Government Audit

Requires the auditor to contract with an independent auditing
firm to conduct an annual financial audit of state government to
evaluate efficiency in operations and effectiveness in spending.
The bill also creates a joint legislative Task Force to gather
information to supplement the auditor's work.  Appropriates
funds.  (SD2)

THE SENATE                              S.B. NO.           S.D. 2
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  The legislature finds that there is an immediate
 2 need for a comprehensive financial audit of state government.
 3      The goal of the audit is to ascertain the financial
 4 viability of state government and to provide the management
 5 reports which will lay the groundwork to reshape the state for a
 6 new and improved way of doing business.  The purpose of the audit
 7 is to verify the financial standing of the state, examine its
 8 organization, management, operations, and programs, and identify
 9 opportunities for reorganization, consolidation, and elimination
10 of duplicated functions.  In addition, the legislature finds that
11 the audit should be conducted by an independent auditor to
12 provide an outsider's view and determine where reductions can be
13 made in state spending.
14      The purpose of this Act, therefore, is to require the
15 auditor to contract with an independent auditing firm to conduct
16 an audit of state government.  The audit is to provide for a
17 complete review of all state agencies and programs, services, and
18 activities operated by those agencies for the purpose of
19 evaluating efficiency in operations and effectiveness in state

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 1 spending. 
 2      SECTION 2.  Definitions.  For purposes of this Act:
 3      "Agency" means any state board, commission, department,
 4 committee, institution, agency, or office within the legislative,
 5 executive, or judicial branch of state government, including
 6 institutions of higher education.
 7      "Independent auditor" means an independent accounting or
 8 auditing firm of national standing that has experience in
 9 conducting financial audits of state or county agencies.
10      SECTION 3.  Financial audit of the state government.  The
11 auditor, through competitive sealed bidding or proposals pursuant
12 to chapter 103D, shall contract with one or more independent
13 auditors to conduct management or financial audits, or both, of
14 state government operations to:
15      (1)  Challenge and question the basic assumptions underlying
16           all agencies and the programs and services they provide
17           to identify those that are vital to the best interests
18           of the people of the State of Hawaii and those that no
19           longer meet that goal;
20      (2)  Review the functions, organizational structures, and
21           staffing levels of all agencies and the programs,
22           services, and activities operated by those agencies;
23      (3)  Evaluate the efficiency with which agencies operate the

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 1           programs under their jurisdictions and fulfill the
 2           duties assigned to them by law;
 3      (4)  Determine methods to maximize the amount of federal
 4           funds received by the State for their programs in order
 5           to better ensure that the people of Hawaii receive a
 6           greater share of the taxes levied on them by the
 7           federal government;
 8      (5)  Determine methods to establish a system for the
 9           reporting of measurements related to performance and
10           for integrating the information so reported into the
11           State's fiscal planning processes;
12      (6)  Make recommendations, including but not limited to the
13           following:
14           (A)  Any necessary changes in organizational structure,
15                management style, and administrative procedures to
16                improve the overall administration and operation
17                of state government;
18           (B)  The use of automated technology;
19           (C)  The privatization of certain operations, or other
20                alternative service delivery approaches including
21                managed (public-private) competition; and
22           (D)  The elimination of or reduction in funding to
23                various agencies, programs, or services; and

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 1      (7)  Make recommendations to the legislature as to
 2           amendments to statutory and constitutional provisions
 3           that will improve the efficiency and economy of state
 4           government.
 5      SECTION 4.  Assistance from state agencies.  All
 6 departments, agencies, and offices of the State and any private
 7 companies or agencies receiving state funds shall fully cooperate
 8 with and provide assistance to the independent auditors as needed
 9 with respect to its audit, and shall respond promptly to the
10 auditors requests in conducting this audit, including but not
11 limited to requests for records and other information requested
12 in the course of the audit.
13      SECTION 5.  Financial audit work plan; public input;
14 reports.(a)  In performing its duties under this Act, the
15 independent auditor shall adopt a financial audit work plan,
16 which shall ensure that the audit is conducted by program and
17 functional areas so that individual agency performance can be
18 analyzed in relationship to other agencies and overlaps and gaps
19 can be detected.
20      (b)  The work plan shall include the conduct of public
21 hearings throughout the State and the establishment of a
22 telephone hotline for citizens to call in suggestions for
23 improving government operations or to report instances of fraud,

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 1 waste, or other abuse.  To the greatest extent possible, the
 2 independent auditor shall seek input from state employees at all
 3 levels.
 4      (c)  The independent auditor, consistent with generally
 5 accepted accounting principles and auditing standards, shall
 6 report its findings and recommendations to the legislature and
 7 the governor no later than twenty days before the convening of
 8 the regular session of 2000.
 9      SECTION 6.  There is established a joint legislative task
10 force consisting of the senate committee on government operations
11 and housing and the house committee on labor and public
12 employment.  The task force shall establish an agenda and goals
13 and objectives consistent with the purposes of this Act.  The
14 task force shall receive public testimony with respect to state
15 government fraud, waste, and excess or any other matter the task
16 force deems worthy of consideration.
17      The task force shall meet at a time to be jointly determined
18 by the chairs of both committees during the 1999 legislative
19 interim.
20      The task force may submit suggestions to the auditor on
21 possible subjects for audits.
22      SECTION 7.  There is appropriated out of the general
23 revenues of the State of Hawaii the sum of $          , or so

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 1 much thereof as may be necessary for fiscal year 1999-2000, for
 2 the purposes of this Act, including costs incurred under this Act
 3 in contracting with one or more independent auditors to conduct
 4 financial audits of state government agencies in accordance with
 5 this Act and for costs incurred in the conduct of those audits.
 6 The sum appropriated shall be expended by the auditor for the
 7 purposes of this Act.
 8      SECTION 8.  This Act shall take effect on July 1, 1999.