| TO: | Honorable Carlos Uresti, Chair, House Committee on Government Reform |
| FROM: | John S. O'Brien, Deputy Director, Legislative Budget Board |
| IN RE: | HB2801 by Smith, Todd (Relating to audits of state agency expenditures to recover overpayments and lost discounts.), As Introduced |
| Fiscal Year | Probable Net Positive/(Negative) Impact to General Revenue Related Funds |
|---|---|
| 2006 | $0 |
| 2007 | $9,600,000 |
| 2008 | $3,200,000 |
| 2009 | $3,200,000 |
| 2010 | $3,200,000 |
| Fiscal Year | Probable Savings/(Cost) from GENERAL REVENUE FUND 1 |
Probable Savings/(Cost) from GR DEDICATED ACCOUNTS 994 |
Probable Savings/(Cost) from OTHER FUNDS 997 |
|---|---|---|---|
| 2006 | $0 | $0 | $0 |
| 2007 | $9,600,000 | $900,000 | $3,000,000 |
| 2008 | $3,200,000 | $300,000 | $1,000,000 |
| 2009 | $3,200,000 | $300,000 | $1,000,000 |
| 2010 | $3,200,000 | $300,000 | $1,000,000 |
The bill would implement a recommendation in the Legislative Budget Board's Staff Performance Report, State Government Efficiency and Operations Submitted to the 79th Legislature.
Recommendation 2 in the "Recover Certain State Agency Overpayments to Vendors" report proposes amending statute to require state entities with more than $100 million in biennial expenditures from appropriated funds to participate in recovery audits unless exempted by the Comptroller of Public Accounts.
The bill would direct the Comptroller of Public Accounts (CPA) to contract with one or more consultants to conduct recovery audits of payments made by state agencies to vendors and to recommend improved state agency accounting operations. The bill would direct the CPA to require recovery audits on expenditures to third parties by agencies with total expenditures exceeding $100 million in a biennium. The CPA may exempt some agencies by rule.
Section 8.03 of Article IX in the current version of the General Appropriations Bill as passed by the House and Senate directs the Comptroller to deposit 50 percent of recovered General Revenue Funds, General Revenue-Dedicated Funds, and Other Funds in the state treasury. Article IX appropriates the other half to the state entity for the original purpose of the appropriation, and directs the state agency to pay the recovery audit firm’s contracted percentage from this appropriation. Article IX returns all recovered Federal Funds to the state agency, which would pay the contracted percentage of the recovery audit firm. The state agency would then expend the remainder or return it to the federal government, as provided in the rules of each federal program.
The bill would require the Comptroller to report a summary of all reports received under the new chapter from consultants under contract during the preceeding biennium to the Legislature no later than January 1 of each odd-numbered year.
The bill would take effect immediately upon enactment, assuming that it received the requisite two-thirds majority votes in both houses of the Legislature. Otherwise, it would take effect September 1, 2005.
It is assumed that the recovery audit firm would produce a 0.04 percent recovery rate on all expenditures. It is assumed that recoveries from fiscal years 2003 to 2005 would be collected in fiscal year 2007, but subsequent years would recover expenditures from a single prior fiscal year. As each Federal Funds program has its own rules regarding recovered expenditures, it is estimated that there would be no savings or revenue gain from Federal Funds.
| Source Agencies: | 304 Comptroller of Public Accounts, 308 State Auditor's Office
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| LBB Staff: | JOB, LB, HC, SD, JI
|