely reaudited.  The agencies                 
  need to know they are not going to slide through without                     
  changes, he said.                                                            
                                                                               
  CHAIR VEZEY asked what the penalty would be for violating                    
  this statute if CSSB 128 were to pass.                                       
                                                                               
  Number 184                                                                   
                                                                               
  MR. WELKER answered, not criminal penalties, but the LB&A                    
  may bring on pressure through the budget processes.  He said                 
  CSSB 128 does not include specific penalties.                                
                                                                               
  Number 194                                                                   
                                                                               
  CHAIR VEZEY asked why CSSB 128 should be put into statute if                 
  it did not have a means of enforcement.  He asked if the                     
  legislative "hammer" was increasing and the administrative                   
  "hammer" was decreasing.  He asked what CSSB 128 is                          
  improving.                                                                   
                                                                               
  Number 208                                                                   
                                                                               
  MR. WELKER replied the intent is not to change the balance                   
  of power, but further a goal that both the legislature and                   
  administration share to improve state government.                            
                                                                               
  Number 214                                                                   
                                                                               
  CHAIR VEZEY asked what the "tool" would be in CSSB 128 to                    
  enforce the statute.                                                         
                                                                               
  Number 218                                                                   
                                                                               
  MR. WELKER answered there are several laws without specific                  
  penalties, but their formal expression of policy by the                      
  legislature gives them recognition so as agencies will                       
  follow them.  He said CSSB 128 would not be an ineffective                   
  law.                                                                         
                                                                               
  Number 229                                                                   
                                                                               
  REPRESENTATIVE G. DAVIS asked if MR. WELKER gets frustrated                  
  with the OMB when he has to relate to them.                                  
                                                                               
  Number 234                                                                   
                                                                               
  MR. WELKER replied that over the years there have been                       
  shifts in implementation and the DLA has no specific concern                 
  with the current OMB.  He said CSSB 128 is an accumulation                   
  of frustration by some LB&A members and also the frequent                    
  sight of good recommendations not taken advantage of.  He                    
  stated the DLA should take care of implementation, and he                    
  did not strongly disagree, but implementation of                             
  recommendations is ultimately the responsibility of the                      
  administration.                                                              
                                                                               
  (REPRESENTATIVE ULMER left the meeting at 9:05 a.m.)                         
                                                                               
  Number 257                                                                   
                                                                               
  REPRESENTATIVE KOTT asked about current audits on agencies                   
  and implementation followed up by the DLA.                                   
                                                                               
  Number 262                                                                   
                                                                               
  MR. WELKER stated the DLA's primary large audit, the State                   
  Single Audit, which is the financial audit of the State of                   
  Alaska in its entirety, averages 70-75 significant                           
  recommendations.  The DLA follows up on the recommendations                  
  they made to the state in the previous year.  The DLA makes                  
  recommendations on special audits looking at particular                      
  areas of concern requested by the LB&A, but they may not                     
  return to those areas for several years.  He said CSSB 128                   
  is focused towards these special audits.                                     
                                                                               
  Number 285                                                                   
                                                                               
  REPRESENTATIVE KOTT asked for clarification that the DLA                     
  does not reevaluate if the recommendations have been                         
  implemented.  He asked if anyone does.                                       
                                                                               
  Number 288                                                                   
                                                                               
  MR. WELKER said there is no formal mechanism and CSSB 128                    
  would help in this area.  Noting the sunset process, the DLA                 
  is sometimes asked to revisit agencies several times.  In                    
  these cases the DLA has the advantage of file history.                       
                                                                               
  Number 304                                                                   
                                                                               
  REPRESENTATIVE KOTT questioned why the DLA would not want to                 
  reevaluate agencies to see if the recommendation had been                    
  implemented.  Does lack of funding or man power limit the                    
  DLA?  He felt the follow up should not be that difficult.                    
                                                                               
  Number 318                                                                   
                                                                               
  MR. WELKER responded that he has no control over his                         
  workload and he probably has 15-20 requested special audits,                 
  which he has not even been able to start yet.  He noted that                 
  even if he did follow up on the special audits, he still has                 
  no enforcement mechanism, and he would have to relay the                     
  same recommendation that the agency ought to do it.  He                      
  thought pressure from the executive branch would create                      
  pressure and help in quick direct implementation.  The                       
  problem is a resource issue, he said.                                        
                                                                               
  (REPRESENTATIVE ULMER rejoined the meeting at 9:24 a.m.)                     
                                                                               
  Number 335                                                                   
                                                                               
  REPRESENTATIVE KOTT asked MR. WELKER to comment on the                       
  number of audits he was responsible for in the 18th                          
  Legislature, as compared to the 17th Legislature.  He asked                  
  if this was a new problem.                                                   
                                                                               
  Number 340                                                                   
                                                                               
  MR. WELKER answered no, the DLA has always been busy.                        
                                                                               
  Number 349                                                                   
                                                                               
  Hearing no more questions, CHAIR VEZEY announced CSSB 128                    
  would be held in committee and called for a short recess at                  
  9:12 a.m.                                                                    
                                                                               
  CHAIR VEZEY called the meeting back to order 9:18 a.m. and                   
  reopened HB 404 for discussion.  REPRESENTATIVE G. DAVIS was                 
  present.                                                                     

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