Report Title:

Auditor; Funding

Description:

Provides the Auditor with sufficient funds to conduct financial statement audits and audits required under federal law of certain state agencies. Establishes the audit revolving fund. Enables the auditor to charge fees for financial audits. Amends Act 1, SLH 2002(HB1821 CD1).

HOUSE OF REPRESENTATIVES

H.B. NO.

1821

TWENTY-FIRST LEGISLATURE, 2002

H.D. 2

STATE OF HAWAII

S.D. 1

C.D. 1


 

A BILL FOR AN ACT

 

relating to the legislative auditor.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. Financial statement audits and audits required under federal law, of departments, offices, and agencies of the executive branch of the State, are currently conducted by public accounting firms contracted primarily by the department of accounting and general services (DAGS). DAGS, however, exercises little oversight in the administration of these contracts. The audits are paid for from funds appropriated to the respective agencies or DAGS. Auditing principles and standards require that these audits be conducted by an entity independent of the one being reviewed.

The office of the auditor is authorized to conduct postaudits under article VII, section 10, of the State Constitution. In addition, chapter 23, Hawaii Revised Statutes, requires the office of the auditor to conduct postaudits of the transactions, accounts, programs, and performance of all departments, offices, and agencies of the State and its political subdivisions.

Since the establishment of the office of the auditor, the legislature has appropriated only enough funds for the office to contract for a few financial statement audits annually. The legislature believes that the time has come to appropriate and align all of the financial auditing functions and its related expenditures as legislative expenses.

The purpose of this Act is to provide the office of the auditor with sufficient funds to conduct financial statement audits and audits required under federal law of certain departments, offices, and agencies of the State. This Act also provides a mechanism to preserve the State’s ability to maximize the underwriting of the audits from non-general fund sources.

SECTION 2. Chapter 23, Hawaii Revised Statutes, is amended by adding two new sections to be appropriately designated and to read as follows:

"§23- Fees for financial audits. The auditor may charge an audited entity a reasonable fee for the cost of performing a financial audit, including financial statement audits, audits required under federal law, and audits of special funds, revolving funds, or trust funds. Moneys collected pursuant to this section shall be deposited in the audit revolving fund established by section 23- .

§23- Audit revolving fund. There is established an audit revolving fund in the office of the auditor. The auditor shall administer the fund. The fund shall consist of any moneys received by the auditor from:

(1) Departments, offices, and agencies of the State and its political subdivisions for financial statement audits and audits required under federal law;

(2) Legislative appropriations; and

(3) All interest earned on the deposit or investment of the moneys in the fund.

The auditor shall use the fund moneys for the purpose of conducting financial statement audits and audits required under federal law, or to pay for certified public accountants to conduct such audits."

SECTION 3. Act 1, Session Laws of Hawaii 2002, is amended by amending section 6 to read as follows:

"SECTION 6. There is appropriated out of the general revenues of the State of Hawaii the sum of [$3,002,219] $2,727,219 or so much thereof as may be necessary to the office of the legislative auditor for the following expenses:

(1) The sum of [$2,172,443] $1,897,443 for defraying the expenses of the office of the legislative auditor during fiscal year 2002-2003;

(2) The sum of $679,776 for defraying the expenses of the office of the state ethics commission during fiscal year 2002-2003; and

(3) The sum of $150,000 during fiscal year 2002-2003 for:

(A) Performing special studies;

(B) Improving capabilities for planning, programming, and budgeting;

(C) Fulfilling other special requests made of the legislative auditor by the Legislature or jointly by the President of the Senate and the Speaker of the House of Representatives;

(D) Legislative studies and contractual services for those studies; and

(E) Such other purposes as may be determined by the joint action of the President of the Senate and the Speaker of the House of Representatives."

SECTION 4. There is appropriated out of the general revenues of the State of Hawaii the sum of $275,000 or so much thereof as may be necessary for fiscal year 2002–2003 to be paid into the audit revolving fund created in section 2 of this Act.

The sum appropriated shall be expended by the office of the auditor for the purposes of this Act.

SECTION 5. There is appropriated out of the audit revolving fund the sum of $600,000 or so much thereof as may be necessary for fiscal year 2002-2003 to be used to carry out the purposes of the audit revolving fund and to provide the auditor with necessary funds to conduct financial statement audits and audits required under federal law of the department of education.

The sum appropriated shall be expended by the office of the auditor for the purposes of this Act.

SECTION 6. Statutory material to be repealed is bracketed

and stricken. New statutory material is underscored.

SECTION 7. This Act shall take effect on July 1, 2002.