Legislative Budget and Audit January 21, 1998 3:30 p.m. State Capitol Juneau, Alaska Tape: LBA-982101 Tape 1 Side 1 CALL TO ORDER Chairman Phillips convened the meeting of the Legislative Budget and Audit Committee on January 21, 1998, at approximately 3:40 p.m. in the State Capitol, Juneau, Alaska. Representative Hanley was excused to meet with the Speaker. PRESENT The following members were present: Senators Representatives Chairman Phillips Representative Martin Senator Adams Representative Bunde Senator Donley Representative Croft Senator Halford Representative James Senator Pearce Representative Therriault Representative Hanley (alternate) ALSO PRESENT Pat Davidson, Acting Chief Legislative Auditor; Dane Larson, Legislative Auditor, Anchorage Manager; Mike Greany, Legislative Fiscal Analyst; Jerome Komisar, President of the University of Alaska. APPROVAL OF MINUTES Representative Martin MOVED to approve the 1997 minutes for the following dates: January 13 January 16 February 26 March 24 July 30 October 8 (Representative Therriault was now present; Representative Bunde left the meeting) Representative Martin WITHDREW his motion until a quorum of members was present. CONSIDERATION OF AUDITS, RELEASE OF AUDITS AND PRELIMINARY AUDIT REQUESTS Chairman Phillips - We have the University of Alaska's response to the request of an audit. Pat Davidson - I would recommend to the Committee that they move to go into Executive Session. Representative Martin MOVED to go into Executive Session to discuss the University of Alaska's selective Russian programs. Chairman Phillips reconvened the meeting. APPROVAL OF MINUTES Representative Martin MOVED to approve the minutes of January 13, January 16, February 26, March 24, July 30, and October 8, 1997. Chairman Phillips - Hearing no objection, the motion was APPROVED. The minutes of August 22 and December 12 will be brought before the Committee at the next meeting. CONSIDERATION OF AUDITS, RELEASE OF AUDITS AND PRELIMINARY AUDIT REQUESTS Representative Martin MOVED since there is now a quorum present to go into Executive Session for the response on the University of Alaska's selective Russian program with the possibility of talking about personalities and other financial considerations. Chairman Phillips - Hearing no objection, the motion was APPROVED. EXECUTIVE SESSION Chairman Phillips reconvened the meeting to the public at 4:40 p.m. Representative Martin MOVED a thirty-day automatic release for the special audit requested on the Department of Education, Pupil Transportation Program, approximate release date February 22. Senator Donley - When we preliminarily release these they go to the Department Are they then completely public so people can comment on them? Pat Davidson - The process we have gone through during the interim is we send the preliminary audit to the agency, give them 20 days to respond to us. What we then do is incorporate their response with the report and send it to the Committee members for their consideration for seven days. If we don't hear any objection from the Committee members, it will be released. Senator Donley - Since the Pupil Transportation Program directly impacts a certain school district also and a lot of the information came from the school district and not the Department of Education, is there a way the school district could look at it also? Pat Davidson - Yes. The Municipality of Anchorage? Senator Donley - I think at least the Municipality should have an opportunity to look at it and comment. Representative Martin - Ms. Davidson, you will show that it is confidential? Pat Davidson - Yes Senator Donley - Could that be part of the motion? Representative Martin AMENDED the motion to include releasing the special audit also to the agencies that need to respond. Chairman Phillips - Hearing no motion, the amended motion was APPROVED. Representative Martin MOVED that the sunset audit on the Department of Public Safety, Council for Domestic Violence and Sexual Assault be approved for the public; the regular audit on the Department of Fish & Game, Estimated FY97 Board Attendance Costs be released to the public and the other general audit done on Travel Compensation Survey be released to the public. Chairman Phillips - Hearing no objection, the motions were APPROVED. Representative Martin - For consideration is the agreement by Senator Pearce and Representative Hudson to withdraw the recommendation on the audit on the Department of Transportation, Public Employees right termination settlement. I'd like to MOVE that this audit request be withdrawn. Chairman Phillips - Was that something we approved or is this old? Pat Davidson - The Committee needs to approve the withdrawal of this request. Chairman Phillips - Hearing no objection, the motion was APPROVED. Pat Davidson - There was one memo that covered both of the audits to be withdrawn. Representative Martin - Both were Representative Hudson and Senator Pearce. Representative Martin MOVED to approve the audit request by Representative Foster of the Department of Community and Regional Affairs, Division of Energy, Bulk Fuel Grant funds to the City of Teller. Chairman Phillips - Hearing no objection, the motion was APPROVED. Representative Martin MOVED to approve the audit request by Representative Martin and Senator Phillips of the Alaska Energy Authority and AIDEA on the Four Dam Pool management for the last three years overviewing their costs of operation. Senator Pearce objected. I feel what you are asking the auditors to do is too broad. What are we specifically looking for? Is there any way to narrow it down? Representative Martin - In consideration of Senator Pearce's request, we've had no knowledge in the last few years nor have there been any audits done on the management costs of the Four Dam Pool. We know that they have the authority and it is pretty much that the Board rubber stamps its own expenditures. We do not know because of the cost to the state and consumer what their average annual cost has been over the years. There has been concern by consumers that because we don't know what impact it has on the state or consumer we should have some idea how much they are spending and why. Senator Pearce - That's not information available in the budget process? Representative Martin - No. I haven't seen it. We know what AIDEA approved but we haven't specifically looked at the Four Dam Pool management unit. Chairman Phillips - What we could do is go ahead and give it a conditional approval and let the auditors come back at the next meeting and tell us what they can and cannot do with the time and manpower we have available to us. That's my suggestion at this time. We do have a lot of audits. Ms Davidson, have your Division look at it and narrow it down and tell us what you can really do. Pat Davidson - What we could do is write a letter to the people and ask them for information and then advise the Committee here is the numbers and what else do you want us to do? Chairman Phillips - Why don't you move it with that understanding, Representative Martin. Representative Martin AMENDED the motion to include the understanding Senator Pearce addressed. Chairman Phillips - Hearing no objection, the amended motion was APPROVED. STATUS OF OUTSTANDING AUDITS Pat Davidson - What I tried to do in this memorandum of January 19 to the Committee was give a perspective in terms of workload of the audit agency and then detail out where we are. What the chart shows is in 1993 and 1994 is we had a significant workload between the sunsets and special audits. What happened in 1995 and 1995 is the requests coming in slowed down and we were able to catch up. We probably were pretty good at the end of 1996 and then the audit requests started again in 1997. Generally what we do is we take them as they come. Sometimes there are going to be differences. Sometimes an auditor has a particular expertise in an area and we're going to wait for that auditor or if that auditor frees up we might bump one ahead. Generally we try to do them in order. There are Committee requests; there are the sunset audits which are required by Statute as well as the state licensing audit which is a combination of a state Statute with regard to the financial statements and Federal compliance in terms of the single audit portion. In this listing, we talk about the statewide single audit (one audit). What I tried to do was identify what are we doing, where are we at when it comes to that audit and that's what the list of all those departments are. In terms of the Committee requests, I believe we are going to get for the next meeting the Public Defender, Agricultural Revolving Loan Fund and Department of Education, Special Education. We have a high priority audit in terms of the Child Custody and Child Protection. Our auditors have a travel request into me and they're heading out. In terms of the pending audit requests as you look at them they can fall into a couple of categories. One is performance audits, looking at the operations of the divisions; the other one how is the program running. I would say the Pt. McKenzie Correctional Facility is that one. There is concern about the financial operations as well as is Pt. McKenzie running the way it should be running. The Division of Alcohol and Drug Abuse is basically an outcome audit. We put a lot of money into that program, what are the outcomes; what do we get for that money and that is what that type of audit is. Then sometime audit requests come in which are frustration with the agency in not providing information to the Committee requested by individual legislators. They will ask the Audit Division to come in. I don't think there are any slack audits in here. They are all very good questions, very important questions. That is the workload we have right now. Representative Therriault - I think we probably have to do what we just did. When we get one and it has to be narrowed then we do it. Maybe we might determine some aren't justified; perhaps staff can attempt to get the answer and come back to us if they're unsuccessful. Clearly the backlog is building. We need to take some steps. Chairman Phillips - I'll be sitting down with the auditors; see where they are. I'll bring back to the Committee a recommendation on how they are going to proceed with this backlog. We've had a lot of requests this summer, more than I've ever see. This is the second time for me as Chairman and there are a lot. I think we need to slow down so people can do their job. By next meeting, I'll have an update and recommendation for the Committee. Representative Bunde - It might be that the Committee's job is to not only screen the audits but to prioritize the backlog. Senator Pearce - Have you every looked at the workloads and divided them out between the agencies and corporations that we've set up for special programs? Are there a lot of audits that come in for special things we've set up that aren't internal to the daily management of the department? Pat Davidson - We do get a lot of requests for the quasi corporations we set up. I think it is because their operations are not as visible. Their financial operations don't run through the same mechanisms. The programs they are trying to operate are different than the norm of government entities. Maybe the budgetary scrutiny may not be the same as you give to a general funded program. Representative Martin - We might also discuss what particular audits that the Division has handled year in and year out that can be contracted out and be done initially that way. Chairman Phillips - That is part of the process I plan to do over the next few weeks. APPOINTMENT OF LEGISLATIVE AUDITOR Chairman Phillips - As of last December we appointed a subcommittee to first advertise the position and also go through a selection process. We selected three candidates which the subcommittee yesterday interviewed and the subcommittee is recommending to this Committee that Dane Larson be our chief auditor. I'd like to have a motion and then answer questions. The process is the subcommittee recommends to this Committee; the Committee as a whole recommends the name which is submitted to the President of the Senate and Speaker of the House. Those respective bodies will vote on the name. In the past, the Senate just had a vote. The House sent it to the Finance Committee and the Finance Committee made a recommendation back to the body as a whole for the House of Representatives approval. That was the process. Representative Martin MOVED that the full Committee accept the recommendation from the subcommittee to appoint Dane Larson as the new Chief Legislative Auditor. Senator Adams objected. Representative Bunde MOVED to go into Executive Session for the discussion of personnel issues. Chairman Phillips - Hearing no objection, the motion to go into Executive Session was APPROVED. EXECUTIVE SESSION Chairman Phillips reconvened the meeting to the public at 5:20 p.m. Representative Martin renewed his motion that the full Committee accept the subcommittee recommendation of the appointment of Dane Larson as Chief Legislative Auditor. Senator Adams objected. Chairman Phillips hearing an objection called for a roll call vote. Yea Representative Bunde, Representative Croft, Senator Halford, Representative Therriault, Senator Phillips, Representative Martin, Representative James Nay Senator Adams, Senator Pearce (Senator Donley was not present for the vote) Chairman Phillips - The motion was APPROVED by a vote of 7-2. Mr. Dane Larson's name will go before the both the House and Senate for approval. OTHER BUSINESS Representative Bunde - The final audits that are being released to the departments for their comments and the Executive Travel Summary being released to the Executive Branch are they available to the public now? Representative Martin - Yes. The only one which is not public pertains to the Department of Education. Chairman Phillips - We need a motion to approve Pat Davidson as Acting Legislative Auditor until the appointment of Dane Larson. Pat Davidson - I am right now the Acting Chief Legislative Auditor. We are recommending that you change that to Dane Larson as Acting. Senator Pearce - Why change it until both bodies approve it? Chairman Phillips - We'll leave it as it stands now. ADJOURNMENT Chairman Phillips adjourned the meeting. (End, Tape: LB&A-982101 Tape 1 Side 1 #842) LB&A 8 01/21/98