Legislature(2017 - 2018)Anch LIO Conf Rm
09/07/2017 02:00 PM Senate LEGISLATIVE BUDGET & AUDIT
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| Audio | Topic |
|---|---|
| Start | |
| Election of Chairman | |
| Approval of Agenda | |
| Approval of Minutes | |
| Special Audit Request | |
| Executive Session | |
| Final Audit Release | |
| Preliminary Audit Release | |
| Other Committee Business | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
LEGISLATIVE BUDGET AND AUDIT COMMITTEE
Anchorage, Alaska
September 7, 2017
2:03 p.m.
MEMBERS PRESENT
Senator Bert Stedman, Chair
Senator Anna MacKinnon
Senator Cathy Giessel
Senator Lyman Hoffman (via teleconference)
Senator Natasha von Imhof (alternate)
Representative Andy Josephson, Vice Chair
Representative Scott Kawasaki (via teleconference)
Representative Ivy Spohnholz
Representative Jennifer Johnston
Representative Dan Ortiz (alternate, via teleconference)
MEMBERS ABSENT
Senator Click Bishop
Representative Paul Seaton
COMMITTEE CALENDAR
ELECTION OF CHAIRMAN
APPROVAL OF AGENDA
APPROVAL OF MINUTES
SPECIAL AUDIT REQUEST
EXECUTIVE SESSION
FINAL AUDIT RELEASE
PRELIMINARY AUDIT RELEASE
OTHER COMMITTEE BUSINESS
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
REPRESENTATIVE DAN SADDLER
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Requested an audit of the Village Public
Safety Officer program.
KRIS CURTIS, Legislative Auditor
Legislative Audit Division
Legislative Agencies and Offices
Legislative Affairs Agency
Juneau, Alaska
POSITION STATEMENT: Provided comments and answered questions
during the special audit request.
ACTION NARRATIVE
2:03:11 PM
CHAIR BERT STEDMAN called the Legislative Budget and Audit
Committee meeting to order at 2:03 p.m. Representatives
Kawasaki (via teleconference), Spohnholz, Johnston, Ortiz
(alternate, via teleconference), and Josephson and Senators
MacKinnon, Giessel, Senator Von Imhof (alternate) and Stedman
were present at the call to order. Senator Hoffman (via
teleconference) arrived as the meeting was in progress.
^ELECTION OF CHAIRMAN
ELECTION OF CHAIRMAN
2:04:41 PM
VICE CHAIR JOSEPHSON moved to elect Senator Stedman as chair of
the Legislative Budget and Audit Committee. There being no
objection, the election of Senator Stedman as chair was so
ordered.
^APPROVAL OF AGENDA
APPROVAL OF AGENDA
2:05:16 PM
REPRESENTATIVE JOSEPHSON made a motion that the Legislative
Budget and Audit Committee approve the agenda. There being no
objection, it was so ordered.
^APPROVAL OF MINUTES
APPROVAL OF MINUTES
2:05:45 PM
REPRESENTATIVE JOSEPHSON made a motion to approve the minutes of
the Legislative Budget and Audit Committee of July 25, 2017,
with the following correction of the word "lasting" to "lapsing"
as it appeared three times on page 4. There being no objection,
the minutes from the meeting of July 25, 2017, were approved, as
corrected.
^SPECIAL AUDIT REQUEST
SPECIAL AUDIT REQUEST
2:06:36 PM
CHAIR STEDMAN announced that the next order of business would be
a special audit request.
2:07:19 PM
REPRESENTATIVE DAN SADDLER, Alaska State Legislature, requested
an audit of the Village Public Safety Officer (VPSO) program.
He stated that he serves on the House Finance Public Safety
Subcommittee, and during work on the fiscal year 2018 (FY 18)
operating budget, he had raised questions regarding the
management and financing of the VPSO program. He said the
Department of Public Safety gave him budget data and answered
some questions; however, he said he feels a more detailed
analysis related to expenses and contractual obligation is
necessary.
REPRESENTATIVE SADDLER offered a background of the VPSO program,
which started in 1979 but has not been audited in the past 14
years, since 2003. He said there has been a steady decline in
the average number of VPSOs employed in Alaska - the current
number is 52. Since 1996, he reported, the turnover rate has
been almost 95 percent. He expressed another concern is that
those hired in the VPSO program have no contractual obligation
to take the job; there are cases wherein VPSOs have been
trained, at the state's expense, " only to turn around pretty
quickly after graduation and take jobs with other [employers]."
He suggested that may not be the best way to spend state dollars
to ensure the hire of Alaskans to improve public safety.
2:09:34 PM
REPRESENTATIVE SADDLER stated that the VPSO program is funded
100 percent by undesignated general funds. He opined that in
Alaska's current fiscal situation, it is important to spend the
state's dollars "wisely and appropriately and prudently." He
stated, "It's especially fitting to look at this program, when
the dollars budgeted and the positions authorized so far exceed
the number of VPSOs actually doing the job."
REPRESENTATIVE SADDLER said he thinks the funding process also
needs review. Currently, there are 10 grantees, who receive
most of their funds in the fiscal year cycle, even when the
funded positions are not even filled, which he remarked may
actually incentivize grantees to not fill vacant positions,
because under current operations, they can retain funds in
excess of their actual expenses and "spend them for purposes
that may be only peripherally related to the VPSO program." He
stated that [the legislature's] responsibility related to the
public employees' retirement system (PERS) is to ensure that
money is spent on intended purposes, not marginally so.
REPRESENTATIVE SADDLER acknowledged that audits cost money, but
he thinks an audit of the VPSO program is justified, because the
public has high expectations of the program, which he described
as "near and dear, especially to rural legislators and their
constituents - the residents of Bush Alaska." He said [the
program] provides an important role in providing public services
in [rural] areas without "intrinsic, local police departments."
He related that the state spent $18 million [on the VPSO
program] in 2015 and "now it's about $14 million." He said,
"That's $185,000 per VPSO per year. We need to make sure those
dollars are being expended prudently." He emphasized the strong
possibility that an audit could result in savings and
efficiencies in the VPSO program, and "that information would
help inform our efforts and your efforts to improve public
safety in rural Alaska."
2:11:51 PM
CHAIR STEDMAN suggested the target time for [the audit] would be
about 1.5 years, and he indicated that a conversation between
the Legislative Budget and Audit Committee, Representative
Saddler, and the chairs of the House and Senate Finance
Committees could take place during that waiting time in order to
address any questions that may arise and "refine this a little."
2:12:51 PM
VICE CHAIR JOSEPHSON noted that the operating budget from FY 17
had intent language that stated that the intent of the
legislature was that "the VPSO program grantees be permitted to
charge their federally approved indirect cost to their VPSO
program grant, provided the statewide average does not exceed 30
percent." He referred to Representative Saddler's mention of
the $185,000 and asked, "Should the audit move forward
consistent with that intent language?"
REPRESENTATIVE SADDLER answered that he would like the audit to
be "wide range and ask those kinds of questions." He said that
in looking at "the history of the VPSO program," it was
"telling" that there has been a "quasi audit done by
[Legislative] Audit at that time, which indicated that the
indirect costs were between 17 and 28 percent, and in the most
recent budget year we have they're basically 27-28 percent." He
said he hoped it would not reach 30 percent. He said he thinks
the intent language has been constructive and gives direction to
the legislature; however, he said he encouraged the
legislature's seeking opportunities to keep costs as low as
possible.
VICE CHAIR JOSEPHSON indicated that a report related to the
operating budget of 2017 states an intent to expand the program
into additional rural areas. He asked Representative Saddler,
"So, there's nothing about the audit that is designed to run
counter to that intent, in your mind?"
REPRESENTATIVE SADDLER answered, "Certainly not." He said he
wants to ensure the VPSO program is running "successfully and
efficiently" and is serving rural Alaskans well. He expressed
his hope that by finding efficiencies, it would be easier for
the legislature, as budgeters, to expand the program to more
communities.
VICE CHAIR JOSEPHSON noted that in the second paragraph of
Representative Saddler's letter requesting the audit, it is
written that the audit "should evaluate the degree that the VPSO
program has been effective at providing public safety services
to rural Alaska villages." He said it strikes him that is a
tough thing to determine, because that would require weighing
"what the absence of the program would look like." He asked if
that was language that Representative Saddler and his staff
could "hone in some way."
REPRESENTATIVE SADDLER answered that the premise upon which
audits are done is the determination of whether programs are
"operating to achieve their desired end," and he thinks that is
appropriate. He noted that further in the paragraph there are
more specific metrics, including: turnover rates, average years
of experience, and number of filled positions. He named the
degree to which search and rescue is operating and public safety
is being provided, as well as the number of unsolved crimes, as
possible areas for which "we can actually put ... some edges on
that request," while "keeping the overall directive."
2:16:49 PM
SENATOR MACKINNON asked Representative Saddler if he had worked
with the state auditor in the process of bringing forward this
audit request.
REPRESENTATIVE SADDLER answered yes, to have general questions
narrowed down to "more achievable, measureable points."
SENATOR MACKINNON said she served on [the Legislative Budget and
Audit Committee] for at least six years, and she said the
process [for requesting audits] is to bring something before the
full committee and for the committee to hear from the state
auditor. She said she supports taking up the issue without
delay and hearing from the auditor as to whether "these are
measurable goals in looking at this preference."
2:18:41 PM
REPRESENTATIVE KAWASAKI said he chaired [the House Finance
Public Safety Subcommittee] and some of the questions being
asked were asked of Captain Merrill (ph), the head of the VPSO
program, [during the subcommittee meetings]. He asked
Representative Saddler what information he anticipates
discovering that would be different from that which was already
given during the subcommittee meetings.
REPRESENTATIVE SADDLER acknowledged that the subcommittee had
received general information regarding the number of VPSO
positions authorized, but he indicated he would like deeper
analysis of the following: the degree to which the program is
succeeding, the reason for some of the indirect cost increases,
the reasons for turnover, the expenses of training and how much
of that is lost. Further, he said there are other questions
beyond the actual operation of the program. For example, there
is the possibility of looking to the federal government or other
sources for funding for the program. He said there is also the
question of whether there could be better ways in which to
manage the program, either by contracting with individual
villages or VPSOs. He continued:
Those are ... higher level analytical questions that
you really can't ask the department that's operating
the program as it stands now to say how they would
change it, because obviously they believe that it's
working the way it should, because it's working the
way it is. It's our job as the policy makers to
consider what may be a better way to implant a policy.
REPRESENTATIVE KAWASAKI asked Representative Saddler if he had
read the 1985 and 2003 audits.
REPRESENTATIVE SADDLER answered yes.
REPRESENTATIVE KAWASAKI said he wished everyone had copies of
those audits, because many of the questions of the committee may
mirror the questions previous legislatures had about the VPSO
program, which went through an audit process and "were never
listened to." He expressed his hope that "this is not another
exercise in futility" and that the Legislative Budget and Audit
Committee uses the audit recommendations from 1985 and 2003,
"which clearly outline problems within the VPSO program that
have still yet not been corrected." He said he supports having
an audit done, as long as the auditor believes it can be done in
a timely manner and "without being a burden to other, maybe more
important, audits that are out there." He said the VPSO program
represents only 9 percent of the general fund budget within the
department, whereas in contrast the Alaska State Troopers
represent 75 percent of the department's general fund budget.
He said he would like to see the audit done in an "effective and
efficient and frugal manner."
REPRESENTATIVE SADDLER responded that he shares Representative
Kawasaki's desire to not have an audit done that "will result in
a report against us." He said, "One of our presiding officers
has a very close, personal interest in the VPSO program and has
worked to extend it and change it, and I think if there's
information that already exists that can be used to provide a
foundation ... for the [legislative] auditor, that will very
useful and might save time and money."
2:22:57 PM
SENATOR MACKINNON requested that the Legislative Budget and
Audit Committee work as a team with the auditor to "start going
back through departments" and try "to start implementing some of
the good work that our auditors have provided for us." She said
she would look for public acknowledgement to be able to "go
forward sooner than later on that process and work towards
prioritizing which departments we might have in front of us over
the next few months" in order to "ask why these old audit
recommendations are not being put into place."
2:23:58 PM
CHAIR STEDMAN indicated that would be the general direction
taken by the committee to avoid doing audits "just for the
exercise of doing audits." He said this audit will be brought
forward by the Legislative Budget and Audit Committee over the
next meeting or two; however, he reiterated that the process may
take about 1.5 years. He said he would like refinements made
before the audit request is passed to the state auditor. He
further expressed his desire for the committee to address
concerns regarding the budget process to avoid ending up "with
two budget cycles behind us."
2:25:36 PM
KRIS CURTIS, Legislative Auditor, Legislative Audit Division,
Legislative Agencies and Offices, Legislative Affairs Agency,
stated that she had worked with the Department of Public Safety
(DPS) and Representative Saddler and staff to help them craft
the audit request. Regarding the question about evaluating the
program's effectiveness, she said:
In considering what we might do in order to wrap our
arms around that very large question, I believe we end
up surveying the stakeholders to what degree they
believe that the program is effective and what ideas
they may have in improving the program. So, that is
something that I don't believe has ... been done for
quite some time.
MS. CURTIS, regarding timing, said [the special audit request]
would be entered into Legislative Audit's queue of audits. She
explained that because there are four or five audits ahead of
this one, she does not expect the division would begin this
audit for at least 1.5 years.
CHAIR STEDMAN indicated that the list of audits could be
streamlined to speed the process.
2:26:54 PM
SENATOR MACKINNON asked for information regarding the four or
five audits awaiting the division's attention.
MS. CURTIS answered that the Alaska Mental Health Trust
Authority audit is being expedited, and she said that audit is
ongoing. The only audit stacked ahead of that one is one from
Senator Giessel for the Board of Game Advisory Committee, and
the division hopes to start the audit this fall. The other two
audits were requested on December 2016 and relate to Medicaid
and the Children's Health Insurance Program (CHIP) travel costs
and the Gasline Development Corporation. Ms. Curtis added that
there are two older, backlogged audit requests. One was made in
2009, by then Senator Davis, for Matanuska Maid, for which all
of the audit objectives have been met except a report on the
disposition of all property. She explained that there was one
building that had not been sold up until January 2017; the
division can now report on the disposition of that building.
She said whether a full audit is done or a memorandum to
expedite the process and use resources efficiently will be a
decision for the Legislative Budget and Audit Committee. The
second backlogged audit request was made in 2013, by then
Representative Austerman, on the motor vessel (M/V) Tustemena,
to determine problems related to the maintenance of the ferry
that resulted in a lawsuit. She explained that the request was
put on hold until the litigation was complete; now that it is
complete, the division will be coming back before the
Legislative Budget and Audit Committee to discuss the terms of
the settlement and to re-ask the committee if it wants the
resources spent to ask the questions or to terminate the audit
request.
2:29:24 PM
SENATOR MACKINNON stated that she understands that with older
requests, the information may not be as valuable today as it
could have been when the original requests were submitted. She
asked if, of the Alaska Mental Health Trust Authority, Board of
Game Advisory Board, Gasline Development Corporation, and
Medicaid audits, there is any way to "contract out" the audits
in order to complete the process in less than a year and a half.
MS. CURTIS answered that hiring an outside auditor would be a
high liability; it is not something that can be done by a CPA
firm. Furthermore, she said the Legislative Audit Division does
not have sufficient funds to contract out audits. She added,
"In the past, it's been more of a consultant you would hire to
answer questions and it wouldn't be an audit in accordance with
standards."
SENATOR MACKINNON offered her understanding that the federal
government may require documentation regarding the tardy audits.
She stated for the record that the backlog of the Legislative
Audit Division is not the fault of Ms. Curtis or her staff;
there has been a transition in new information technology (IT)
that has prevented "our staff" from moving forward. She
mentioned trouble regarding Medicaid and all the litigation that
the state has experienced. She inquired whether the committee
would be getting an update regarding the ramifications related
to [the late audits and the federal government]. She offered
her understanding that "those records are submitted now."
2:31:46 PM
CHAIR STEDMAN said he thinks "the sure answer to that is yes,"
but asked Ms. Curtis to expound upon the issue.
MS. CURTIS explained that what Senator MacKinnon had been
referring to is the implementation of the new state accounting
system, called IRIS, which went live in July 2015. She said FY
16 is the first year in which the statewide single audit was
prepared using records from the new system. She indicated that
the division sent out communications and alerts as notification
of the likelihood that information would not be available [for
the legislature] when it arrived [in Juneau] in January 2017.
She said the information was not available until May, and
according to federal requirement, the single audit is due by
March 31.
MS. CURTIS expressed her hope that the Legislative Budget and
Audit Committee would release that [single audit] as the final
public document at today's meeting. She said she has staff
standing by to upload it in the [Federal Audit] Clearing House.
She said she has been working with both federal and state
agencies about the release [of the single audit], and there has
been threat by the federal government to withhold funding
because the audit has not been released. She offered her
understanding that to date, the division has been able to avoid
that happening, and hopefully the division will be able to get
it to the clearing house by today.
SENATOR MACKINNON stated that does answer the question but does
not prevent the extra scrutiny that will be faced over the next
few years. She said she hopes the federal government
understands that it is difficult to implement technology in the
Forty-Ninth state. She expressed appreciation for the auditing
team. She surmised the federal government would be setting up a
"variety of scenarios where we're definitely tracked on things."
MS. CURTIS responded, "When you submit the audit report late,
you become a high-risk auditee." She said there are other ways
to become a high-risk auditee, for example, by having a
"modified opinion," which Alaska has had in previous years;
therefore, the state is already a high-risk auditee. She said
that designation lasts for two years and affects the audit
coverage required, but Alaska already has enough coverage;
therefore, [the timing of the single audit] "will not impact the
number of federal programs we're required to select."
^EXECUTIVE SESSION
EXECUTIVE SESSION
2:35:37 PM
CHAIR STEDMAN announced that the next order of business would be
an executive session.
2:35:49 PM
VICE CHAIR JOSEPHSON moved that the Legislative Budget and Audit
go into Executive Session under Uniform Rule 22 for the purpose
of discussing confidential audit reports under AS 24.20.301. He
asked that the following individuals remain in the room: Kris
Curtis, Linda Day, Brenda Tchernykh, Brian Blackwell, Mark
Lundahl, Dawn Borjesson, and any legislators not on the
Legislative Budget and Audit Committee and any staff working for
committee members. There being no objection, the committee went
into executive session at 2:36 p.m.
2:36:26 PM
The committee took an at-ease from 2:36 p.m. to 4:01 p.m.
4:01:19 PM
CHAIR STEDMAN called the Legislative Budget and Audit Committee
back to order at 4:01 p.m. Representatives Kawasaki (via
teleconference), Spohnholz, Johnston, Ortiz (alternate, via
teleconference), and Josephson and Senators MacKinnon, Giessel,
Hoffman (via teleconference), Von Imhof (alternate, via
teleconference), and Stedman were present at the call back to
order.
^FINAL AUDIT RELEASE
FINAL AUDIT RELEASE
4:02:53 PM
VICE CHAIR JOSEPHSON made a motion that the Legislative Budget
and Audit Committee release the following final audits: the
Real Estate Commission, the Board of Martial and Family Therapy,
the Board of Professional Counselors, and the FY 16 single
statewide audit. There being no objection, it was so ordered.
^PRELIMINARY AUDIT RELEASE
PRELIMINARY AUDIT RELEASE
4:03:54 PM
VICE CHAIR JOSEPHSON made a motion that that Legislative Budget
and Audit Committee release the following preliminary audits to
the appropriate agency for response: the Board of Certified
Real Estate Appraisers. There being no objection, it was so
ordered.
^OTHER COMMITTEE BUSINESS
OTHER COMMITTEE BUSINESS
4:04:26 PM
CHAIR STEDMAN announced there would be an upcoming meeting
before the end of 2017 and another meeting in January 2018.
4:05:20 PM
ADJOURNMENT
There being no further business before the committee, the
Legislative Budget and Audit Committee meeting was adjourned at
4:06 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 9.7.17 LBA Meeting Agenda.pdf |
JBUD 9/7/2017 2:00:00 PM |
9/7/17 Meeting Materials |
| jbud 072517 0946 AM.pdf |
JBUD 9/7/2017 2:00:00 PM |
9/7/17 Meeting Materials |
| 2017 - LBA Chair Stedman - VPSO Audit request - FINAL after consult with Kris Curtis LBA - UPDATED 8-21-17.pdf |
JBUD 9/7/2017 2:00:00 PM |
9/7/17 Meeting Materials |