1-1 By: Wolens (Senate Sponsor - Ratliff) H.B. No. 2906
1-2 (In the Senate - Received from the House May 6, 1997;
1-3 May 7, 1997, read first time and referred to Committee on State
1-4 Affairs; May 16, 1997, reported favorably by the following vote:
1-5 Yeas 13, Nays 0; May 16, 1997, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to the duties of the state auditor, state audits, and
1-9 investigations.
1-10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-11 SECTION 1. Section 7.022, Education Code, is amended to read
1-12 as follows:
1-13 Sec. 7.022. INTERNAL AUDIT. [(a)] The auditor appointed by
1-14 the commissioner under Section 7.055 shall coordinate the agency's
1-15 efforts to evaluate and improve its internal operations.
1-16 [(b) The state auditor shall review the quality and
1-17 effectiveness of the agency's process for auditing internal
1-18 operations and shall report the state auditor's findings to the
1-19 commissioner and the board.]
1-20 SECTION 2. Section 321.008, Government Code, is amended to
1-21 read as follows:
1-22 Sec. 321.008. QUALIFYING FOR OFFICE. (a) To qualify for
1-23 office, the State Auditor must take the constitutional oath of
1-24 office [and execute a bond in an amount determined by the committee
1-25 to be sufficient to protect the state's interests, payable to the
1-26 governor. The bond must be approved by the committee, be
1-27 conditioned on the faithful discharge of his duties, and have a
1-28 solvent surety company as surety. At least once in each five-year
1-29 period, the committee shall review the amount of the bond and
1-30 adjust the amount as necessary to take account of changed
1-31 conditions].
1-32 (b) The State Auditor must file the oath [and approved bond]
1-33 with the secretary of state not later than the 10th day after the
1-34 date on which the committee appointed the State Auditor, or the
1-35 committee or a majority of the committee members shall appoint
1-36 another qualified person as State Auditor.
1-37 [(c) The state shall pay the premium to the surety company
1-38 for the execution of the bond required by Subsection (a).]
1-39 SECTION 3. Section 321.014, Government Code, is amended by
1-40 adding Subsections (f) and (g) to read as follows:
1-41 (f) Each audited department or entity shall report on the
1-42 manner in which the department or entity has addressed the findings
1-43 and recommendations that are included in a report prepared by the
1-44 state auditor under this section. The state auditor shall
1-45 prescribe the form and schedule for a report by the department or
1-46 entity under this subsection.
1-47 (g) If a department or entity does not implement a change
1-48 recommended by the state auditor's report, the department or entity
1-49 shall file a report with the persons specified by Subsection (c).
1-50 The report must:
1-51 (1) identify the recommendation the department or
1-52 entity did not implement; and
1-53 (2) state the reason the department or entity did not
1-54 implement the recommendation.
1-55 SECTION 4. Chapter 321, Government Code, is amended by
1-56 adding Section 321.020 to read as follows:
1-57 Sec. 321.020. COORDINATION OF CERTAIN AUDITS.
1-58 (a) Notwithstanding any other law, a state agency, or a
1-59 corporation that is dedicated to the benefit of a state agency and
1-60 that meets the criteria specified by Section B, Article 2.23B,
1-61 Texas Non-Profit Corporation Act (Article 1396-2.23B, Vernon's
1-62 Texas Civil Statutes), may employ a private auditor to audit the
1-63 state agency or corporation only if:
1-64 (1) the agency or corporation is authorized to do so
2-1 by law or through a delegation of authority from the state auditor;
2-2 (2) the scope of the proposed audit has been submitted
2-3 to the state auditor for review and comment; and
2-4 (3) the services of the private auditor are procured
2-5 through a competitive selection process in a manner allowed by law.
2-6 (b) At the joint direction of the lieutenant governor and
2-7 the speaker of the house of representatives, the state auditor
2-8 shall provide contract management services to the agency or
2-9 corporation for an audit described by this section.
2-10 SECTION 5. Chapter 321, Government Code, is amended by
2-11 adding Section 321.022 to read as follows:
2-12 Sec. 321.022. COORDINATION OF INVESTIGATIONS. (a) If the
2-13 administrative head of a department or entity that is subject to
2-14 audit by the state auditor has reasonable cause to believe that
2-15 money received from the state by the department or entity or by a
2-16 client or contractor of the department or entity may have been
2-17 lost, misappropriated, or misused, or that other fraudulent or
2-18 unlawful conduct has occurred in relation to the operation of the
2-19 department or entity, the administrative head shall report the
2-20 reason and basis for the belief to the state auditor. The state
2-21 auditor may investigate the report or may monitor any investigation
2-22 conducted by the department or entity.
2-23 (b) The state auditor, in consultation with state agencies
2-24 and institutions, shall prescribe the form, content, and timing of
2-25 a report required by this section.
2-26 (c) All records of a communication by or to the state
2-27 auditor relating to a report to the state auditor under Subsection
2-28 (a) are audit working papers of the state auditor.
2-29 SECTION 6. Section 403.024(b), Government Code, as added by
2-30 Section 5.30, Chapter 76, Acts of the 74th Legislature, Regular
2-31 Session, 1995, is amended to read as follows:
2-32 (b) In this section, "state agency" has the meaning assigned
2-33 by Section 2056.001 [403.013].
2-34 SECTION 7. Subchapter F, Chapter 411, Government Code, is
2-35 amended by adding Section 411.132 to read as follows:
2-36 Sec. 411.132. ACCESS TO CRIMINAL HISTORY RECORD INFORMATION:
2-37 STATE AUDITOR. (a) The state auditor is entitled to obtain from
2-38 the department criminal history record information for purposes of:
2-39 (1) performing risk assessment in devising the annual
2-40 audit plan; or
2-41 (2) performing an investigation under Chapter 321 of
2-42 specified acts or allegations of impropriety, malfeasance, or
2-43 nonfeasance.
2-44 (b) The department and the state auditor shall enter into an
2-45 agreement providing the state auditor with electronic access to the
2-46 information that includes appropriate safeguards against
2-47 unauthorized disclosure of the information.
2-48 (c) Except as provided by Subsection (d), information
2-49 obtained by the state auditor under Subsection (a) may not be
2-50 released or disclosed to any person except on court order or with
2-51 the consent of the person who is the subject of the criminal
2-52 history record information.
2-53 (d) If, in the judgment of the state auditor, information
2-54 obtained under Subsection (a) indicates a substantial risk to the
2-55 interests of the state, the state auditor shall report the
2-56 information to the legislative audit committee and to the
2-57 administrative head of the affected agency. The reports are audit
2-58 working papers of the state auditor.
2-59 (e) The state auditor shall destroy information obtained
2-60 under Subsection (a) when the information is no longer needed for
2-61 audit purposes or to support audit findings.
2-62 SECTION 8. Section 2102.003(3), Government Code, is amended
2-63 to read as follows:
2-64 (3) "State agency" means [includes] a department,
2-65 board, bureau, institution, commission, or other agency in the
2-66 executive branch of state government [of the state].
2-67 SECTION 9. Section 2102.005, Government Code, is amended to
2-68 read as follows:
2-69 Sec. 2102.005. INTERNAL AUDITING REQUIRED. A state agency
3-1 shall conduct a [full-time] program of internal auditing that
3-2 includes:
3-3 (1) an annual audit plan that is prepared using risk
3-4 assessment techniques and that identifies the individual audits to
3-5 be conducted during the year; and
3-6 (2) periodic audits of the agency's major systems and
3-7 controls, including:
3-8 (A) accounting systems and controls;
3-9 (B) administrative systems and controls; and
3-10 (C) electronic data processing systems and
3-11 controls.
3-12 SECTION 10. Section 2102.009, Government Code, is amended to
3-13 read as follows:
3-14 Sec. 2102.009. ANNUAL REPORT. [(a)] The internal auditor
3-15 shall prepare an annual report and submit the report before
3-16 November 1 of each year to the governor, the Legislative Budget
3-17 Board, the Sunset Advisory Commission, the state auditor, the state
3-18 agency's governing board, and the administrator. The state auditor
3-19 shall prescribe the form and content of the report, subject to the
3-20 approval of the legislative audit committee.
3-21 [(b) The report must contain:]
3-22 [(1) a copy of the annual audit plan;]
3-23 [(2) a list of audits completed;]
3-24 [(3) an explanation of any deviation from the approved
3-25 annual audit plan;]
3-26 [(4) a narrative description of the most significant
3-27 findings and recommendations for each audit;]
3-28 [(5) a narrative description of the management actions
3-29 taken in response to the audit findings and recommendations;]
3-30 [(6) a table listing the auditor's audit
3-31 recommendations and the five-year fiscal impact for each
3-32 recommendation;]
3-33 [(7) a table of the audit recommendations from the
3-34 previous fiscal year's report and an explanation of the status of
3-35 each recommendation; and]
3-36 [(8) a statement of the last date on which an external
3-37 peer review of the agency's internal audit program was conducted.]
3-38 [(c) Each audit recommendation must show whether:]
3-39 [(1) the recommendation has been implemented;]
3-40 [(2) the recommendation is in the process of
3-41 implementation;]
3-42 [(3) action on implementation of the recommendation
3-43 has been delayed; or]
3-44 [(4) the agency does not intend to take action on the
3-45 recommendation.]
3-46 [(d) The report must emphasize the findings in important
3-47 areas that are difficult to quantify, including weaknesses in
3-48 management controls or quality of services.]
3-49 SECTION 11. Subsections (d), (e), and (f), Section 12,
3-50 Article 21.28, Insurance Code, are amended to read as follows:
3-51 (d) Audit. The state auditor may [shall] conduct an
3-52 [annual] audit of the liquidator in accordance with the audit plan
3-53 reviewed and approved by the legislative audit committee. The
3-54 audits authorized [or required] by this subsection shall be
3-55 conducted in the manner provided by Chapter 321, Government Code.
3-56 (e) Contents of Auditor's Report. The state auditor's
3-57 report of the audit authorized [required] by Subsection (d) of this
3-58 section may include:
3-59 (1) an analysis of the overall performance of the
3-60 liquidator;
3-61 (2) an analysis of the liquidator's financial
3-62 operations and condition;
3-63 (3) an analysis of receipts and expenditures made in
3-64 connection with each audited receivership and an analysis of the
3-65 adequacy of the receiver's bond in relation to assets, receipts,
3-66 and expenditures;
3-67 (4) the amount of funds made available to the
3-68 liquidator by a guaranty association in connection with each
3-69 audited receivership and a detail of the purpose and manner of
4-1 expenditure of such funds;
4-2 (5) the ratio of the total amount of claims paid to
4-3 the total costs incurred in connection with each audited
4-4 receivership;
4-5 (6) the ratio of the liquidator's administrative
4-6 expenses to the total costs incurred in connection with each
4-7 audited receivership; or
4-8 (7) an analysis of the feasibility of using attorneys
4-9 who are employees of the liquidator in all litigation.
4-10 (f) Filing of Auditor's Reports. Copies of the auditor's
4-11 report shall be filed[,] in the manner required by Section 321.014,
4-12 Government Code[, not later than March 31 of the year following the
4-13 year covered by the audit]. An additional copy of the report shall
4-14 be filed with the board and the commissioner.
4-15 SECTION 12. Article 26.57(a), Insurance Code, is amended to
4-16 read as follows:
4-17 (a) The transactions of the system are subject to audit by
4-18 the state auditor in accordance with [shall conduct annually a
4-19 special audit of the system under] Chapter 321, Government Code.
4-20 [The state auditor's report shall include a financial audit and an
4-21 economy and efficiency audit.]
4-22 SECTION 13. Section 223.041, Transportation Code, is amended
4-23 to read as follows:
4-24 Sec. 223.041. ENGINEERING AND DESIGN CONTRACTS. (a) The
4-25 department's policy regarding the regular use of private sector
4-26 professional services for preliminary and construction engineering
4-27 and engineering design shall achieve a balance between the use of
4-28 department employees and the use of private contractors if the
4-29 costs are equivalent.
4-30 (b) [The office of the state auditor shall determine
4-31 relevant costs to be considered under Subsection (a).]
4-32 [(c)] The commission may provide for hearings at which
4-33 private sector complaints relating to the selection process are
4-34 heard.
4-35 SECTION 14. Section 58.017, Agriculture Code, is amended to
4-36 read as follows:
4-37 Sec. 58.017. PERFORMANCE MEASURES [COST-BENEFIT REPORT].
4-38 The board, in conjunction with the Legislative Budget Board, the
4-39 state auditor, and the Office of the Governor, shall develop a
4-40 minimum of two performance measures that provide information on the
4-41 benefits of the authority's loan programs. The performance
4-42 measures shall be included in the report required under Section
4-43 58.016(d) of this code or as a component of the measures
4-44 incorporated into the Appropriations Act [(a) The board shall
4-45 perform a biennial cost-benefit study of the authority's active and
4-46 inactive programs and prepare a report regarding that study. The
4-47 study must include an examination of the number of jobs created or
4-48 retained in this state as a result of each program and the costs
4-49 and benefits associated with those jobs].
4-50 [(b) The chairman of the board shall file the report
4-51 prepared under Subsection (a) with the state auditor before
4-52 December 1 of each even-numbered year.]
4-53 [(c) The state auditor shall review the report filed under
4-54 Subsection (b) and send the report and the auditor's comments
4-55 regarding the methodology used by the authority in performing the
4-56 cost-benefit study to the governor and the presiding officer of
4-57 each house of the legislature not later than February 1 of each
4-58 odd-numbered year. The state auditor shall provide assistance to
4-59 the department in preparing the report required by this section.]
4-60 SECTION 15. The following laws are repealed:
4-61 (1) Section 61.029(e), Education Code;
4-62 (2) Section 321.013(j), Government Code;
4-63 (3) Section 321.015, Government Code;
4-64 (4) Section 2303.0525, Government Code; and
4-65 (5) Section 15A, Texas State College and University
4-66 Employees Uniform Insurance Benefits Act (Article 3.50-3, Vernon's
4-67 Texas Insurance Code).
4-68 SECTION 16. The importance of this legislation and the
4-69 crowded condition of the calendars in both houses create an
5-1 emergency and an imperative public necessity that the
5-2 constitutional rule requiring bills to be read on three several
5-3 days in each house be suspended, and this rule is hereby suspended.
5-4 * * * * *