SB 246: An Act relating to reimbursable service agreements and other agreements between state agencies for the purchase of services. Randy Welker, Legislative Auditor, testified in support of SB 246. Nancy Slagle, Director, Division of Budget Review, Office of Management & Budget, and Tracy Cramer, Budget Analyst, Office of Management & Budget, voiced their concerns regarding SB 246. In addition, Mike Greany, Director, Legislative Finance Division, listed his concerns. The bill was HELD in committee for additional review. SENATE BILL NO. 246: An Act relating to reimbursable service agreements and other agreements between state agencies for the purchase of services. Co-chair Frank directed that SB 246 be brought before the committee and invited Randy Welker, Legislative Auditor, to speak to the bill. Randy Welker said that SB 246 dealt with RSAs (reimbursable service agreements). The primary impetus for this legislation was an auditor's report released last interim on the commissioner's office in the Department of Health & Social Services. The audit objected to the manner in which the commissioner's office was using RSAs to bring money into the commissioner's office appropriation increasing the level of expenditure authority for the Commissioner after the legislature and Governor had established a lower expenditure authority amount. He did not want to apply that all RSAs were troublesome or invalid but felt this legislation will provide some clarification in statute. He did not believe it would add any additional requirements that do not exist in the system at present. It provides focus and emphasis from the legislature on the appropriate use of RSAs. He said the statute as amended would state that an RSA could not be used to transfer money between appropriations and provides several rules for the use of RSAs. First, it would require legal authority to request the service requested, secondly, legal authority to provide the service requested, and finally, when that service has been provided, the billing for the service is based on an actual cost of the service provided. Co-chair Frank asked if the service had to be provided. Mr. Welker answered that unless a service has been provided, there is no executed agreement, and no basis for billing. In answer to Senator Rieger's question whether LB&A routinely peruses RSAs, Mr. Welker said that they did not go out of the way but staff is aware of the potential for abuse or misuse of RSAs. In answer to another question by Senator Rieger, Mr. Welker reiterated that SB 246 will help clarify what the legislature believes to be the legitimate use of RSAs. Senator Jacko asked if OM&B had a position statement available. Co-chair Frank invited Nancy Slagle, Director, Division of Budget Review, Office of Management & Budget, and Tracy Cramer, Budget Analyst, Office of Management & Budget to join the committee at the table. NANCY SLAGLE explained that until the mid-80s there were such statutory requirements in the purchasing area of the statutes. The administration feared that under SB 246 instances may occur where there may be the lack of statutory authority but some expertise may be needed to be purchased from another agency. Another area of concern is if the legislature in their budget process decided to put money into a certain component for accountability purposes and approved the transfer of those funds to other components to provide the services, it may be questionable under SB 246 whether there is an actual contractual arrangement between those components. In answer to Senator Rieger, Ms. Slagle replied that a written agreement has historically been used as a contractual agreement between agencies. The only problem would be if the money is placed in a particular component but the services are not provided in that component but provided elsewhere. She said that OM&B provides written procedures for RSAs to the agencies. It provides not only the procedures but oversight for those RSA agreements. She assured the committee that the department is very careful about what it approves and disapproves. Senator Sharp asked if OM&B had the authority to prohibit RSAs between divisions or sections within a department. Ms. Slagle answered that OM&B was able to oversee all RSAs between divisions or departments. Senator Rieger wanted to know if there was a technical definition of agency and if an agency could move appropriations within an agency. Ms. Slagle believed there was a definition of agency but would provide that information to the committee. Co-chair Frank requested OM&B, Randy Welker and Mike Greany to propose a mutually agreed upon amendment that would not unduly restrict but eliminate potential for abuse of RSAs. Mike Greany cautioned the committee that any amendment made should not effect the legislature's ability to build in transfers within the budgeting process. Co-chair Frank announced that SB 246 would be HELD in committee. ADJOURNMENT The meeting was adjourned at approximately 10:00 a.m.