78R7772 JJT-D

By:  Hochberg                                                     H.B. No. 2485



A BILL TO BE ENTITLED

AN ACT

relating to internal auditing of state agencies.                              
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:                        
	SECTION 1.  Section 2102.004, Government Code, is amended to 
read as follows:
	Sec. 2102.004.  APPLICABILITY.  (a)  Sections 
2102.005-2102.012 apply only to a [This chapter applies to each] 
state agency that:
		(1)  has an annual operating budget that exceeds $10 
million;        
		(2)  has a staff of more than 100 full-time equivalent 
employees; or 
		(3)  receives and processes more than $10 million in 
cash in a fiscal year.
	(b)  Sections 2102.013 and 2102.014 apply to each state 
agency that receives an appropriation and that is not described by 
Subsection (a).
	SECTION 2.  Chapter 2102, Government Code, is amended by 
adding Sections 2102.013 and 2102.014 to read as follows:
	Sec. 2102.013.  ANNUAL RISK ASSESSMENT; REPORT.  (a)  A state 
agency described by Section 2102.004(b) shall conduct each year a 
formal risk assessment consisting of an executive management review 
of agency functions, activities, and processes.
	(b)  The risk assessment must evaluate the probability of and 
the likely effect of observed financial, managerial, and compliance 
risks and must rank risks according to the probability and likely 
effect of the risks evaluated.
	(c)  The state agency shall submit the written risk 
assessment to the state auditor in the form and at the time 
prescribed by the state auditor.
	Sec. 2102.014.  EVALUATION OF RISK ASSESSMENT REPORTS; 
AUDITS.  (a)  The state auditor shall:
		(1)  evaluate reports submitted under Section 
2102.013;              
		(2)  identify agencies with significant financial, 
managerial, or compliance risk; and
		(3)  recommend to the governor that the identified 
agencies be ordered to conduct an internal audit.
	(b)  The governor shall order agencies identified under this 
section to conduct internal audits and submit reports as required 
by Sections 2102.005-2102.011.
	(c)  The governor may provide available money to agencies as 
necessary to pay the costs of audits ordered under this section.
	SECTION 3.  This Act takes effect immediately if it receives 
a vote of two-thirds of all the members elected to each house, as 
provided by Section 39, Article III, Texas Constitution.  If this 
Act does not receive the vote necessary for immediate effect, this 
Act takes effect September 1, 2003.