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H.B. 369

             1     

STATE AUDITOR REVISIONS

             2     
2013 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Chief Sponsor: Craig Hall

             5     
Senate Sponsor: Wayne A. Harper

             6     
             7      LONG TITLE
             8      General Description:
             9          This bill amends provisions related to the state auditor's authority to conduct a
             10      performance and special purpose audit.
             11      Highlighted Provisions:
             12          This bill:
             13          .    authorizes the state auditor to conduct a performance and special purpose audit to
             14      determine whether an entity's management, control, and information systems are
             15      adequate, effective, and secure; and
             16          .    makes technical corrections.
             17      Money Appropriated in this Bill:
             18          None
             19      Other Special Clauses:
             20          None
             21      Utah Code Sections Affected:
             22      AMENDS:
             23          67-3-1, as last amended by Laws of Utah 2012, Chapter 137
             24     
             25      Be it enacted by the Legislature of the state of Utah:
             26          Section 1. Section 67-3-1 is amended to read:
             27           67-3-1. Functions and duties.


             28          (1) (a) The state auditor is the auditor of public accounts and is independent of any
             29      executive or administrative officers of the state.
             30          (b) The state auditor is not limited in the selection of personnel or in the determination
             31      of the reasonable and necessary expenses of the state auditor's office.
             32          (2) The state auditor shall examine and certify annually in respect to each fiscal year,
             33      financial statements showing:
             34          (a) the condition of the state's finances;
             35          (b) the revenues received or accrued;
             36          (c) expenditures paid or accrued;
             37          (d) the amount of unexpended or unencumbered balances of the appropriations to the
             38      agencies, departments, divisions, commissions, and institutions; and
             39          (e) the cash balances of the funds in the custody of the state treasurer.
             40          (3) (a) The state auditor shall:
             41          (i) audit each permanent fund, each special fund, the General Fund, and the accounts of
             42      any department of state government or any independent agency or public corporation as the law
             43      requires, as the auditor determines is necessary, or upon request of the governor or the
             44      Legislature;
             45          (ii) perform the audits in accordance with generally accepted auditing standards and
             46      other auditing procedures as promulgated by recognized authoritative bodies;
             47          (iii) as the auditor determines is necessary, conduct the audits to determine:
             48          (A) honesty and integrity in fiscal affairs;
             49          (B) accuracy and reliability of financial statements;
             50          (C) effectiveness and adequacy of financial controls; and
             51          (D) compliance with the law.
             52          (b) If any state entity receives federal funding, the state auditor shall ensure that the
             53      audit is performed in accordance with federal audit requirements.
             54          (c) (i) The costs of the federal compliance portion of the audit may be paid from an
             55      appropriation to the state auditor from the General Fund.
             56          (ii) If an appropriation is not provided, or if the federal government does not
             57      specifically provide for payment of audit costs, the costs of the federal compliance portions of
             58      the audit shall be allocated on the basis of the percentage that each state entity's federal funding


             59      bears to the total federal funds received by the state.
             60          (iii) The allocation shall be adjusted to reflect any reduced audit time required to audit
             61      funds passed through the state to local governments and to reflect any reduction in audit time
             62      obtained through the use of internal auditors working under the direction of the state auditor.
             63          (4) (a) Except as provided in Subsection (4)(b), the state auditor shall, in addition to
             64      financial audits, and as the auditor determines is necessary, conduct performance and special
             65      purpose audits, examinations, and reviews of any entity that receives public funds, including a
             66      determination of any or all of the following:
             67          (i) the honesty and integrity of all its fiscal affairs;
             68          (ii) whether or not its administrators have faithfully complied with legislative intent;
             69          (iii) whether or not its operations have been conducted in an efficient, effective, and
             70      cost-efficient manner;
             71          (iv) whether or not its programs have been effective in accomplishing the intended
             72      objectives; and
             73          (v) whether or not its management, control, and information systems are adequate
             74      [and], effective, and secure.
             75          (b) The auditor may not conduct performance and special purpose audits,
             76      examinations, and reviews of any entity that receives public funds if the entity:
             77          (i) has an elected auditor; and
             78          (ii) has, within the entity's last budget year, had its financial statements or performance
             79      formally reviewed by another outside auditor.
             80          (5) The state auditor shall administer any oath or affirmation necessary to the
             81      performance of the duties of the auditor's office, and may subpoena witnesses and documents,
             82      whether electronic or otherwise, and examine into any matter that the auditor considers
             83      necessary.
             84          (6) The state auditor may require all persons who have had the disposition or
             85      management of any property of this state or its political subdivisions to submit statements
             86      regarding it at the time and in the form that the auditor requires.
             87          (7) The state auditor shall:
             88          (a) except where otherwise provided by law, institute suits in Salt Lake County in
             89      relation to the assessment, collection, and payment of its revenues against:


             90          (i) persons who by any means have become entrusted with public money or property
             91      and have failed to pay over or deliver the money or property; and
             92          (ii) all debtors of the state;
             93          (b) collect and pay into the state treasury all fees received by the state auditor;
             94          (c) perform the duties of a member of all boards of which the state auditor is a member
             95      by the constitution or laws of the state, and any other duties that are prescribed by the
             96      constitution and by law;
             97          (d) stop the payment of the salary of any state official or state employee who:
             98          (i) refuses to settle accounts or provide required statements about the custody and
             99      disposition of public funds or other state property;
             100          (ii) refuses, neglects, or ignores the instruction of the state auditor or any controlling
             101      board or department head with respect to the manner of keeping prescribed accounts or funds;
             102      or
             103          (iii) fails to correct any delinquencies, improper procedures, and errors brought to the
             104      official's or employee's attention;
             105          (e) establish accounting systems, methods, and forms for public accounts in all taxing
             106      or fee-assessing units of the state in the interest of uniformity, efficiency, and economy;
             107          (f) superintend the contractual auditing of all state accounts;
             108          (g) subject to Subsection (8), withhold state allocated funds or the disbursement of
             109      property taxes from any state taxing or fee-assessing unit, if necessary, to ensure that officials
             110      and employees in those taxing units of the state comply with state laws and procedures in the
             111      budgeting, expenditures, and financial reporting of public funds; and
             112          (h) subject to Subsection (9), withhold the disbursement of tax money from any county,
             113      if necessary, to ensure that officials and employees in the county comply with Section
             114      59-2-303.1 .
             115          (8) Except as otherwise provided by law, the state auditor may not withhold funds
             116      under Subsection (7)(g) until a taxing or fee-assessing unit has received formal written notice
             117      of noncompliance from the auditor and has been given 60 days to make the specified
             118      corrections.
             119          (9) The state auditor may not withhold funds under Subsection (7)(h) until a county has
             120      received formal written notice of noncompliance from the auditor and has been given 60 days


             121      to make the specified corrections.
             122          (10) The state auditor shall:
             123          (a) establish audit guidelines and procedures for audits of local mental health and
             124      substance abuse authorities and their contract providers, conducted pursuant to Title 17,
             125      Chapter 43, Parts 2, Local Substance Abuse Authorities and 3, Local Mental Health
             126      Authorities, Title 51, Chapter 2a, Accounting Reports from Political Subdivisions, Interlocal
             127      Organizations, and Other Local Entities Act, and Title 62A, Chapter 15, Substance Abuse and
             128      Mental Health Act; and
             129          (b) ensure that those guidelines and procedures provide assurances to the state that:
             130          (i) state and federal funds appropriated to local mental health authorities are used for
             131      mental health purposes;
             132          (ii) a private provider under an annual or otherwise ongoing contract to provide
             133      comprehensive mental health programs or services for a local mental health authority is in
             134      compliance with state and local contract requirements, and state and federal law;
             135          (iii) state and federal funds appropriated to local substance abuse authorities are used
             136      for substance abuse programs and services; and
             137          (iv) a private provider under an annual or otherwise ongoing contract to provide
             138      comprehensive substance abuse programs or services for a local substance abuse authority is in
             139      compliance with state and local contract requirements, and state and federal law.
             140          (11) The state auditor may, in accordance with the auditor's responsibilities for political
             141      subdivisions of the state as provided in Title 51, Chapter 2a, Accounting Reports from Political
             142      Subdivisions, Interlocal Organizations, and Other Local Entities Act, initiate audits or
             143      investigations of any political subdivision that are necessary to determine honesty and integrity
             144      in fiscal affairs, accuracy and reliability of financial statements, effectiveness, and adequacy of
             145      financial controls and compliance with the law.
             146          (12) (a) The state auditor may not audit work that the state auditor performed before
             147      becoming state auditor.
             148          (b) If the state auditor has previously been a responsible official in state government
             149      whose work has not yet been audited, the Legislature shall:
             150          (i) designate how that work shall be audited; and
             151          (ii) provide additional funding for those audits, if necessary.


             152          (13) The state auditor shall:
             153          (a) with the assistance, advice, and recommendations of an advisory committee
             154      appointed by the state auditor from among local district boards of trustees, officers, and
             155      employees and special service district boards, officers, and employees:
             156          (i) prepare a Uniform Accounting Manual for Local Districts that:
             157          (A) prescribes a uniform system of accounting and uniform budgeting and reporting
             158      procedures for local districts under Title 17B, Limited Purpose Local Government Entities -
             159      Local Districts, and special service districts under Title 17D, Chapter 1, Special Service
             160      District Act;
             161          (B) conforms with generally accepted accounting principles; and
             162          (C) prescribes reasonable exceptions and modifications for smaller districts to the
             163      uniform system of accounting, budgeting, and reporting;
             164          (ii) maintain the manual under Subsection (13)(a) so that it continues to reflect
             165      generally accepted accounting principles;
             166          (iii) conduct a continuing review and modification of procedures in order to improve
             167      them;
             168          (iv) prepare and supply each district with suitable budget and reporting forms; and
             169          (v) prepare instructional materials, conduct training programs, and render other
             170      services considered necessary to assist local districts and special service districts in
             171      implementing the uniform accounting, budgeting, and reporting procedures; and
             172          (b) continually analyze and evaluate the accounting, budgeting, and reporting practices
             173      and experiences of specific local districts and special service districts selected by the state
             174      auditor and make the information available to all districts.
             175          (14) (a) The following records in the custody or control of the state auditor are
             176      protected records under Title 63G, Chapter 2, Government Records Access and Management
             177      Act:
             178          (i) records that would disclose information relating to allegations of personal
             179      misconduct, gross mismanagement, or illegal activity of a past or present governmental
             180      employee if the information or allegation cannot be corroborated by the state auditor through
             181      other documents or evidence, and the records relating to the allegation are not relied upon by
             182      the state auditor in preparing a final audit report;


             183          (ii) records and audit workpapers to the extent they would disclose the identity of a
             184      person who during the course of an audit, communicated the existence of any waste of public
             185      funds, property, or manpower, or a violation or suspected violation of a law, rule, or regulation
             186      adopted under the laws of this state, a political subdivision of the state, or any recognized entity
             187      of the United States, if the information was disclosed on the condition that the identity of the
             188      person be protected;
             189          (iii) before an audit is completed and the final audit report is released, records or drafts
             190      circulated to a person who is not an employee or head of a governmental entity for their
             191      response or information;
             192          (iv) records that would disclose an outline or part of any audit survey plans or audit
             193      program; and
             194          (v) requests for audits, if disclosure would risk circumvention of an audit.
             195          (b) The provisions of Subsections (14)(a)(i), (ii), and (iii) do not prohibit the disclosure
             196      of records or information that relate to a violation of the law by a governmental entity or
             197      employee to a government prosecutor or peace officer.
             198          (c) The provisions of this Subsection (14) do not limit the authority otherwise given to
             199      the state auditor to classify a document as public, private, controlled, or protected under Title
             200      63G, Chapter 2, Government Records Access and Management Act.
             201          (15) If the state auditor conducts an audit of an entity that the state auditor has
             202      previously audited and finds that the entity has not implemented a recommendation made by
             203      the state auditor in a previous audit, the state auditor shall notify the Legislative Management
             204      Committee through its audit subcommittee that the entity has not implemented that
             205      recommendation.




Legislative Review Note
    as of 2-22-13 1:26 PM


Office of Legislative Research and General Counsel


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