1-1 AN ACT
1-2 relating to the duties of the state auditor, state audits, and
1-3 investigations.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section 7.022, Education Code, is amended to read
1-6 as follows:
1-7 Sec. 7.022. INTERNAL AUDIT. [(a)] The auditor appointed by
1-8 the commissioner under Section 7.055 shall coordinate the agency's
1-9 efforts to evaluate and improve its internal operations.
1-10 [(b) The state auditor shall review the quality and
1-11 effectiveness of the agency's process for auditing internal
1-12 operations and shall report the state auditor's findings to the
1-13 commissioner and the board.]
1-14 SECTION 2. Section 321.001, Government Code, is amended to
1-15 read as follows:
1-16 Sec. 321.001. DEFINITIONS. In this chapter:
1-17 (1) "Audit working paper" means all documentary and
1-18 other information prepared or maintained in conducting an audit or
1-19 investigation, including all intra-agency and interagency
1-20 communications relating to an audit or investigation and all draft
1-21 reports or portions thereof.
1-22 (2) "Committee" means the legislative audit committee.
1-23 (3) [(2)] "Department" includes every state
1-24 department, agency, board, bureau, institution, or commission.
2-1 SECTION 3. Section 321.008, Government Code, is amended to
2-2 read as follows:
2-3 Sec. 321.008. QUALIFYING FOR OFFICE. (a) To qualify for
2-4 office, the State Auditor must take the constitutional oath of
2-5 office [and execute a bond in an amount determined by the committee
2-6 to be sufficient to protect the state's interests, payable to the
2-7 governor. The bond must be approved by the committee, be
2-8 conditioned on the faithful discharge of his duties, and have a
2-9 solvent surety company as surety. At least once in each five-year
2-10 period, the committee shall review the amount of the bond and
2-11 adjust the amount as necessary to take account of changed
2-12 conditions].
2-13 (b) The State Auditor must file the oath [and approved bond]
2-14 with the secretary of state not later than the 10th day after the
2-15 date on which the committee appointed the State Auditor, or the
2-16 committee or a majority of the committee members shall appoint
2-17 another qualified person as State Auditor.
2-18 [(c) The state shall pay the premium to the surety company
2-19 for the execution of the bond required by Subsection (a).]
2-20 SECTION 4. Section 321.014, Government Code, is amended by
2-21 adding Subsections (f) and (g) to read as follows:
2-22 (f) Each audited department or entity shall report on the
2-23 manner in which the department or entity has addressed the findings
2-24 and recommendations that are included in a report prepared by the
2-25 state auditor under this section. The state auditor shall
2-26 prescribe the form and schedule for a report by the department or
2-27 entity under this subsection.
3-1 (g) If a department or entity does not implement a change
3-2 recommended by the state auditor's report, the department or entity
3-3 shall file a report with the persons specified by Subsection (c).
3-4 The report must:
3-5 (1) identify the recommendation the department or
3-6 entity did not implement; and
3-7 (2) state the reason the department or entity did not
3-8 implement the recommendation.
3-9 SECTION 5. Section 321.019, Government Code, is amended to
3-10 read as follows:
3-11 Sec. 321.019. INTERFERENCE WITH AUDIT OR INVESTIGATION
3-12 [EXAMINATION OF RECORDS]. (a) An officer or employee of this
3-13 state or of an entity subject to audit or investigation by the
3-14 state auditor [a governmental unit of the state] commits an offense
3-15 if the officer or employee:
3-16 (1) refuses to immediately permit the State Auditor to
3-17 examine or have access to the books, accounts, reports, vouchers,
3-18 papers, documents, or electronic data to which the State Auditor is
3-19 entitled under Section 321.013(e) or other law, or to the cash
3-20 drawer, or cash from the officer's or employee's department;
3-21 (2) interferes with an examination by the State
3-22 Auditor; or
3-23 (3) refuses to make a report required by this chapter.
3-24 (b) An offense under this section is a Class A misdemeanor[,
3-25 punishable by a fine of not less than $100 nor more than $1,000, by
3-26 imprisonment in the county jail for not less than one month nor
3-27 more than one year, or by both].
4-1 SECTION 6. Chapter 321, Government Code, is amended by
4-2 adding Section 321.020 to read as follows:
4-3 Sec. 321.020. COORDINATION OF CERTAIN AUDITS.
4-4 (a) Notwithstanding any other law, a state agency, or a
4-5 corporation that is dedicated to the benefit of a state agency and
4-6 that meets the criteria specified by Section B, Article 2.23B,
4-7 Texas Non-Profit Corporation Act (Article 1396-2.23B, Vernon's
4-8 Texas Civil Statutes), may employ a private auditor to audit the
4-9 state agency or corporation only if:
4-10 (1) the agency or corporation is authorized to do so
4-11 by law or through a delegation of authority from the state auditor;
4-12 (2) the scope of the proposed audit has been submitted
4-13 to the state auditor for review and comment; and
4-14 (3) the services of the private auditor are procured
4-15 through a competitive selection process in a manner allowed by law.
4-16 (b) At the joint direction of the lieutenant governor and
4-17 the speaker of the house of representatives, the state auditor
4-18 shall provide contract management services to the agency or
4-19 corporation for an audit described by this section.
4-20 SECTION 7. Chapter 321, Government Code, is amended by
4-21 adding Section 321.022 to read as follows:
4-22 Sec. 321.022. COORDINATION OF INVESTIGATIONS. (a) If the
4-23 administrative head of a department or entity that is subject to
4-24 audit by the state auditor has reasonable cause to believe that
4-25 money received from the state by the department or entity or by a
4-26 client or contractor of the department or entity may have been
4-27 lost, misappropriated, or misused, or that other fraudulent or
5-1 unlawful conduct has occurred in relation to the operation of the
5-2 department or entity, the administrative head shall report the
5-3 reason and basis for the belief to the state auditor. The state
5-4 auditor may investigate the report or may monitor any investigation
5-5 conducted by the department or entity.
5-6 (b) The state auditor, in consultation with state agencies
5-7 and institutions, shall prescribe the form, content, and timing of
5-8 a report required by this section.
5-9 (c) All records of a communication by or to the state
5-10 auditor relating to a report to the state auditor under Subsection
5-11 (a) are audit working papers of the state auditor.
5-12 SECTION 8. Section 403.024(b), Government Code, as added by
5-13 Section 5.30, Chapter 76, Acts of the 74th Legislature, Regular
5-14 Session, 1995, is amended to read as follows:
5-15 (b) In this section, "state agency" has the meaning assigned
5-16 by Section 2056.001 [403.013].
5-17 SECTION 9. Subchapter F, Chapter 411, Government Code, is
5-18 amended by adding Section 411.132 to read as follows:
5-19 Sec. 411.132. ACCESS TO CRIMINAL HISTORY RECORD INFORMATION:
5-20 STATE AUDITOR. (a) The state auditor is entitled to obtain from
5-21 the department criminal history record information for purposes of:
5-22 (1) performing risk assessment in devising the annual
5-23 audit plan; or
5-24 (2) performing an investigation under Chapter 321 of
5-25 specified acts or allegations of impropriety, malfeasance, or
5-26 nonfeasance.
5-27 (b) The department and the state auditor shall enter into an
6-1 agreement providing the state auditor with electronic access to the
6-2 information that includes appropriate safeguards against
6-3 unauthorized disclosure of the information.
6-4 (c) Except as provided by Subsection (d), information
6-5 obtained by the state auditor under Subsection (a) may not be
6-6 released or disclosed to any person except on court order or with
6-7 the consent of the person who is the subject of the criminal
6-8 history record information.
6-9 (d) If, in the judgment of the state auditor, information
6-10 obtained under Subsection (a) indicates a substantial risk to the
6-11 interests of the state, the state auditor shall report the
6-12 information to the legislative audit committee and to the
6-13 administrative head of the affected agency. The reports are audit
6-14 working papers of the state auditor.
6-15 (e) The state auditor shall destroy information obtained
6-16 under Subsection (a) when the information is no longer needed for
6-17 audit purposes or to support audit findings.
6-18 SECTION 10. Section 552.116, Government Code, is amended to
6-19 read as follows:
6-20 Sec. 552.116. EXCEPTION: AUDIT [STATE AUDITOR] WORKING
6-21 PAPERS. An audit working paper or draft audit report of the state
6-22 auditor or of another state agency or institution of higher
6-23 education as defined by Section 61.003, Education Code, is excepted
6-24 from the requirements of Section 552.021.
6-25 SECTION 11. Section 2102.003(3), Government Code, is amended
6-26 to read as follows:
6-27 (3) "State agency" means [includes] a department,
7-1 board, bureau, institution, commission, or other agency in the
7-2 executive branch of state government [of the state].
7-3 SECTION 12. Section 2102.005, Government Code, is amended to
7-4 read as follows:
7-5 Sec. 2102.005. INTERNAL AUDITING REQUIRED. A state agency
7-6 shall conduct a [full-time] program of internal auditing that
7-7 includes:
7-8 (1) an annual audit plan that is prepared using risk
7-9 assessment techniques and that identifies the individual audits to
7-10 be conducted during the year; and
7-11 (2) periodic audits of the agency's major systems and
7-12 controls, including:
7-13 (A) accounting systems and controls;
7-14 (B) administrative systems and controls; and
7-15 (C) electronic data processing systems and
7-16 controls.
7-17 SECTION 13. Section 2102.009, Government Code, is amended to
7-18 read as follows:
7-19 Sec. 2102.009. ANNUAL REPORT. [(a)] The internal auditor
7-20 shall prepare an annual report and submit the report before
7-21 November 1 of each year to the governor, the Legislative Budget
7-22 Board, the Sunset Advisory Commission, the state auditor, the state
7-23 agency's governing board, and the administrator. The state auditor
7-24 shall prescribe the form and content of the report, subject to the
7-25 approval of the legislative audit committee.
7-26 [(b) The report must contain:]
7-27 [(1) a copy of the annual audit plan;]
8-1 [(2) a list of audits completed;]
8-2 [(3) an explanation of any deviation from the approved
8-3 annual audit plan;]
8-4 [(4) a narrative description of the most significant
8-5 findings and recommendations for each audit;]
8-6 [(5) a narrative description of the management actions
8-7 taken in response to the audit findings and recommendations;]
8-8 [(6) a table listing the auditor's audit
8-9 recommendations and the five-year fiscal impact for each
8-10 recommendation;]
8-11 [(7) a table of the audit recommendations from the
8-12 previous fiscal year's report and an explanation of the status of
8-13 each recommendation; and]
8-14 [(8) a statement of the last date on which an external
8-15 peer review of the agency's internal audit program was conducted.]
8-16 [(c) Each audit recommendation must show whether:]
8-17 [(1) the recommendation has been implemented;]
8-18 [(2) the recommendation is in the process of
8-19 implementation;]
8-20 [(3) action on implementation of the recommendation
8-21 has been delayed; or]
8-22 [(4) the agency does not intend to take action on the
8-23 recommendation.]
8-24 [(d) The report must emphasize the findings in important
8-25 areas that are difficult to quantify, including weaknesses in
8-26 management controls or quality of services.]
8-27 SECTION 14. Subsections (d), (e), and (f), Section 12,
9-1 Article 21.28, Insurance Code, are amended to read as follows:
9-2 (d) Audit. The state auditor may [shall] conduct an
9-3 [annual] audit of the liquidator in accordance with the audit plan
9-4 reviewed and approved by the legislative audit committee. The
9-5 audits authorized [or required] by this subsection shall be
9-6 conducted in the manner provided by Chapter 321, Government Code.
9-7 (e) Contents of Auditor's Report. The state auditor's
9-8 report of the audit authorized [required] by Subsection (d) of this
9-9 section may include:
9-10 (1) an analysis of the overall performance of the
9-11 liquidator;
9-12 (2) an analysis of the liquidator's financial
9-13 operations and condition;
9-14 (3) an analysis of receipts and expenditures made in
9-15 connection with each audited receivership and an analysis of the
9-16 adequacy of the receiver's bond in relation to assets, receipts,
9-17 and expenditures;
9-18 (4) the amount of funds made available to the
9-19 liquidator by a guaranty association in connection with each
9-20 audited receivership and a detail of the purpose and manner of
9-21 expenditure of such funds;
9-22 (5) the ratio of the total amount of claims paid to
9-23 the total costs incurred in connection with each audited
9-24 receivership;
9-25 (6) the ratio of the liquidator's administrative
9-26 expenses to the total costs incurred in connection with each
9-27 audited receivership; or
10-1 (7) an analysis of the feasibility of using attorneys
10-2 who are employees of the liquidator in all litigation.
10-3 (f) Filing of Auditor's Reports. Copies of the auditor's
10-4 report shall be filed[,] in the manner required by Section 321.014,
10-5 Government Code[, not later than March 31 of the year following the
10-6 year covered by the audit]. An additional copy of the report shall
10-7 be filed with the board and the commissioner.
10-8 SECTION 15. Article 26.57(a), Insurance Code, is amended to
10-9 read as follows:
10-10 (a) The transactions of the system are subject to audit by
10-11 the state auditor in accordance with [shall conduct annually a
10-12 special audit of the system under] Chapter 321, Government Code.
10-13 [The state auditor's report shall include a financial audit and an
10-14 economy and efficiency audit.]
10-15 SECTION 16. Section 223.041, Transportation Code, is amended
10-16 to read as follows:
10-17 Sec. 223.041. ENGINEERING AND DESIGN CONTRACTS. (a) The
10-18 department's policy regarding the regular use of private sector
10-19 professional services for preliminary and construction engineering
10-20 and engineering design shall achieve a balance between the use of
10-21 department employees and the use of private contractors if the
10-22 costs are equivalent.
10-23 (b) [The office of the state auditor shall determine
10-24 relevant costs to be considered under Subsection (a).]
10-25 [(c)] The commission may provide for hearings at which
10-26 private sector complaints relating to the selection process are
10-27 heard.
11-1 SECTION 17. Section 58.017, Agriculture Code, is amended to
11-2 read as follows:
11-3 Sec. 58.017. PERFORMANCE MEASURES [COST-BENEFIT REPORT].
11-4 The board, in conjunction with the Legislative Budget Board, the
11-5 state auditor, and the Office of the Governor, shall develop a
11-6 minimum of two performance measures that provide information on the
11-7 benefits of the authority's loan programs. The performance
11-8 measures shall be included in the report required under Section
11-9 58.016(d) of this code or as a component of the measures
11-10 incorporated into the Appropriations Act [(a) The board shall
11-11 perform a biennial cost-benefit study of the authority's active and
11-12 inactive programs and prepare a report regarding that study. The
11-13 study must include an examination of the number of jobs created or
11-14 retained in this state as a result of each program and the costs
11-15 and benefits associated with those jobs].
11-16 [(b) The chairman of the board shall file the report
11-17 prepared under Subsection (a) with the state auditor before
11-18 December 1 of each even-numbered year.]
11-19 [(c) The state auditor shall review the report filed under
11-20 Subsection (b) and send the report and the auditor's comments
11-21 regarding the methodology used by the authority in performing the
11-22 cost-benefit study to the governor and the presiding officer of
11-23 each house of the legislature not later than February 1 of each
11-24 odd-numbered year. The state auditor shall provide assistance to
11-25 the department in preparing the report required by this section.]
11-26 SECTION 18. The following laws are repealed:
11-27 (1) Section 61.029(e), Education Code;
12-1 (2) Section 321.013(j), Government Code;
12-2 (3) Section 321.015, Government Code;
12-3 (4) Section 2303.0525, Government Code; and
12-4 (5) Section 15A, Texas State College and University
12-5 Employees Uniform Insurance Benefits Act (Article 3.50-3, Vernon's
12-6 Texas Insurance Code).
12-7 SECTION 19. The importance of this legislation and the
12-8 crowded condition of the calendars in both houses create an
12-9 emergency and an imperative public necessity that the
12-10 constitutional rule requiring bills to be read on three several
12-11 days in each house be suspended, and this rule is hereby suspended.
_______________________________ _______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 2906 was passed by the House on May
5, 1997, by a non-record vote; that the House refused to concur in
Senate amendments to H.B. No. 2906 on May 23, 1997, and requested
the appointment of a conference committee to consider the
differences between the two houses; and that the House adopted the
conference committee report on H.B. No. 2906 on May 29, 1997, by a
non-record vote.
_______________________________
Chief Clerk of the House
I certify that H.B. No. 2906 was passed by the Senate, with
amendments, on May 21, 1997, by a viva-voce vote; at the request of
the House, the Senate appointed a conference committee to consider
the differences between the two houses; and that the Senate adopted
the conference committee report on H.B. No. 2906 on May 30, 1997,
by a viva-voce vote.
_______________________________
Secretary of the Senate
APPROVED: _____________________
Date
_____________________
Governor