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H.B. 380

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STATE AUDITOR REQUIREMENTS

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1997 GENERAL SESSION

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STATE OF UTAH

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Sponsor: David Ure

5    AN ACT RELATING TO STATE OFFICERS AND EMPLOYEES; CHANGING THE AUDIT
6    REQUIREMENTS IN SOME PROGRAMS; DELETING THE AUDIT REQUIREMENTS IN
7    OTHER PROGRAMS; CHANGING SOME PROVISIONS RELATING TO WHO APPOINTS
8    AN OUTSIDE AUDITOR; ADDING A PROVISION CLASSIFYING CERTAIN AUDIT
9    RECORDS AS PROTECTED; AND PROVIDING AN EFFECTIVE DATE.
10    This act affects sections of Utah Code Annotated 1953 as follows:
11    AMENDS:
12         31A-3-101, as last amended by Chapter 204, Laws of Utah 1986
13         32A-1-113, as renumbered and amended by Chapter 23, Laws of Utah 1990
14         51-2-3, as last amended by Chapter 235, Laws of Utah 1989
15         51-7-13, as last amended by Chapter 263, Laws of Utah 1995
16         63-38-7, as enacted by Chapter 207, Laws of Utah 1969
17         64-13a-12, as enacted by Chapter 201, Laws of Utah 1985
18         67-3-1, as last amended by Chapter 271, Laws of Utah 1995
19    REPEALS:
20         32A-1-114, as renumbered and amended by Chapter 23, Laws of Utah 1990
21         53A-13-207, as enacted by Chapter 2, Laws of Utah 1988
22         67-3-9, as enacted by Chapter 323, Laws of Utah 1990
23         71-9-4, as last amended by Chapter 110, Laws of Utah 1994
24    Be it enacted by the Legislature of the state of Utah:
25        Section 1. Section 31A-3-101 is amended to read:
26         31A-3-101. General finance provisions.
27        (1) The department's expenses shall be paid from the General Fund. Department


1    expenditures shall conform to the Legislature's appropriation adopted under Title 63, Chapter 38,
2    Budgetary Procedures Act.
3        (2) Except as provided in Sections 31A-3-301 and 31A-2-206, or as otherwise specifically
4    provided in this title, all monies collected by the commissioner shall be deposited without
5    deduction in the General Fund. [The commissioner's record of receipts and deposits and the state
6    treasurer's record of Insurance Department receipts shall regularly be compared by the state
7    auditor.]
8        Section 2. Section 32A-1-113 is amended to read:
9         32A-1-113. Department expenditures and revenues -- Liquor Control Fund --
10     Exempt from Division of Finance -- Annual audits.
11        (1) (a) All money received by the department in the administration of this title, except as
12    otherwise provided, together with all property acquired, administered, possessed, or received by
13    the department, is the property of the state. Money received in the administration of this title shall
14    be paid to the department and transferred into the state treasury to the credit of the Liquor Control
15    Fund.
16        (b) All expenses, debts, and liabilities incurred by the department in connection with the
17    administration of this title shall be paid from the Liquor Control Fund.
18        (c) The fiscal officers of the department shall transfer annually from the Liquor Control
19    Fund to the General Fund a sum equal to the amount of net profit earned from the sale of liquor
20    since the preceding transfer of funds. The transfer shall be made within 90 days of the end of the
21    department's fiscal year on June 30.
22        (2) (a) Deposits made by the department shall be made to banks designated as state
23    depositories and reported to the state treasurer at the end of each day.
24        (b) Any member of the commission and any employee of the department is not personally
25    liable for any loss caused by the default or failure of depositories.
26        (c) All funds deposited in any bank or trust company are entitled to the same priority of
27    payment as other public funds of the state.
28        (3) All expenditures necessary for the administration of this title, including the payment
29    of all salaries, premiums, if any, on bonds of the commissioners, the director, and the department
30    staff in all cases where bonds are required, and all other expenditures incurred in establishing,
31    operating, and maintaining state stores and package agencies and in the administration of this title,

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1    shall be paid by warrants of the state auditor drawn on the state treasurer paid out of the Liquor
2    Control Fund.
3        (4) If the cash balance of the Liquor Control Fund is not adequate to cover the warrants
4    drawn against it by the state treasurer, the cash resources of the General Fund may be utilized to
5    the extent necessary. However, at no time may the fund equity of the Liquor Control Fund fall
6    below zero.
7        (5) When any check issued in payment of any fees or costs authorized or required by this
8    title is returned to the department as dishonored, the department may assess a service charge in an
9    amount set by commission rule against the person on whose behalf the check was tendered.
10        (6) The laws that govern the Division of Finance and prescribe the general powers and
11    duties of the Division of Finance are not applicable to the Department of Alcoholic Beverage
12    Control in the purchase and sale of alcoholic products.
13        (7) The accounts of the department shall be audited annually by the state auditor or by any
14    other person, firm, or corporation the [governor] state auditor appoints. The audit report
15    [containing particulars as the governor may require] shall be made to the [governor] state auditor,
16    and copies submitted to members of the Legislature and the council not later than January 1
17    following the close of the fiscal year for which the report is made.
18        Section 3. Section 51-2-3 is amended to read:
19         51-2-3. Audit reports -- Contents -- Preservation.
20        (1) (a) Audit reports shall include:
21        (i) the financial statements;
22        (ii) the auditor's opinion on the financial statements;
23        (iii) a statement by the auditor expressing positive assurance of compliance with state
24    fiscal laws identified by the state auditor;
25        (iv) a copy of the auditor's letter to management that identifies any material weakness in
26    internal controls discovered by the auditor and other financial issues related to the expenditure of
27    funds received from federal, state, or local governments to be considered by management; and
28        (v) management's response to the specific recommendations.
29        (b) In addition to the items required by Subsection (1) (a), audit reports of political
30    subdivisions receiving direct federal financial assistance shall include:
31        (i) compliance reports;

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1        (ii) internal control reports; and
2        (iii) any other reports required by the federal government.
3        (2) (a) The governing body of each political subdivision and each interlocal organization
4    or other local entity required to be audited shall:
5        (i) file and preserve all audit reports; and
6        (ii) file copies of all audit reports with the state auditor.
7        (b) The governing body of each school district shall also file copies of the audit reports
8    affecting school districts in the office of the superintendent of public instruction.
9        (3) Copies of the audit reports are open to inspection during regular office hours by any
10    interested persons, wherever the audit reports are filed.
11        (4) The state auditor shall have access to all audit workpapers created under this chapter.
12        Section 4. Section 51-7-13 is amended to read:
13         51-7-13. Funds of member institutions of state system of higher education --
14     Authorized deposits or investments -- Release of restrictions on gifts.
15        (1) The provisions of this section apply to all funds of member institutions of the state
16    system of higher education that are not transferred to the state treasurer under Section 51-7-4.
17        (2) (a) (i) Except as provided in Subsection (ii), the following funds shall be invested
18    according to rules established by the council:
19        (A) all funds acquired by gift, devise, or bequest or by federal or private grant; and
20        (B) the corpus of funds functioning as endowments.
21        (ii) Notwithstanding Subsection (2)(a)(i), if the terms of a gift or grant require particular
22    investments, the funds shall be invested according to those terms.
23        (b) Proceeds of general obligation bond issues and all funds pledged or otherwise
24    dedicated to the payment of interest and principal of general obligation bonds issued by or for the
25    benefit of the institution shall be invested according to the requirements of:
26        (i) Section 51-7-11 and the rules of the council; or
27        (ii) the terms of the borrowing instruments applicable to those bonds and funds if those
28    terms are more restrictive than Section 51-7-11.
29        (c) (i) The public treasurer shall invest the proceeds of bonds other than general obligation
30    bonds issued by or for the benefit of the institution and all funds pledged or otherwise dedicated
31    to the payment of interest and principal of bonds other than general obligation bonds according

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1    to the terms of the borrowing instruments applicable to those bonds.
2        (ii) If no provisions governing investment of bond proceeds or pledged or dedicated funds
3    are contained in the borrowing instruments applicable to those bonds or funds, the public treasurer
4    shall comply with the requirements of Section 51-7-11 in investing those proceeds and funds.
5        (d) All other funds in the custody or control of any of those institutions shall be invested
6    as provided in Section 51-7-11 and the rules of the council.
7        (3) (a) Each institution shall make monthly reports detailing the deposit and investment
8    of funds in its custody or control to its institutional council and the State Board of Regents.
9        (b) The state auditor [shall] may conduct or cause to be conducted an annual audit of the
10    investment program of each institution.
11        (c) The State Board of Regents shall:
12        (i) require whatever internal controls and supervision are necessary to ensure the
13    appropriate safekeeping, investment, and accounting for all funds of these institutions; and
14        (ii) submit annually to the governor and the Legislature a summary report of all
15    investments by institutions under its jurisdiction.
16        (4) (a) The State Board of Regents may release, in whole or in part, a restriction imposed
17    by the applicable gift instrument on the investment of a fund held by a member institution by
18    obtaining the written consent of the donor.
19        (b) (i) If written consent of the donor cannot be obtained because the donor is dead,
20    disabled, unavailable, or cannot be identified, the State Board of Regents may apply in the name
21    of the institution to the district court of the district in which the institution is located for a release
22    from the restriction.
23        (ii) If, after notice and opportunity to be heard, the court finds that the restriction is
24    obsolete, inappropriate, or impracticable, it may by order release the restriction in whole or in part.
25        Section 5. Section 63-38-7 is amended to read:
26         63-38-7. Cash funds -- Petty cash, application for -- Cash advances -- Revolving fund
27     established by law excepted.
28        [(1) As of June thirtieth of each fiscal year the state auditor shall conduct a cash
29    reconciliation of each petty cash, imprest cash or revolving fund now established and report the
30    results thereof to the director of finance.]
31        [(2)] (1) Before any new petty cash funds [shall] may be established, [it shall be the duty

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1    of] the commission, department, or agency requesting [such] the fund or funds [to make
2    application] shall apply in writing to the state fiscal officer, setting [forth] out the reasons [therefor
3    and stating the amount of and necessity for such fund] for which it is needed and the amount
4    requested.
5        [(3)] (2) The state fiscal officer shall review [such] the application and submit [the same]
6    it to the governor with his recommendations, and the governor may establish [such] the fund or
7    funds from moneys in the state treasury.
8        [(4)] (3) The state fiscal officer may, in lieu of establishing petty cash, imprest cash, or
9    revolving funds for state institutions of higher education, permit advances to be made from
10    allotments to [such] the institutions in sufficient amounts to provide necessary working bank
11    balances to facilitate an orderly management of institutional affairs. [Said] The institutions shall
12    make reports as required by the state fiscal officer for the expenditure of funds included in [such]
13    any advances.
14        [(5)] (4) Revolving funds established by law [shall] are not [be] subject to the provisions
15    of this section.
16        Section 6. Section 64-13a-12 is amended to read:
17         64-13a-12. Audit of financial statements.
18        The financial statements of the fund [shall] may be audited annually by the state auditor
19    or by another person, firm, or corporation [as] the [governor] state auditor may appoint[, and the].
20    The report of the auditor[, containing information the governor may require,] shall be made to the
21    [governor,] state auditor and copies [shall be submitted] provided to the members of the
22    Legislature on or before January 1 next following the close of the fiscal year for which the report
23    is made.
24        Section 7. Section 67-3-1 is amended to read:
25         67-3-1. Functions and duties.
26        (1) (a) The state auditor shall be the auditor of public accounts and as such shall be
27    independent of any executive or administrative officers of the state.
28        (b) He is not limited [by the provisions of Section 63A-3-107] in the selection of his
29    personnel or in the determination of the reasonable and necessary expenses of his office.
30        (2) The state auditor [has the duty to] shall:
31        (a) Examine and certify annually in respect to each fiscal year, financial statements

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1    showing the condition of the state's finances, the revenues received or accrued, expenditures paid
2    or accrued, and the amount of unexpended or unencumbered balances of the appropriations to the
3    agencies, departments, divisions, commissions, and institutions and the cash balances of the funds
4    in the custody of the state treasurer. The Division of Finance shall prepare the foregoing financial
5    statements and other reports in accordance with legal requirements and generally-accepted
6    accounting principles for the state auditor's examination and certification, as requested and not
7    later than 60 days following such requests or the end of each fiscal year. The auditor shall file the
8    statements with the governor and the Legislature.
9        (b) (i) Audit each permanent fund, each special fund, the General Fund, and the accounts
10    of any department of state government or any independent agency or public corporation on a
11    regular basis as the auditor shall determine necessary or upon request of the governor or the
12    Legislature. These audits are to be performed in accordance with generally accepted auditing
13    standards and other auditing procedures as promulgated by recognized authoritative bodies. The
14    audits shall be conducted to determine honesty and integrity in fiscal affairs, accuracy and
15    reliability of financial statements, effectiveness and adequacy of financial controls, and compliance
16    with the law, as the auditor shall determine necessary.
17        (ii) In the event that any state entity[, with the exception of colleges and universities,]
18    receives federal funding, the audit shall be performed in accordance with federal audit
19    requirements under the direction of the state auditor. The costs of the federal compliance portion
20    of the audit may be paid from an appropriation to the state auditor from the General Fund. If an
21    appropriation is not provided, or if the federal government does not specifically provide for
22    payment of audit costs, the costs of the federal compliance portions of the audit shall be allocated
23    by the Department of Administrative Services on the basis of the percentage that each state entity's
24    federal funding bears to the total federal funds received by the state. The allocation shall be
25    adjusted to reflect any reduced audit time required to audit funds passed through the state to local
26    governments and to reflect any reduction in audit time obtained through the use of internal auditors
27    working under the direction of the state auditor.
28        (c) Present to the governor on October 1st of each year and to the Legislature on the first
29    day of each annual general session, a statement of his appropriation expenditures segregated as to
30    cost of salaries, travel, office and other expenses, and capital outlay for equipment, together with
31    his recommendations as to new legislation and a complete record of the accomplishments of his

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1    office for the preceding year [and to make an annual report to the governor of the condition of the
2    funds held by the state treasurer].
3        (d) Issue subpoenas requiring any person who has had financial transactions with the state
4    to appear before him and to answer under oath, orally or in writing, as to any facts concerning
5    these transactions; and for the purpose of obtaining any such facts the state auditor is empowered
6    to administer oaths.
7        (e) Require, in his discretion, all persons who have had the disposition or management of
8    any property of this state to render statements regarding it to him, and each of these persons must
9    render the statements at such times and in such form as the auditor may require.
10        (f) [Make the necessary audit to ascertain whether all revenues due to the state have been
11    collected and remitted to the state treasurer, and except] Except where otherwise provided by law,
12    institute suits in relation to the assessment, collection, and payment of its revenues against persons
13    who by any means have become entrusted with public monies or property and have failed to pay
14    over or deliver the same and against all debtors of the state, all of which suits of the courts of the
15    county in which the seat of government may be located shall have jurisdiction without regard to
16    the residence of the defendants.
17        (g) Authenticate with his official seal all copies of papers issued from his office as he
18    [deems] considers necessary.
19        (h) Collect and pay into the state treasury all fees received by him.
20        (i) Perform the duties of a member of all boards of which he is or may be made a member
21    by the constitution or laws of the state, and such other duties as are prescribed by the constitution
22    and by law.
23        (j) Stop the payment of the salary of any state official or state employee who refuses to
24    settle his accounts or render such statements as may be required with respect to the custody and
25    disposition of public funds or other state property or who refuses, neglects, or ignores the
26    instruction of the state auditor or any controlling board or department head with respect to the
27    manner of keeping prescribed accounts or funds or who fails to correct any delinquencies,
28    improper procedures, and errors brought to his attention.
29        (k) Establish accounting systems, methods, and forms for public accounts in all taxing
30    units of the state in the interest of uniformity, efficiency, and economy.
31        (l) Superintend the contractual auditing of all state accounts.

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1        (m) Withhold state allocated funds or the disbursement of property taxes from any state
2    taxing unit, if necessary, to ensure that officials and employees in those taxing units of the state
3    comply with state laws and procedures in the budgeting, expenditures, and financial reporting of
4    public funds. Except as otherwise specified in the law, funds may not be withheld until a taxing
5    unit has received formal written notice of noncompliance from the auditor and has been given 60
6    days to make the specified corrections.
7        (n) Withhold the disbursement of tax monies from any county, if necessary, to ensure that
8    officials and employees in the county comply with Section 59-2-303.1. For purposes of this
9    subsection, funds may not be withheld until a county has received formal written notice of
10    noncompliance from the auditor and has been given 60 days to make the specified corrections.
11        (3) The state auditor may not audit work he performed before becoming state auditor. In
12    the event that the state auditor has previously been a responsible official in state government
13    whose work has not yet been audited, the Legislature shall designate how such work shall be
14    audited and shall provide additional funding for such audits, if necessary.
15        (4) The following records in the custody or control of the state auditor shall be protected
16    records under Title 63, Chapter 2, Government Records Access and Management Act:
17        (a) records that would disclose information relating to allegations of personal misconduct,
18    gross mismanagement, or illegal activity of a past or present governmental employee if the
19    information or allegation cannot be corroborated by the state auditor through other documents or
20    evidence, and the records relating to the allegation are not relied upon by the state auditor in
21    preparing a final audit report;
22        (b) records and audit workpapers to the extent they would disclose the identity of a person
23    who during the course of an audit, communicated the existence of any waste of public funds,
24    property, or manpower, or a violation or suspected violation of a law, rule, or regulation adopted
25    under the laws of this state, a political subdivision of the state, or any recognized entity of the
26    United States, if the information was disclosed on the condition that the identity of the person be
27    protected;
28        (c) prior to the time that an audit is completed and the final audit report is released, records
29    or drafts circulated to a person who is not an employee or head of a governmental entity for their
30    response or information;
31        (d) records that would disclose an outline or part of any audit survey plans or audit

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1    program;
2        (e) requests for audits, if disclosure would risk circumvention of an audit;
3        (f) the provisions of Subsections (a), (b), and (c) do not prohibit the disclosure of records
4    or information that relate to a violation of the law by a governmental entity or employee to a
5    government prosecutor or peace officer; and
6        (g) the provisions of this section do not limit the authority otherwise given to the state
7    auditor to classify a document as public, private, controlled, or protected under Title 63, Chapter
8    2, Government Records Access and Management Act.
9        Section 8. Repealer.
10        This act repeals:
11        Section 32A-1-114, City, Incorporated Town, and County Liquor Control Fund.
12        Section 53A-13-207, Allotment accounts established from driver education tax.
13        Section 67-3-9, Audit of independent agencies.
14        Section 71-9-4, Audit of contracting organization -- Report.
15        Section 9. Effective date.
16        This act takes effect on July 1, 1997.




Legislative Review Note
    as of 2-13-97 9:30 AM


A limited legal review of this bill raises no obvious constitutional or statutory concerns.

Office of Legislative Research and General Counsel


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