CS FOR HOUSE BILL NO. 243(STA) "An Act establishing state agency program performance management and audit powers in the Office of the Governor for the evaluation of agency programs; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. Co-Chair Wilken stated that this bill, sponsored by the House Rules Committee at the request of the Governor, "reestablishes an audit function in the Office of the Governor and funding will be provided by reallocation of existing Office of the Governor funds." JAY HOGAN, Deputy Director, Office of Management and Budget, Office of the Governor, testified that he began working for the State in 1970 and at that time internal auditing was conducted within the Department of Administration. In 1983, he noted, the Office of Management and Budget was created and the internal audit functions were assigned to it along with numerous other activities. He continued that since that time, "the functions have been scoped down" with the elimination of the audit function in the middle 1990s. Governor Murkowski intends to "reemphasize," "recreate" and "broaden" the internal audit function, according to Mr. Hogan. Mr. Hogan explained the expansion would include program evaluations to determine their current usefulness. Mr. Hogan stated that the Governor's FY 04 budget request includes funds to undertake the internal auditing functions. He noted that the House of Representatives and the Senate have approved this funding. Mr. Hogan expressed that this legislation is a result of the "realization" that although internal audits had been conducted in the past, no statutory direction exists to require them. This bill would create the statutory direction, he said. Mr. Hogan stated that in the undertaking of an internal audit it is appropriate that the information is kept confidential. He informed that testimony relevant to an audit is sometimes discovered but for various reasons must be kept confidential. He noted this legislation allows access to this information by auditors, similar to the authority granted to the Division of Legislative Audit. He pointed out a difference in that the information secured by the Division of Legislative Audit is kept confidential until the Legislative Budget and Audit Committee and affected State agencies review the audit, at which time the information is released. By contrast, he explained the information gathered in audits conducted by the Office of Management and Budget would remain confidential until it is released by direction of the governor. Mr. Hogan emphasized the Office of Management and Budget would be unable to conduct audits similar to the Division of Legislative Audit, but rather could only conduct audits on activities within the Executive Branch. Senator Hoffman saw the need for this function; however he was concerned with the absence of a defined date in which completed audits must be released. He surmised from the witness' testimony that the governor could determine whether the information is never released. Senator Hoffman suggested language in the bill to provide for timelines for release to ensure the legislature and the public would have access to the outcome of the audits. Mr. Hogan pointed out that no specific release date is required for legislative audits. He predicted situations in which such releases would not be advisable, exampling a personnel audit conducted as a result of alleged impropriety involving "matters of delicacy". He expressed that it would be conceivable that an audit might never be completed although the problem itself was resolved. Co-Chair Wilken clarified the witness would prefer not to specify a date certain in this bill. Mr. Hogan remarked that "great effort" was taken to follow the legislative audit process, which he opined has worked well since statehood. He surmised that the Governor would prefer to use discretion. Senator Hoffman countered that despite information held confidential until release, members of the legislature could review that information. In contrast, he stated this legislation would not provide the same option. Mr. Hogan relayed that the House State Affairs Committee discussed the issue and determined that language in Section 3 amending AS 44.19.147. Internal audit records., on page 2, lines 5-9 of the committee substitute, satisfied the concerns of the Division of Legislative Audit. This language reads as follows. …However, internal audit work papers and other related supportive material containing information, data, estimates, and statistics obtained during the course of an audit conducted under AS 44.18.145(a) may be kept confidential only to the extent required by law applicable to the agency from which the material is or was obtained. Senator Taylor offered a motion to report the bill from Committee with individual recommendations and accompanying fiscal note. Without objection CS HB 243 (STA) MOVED from Committee with zero fiscal note #2 from the Office of the Governor.