Legislature(2021 - 2022)
11/09/2021 02:00 PM Senate LEGISLATIVE BUDGET & AUDIT
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| Audio | Topic |
|---|---|
| Start | |
| Approval of Minutes | |
| Executive Session | |
| Final and Preliminary Audit Releases | |
| 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
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 |