Assigned to GOV AS
PASSED BY COMMITTEE
Assigned to GOV AS
PASSED BY COMMITTEE
ARIZONA STATE SENATE
Fifty-Third Legislature, Second Regular Session
AMENDED
Purpose
Modifies the various powers and duties of the Joint Legislative Audit Committee (JLAC) and the Office of the Auditor General (OAG) for statutory audits.
Background
JLAC oversees all audit functions of the Legislature and state agencies, including sunset, performance, special and financial audits and special research requests, including preparation and introduction of legislation resulting from audit findings. JLAC appoints an Auditor General, subject to approval by a majority vote of both legislative houses (A.R.S. § 41-1279).
The OAG is required by statute to perform audits of state agencies, counties, universities, community college districts and school districts using generally accepted governmental auditing standards. The OAG also performs procedural reviews for all state agencies, including evaluation of administrative and internal accounting controls and prepares a report on the review. The OAG may be assigned by JLAC to perform special research, audits or investigations of state agencies (A.R.S. § 41-1279.03).
Currently, statute requires each standing committee of both legislative houses to appoint a subcommittee of five members; subcommittees jointly constitute a committee of reference (COR) in their respective subject matter areas (A.R.S. § 41-2954). JLAC designates the chair of each COR and assigns agencies to the respective COR according to subject matter for performance review (A.R.S. § 41-2953).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
JLAC
1. Requires the President of the Senate and the Speaker of the House of Representatives, rather than JLAC, to:
a) designate the chairman of each COR and assign agencies to their respective CORs; and
b) receive and designate the following reports to the appropriate COR:
i. the annual report of the license classifications for the valid taking or handling of wildlife from the Arizona Game and Fish Commission;
ii. the written report submitted by a person or legislator advocating mandated health coverage; and
iii. the workers' compensation presumptions of compensability report submitted by a person advocating that a legislative proposal mandate that an insurer or self-insured employer deem a disease or condition has arisen out of employment or substantially modify a statute establishing a presumption of compensability for a disease or condition.
2. Removes the requirement that the COR provide a report of its recommendations to JLAC after studying the reports relating to mandated health coverage and presumption of compensability.
3. Stipulates, retroactive to July 1, 2018, JLAC will:
a) meet annually, instead of quarterly; and
b) terminate on July 1, 2026, instead of July 1, 2018.
OAG
4. Modifies the following powers and duties of the OAG:
a) requires an annual financial and compliance audit of all state agencies subject to the federal single audit requirements, instead of biennially;
b) removes the requirement of an annual report to the Governor and JLAC summarizing the activities from the previous fiscal year;
c) allows an investigation into allegations of financial impropriety, malfeasance or nonfeasance of a state agency or political subdivision, as resources allow, in any of the following circumstances:
i. in connection with an authorized audit;
ii. upon the request of a public officer of a state agency or political subdivision regarding matters under the supervision or control of that public officer; or
iii. upon request of a sheriff, a county attorney, a municipal attorney or the Attorney General (AG) as part of an open investigation of a state agency or political subdivision if that open investigation is under the control of the specified entities;
d) requires a performance audit on a county transportation excise tax after the first 5 years, instead of the first 10 years;
e) removes the requirement that school district performance audits determine whether school districts receiving monies from the Arizona Structured English Immersion Fund and the Statewide Compensatory Instruction Fund comply with English Language Education for Children requirements;
f) allows the OAG to request a status report on the implementation of audit recommendations within two years of a school district audit and provide status reports to JLAC, rather than every six months;
g) provides the OAG or OAG authorized representatives to request interviews of employees in the performance of official duties;
h) allows the OAG or OAG authorized representative to attend executive sessions, as authorized by open meeting laws for any public body, when conducting an authorized audit;
i) removes requirements that a uniform expenditure reporting system for community college districts include:
i. a reconciliation of the total expenditures reported within the financial statements to the total expenditures reported within the expenditure limitation report; and
ii. total budgeted expenditures, total exclusions from local revenues and total amounts of budgeted expenditures to be listed by fund;
j) requires county and community college district audits be conducted according to generally accepted governmental auditing standards and include tests of accounting records as necessary.
5. Specifies the county treasurer, in addition to existing entities, must cooperate with and provide information to the OAG regarding a county transportation excise tax.
6. Requires the OAG, instead of JLAC, to conduct a review of the Arizona Department of Education, commissions established by the Legislature within the judiciary and state universities.
7. Allows the OAG, instead of JLAC, to combine the review of all state universities into one or more reviews and reports.
Audits
8. Requires all officers of any state agency, board, commission, department, institution, program, advisory council, committee, or political subdivision and all contractors with the state to afford reasonable and needed facilities for OAG staff and make records available, in the form and at the time prescribed.
9. Specifies any officer or person who knowingly obstructs or misleads the OAG in the execution of the OAG's duties is guilty of a class 2 misdemeanor.
10. Requires the AG to supervise the prosecution of all offenders for failure to cooperate with the OAG.
11. Requires staff of the Joint Legislative Budget Committee (JLBC) to notify all legislative
members of the cost to conduct a special audit authorized by a legislative measure, based
upon information from the OAG, and provide the cost prior to the measure:
a) being third read in the house of origin;
b) being third read in the house in which the special audit provision was added; or
c) being final read if the audit provision was added in a conference committee.
12. Modifies the continuation or termination factors evaluated by the COR to include:
a) the key statutory objectives and purposes;
b) the agency's effectiveness and efficiency in fulfilling its key statutory objectives and purposes;
c) the extent the agency's key statutory objectives and purposes are duplicated by other governmental agencies or private enterprises;
d) the extent the agency provides public access to records, meetings, rulemakings and solicits public input in rules and decisions;
e) the extent that regulation is appropriate as compared to other states or best practices;
f) the extent the agency has established safeguards against conflicts of interest; and
g) the extent of statutory changes needed to allow the agency to fulfill its statutory objectives and purposes or to eliminate unnecessary statutory responsibilities.
13. Removes the requirement that the COR consider the extent to which:
a) the agency serves the entire state, rather than specific interests;
b) the AG or other agency has the authority to prosecute actions; and
c) the agency has used private contractors in performing its duties as compared to other states and how more effective use of private contractors could be accomplished.
14. Revises the agency's written statement included in a final sunset report by:
a) removing the requirement for identifying the problem or needs the agency addresses, a statement of agency objectives and accomplishments, and identifying additional agencies with conflicting or duplicative objectives;
b) including the extent to which the agency creates unexpected negative consequences that may require additional review by a COR, including increasing the price of goods, impacting the availability of services, limiting the abilities of individuals and businesses to efficiently operate and increasing the cost of government; and
c) including the extent which the agency addressed deficiencies in its enabling statutes.
15. Allows monies received from performing audits of federal funds, county transportation
excise tax performance audits and other statutorily authorized sources to be included in
the Audit Services Revolving Fund.
Miscellaneous
16. Requires the treasurer of a county that approved a county transportation excise tax to
reimburse the OAG for the cost of conducting excise tax studies or performance audits on
Arizona Highway User Revenue Fund monies.
17. Repeals statute requiring all county, community college and school district officers
provide facilities and information in the form and time prescribed by the OAG and
codifies the practice in section 9.
18. Modifies the definition of performance audit.
19. Defines political subdivision.
20. Makes technical and conforming changes.
21. Becomes effective on the general effective date, with a retroactive provision as noted.
Amendments Adopted by Committee
1. Specifies a sheriff, a county attorney, a municipal attorney or the AG can request a financial investigation under outlined conditions.
2. Makes technical changes.
House Action Senate Action
GOV 2/15/18 DPA 7-0-0-1 GOV 3/7/18 DPA 6-1-0
3rd Read 2/21/18 60-0-0
Prepared by Senate Research
March 9, 2018
JO/lat