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H.B. 380 Enrolled

    

STATE AUDITOR REQUIREMENTS

    
1997 GENERAL SESSION

    
STATE OF UTAH

    
Sponsor: David Ure

    AN ACT RELATING TO STATE OFFICERS AND EMPLOYEES; CHANGING THE AUDIT
    REQUIREMENTS IN SOME PROGRAMS; DELETING THE AUDIT
    REQUIREMENTS IN OTHER PROGRAMS; CHANGING SOME PROVISIONS
    RELATING TO WHO APPOINTS AN OUTSIDE AUDITOR; ADDING A PROVISION
    CLASSIFYING CERTAIN AUDIT RECORDS AS PROTECTED; AND PROVIDING
    AN EFFECTIVE DATE.
    This act affects sections of Utah Code Annotated 1953 as follows:
    AMENDS:
         31A-3-101, as last amended by Chapter 204, Laws of Utah 1986
         32A-1-113, as renumbered and amended by Chapter 23, Laws of Utah 1990
         51-2-3, as last amended by Chapter 235, Laws of Utah 1989
         51-7-13, as last amended by Chapter 263, Laws of Utah 1995
         63-38-7, as enacted by Chapter 207, Laws of Utah 1969
         64-13a-12, as enacted by Chapter 201, Laws of Utah 1985
         67-3-1, as last amended by Chapter 271, Laws of Utah 1995
    REPEALS:
         32A-1-114, as renumbered and amended by Chapter 23, Laws of Utah 1990
         53A-13-207, as enacted by Chapter 2, Laws of Utah 1988
         67-3-9, as enacted by Chapter 323, Laws of Utah 1990
         71-9-4, as last amended by Chapter 110, Laws of Utah 1994
    Be it enacted by the Legislature of the state of Utah:
        Section 1. Section 31A-3-101 is amended to read:
         31A-3-101. General finance provisions.
        (1) The department's expenses shall be paid from the General Fund. Department
    expenditures shall conform to the Legislature's appropriation adopted under Title 63, Chapter 38,


    Budgetary Procedures Act.
        (2) Except as provided in Sections 31A-3-301 and 31A-2-206, or as otherwise specifically
    provided in this title, all monies collected by the commissioner shall be deposited without deduction
    in the General Fund. [The commissioner's record of receipts and deposits and the state treasurer's
    record of Insurance Department receipts shall regularly be compared by the state auditor.]
        Section 2. Section 32A-1-113 is amended to read:
         32A-1-113. Department expenditures and revenues -- Liquor Control Fund -- Exempt
     from Division of Finance -- Annual audits.
        (1) (a) All money received by the department in the administration of this title, except as
    otherwise provided, together with all property acquired, administered, possessed, or received by the
    department, is the property of the state. Money received in the administration of this title shall be
    paid to the department and transferred into the state treasury to the credit of the Liquor Control Fund.
        (b) All expenses, debts, and liabilities incurred by the department in connection with the
    administration of this title shall be paid from the Liquor Control Fund.
        (c) The fiscal officers of the department shall transfer annually from the Liquor Control Fund
    to the General Fund a sum equal to the amount of net profit earned from the sale of liquor since the
    preceding transfer of funds. The transfer shall be made within 90 days of the end of the department's
    fiscal year on June 30.
        (2) (a) Deposits made by the department shall be made to banks designated as state
    depositories and reported to the state treasurer at the end of each day.
        (b) Any member of the commission and any employee of the department is not personally
    liable for any loss caused by the default or failure of depositories.
        (c) All funds deposited in any bank or trust company are entitled to the same priority of
    payment as other public funds of the state.
        (3) All expenditures necessary for the administration of this title, including the payment of
    all salaries, premiums, if any, on bonds of the commissioners, the director, and the department staff
    in all cases where bonds are required, and all other expenditures incurred in establishing, operating,
    and maintaining state stores and package agencies and in the administration of this title, shall be paid

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    by warrants [of the state auditor] drawn on the state treasurer paid out of the Liquor Control Fund.
        (4) If the cash balance of the Liquor Control Fund is not adequate to cover the warrants
    drawn against it by the state treasurer, the cash resources of the General Fund may be utilized to the
    extent necessary. However, at no time may the fund equity of the Liquor Control Fund fall below
    zero.
        (5) When any check issued in payment of any fees or costs authorized or required by this
    title is returned to the department as dishonored, the department may assess a service charge in an
    amount set by commission rule against the person on whose behalf the check was tendered.
        (6) The laws that govern the Division of Finance and prescribe the general powers and duties
    of the Division of Finance are not applicable to the Department of Alcoholic Beverage Control in
    the purchase and sale of alcoholic products.
        (7) The accounts of the department shall be audited annually by the state auditor or by any
    other person, firm, or corporation the [governor] state auditor appoints. The audit report [containing
    particulars as the governor may require] shall be made to the [governor] state auditor, and copies
    submitted to members of the Legislature and the council not later than January 1 following the close
    of the fiscal year for which the report is made.
        Section 3. Section 51-2-3 is amended to read:
         51-2-3. Audit reports -- Contents -- Preservation.
        (1) (a) Audit reports shall include:
        (i) the financial statements;
        (ii) the auditor's opinion on the financial statements;
        (iii) a statement by the auditor expressing positive assurance of compliance with state fiscal
    laws identified by the state auditor;
        (iv) a copy of the auditor's letter to management that identifies any material weakness in
    internal controls discovered by the auditor and other financial issues related to the expenditure of
    funds received from federal, state, or local governments to be considered by management; and
        (v) management's response to the specific recommendations.
        (b) In addition to the items required by Subsection (1) (a), audit reports of political

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    subdivisions receiving direct federal financial assistance shall include:
        (i) compliance reports;
        (ii) internal control reports; and
        (iii) any other reports required by the federal government.
        (2) (a) The governing body of each political subdivision and each interlocal organization or
    other local entity required to be audited shall:
        (i) file and preserve all audit reports; and
        (ii) file copies of all audit reports with the state auditor.
        (b) The governing body of each school district shall also file copies of the audit reports
    affecting school districts in the office of the superintendent of public instruction.
        (3) Copies of the audit reports are open to inspection during regular office hours by any
    interested persons, wherever the audit reports are filed.
        (4) The state auditor shall have access to all audit workpapers created under this chapter.
        Section 4. Section 51-7-13 is amended to read:
         51-7-13. Funds of member institutions of state system of higher education --
     Authorized deposits or investments -- Release of restrictions on gifts.
        (1) The provisions of this section apply to all funds of member institutions of the state
    system of higher education that are not transferred to the state treasurer under Section 51-7-4.
        (2) (a) (i) Except as provided in Subsection (ii), the following funds shall be invested
    according to rules established by the council:
        (A) all funds acquired by gift, devise, or bequest or by federal or private grant; and
        (B) the corpus of funds functioning as endowments.
        (ii) Notwithstanding Subsection (2)(a)(i), if the terms of a gift or grant require particular
    investments, the funds shall be invested according to those terms.
        (b) Proceeds of general obligation bond issues and all funds pledged or otherwise dedicated
    to the payment of interest and principal of general obligation bonds issued by or for the benefit of
    the institution shall be invested according to the requirements of:
        (i) Section 51-7-11 and the rules of the council; or

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        (ii) the terms of the borrowing instruments applicable to those bonds and funds if those terms
    are more restrictive than Section 51-7-11.
        (c) (i) The public treasurer shall invest the proceeds of bonds other than general obligation
    bonds issued by or for the benefit of the institution and all funds pledged or otherwise dedicated to
    the payment of interest and principal of bonds other than general obligation bonds according to the
    terms of the borrowing instruments applicable to those bonds.
        (ii) If no provisions governing investment of bond proceeds or pledged or dedicated funds
    are contained in the borrowing instruments applicable to those bonds or funds, the public treasurer
    shall comply with the requirements of Section 51-7-11 in investing those proceeds and funds.
        (d) All other funds in the custody or control of any of those institutions shall be invested as
    provided in Section 51-7-11 and the rules of the council.
        (3) (a) Each institution shall make monthly reports detailing the deposit and investment of
    funds in its custody or control to its institutional council and the State Board of Regents.
        (b) The state auditor [shall] may conduct or cause to be conducted an annual audit of the
    investment program of each institution.
        (c) The State Board of Regents shall:
        (i) require whatever internal controls and supervision are necessary to ensure the appropriate
    safekeeping, investment, and accounting for all funds of these institutions; and
        (ii) submit annually to the governor and the Legislature a summary report of all investments
    by institutions under its jurisdiction.
        (4) (a) The State Board of Regents may release, in whole or in part, a restriction imposed
    by the applicable gift instrument on the investment of a fund held by a member institution by
    obtaining the written consent of the donor.
        (b) (i) If written consent of the donor cannot be obtained because the donor is dead, disabled,
    unavailable, or cannot be identified, the State Board of Regents may apply in the name of the
    institution to the district court of the district in which the institution is located for a release from the
    restriction.
        (ii) If, after notice and opportunity to be heard, the court finds that the restriction is obsolete,

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    inappropriate, or impracticable, it may by order release the restriction in whole or in part.
        Section 5. Section 63-38-7 is amended to read:
         63-38-7. Cash funds -- Petty cash, application for -- Cash advances -- Revolving fund
     established by law excepted.
        [(1) As of June thirtieth of each fiscal year the state auditor shall conduct a cash
    reconciliation of each petty cash, imprest cash or revolving fund now established and report the
    results thereof to the director of finance.]
        [(2)] (1) Before any new petty cash funds [shall] may be established, [it shall be the duty of]
    the commission, department, or agency requesting [such] the fund or funds [to make application]
    shall apply in writing to the state fiscal officer, setting [forth] out the reasons [therefor and stating
    the amount of and necessity for such fund] for which it is needed and the amount requested.
        [(3)] (2) The state fiscal officer shall review [such] the application and submit [the same]
    it to the governor with his recommendations, and the governor may establish [such] the fund or
    funds from moneys in the state treasury.
        [(4)] (3) The state fiscal officer may, in lieu of establishing petty cash, imprest cash, or
    revolving funds for state institutions of higher education, permit advances to be made from
    allotments to [such] the institutions in sufficient amounts to provide necessary working bank
    balances to facilitate an orderly management of institutional affairs. [Said] The institutions shall
    make reports as required by the state fiscal officer for the expenditure of funds included in [such]
    any advances.
        [(5)] (4) Revolving funds established by law [shall] are not [be] subject to the provisions of
    this section.
        Section 6. Section 64-13a-12 is amended to read:
         64-13a-12. Audit of financial statements.
        The financial statements of the fund [shall] may be audited annually by the state auditor or
    by another person, firm, or corporation [as] the [governor] state auditor may appoint[, and the]. The
    report of the auditor[, containing information the governor may require,] shall be made to the
    [governor,] state auditor and copies [shall be submitted] provided to the members of the Legislature

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    on or before January 1 next following the close of the fiscal year for which the report is made.
        Section 7. Section 67-3-1 is amended to read:
         67-3-1. Functions and duties.
        (1) (a) The state auditor shall be the auditor of public accounts and as such shall be
    independent of any executive or administrative officers of the state.
        (b) He is not limited [by the provisions of Section 63A-3-107] in the selection of his
    personnel or in the determination of the reasonable and necessary expenses of his office.
        (2) The state auditor [has the duty to] shall:
        (a) Examine and certify annually in respect to each fiscal year, financial statements showing
    the condition of the state's finances, the revenues received or accrued, expenditures paid or accrued,
    and the amount of unexpended or unencumbered balances of the appropriations to the agencies,
    departments, divisions, commissions, and institutions and the cash balances of the funds in the
    custody of the state treasurer. The Division of Finance shall prepare the foregoing financial
    statements and other reports in accordance with legal requirements and generally-accepted
    accounting principles for the state auditor's examination and certification, as requested and not later
    than 60 days following such requests or the end of each fiscal year. The auditor shall file the
    statements with the governor and the Legislature.
        (b) (i) Audit each permanent fund, each special fund, the General Fund, and the accounts of
    any department of state government or any independent agency or public corporation on a regular
    basis as the auditor shall determine necessary or upon request of the governor or the Legislature.
    These audits are to be performed in accordance with generally accepted auditing standards and other
    auditing procedures as promulgated by recognized authoritative bodies. The audits shall be
    conducted to determine honesty and integrity in fiscal affairs, accuracy and reliability of financial
    statements, effectiveness and adequacy of financial controls, and compliance with the law, as the
    auditor shall determine necessary.
        (ii) In the event that any state entity[, with the exception of colleges and universities,]
    receives federal funding, the audit shall be performed in accordance with federal audit requirements
    under the direction of the state auditor. The costs of the federal compliance portion of the audit may

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    be paid from an appropriation to the state auditor from the General Fund. If an appropriation is not
    provided, or if the federal government does not specifically provide for payment of audit costs, the
    costs of the federal compliance portions of the audit shall be allocated [by the Department of
    Administrative Services] on the basis of the percentage that each state entity's federal funding bears
    to the total federal funds received by the state. The allocation shall be adjusted to reflect any reduced
    audit time required to audit funds passed through the state to local governments and to reflect any
    reduction in audit time obtained through the use of internal auditors working under the direction of
    the state auditor.
        (c) Present to the governor on October 1st of each year and to the Legislature on the first day
    of each annual general session, a statement of his appropriation expenditures segregated as to cost
    of salaries, travel, office and other expenses, and capital outlay for equipment, together with his
    recommendations as to new legislation and a complete record of the accomplishments of his office
    for the preceding year [and to make an annual report to the governor of the condition of the funds
    held by the state treasurer].
        (d) Issue subpoenas requiring any person who has had financial transactions with the state
    to appear before him and to answer under oath, orally or in writing, as to any facts concerning these
    transactions; and for the purpose of obtaining any such facts the state auditor is empowered to
    administer oaths.
        (e) Require, in his discretion, all persons who have had the disposition or management of
    any property of this state to render statements regarding it to him, and each of these persons must
    render the statements at such times and in such form as the auditor may require.
        (f) [Make the necessary audit to ascertain whether all revenues due to the state have been
    collected and remitted to the state treasurer, and except] Except where otherwise provided by law,
    institute suits in relation to the assessment, collection, and payment of its revenues against persons
    who by any means have become entrusted with public monies or property and have failed to pay
    over or deliver the same and against all debtors of the state, all of which suits of the courts of the
    county in which the seat of government may be located shall have jurisdiction without regard to the
    residence of the defendants.

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        (g) Authenticate with his official seal all copies of papers issued from his office as he
    [deems] considers necessary.
        (h) Collect and pay into the state treasury all fees received by him.
        (i) Perform the duties of a member of all boards of which he is or may be made a member
    by the constitution or laws of the state, and such other duties as are prescribed by the constitution
    and by law.
        (j) Stop the payment of the salary of any state official or state employee who refuses to settle
    his accounts or render such statements as may be required with respect to the custody and disposition
    of public funds or other state property or who refuses, neglects, or ignores the instruction of the state
    auditor or any controlling board or department head with respect to the manner of keeping prescribed
    accounts or funds or who fails to correct any delinquencies, improper procedures, and errors brought
    to his attention.
        (k) Establish accounting systems, methods, and forms for public accounts in all taxing units
    of the state in the interest of uniformity, efficiency, and economy.
        (l) Superintend the contractual auditing of all state accounts.
        (m) Withhold state allocated funds or the disbursement of property taxes from any state
    taxing unit, if necessary, to ensure that officials and employees in those taxing units of the state
    comply with state laws and procedures in the budgeting, expenditures, and financial reporting of
    public funds. Except as otherwise specified in the law, funds may not be withheld until a taxing unit
    has received formal written notice of noncompliance from the auditor and has been given 60 days
    to make the specified corrections.
        (n) Withhold the disbursement of tax monies from any county, if necessary, to ensure that
    officials and employees in the county comply with Section 59-2-303.1. For purposes of this
    subsection, funds may not be withheld until a county has received formal written notice of
    noncompliance from the auditor and has been given 60 days to make the specified corrections.
        (3) The state auditor may not audit work he performed before becoming state auditor. In the
    event that the state auditor has previously been a responsible official in state government whose
    work has not yet been audited, the Legislature shall designate how such work shall be audited and

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    shall provide additional funding for such audits, if necessary.
        (4) The following records in the custody or control of the state auditor shall be protected
    records under Title 63, Chapter 2, Government Records Access and Management Act:
        (a) records that would disclose information relating to allegations of personal misconduct,
    gross mismanagement, or illegal activity of a past or present governmental employee if the
    information or allegation cannot be corroborated by the state auditor through other documents or
    evidence, and the records relating to the allegation are not relied upon by the state auditor in
    preparing a final audit report;
        (b) records and audit workpapers to the extent they would disclose the identity of a person
    who during the course of an audit, communicated the existence of any waste of public funds,
    property, or manpower, or a violation or suspected violation of a law, rule, or regulation adopted
    under the laws of this state, a political subdivision of the state, or any recognized entity of the United
    States, if the information was disclosed on the condition that the identity of the person be protected;
        (c) prior to the time that an audit is completed and the final audit report is released, records
    or drafts circulated to a person who is not an employee or head of a governmental entity for their
    response or information;
        (d) records that would disclose an outline or part of any audit survey plans or audit program;
        (e) requests for audits, if disclosure would risk circumvention of an audit;
        (f) the provisions of Subsections (a), (b), and (c) do not prohibit the disclosure of records
    or information that relate to a violation of the law by a governmental entity or employee to a
    government prosecutor or peace officer; and
        (g) the provisions of this section do not limit the authority otherwise given to the state
    auditor to classify a document as public, private, controlled, or protected under Title 63, Chapter 2,
    Government Records Access and Management Act.
        Section 8. Repealer.
        This act repeals:
        Section 32A-1-114, City, Incorporated Town, and County Liquor Control Fund.
        Section 53A-13-207, Allotment accounts established from driver education tax.

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        Section 67-3-9, Audit of independent agencies.
        Section 71-9-4, Audit of contracting organization -- Report.
        Section 9. Effective date.
        This act takes effect on July 1, 1997.

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