Legislature(2009 - 2010)BELTZ 211
03/17/2009 09:00 AM Senate STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| SB78 | |
| SB23 | |
| HB63 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 63 | TELECONFERENCED | |
| *+ | SB 78 | TELECONFERENCED | |
| *+ | SB 69 | TELECONFERENCED | |
| + | SB 23 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 78-LEGISLATIVE AUDIT DIVISION POWERS
9:00:40 AM
CHAIR MENARD announced the consideration of SB 78.
9:00:44 AM
SENATOR FRED DYSON, Alaska State Legislature, sponsor of SB 78,
said auditor Pat Davidson has frustrated him over the years
because she is always right. "I have come to the conclusion that
it's a very well-run function and they have done an excellent
job for us." Ms. Davidson tells him that her authority is
limited to audits of state organizations. He would like to
expand it to cover any organization that receives state funds.
SB 78 does that. He has heard that some of the pass-through
grants of state divisions were "kinda insider deals" where the
people steering the grants gave the money to very close
associations, including family members. He is not asserting that
that is true, but he is concerned about it. He has asked Ms.
Davidson to audit things that he thought were being misused. She
told him she doesn't have that authority. When Governor
Murkowski took office he said he was surprised at how little
auditing there was in the executive branch. The auditors have
done magnificent work, and he wants to give them the authority
to do audits anywhere public funds pass through state hands. The
legislature is a steward of public funds.
SENATOR DYSON said Ms. Davidson doesn't arbitrarily audit
things. She is subject to the legislature's direction. There is
a drafting error on page 1, line 4. The drafter changed "shall"
to "may" and it should be changed back. The other change on page
2 clarifies that the legislature and the audit office have the
authority to track public money that goes through the state.
9:04:56 AM
SENATOR MEYER asked if this would include federal money passed
through the state, including the economic stimulus money that
the state will receive.
SENATOR DYSON said his intention is to give the authority to
audit any public monies that pass through state hands.
9:05:34 AM
SENATOR FRENCH asked if the boy scouts got $5,000 to work on
their ball fields, would SB 78 allow for a total audit of all
boy scouts or would it just be limited to the $5,000?
SENATOR DYSON said his intention is to only track the money that
went through the state. He hears from his district that grants
from the state are getting siphoned off for other projects. The
auditor could chase that down. He would like to see SB 78 made
into a committee bill.
PAT DAVIDSON, Auditor, Division of Legislative Audit, said she
agreed with changing "shall" to "may". That wouldn't weaken her
current authority. In existing law there are two areas that make
the audit division as effective as it is. Item number 6 allows
access at all times to books, accounts, reports and other
records -- whether confidential or not -- of every state agency.
It also requires assistance and cooperation of all state
officials and other state employees on the inspection,
examination, and audit of state agency accounts. That makes the
audit division effective and efficient. Because both Section 5
and 6 refer to state agencies, in Section 11 the committee may
want to extend the division's authority to nonprofits or local
governments. "We are a service agency to the legislature. If
it's the legislature's policy call that you want us to be
following that state money to wherever it goes, I'm fine with
that." It is unclear if she is now allowed to audit once the
money has left the state agencies. If there is a grant agreement
that allows the department to audit the money, her division can
do an audit. There is money that flows out of the state without
many strings attached, like revenue sharing, and she can't audit
those. It's fine if the legislature gives the audit division
that authority, but it should consider whether it wants the
auditors to have access to confidential information at that
local level. That is an effectiveness and efficiency issue.
CHAIR MENARD asked if she supported the bill as written.
MS. DAVIDSON replied, "If the legislature wants the audit
division to be able to follow all state money into local
governments and nonprofits, then I believe that Section 11 will
do that for us" But the two other concerns are public policy
issues. "Do you want us to be able to look at confidential
information, if generated, and require the assistance of state
and local officials?" Those are efficiency and effectiveness
issues.
9:12:06 AM
CHAIR MENARD assumed this would require an increase in staff.
MS. DAVIDSON said there is a zero fiscal note because it doesn't
mandate any additional audits. It allows the Budget and Audit
Committee to approve additional audits. Currently, about 70
percent of her workload is mandated by statute. The other 30
percent is from legislative requests approved by the committee,
and they are dealt with on a first come, first served basis. If
those audit reports aren't completed in a timely manner, she
will hear about it. A staffing discussion would follow. This may
increase the workload, but she would have to see.
SENATOR MEYER asked what her backlog is now. If someone requests
an audit and it is approved, does it take a year to complete?
MS. DAVIDSON said it will take about six to nine months. Federal
auditors are talking to her about additional requirements for
the stimulus money. "Normally that statewide single audit that
covers all the federal requirements eats up about 60 percent of
our budget - it's going to be going up, and that workload is
probably going to be there for the next four to five years."
9:14:29 AM
SENATOR MEYER said, "She doesn't need any additional staff to do
what's being asked of her in the bill; it's just that if we want
it done faster than the six to nine months or year ... then we
would have to add staff, and of course that would change the
fiscal note." He is concerned about the federal money. The state
is responsible for state money. But, for example, if federal
money came to the state and was passed to the school district,
what would the state do with the results of the audit?
MS. DAVIDSON said the federal government is more consistent
about putting audit requirements on their money than the state
is. The federal government wants the state to be accountable for
any federal money passed to the state. The system that is set up
now is the single audit approach. So when federal money comes to
a school district - either directly or from the state - when the
auditors are in there, they will be doing federal compliance
work to make sure the money is spent in accordance with the
federal requirements. The state agencies are responsible for
taking any findings from those audits and acting on them. "And
so right now the layer for federal money is pretty well
complete, but with all single audits, there's thresholds for
what you have to audit and what you don't have to audit."
Federal dollars passing through now generally have audit
requirements with them.
9:16:58 AM
SENATOR MEYER asked if that includes the stimulus money.
MS. DAVIDSON said the U.S. Office of Management and Budget,
General Accounting, and the Inspector General in each department
are scrambling to come up with "compliance supplements," which
are the regulations that the auditors will have to follow when
auditing that money. Her understanding is that "they're cranking
those things up for us to look at more - rather than less --
when it comes to the economic stimulus money."
SENATOR FRENCH asked if receiving a small amount of state money
would enable the legislative Audit and Budget Committee to order
an audit of the entire organization. Language on page 2, lines
24 and 25, suggests that the receipt of just a little state
money would allow a "thorough top-to-bottom review of any
organization that got any amount of money from the state." In
terms of efficiency, it would concern him if the auditors were
asked to look at the Alaska boy scout organization "from stem to
stern" because it got $5,000 for a ball field. That would not be
a wise use of state resources. He asked Ms. Davidson if the bill
language was broader than it should be.
9:19:12 AM
MS. DAVIDSON said the way she read it and based on her
background, "we would follow the state money." But there would
be some overlap. If, for example, $5,000 of state money was
comingled with $10,000 of Rasmussen money, "we would limit
ourselves as much as possible to the $5,000; however, when you
get into an organization that small you're not going to find a
sophisticated accounting system where they are setting up
controls ... for different pots of money, and as a result ...
our evaluation would be of the system overall." But there would
be a focus on just the state's $5,000.
SENATOR FRENCH said Ms. Davidson has a sterling reputation, but
for posterity he asked that the language be tightened with
respect to the powers of the audit committee and auditing board.
9:21:27 AM
SENATOR PASKVAN said if the audit is approved, could the
approving language have those restrictions?
MS. DAVIDSON said the audits that are approved by the
Legislative Budget and Audit committee are generated by
individual legislators. They write to the committee chair
requesting an audit. In that request they have to identify what
the objective is, and she has to understand what the requester
wants. The legislature has authority over state funds, but she
is not sure that even the legislature can order an audit of
raffle receipts of an organization. There is an inherent
limitation on what can be audited because the authority comes
from the legislature. The bill will allow her to move from state
agencies down to nonprofits and local governments. "I didn't
read it to expand it beyond state funds or federal funds flowing
from the state."
9:23:49 AM
SENATOR DYSON remembered previous conversations with Ms.
Davidson where he asked if she could hire contract auditors, and
she had indicated that she could. If the committee thinks
something is a priority, the tools are in place to hire help.
Ms. Davidson made a good point about what access an auditor will
have when auditing a non-state organization. He will fix that
language today. He asked again to make SB 78 a committee bill
because it is excellent public policy.
SENATOR MEYER moved to adopt Amendment 1, which inserts the word
"duties" and on Page 1, lines 4 and 5, deletes "may", and
inserts "shall". There was no objection and Amendment 1 was
adopted.
SENATOR FRENCH moved Amendment 2, conceptually, as follows: On
page 2, line 24, "that the audit function be restricted to the
state dollars that an organization receives and not an umbrella
audit." He trusts Ms. Davidson, but the language says: "perform
an audit of an organization that receives money from or through
the state." That is a sweeping statement and is too broad.
SENATOR DYSON said that would be good. "I would encourage you to
consider whether or not that it includes federal funds that flow
through the state." He wants the language to include "public
funds flowing through the state."
SENATOR FRENCH said no one wants to see fraud, waste, or abuse.
On the other hand, the powers of the federal government to watch
its money versus the state's ability to watch state money is out
of whack. State money should only be spent to watch state
dollars. He suggested taking a day to tighten the language and
pass it out in the next hearing.
SENATOR MEYER said the sponsor requested a day to rework it.
SENATOR FRENCH said he will draft something for the sponsor.
9:28:55 AM
CHAIR MENARD held SB 78 and took a brief at-ease.
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