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ARIZONA STATE SENATE
Fifty-Fourth Legislature, First Regular Session
JLAC; auditor general
Purpose
Modifies requirements relating to the Office of the Auditor General (OAG) audits, investigations, powers and duties. Modifies factors considered by legislative Committees of Reference (CORs) in determining the need for continuation or termination of state agencies.
Background
The OAG is appointed to a five-year term by the Joint Legislative Audit Committee (JLAC), upon approval of a concurrent resolution of the Legislature. The OAG is charged with several powers and duties, including: 1) preparing an audit plan for approval by JLAC; 2) conducting audits relating to the finances and performance of state agencies, government functions and school districts; 3) performing special research requests, special audits and investigations of state agencies as requested by JLAC; 4) reporting the results of each audit, investigation or review to JLAC; and 5) establishing a uniform expenditure reporting system for political subdivisions (A.R.S. § 41-1279.03).
Additionally, the OAG is required to provide JLAC with a list of all state agencies scheduled for termination and an estimate of the audit hours necessary to conduct a sunset review of each agency. JLAC must hold a hearing to review the termination schedule and select state agencies subject to a sunset review by the OAG and agencies subject to a sunset review by the CORs. The CORs must hold a public hearing in order to determine the need for continuation, revision, consolidation or termination of each state agency. In determining the need for continuation or termination, the CORs must consider certain statutory factors. The CORs must prepare a final sunset review report, including a recommendation that the state agency be continued, revised, consolidated or terminated. Each COR must oversee the preparation of any legislation necessary to implement the recommendations of the final sunset review report (A.R.S. § 41-2954).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
OAG Audit, Investigation and Expenditure Reporting Requirements
1. Requires the OAG to conduct annual, rather than biennial, financial and compliance audits of financial transactions and accounts kept by state agencies subject to federal single-audit requirements.
2. Removes the requirement that the OAG submit an annual report to the Governor and JLAC.
3. Requires the OAG, as resources allow, to conduct investigations relating to allegations of financial impropriety, malfeasance or nonfeasance of a state agency or political subdivision funded by tax revenue:
a) in connection with an audit authorized by law;
b) on request of a public officer of a state agency or political subdivision regarding matters under the supervision or control of the public officer; or
c) on request of a sheriff, county attorney, municipal attorney or the Attorney General (AG) in connection with an open investigation of a state agency or political subdivision.
4. Requires the OAG to conduct a performance audit 5 years, rather than 10 years, after a county transportation excise tax is adopted.
5. Requires Joint Legislative Budget Committee staff, based on information provided by the OAG, to notify all members of the Legislature of the cost of conducting any special audit required by legislation before the legislation is scheduled for:
a) third read in the chamber of origin;
b) third read in the chamber in which the special audit was added; or
c) final passage, if the special audit was added in a conference committee.
6. Removes the requirement that OAG school district performance audits determine whether school districts receive money from the Arizona English Language Learner Fund and the Statewide Compensatory Instruction Fund.
7. Requires school districts to submit a written status report on the implementation of OAG performance audit recommendations upon request of the OAG, rather than every six months, within the two-year period following the audit.
8. Requires the treasurer of a county that has approved a county transportation excise tax, in addition to the Arizona Department of Transportation, to:
a) cooperate with and provide necessary information to the OAG; and
b) reimburse the OAG for the cost of conducting studies or hiring a consultant to conduct studies relating to county transportation excise tax monies.
9. Requires the OAG, in the performance of official duties, to have access to employees of state agencies, boards and commissions or political subdivisions of the state.
10. Requires officers of the state or a political subdivision and all contractors that contract with the state to:
a) afford reasonable and needed facilities for OAG staff; and
b) make records available to OAG staff.
11. Requires the AG to supervise the prosecution of all individuals who violate statutory requirements for OAG access to executive sessions, records and information.
12. Classifies, as a class 2 misdemeanor, knowingly obstructing or misleading the OAG in the execution of the OAG's duties.
13. Adds, to the Audit Services Revolving Fund, monies received by the OAG from:
a) state budget units, community college districts and school districts for conducting audits of federal funds;
b) counties for which the OAG conducts transportation excise tax performance audits; and
c) any other statutorily-authorized source.
14. Removes the requirement that the uniform expenditure reporting system for community college districts include:
a) individual fund breakdowns; and
b) a reconciliation of the total expenditures reported within financial statements to the total expenditures reported within the expenditure limitation report.
15. Requires county and community college district financial statement audits conducted by the OAG to:
a) include compliance audits of financial transactions and applicable accounts kept by a county that is required to comply with federal single audit requirements;
b) be conducted in accordance with generally-accepted governmental auditing standards; and
c) include necessary tests of the accounting records and other auditing procedures.
16. Repeals the requirement that county, community college and school district officers afford facilities to the OAG, and make returns and exhibits under oath to the OAG and applicable penalties for violations.
17. Modifies the definition of investigation to include an inquiry into specified acts or allegations of impropriety, malfeasance or nonfeasance by a political subdivision.
18. Modifies the definition of an OAG performance audit to include an audit that determines at least one, rather than all, of the following criteria:
a) whether the audited state agency is managing or using its resources in an economical and efficient manner;
b) causes of inefficiencies or uneconomical practices; and
c) whether the desired results and enabling objectives are being achieved.
19. Defines political subdivision.
Sunset Reviews and the CORs
20. Removes the requirement that the factors a COR must consider in determining the need for continuation or termination of a state agency (COR factors) include the extent to which the:
a) agency services the entire state, rather than specific interest;
b) AG or other applicable agency has the authority to prosecute actions; and
c) agency has used private contractors in the performance of its duties as compared to other states and how a more effective use of private contractors could be accomplished.
21. Requires the COR factors to include the extent to which:
a) the state agency's key objectives and purposes duplicate the objectives and purposes of other governmental agencies;
b) the state agency has established safeguards against possible conflicts of interest; and
c) statutory changes are necessary for the state agency to better fulfil its objectives and purposes and eliminate responsibilities that are no longer necessary.
22. Requires the COR factors, rather than the state agency's written statement included in the final sunset review report (agency statement), to include the extent to which the agency's objectives and purposes duplicate the functions of other state agencies.
23. Requires the agency statement, rather than the COR factors, to include the extent to which the state agency creates unexpected negative consequences that might require additional review by a COR, including:
a) increasing the price of goods or affecting the availability of services;
b) limiting the ability of individuals and businesses to operate efficiently; and
c) increasing the cost of government.
24. Removes the requirement that the agency statement contain:
a) an identification of the problem or needs that the state agency is intended to address; and
b) a statement of the state agency's agenda.
25. Requires the agency statement to contain the extent to which the state agency has addressed deficiencies in its enabling statute.
Miscellaneous
26. Makes technical and conforming changes.
27. Becomes effective on the general effective date.
House Action
APPROP 2/20/19 DPA 10-0-0-1
3rd Read 3/4/19 59-0-1
Prepared by Senate Research
March 14, 2019
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