STAND. COM. REP. NO. 331

                                   Honolulu, Hawaii
                                                     , 1999

                                   RE:  S.B. No. 38
                                        S.D. 1




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 1999
State of Hawaii

Sir:

     Your Committee on Government Operations and Housing, to
which was referred S.B. No. 38 entitled: 

     "A BILL FOR AN ACT RELATING TO ANNUAL STATE AND COUNTY
     GOVERNMENT FINANCIAL AUDITS,"

begs leave to report as follows:

     The purpose of this measure is to require the Auditor to
contract with independent auditors to conduct comprehensive
annual financial audits of state and county governments.

     Testimony in opposition was received from the State Auditor,
County Council for the County of Hawaii, and the Department of
Finance for the County of Hawaii.

     Your Committee finds that there is an immediate need for
independent comprehensive annual financial audits of Hawaii state
and county governments.  Annual audits provide management
information which enable the state and county governments to
examine their organization, management, operations, and programs,
and identify opportunities for reorganization, consolidation, and
elimination of duplicated functions.  

     Your Committee finds that audits enable both state and
county governments to develop more effective and efficient
budgets.

     Testimony in opposition of this measure stated that
requiring annual audits of all state and county governments

 
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                                   STAND. COM. REP. NO. 331
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duplicates the state and county government audits which occur
every year and is too costly.  However, your Committee finds that
in order to ensure an objective and effective audit, each audit
should be conducted by one or more independent auditors.
Additionally, the money saved by identifying inefficient and
wasteful government operations through the audit process
justifies the expense of conducting annual audits of Hawaii state
and county governments.

     Your Committee adopted the recommendation of the State
Auditor and amended this measure to eliminate the provisions that
would require the financial audit to determine where cutbacks
should take place and to make recommendations for reorganization
or consolidation of state and county agencies.

     As affirmed by the record of votes of the members of your
Committee on Government Operations and Housing that is attached
to this report, your Committee is in accord with the intent and
purpose of S.B. No. 38, as amended herein, and recommends that it
pass Second Reading in the form attached hereto as S.B. No. 38,
S.D. 1, and be referred to the Committee on Ways and Means.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Government
                                   Operations and Housing,



                                   ______________________________
                                   ROD TAM, Chair

 
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