IMF H.B. 2906 75(R)BILL ANALYSIS STATE AFFAIRS H.B. 2906 By: Wolens 4-10-97 Committee Report (Amended) BACKGROUND The State Auditor's Office is authorized under Chapter 321, Government Code, to conduct audits of all state agencies. Other statutes also direct the State Auditor to perform specific audit responsibilities with respect to specific state agencies. PURPOSE As proposed, H.B. 2906 would repeal unnecessary and redundant provisions relating to the State Auditor and agency internal auditors. H.B. 2906 permits review of audit recommendation implementation by state entities, provides for coordination of audit work conducted by private entities on behalf of state agencies, establishes a method for the identification of potential problems and investigations of incidents of fraud and abuse in state agencies, and improves the State Auditor's ability to assess risk associated with state operations through access to criminal history information. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Sec. 7.022, Education Code, to eliminate the requirement that the State Auditor report on internal audits at the Texas Education Agency. SECTION 2. Amends Sec. 321.008, Government Code, to eliminate the bonding requirement for the State Auditor. SECTION 3. Amends Sec. 321.014, Government Code, to require audited agencies to report on the manner in which they have addressed audit findings and recommendations. SECTION 4. Amends Sec. 321.020, Government Code, to provide a mechanism for coordination and/or management of private audits performed of state agencies and corporations assisting state agencies. SECTION 5. Adds Sec. 321.022, Government Code, to require state agencies to report incidents of possible fraud, abuse, or misappropriation of funds to the State Auditor. SECTION 6. Amends Sec. 403.024, Government Code, to define "state agency" in a manner excluding the legislative and judicial branches of government. SECTION 7. Adds Sec. 411.132, Government Code, to authorize the State Auditor to obtain access to criminal history record information for purposes of performing risk assessment, or in connection with an investigation. SECTION 8. Amends Sec. 2102.003, Government Code, to define "state agency" in a manner excluding the legislative and judicial branches of government. SECTION 9. Amends Sec. 2102.005, Government Code, to eliminate the requirement for a fulltime program of internal auditing. SECTION 10. Amends Sec. 2102.009, Government Code, to delete statutory requirements for the content of the internal auditors' annual report and to further provide that the State Auditor shall determine the format and content of the report. SECTION 11. Amends Art. 21.28, Sec. 12(d-f), Insurance Code, to provide that the Liquidator function at the Department of Insurance is subject to audit, as opposed to a mandatory annual audit requirement. SECTION 12. Amends Art. 26.57(a), Insurance Code, to provide that the transactions of the Texas Health Reinsurance System are subject to audit, as opposed to requiring an annual special audit. SECTION 13. Amends Sec. 223.041, Transportation Code, to eliminate the requirement for State Auditor determination of relevant costs to be considered in privatization of engineering design contracts. SECTION 14. Repeals Sec. 58.017(c), Agriculture Code; Sec. 61.029(e), Education Code; Sec. 321.013(j) and 321.015, Government Code; and Art. 3.50-3, Sec. 15A, Insurance Code. SECTION 15. Emergency clause. EXPLANATION OF AMENDMENTS 1. Clarifies that the section pertaining to employing a private auditor does not apply to subrecipient audits (such as agency audits of special deputy receivers and other contractors with the agency), but only to audits of the agency or corporation. 2. Sets up a mechanism for reporting which state auditor recommendations a department or entity did not implement and why. 3. Removes language requiring direct and immediate reporting of suspected misuse of funds; allows the state auditor to work with state agencies to develop a reasonable time frame and format for reporting suspected misuse. 4-5. Requires the auditor to prescribe the form, content, and timing of agency reports of fraud investigations. 6. Gives the legislative audit committee an oversight role over the state auditor in determining the form and content of the annual reports of agency internal audits. 7-8. Last session, in response to a recommendation of the Sunset Commission, the legislature set up a cost-benefit study of the programs administered by the Texas Agricultural Finance Authority (TAFA) and required the state auditor to both help prepare the study and review it. This amendment would repeal the current language and require instead that TAFA, with assistance from the state auditor, the LBB, and the Governor's Office, develop at least two performance measures on the costs and benefits of TAFA's loan programs.