This document includes House Floor Amendments incorporated into the bill on Thu, Feb 16, 2017 at 10:40 AM by jeyring.
Representative Val L. Peterson proposes the following substitute bill:


1     
STATE AUDITOR FISCAL AUDITING AND

2     
REPORTING AMENDMENTS

3     
2017 GENERAL SESSION

4     
STATE OF UTAH

5     
Chief Sponsor: Curtis S. Bramble

6     
House Sponsor: Steve Eliason

7     

8     LONG TITLE
9     General Description:
10          This bill modifies provisions related to fiscal reporting requirements to the state auditor
11     and auditing duties of the state auditor.
12     Highlighted Provisions:
13          This bill:
14          ▸     amends the threshold for certain accounting reports;
15          ▸     amends the threshold for different levels of review for certain nonprofit
16     corporations' financial information;
17          ▸     authorizes the state auditor to seek judicial relief to take temporary custody of
18     public funds if the state auditor determines an action is necessary to protect public
19     funds from being improperly diverted from their intended public purpose;
20          ▸     provides that the state treasurer may take temporary custody of public funds if
21     ordered by a court to do so; and
22          ▸     makes technical corrections.
23     Money Appropriated in this Bill:
24          None
25     Other Special Clauses:

26          Ĥ→ [
None] This bill provides a special effective date. ←Ĥ
27     Utah Code Sections Affected:
28     AMENDS:
29          17B-1-641, as last amended by Laws of Utah 2014, Chapter 377
30          51-2a-201, as last amended by Laws of Utah 2015, Chapter 138
31          51-2a-201.5, as enacted by Laws of Utah 2015, Chapter 138
32          63G-2-502, as last amended by Laws of Utah 2015, Chapter 174
33          67-3-1, as last amended by Laws of Utah 2015, Chapter 174
34          67-4-1, as last amended by Laws of Utah 1998, Chapter 14
35     

36     Be it enacted by the Legislature of the state of Utah:
37          Section 1. Section 17B-1-641 is amended to read:
38          17B-1-641. Local district may expand uniform procedures -- Limitation.
39          (1) Subject to Subsection (2), a local district may expand the uniform accounting,
40     budgeting, and reporting procedure prescribed in the Uniform Accounting Manual for Local
41     Districts prepared by the state auditor under Subsection 67-3-1[(14)](15), to better serve the
42     needs of the district.
43          (2) A local district may not deviate from or alter the basic prescribed classification
44     systems for the identity of funds and accounts set forth in the Uniform Accounting Manual for
45     Local Districts.
46          Section 2. Section 51-2a-201 is amended to read:
47          51-2a-201. Accounting reports required.
48          (1) The governing board of an entity whose revenues or expenditures of all funds is
49     [$750,000] $1,000,000 or more shall cause an audit to be made of its accounts by a competent
50     certified public accountant.
51          (2) The governing board of an entity whose revenues or expenditures of all funds is
52     less than [$750,000] $1,000,000 shall cause a financial report to be made in the manner
53     prescribed by the state auditor.
54          Section 3. Section 51-2a-201.5 is amended to read:
55          51-2a-201.5. Accounting reports required -- Reporting to state auditor.
56          (1) As used in this section:

57          (a) (i) "Federal pass through money" means federal money received by a nonprofit
58     corporation through a subaward or contract from the state or a political subdivision.
59          (ii) "Federal pass through money" does not include federal money received by a
60     nonprofit corporation as payment for goods or services purchased by the state or political
61     subdivision from the nonprofit corporation.
62          (b) (i) "Local money" means money that is owned, held, or administered by a political
63     subdivision of the state that is derived from fee or tax revenues.
64          (ii) "Local money" does not include:
65          (A) money received by a nonprofit corporation as payment for goods or services
66     purchased from the nonprofit corporation; or
67          (B) contributions or donations received by the political subdivision.
68          (c) (i) "State money" means money that is owned, held, or administered by a state
69     agency and derived from state fee or tax revenues.
70          (ii) "State money" does not include:
71          (A) money received by a nonprofit corporation as payment for goods or services
72     purchased from the nonprofit corporation; or
73          (B) contributions or donations received by the state agency.
74          (2) (a) The governing board of a nonprofit corporation whose revenues or expenditures
75     of federal pass through money, state money, and local money is [$750,000] $1,000,000 or more
76     shall cause an audit to be made of its accounts by an independent certified public accountant.
77          (b) The governing board of a nonprofit corporation whose revenues or expenditures of
78     federal pass through money, state money, and local money is at least $350,000 but less than
79     [$750,000] $1,000,000 shall cause a review to be made of its accounts by an independent
80     certified public accountant.
81          (c) The governing board of a nonprofit corporation whose revenues or expenditures of
82     federal pass through money, state money, and local money is at least $100,000 but less than
83     $350,000 shall cause a compilation to be made of its accounts by an independent certified
84     public accountant.
85          (d) The governing board of a nonprofit corporation whose revenues or expenditures of
86     federal pass through money, state money, and local money is less than $100,000 but greater
87     than $25,000 shall cause a fiscal report to be made in a format prescribed by the state auditor.

88          (3) A nonprofit corporation described in Subsection 51-2a-102(6)(f) shall provide the
89     state auditor a copy of an accounting report prepared under this section within six months of
90     the end of the nonprofit corporation's fiscal year.
91          (4) (a) A state agency that disburses federal pass through money or state money to a
92     nonprofit corporation shall enter into a written agreement with the nonprofit corporation that
93     requires the nonprofit corporation to annually disclose whether:
94          (i) the nonprofit corporation met or exceeded the dollar amounts listed in Subsection
95     (2) in the previous fiscal year of the nonprofit corporation; or
96          (ii) the nonprofit corporation anticipates meeting or exceeding the dollar amounts listed
97     in Subsection (2) in the fiscal year the money is disbursed.
98          (b) If the nonprofit corporation discloses to the state agency that the nonprofit
99     corporation meets or exceeds the dollar amounts as described in Subsection (4)(a), the state
100     agency shall notify the state auditor.
101          (5) This section does not apply to a nonprofit corporation that is a charter school
102     created under Title 53A, Chapter 1a, Part 5, The Utah Charter Schools Act. A charter school is
103     subject to the requirements of Section 53A-1a-507.
104          (6) A nonprofit corporation is exempt from Section 51-2a-201.
105          Section 4. Section 63G-2-502 is amended to read:
106          63G-2-502. State Records Committee -- Duties.
107          (1) The records committee shall:
108          (a) meet at least once every three months;
109          (b) review and approve schedules for the retention and disposal of records;
110          (c) hear appeals from determinations of access as provided by Section 63G-2-403;
111          (d) determine disputes submitted by the state auditor under Subsection
112     67-3-1[(15)](16)(d); and
113          (e) appoint a chairman from among its members.
114          (2) The records committee may:
115          (a) make rules to govern its own proceedings as provided by Title 63G, Chapter 3,
116     Utah Administrative Rulemaking Act; and
117          (b) by order, after notice and hearing, reassign classification and designation for any
118     record series by a governmental entity if the governmental entity's classification or designation

119     is inconsistent with this chapter.
120          (3) The records committee shall annually appoint an executive secretary to the records
121     committee. The executive secretary may not serve as a voting member of the committee.
122          (4) Five members of the records committee are a quorum for the transaction of
123     business.
124          (5) The state archives shall provide staff and support services for the records
125     committee.
126          (6) If the records committee reassigns the classification or designation of a record or
127     record series under Subsection (2)(b), any affected governmental entity or any other interested
128     person may appeal the reclassification or redesignation to the district court. The district court
129     shall hear the matter de novo.
130          (7) The Office of the Attorney General shall provide counsel to the records committee
131     and shall review proposed retention schedules.
132          Section 5. Section 67-3-1 is amended to read:
133          67-3-1. Functions and duties.
134          (1) (a) The state auditor is the auditor of public accounts and is independent of any
135     executive or administrative officers of the state.
136          (b) The state auditor is not limited in the selection of personnel or in the determination
137     of the reasonable and necessary expenses of the state auditor's office.
138          (2) The state auditor shall examine and certify annually in respect to each fiscal year,
139     financial statements showing:
140          (a) the condition of the state's finances;
141          (b) the revenues received or accrued;
142          (c) expenditures paid or accrued;
143          (d) the amount of unexpended or unencumbered balances of the appropriations to the
144     agencies, departments, divisions, commissions, and institutions; and
145          (e) the cash balances of the funds in the custody of the state treasurer.
146          (3) (a) The state auditor shall:
147          (i) audit each permanent fund, each special fund, the General Fund, and the accounts of
148     any department of state government or any independent agency or public corporation as the law
149     requires, as the auditor determines is necessary, or upon request of the governor or the

150     Legislature;
151          (ii) perform the audits in accordance with generally accepted auditing standards and
152     other auditing procedures as promulgated by recognized authoritative bodies;
153          (iii) as the auditor determines is necessary, conduct the audits to determine:
154          (A) honesty and integrity in fiscal affairs;
155          (B) accuracy and reliability of financial statements;
156          (C) effectiveness and adequacy of financial controls; and
157          (D) compliance with the law.
158          (b) If any state entity receives federal funding, the state auditor shall ensure that the
159     audit is performed in accordance with federal audit requirements.
160          (c) (i) The costs of the federal compliance portion of the audit may be paid from an
161     appropriation to the state auditor from the General Fund.
162          (ii) If an appropriation is not provided, or if the federal government does not
163     specifically provide for payment of audit costs, the costs of the federal compliance portions of
164     the audit shall be allocated on the basis of the percentage that each state entity's federal funding
165     bears to the total federal funds received by the state.
166          (iii) The allocation shall be adjusted to reflect any reduced audit time required to audit
167     funds passed through the state to local governments and to reflect any reduction in audit time
168     obtained through the use of internal auditors working under the direction of the state auditor.
169          (4) (a) Except as provided in Subsection (4)(b), the state auditor shall, in addition to
170     financial audits, and as the auditor determines is necessary, conduct performance and special
171     purpose audits, examinations, and reviews of any entity that receives public funds, including a
172     determination of any or all of the following:
173          (i) the honesty and integrity of all its fiscal affairs;
174          (ii) whether or not its administrators have faithfully complied with legislative intent;
175          (iii) whether or not its operations have been conducted in an efficient, effective, and
176     cost-efficient manner;
177          (iv) whether or not its programs have been effective in accomplishing the intended
178     objectives; and
179          (v) whether or not its management, control, and information systems are adequate,
180     effective, and secure.

181          (b) The auditor may not conduct performance and special purpose audits,
182     examinations, and reviews of any entity that receives public funds if the entity:
183          (i) has an elected auditor; and
184          (ii) has, within the entity's last budget year, had its financial statements or performance
185     formally reviewed by another outside auditor.
186          (5) The state auditor shall administer any oath or affirmation necessary to the
187     performance of the duties of the auditor's office, and may subpoena witnesses and documents,
188     whether electronic or otherwise, and examine into any matter that the auditor considers
189     necessary.
190          (6) The state auditor may require all persons who have had the disposition or
191     management of any property of this state or its political subdivisions to submit statements
192     regarding it at the time and in the form that the auditor requires.
193          (7) The state auditor shall:
194          (a) except where otherwise provided by law, institute suits in Salt Lake County in
195     relation to the assessment, collection, and payment of its revenues against:
196          (i) persons who by any means have become entrusted with public money or property
197     and have failed to pay over or deliver the money or property; and
198          (ii) all debtors of the state;
199          (b) collect and pay into the state treasury all fees received by the state auditor;
200          (c) perform the duties of a member of all boards of which the state auditor is a member
201     by the constitution or laws of the state, and any other duties that are prescribed by the
202     constitution and by law;
203          (d) stop the payment of the salary of any state official or state employee who:
204          (i) refuses to settle accounts or provide required statements about the custody and
205     disposition of public funds or other state property;
206          (ii) refuses, neglects, or ignores the instruction of the state auditor or any controlling
207     board or department head with respect to the manner of keeping prescribed accounts or funds;
208     or
209          (iii) fails to correct any delinquencies, improper procedures, and errors brought to the
210     official's or employee's attention;
211          (e) establish accounting systems, methods, and forms for public accounts in all taxing

212     or fee-assessing units of the state in the interest of uniformity, efficiency, and economy;
213          (f) superintend the contractual auditing of all state accounts;
214          (g) subject to Subsection (8)(a), withhold state allocated funds or the disbursement of
215     property taxes from a state or local taxing or fee-assessing unit, if necessary, to ensure that
216     officials and employees in those taxing units comply with state laws and procedures in the
217     budgeting, expenditures, and financial reporting of public funds; and
218          (h) subject to Subsection (9), withhold the disbursement of tax money from any county,
219     if necessary, to ensure that officials and employees in the county comply with Section
220     59-2-303.1.
221          (8) (a) Except as otherwise provided by law, the state auditor may not withhold funds
222     under Subsection (7)(g) until a state or local taxing or fee-assessing unit has received formal
223     written notice of noncompliance from the auditor and has been given 60 days to make the
224     specified corrections.
225          (b) If, after receiving notice under Subsection (8)(a), a state or independent local
226     fee-assessing unit that exclusively assesses fees has not made corrections to comply with state
227     laws and procedures in the budgeting, expenditures, and financial reporting of public funds, the
228     state auditor:
229          (i) shall provide a recommended timeline for corrective actions; and
230          (ii) may prohibit the state or local fee-assessing unit from accessing money held by the
231     state; and
232          (iii) may prohibit a state or local fee-assessing unit from accessing money held in an
233     account of a financial institution by filing an action in district court requesting an order of the
234     court to prohibit a financial institution from providing the fee-assessing unit access to an
235     account.
236          (c) The state auditor shall remove a limitation on accessing funds under Subsection
237     (8)(b) upon compliance with state laws and procedures in the budgeting, expenditures, and
238     financial reporting of public funds.
239          (d) If a local taxing or fee-assessing unit has not adopted a budget in compliance with
240     state law, the state auditor:
241          (i) shall provide notice to the taxing or fee-assessing unit of the unit's failure to
242     comply;

243          (ii) may prohibit the taxing or fee-assessing unit from accessing money held by the
244     state; and
245          (iii) may prohibit a taxing or fee-assessing unit from accessing money held in an
246     account of a financial institution by:
247          (A) contacting the taxing or fee-assessing unit's financial institution and requesting that
248     the institution prohibit access to the account; or
249          (B) filing an action in district court requesting an order of the court to prohibit a
250     financial institution from providing the taxing or fee-assessing unit access to an account.
251          (e) If the local taxing or fee-assessing unit adopts a budget in compliance with state
252     law, the state auditor shall eliminate a limitation on accessing funds described in Subsection
253     (8)(d).
254          (9) The state auditor may not withhold funds under Subsection (7)(h) until a county has
255     received formal written notice of noncompliance from the auditor and has been given 60 days
256     to make the specified corrections.
257          (10) Notwithstanding Subsection (7)(g), (7)(h), (8)(b), or (8)(d) the state auditor:
258          (a) shall authorize a disbursement by a state or local taxing or fee-assessing unit if the
259     disbursement is necessary to:
260          (i) avoid a major disruption in the operations of the state or local taxing or
261     fee-assessing unit; or
262          (ii) meet debt service obligations; and
263          (b) may authorize a disbursement by a state or local taxing or fee-assessing unit as the
264     state auditor determines is appropriate.
265          (11) (a) The state auditor may seek relief under Ĥ→ [
Rule 65,] the ←Ĥ Utah Rules of Civil
266     Procedure Ĥ→ [
,] ←Ĥ to take temporary custody of public funds if an action is necessary
266a     to protect public
267     funds from being improperly diverted from their intended public purpose.
268          (b) If the state auditor seeks relief under Subsection (11)(a):
269          (i) the state auditor is not required to exhaust the procedures in Subsection (7) or (8);
270     and
271          (ii) the state treasurer may hold the public funds in accordance with Section 67-4-1 if a
272     court orders the public funds to be protected from improper diversion from their public
273     purpose.

274          [(11)] (12) The state auditor shall:
275          (a) establish audit guidelines and procedures for audits of local mental health and
276     substance abuse authorities and their contract providers, conducted pursuant to Title 17,
277     Chapter 43, Part 2, Local Substance Abuse Authorities, and Part 3, Local Mental Health
278     Authorities, Title 51, Chapter 2a, Accounting Reports from Political Subdivisions, Interlocal
279     Organizations, and Other Local Entities Act, and Title 62A, Chapter 15, Substance Abuse and
280     Mental Health Act; and
281          (b) ensure that those guidelines and procedures provide assurances to the state that:
282          (i) state and federal funds appropriated to local mental health authorities are used for
283     mental health purposes;
284          (ii) a private provider under an annual or otherwise ongoing contract to provide
285     comprehensive mental health programs or services for a local mental health authority is in
286     compliance with state and local contract requirements, and state and federal law;
287          (iii) state and federal funds appropriated to local substance abuse authorities are used
288     for substance abuse programs and services; and
289          (iv) a private provider under an annual or otherwise ongoing contract to provide
290     comprehensive substance abuse programs or services for a local substance abuse authority is in
291     compliance with state and local contract requirements, and state and federal law.
292          [(12)] (13) The state auditor may, in accordance with the auditor's responsibilities for
293     political subdivisions of the state as provided in Title 51, Chapter 2a, Accounting Reports from
294     Political Subdivisions, Interlocal Organizations, and Other Local Entities Act, initiate audits or
295     investigations of any political subdivision that are necessary to determine honesty and integrity
296     in fiscal affairs, accuracy and reliability of financial statements, effectiveness, and adequacy of
297     financial controls and compliance with the law.
298          [(13)] (14) (a) The state auditor may not audit work that the state auditor performed
299     before becoming state auditor.
300          (b) If the state auditor has previously been a responsible official in state government
301     whose work has not yet been audited, the Legislature shall:
302          (i) designate how that work shall be audited; and
303          (ii) provide additional funding for those audits, if necessary.
304          [(14)] (15) The state auditor shall:

305          (a) with the assistance, advice, and recommendations of an advisory committee
306     appointed by the state auditor from among local district boards of trustees, officers, and
307     employees and special service district boards, officers, and employees:
308          (i) prepare a Uniform Accounting Manual for Local Districts that:
309          (A) prescribes a uniform system of accounting and uniform budgeting and reporting
310     procedures for local districts under Title 17B, Limited Purpose Local Government Entities -
311     Local Districts, and special service districts under Title 17D, Chapter 1, Special Service
312     District Act;
313          (B) conforms with generally accepted accounting principles; and
314          (C) prescribes reasonable exceptions and modifications for smaller districts to the
315     uniform system of accounting, budgeting, and reporting;
316          (ii) maintain the manual under Subsection [(14)] (15)(a) so that it continues to reflect
317     generally accepted accounting principles;
318          (iii) conduct a continuing review and modification of procedures in order to improve
319     them;
320          (iv) prepare and supply each district with suitable budget and reporting forms; and
321          (v) prepare instructional materials, conduct training programs, and render other
322     services considered necessary to assist local districts and special service districts in
323     implementing the uniform accounting, budgeting, and reporting procedures; and
324          (b) continually analyze and evaluate the accounting, budgeting, and reporting practices
325     and experiences of specific local districts and special service districts selected by the state
326     auditor and make the information available to all districts.
327          [(15)] (16) (a) The following records in the custody or control of the state auditor are
328     protected records under Title 63G, Chapter 2, Government Records Access and Management
329     Act:
330          (i) records that would disclose information relating to allegations of personal
331     misconduct, gross mismanagement, or illegal activity of a past or present governmental
332     employee if the information or allegation cannot be corroborated by the state auditor through
333     other documents or evidence, and the records relating to the allegation are not relied upon by
334     the state auditor in preparing a final audit report;
335          (ii) records and audit workpapers to the extent they would disclose the identity of a

336     person who during the course of an audit, communicated the existence of any waste of public
337     funds, property, or manpower, or a violation or suspected violation of a law, rule, or regulation
338     adopted under the laws of this state, a political subdivision of the state, or any recognized entity
339     of the United States, if the information was disclosed on the condition that the identity of the
340     person be protected;
341          (iii) before an audit is completed and the final audit report is released, records or drafts
342     circulated to a person who is not an employee or head of a governmental entity for their
343     response or information;
344          (iv) records that would disclose an outline or part of any audit survey plans or audit
345     program; and
346          (v) requests for audits, if disclosure would risk circumvention of an audit.
347          (b) The provisions of Subsections [(15)] (16)(a)(i), (ii), and (iii) do not prohibit the
348     disclosure of records or information that relate to a violation of the law by a governmental
349     entity or employee to a government prosecutor or peace officer.
350          (c) The provisions of this Subsection [(15)] (16) do not limit the authority otherwise
351     given to the state auditor to classify a document as public, private, controlled, or protected
352     under Title 63G, Chapter 2, Government Records Access and Management Act.
353          (d) (i) As used in this Subsection [(15)] (16)(d), "record dispute" means a dispute
354     between the state auditor and the subject of an audit performed by the state auditor as to
355     whether the state auditor may release a record, as defined in Section 63G-2-103, to the public
356     that the state auditor gained access to in the course of the state auditor's audit but which the
357     subject of the audit claims is not subject to disclosure under Title 63G, Chapter 2, Government
358     Records Access and Management Act.
359          (ii) The state auditor may submit a record dispute to the State Records Committee,
360     created in Section 63G-2-501, for a determination of whether the state auditor may, in
361     conjunction with the state auditor's release of an audit report, release to the public the record
362     that is the subject of the record dispute.
363          (iii) The state auditor or the subject of the audit may seek judicial review of a State
364     Records Committee determination under Subsection [(15)] (16)(d)(ii), as provided in Section
365     63G-2-404.
366          [(16)] (17) If the state auditor conducts an audit of an entity that the state auditor has

367     previously audited and finds that the entity has not implemented a recommendation made by
368     the state auditor in a previous audit, the state auditor shall notify the Legislative Management
369     Committee through its audit subcommittee that the entity has not implemented that
370     recommendation.
371          Section 6. Section 67-4-1 is amended to read:
372          67-4-1. Duties.
373          (1) The state treasurer shall:
374          (a) receive and maintain custody of all state funds;
375          (b) unless otherwise provided by law, invest all funds delivered into the state treasurer's
376     custody according to the procedures and requirements of Title 51, Chapter 7, State Money
377     Management Act;
378          (c) pay warrants drawn by the Division of Finance as they are presented;
379          (d) return each redeemed warrant to the Division of Finance for purposes of
380     reconciliation, post-audit, and verification;
381          (e) ensure that state warrants not presented to the state treasurer for payment within one
382     year from the date of issue, or a shorter period if required by federal regulation or contract, are
383     canceled and credited to the proper fund;
384          (f) account for all money received and disbursed;
385          (g) keep separate account of the different funds;
386          (h) keep safe all bonds, warrants, and securities delivered into his custody;
387          (i) at the request of either house of the Legislature, or of any legislative committee,
388     give information in writing as to the condition of the treasury, or upon any subject relating to
389     the duties of his office;
390          (j) keep the books open at all times for the inspection by the governor, the state auditor,
391     or any member of the Legislature, or any committee appointed to examine them by either house
392     of the Legislature;
393          (k) authenticate and validate documents when necessary;
394          (l) adopt a seal and file a description and an impression of it with the Division of
395     Archives; and
396          (m) discharge the duties of a member of all official boards of which he is or may be
397     made a member by the Constitution or laws of Utah.

398          (2) When necessary to perform his duties, the state treasurer may inspect the books,
399     papers, and accounts of any state entity.
400          (3) The state treasurer may take temporary custody of public funds if ordered by a court
401     to do so under Subsection 67-3-1(11).
401a      Ĥ→ Section 7. Effective date.
401b           If approved by two-thirds of all the members elected to each house, this bill takes effect
401c     upon approval by the governor, or the day following the constitutional time limit of Utah
401d     Constitution, Article VII, Section 8, without the governor's signature, or in the case of a veto,
401e     the date of veto override. ←Ĥ