By:  Shapiro                                                      S.B. No. 1694


A BILL TO BE ENTITLED

AN ACT

relating to state agency internal auditing.                                   
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:                        
	SECTION 1.  Section 2102.002, Government Code, is amended to 
read as follows:
	Sec. 2102.002.  PURPOSE.  The purpose of this chapter is to 
establish guidelines for a program of internal auditing to assist 
agency administrators and governing boards by furnishing 
independent analyses, appraisals, and recommendations about the 
adequacy and effectiveness of a state agency's systems of internal 
control policies and procedures and the quality of performance in 
carrying out assigned responsibilities.  Internal auditing is 
defined as an independent, objective assurance and consulting 
activity designed to add value and improve an organization's 
operations.  It helps an organization accomplish its objectives by 
bringing a systematic, disciplined approach to evaluate and improve 
the effectiveness of risk management, control, and governance 
processes.
	SECTION 2.  Section 2102.003, Government Code, is amended to 
read as follows:
	Sec. 2102.003.  DEFINITIONS.  In this chapter:                                 
		(1)  "Administrator" means the executive head of a 
state agency.            
		(2)  "Assurance services" means an examination of 
evidence for the purpose of providing an independent assessment of 
risk management, control, or governance processes for an 
organization.  Assurance services include audits as defined in this 
section.
		(3)  "Audit" means:                                                    
			(A)  a financial audit described by Section 
321.0131;                      
			(B)  a compliance audit described by Section 
321.0132;                     
			(C)  an economy and efficiency audit described by 
Section 321.0133;        
			(D)  an effectiveness audit described by Section 
321.0134; or              
			(E)  an investigation described by Section 
321.0136.                       
		(4)  "Consulting services" means advisory and related 
client service activities, the nature and scope of which are agreed 
upon with the client and are intended to add value and improve an 
organization's operations.  Consulting services include counsel, 
advice, facilitation, and training.
		(5) [(3)]  "State agency" means a department, board, 
bureau, institution, commission, or other agency in the executive 
branch of state government.
	SECTION 3.  Section 2102.006, Government Code, is amended by 
adding Subsection (d) to read as follows:
	(d)  The governing board of a state agency, or the 
administrator of a state agency if the state agency does not have a 
governing board, shall periodically review the resources dedicated 
to the internal audit program and determine if adequate resources 
exist to ensure that risks identified in the annual risk assessment 
are adequately covered within a reasonable time frame.
	SECTION 4.  Section 2102.011, Government Code, is amended to 
read as follows:
	Sec. 2102.011.  INTERNAL AUDIT STANDARDS.  The internal 
audit program shall conform to the Standards for the Professional 
Practice of Internal Auditing, [generally accepted governmental 
auditing standards,] the [Certified Internal Auditor] Code of 
[Professional] Ethics contained in the Professional Practices 
Framework as promulgated by[, and the Statement of Responsibilities 
of Internal Auditing of] the Institute of Internal Auditors, and 
generally accepted government auditing standards.
	SECTION 5.  This Act takes effect September 1, 2003.                           
	SECTION 6.  The importance of this legislation and the 
crowded condition of the calendars in both houses creates an 
emergency and an imperative public necessity that the 
constitutional rule requiring bills to read on three several days 
in each house be suspended, and this rule is hereby suspended.