REPORT TITLE:
Government Audit


DESCRIPTION:
Requires the auditor to contract with an independent auditing
firm to conduct an annual financial audit of Hawaii state and
county governments to evaluate efficiency in operations and
effectiveness in spending, and to determine where cutbacks in
state and county funding may take place.  Appropriates funds.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
THE SENATE                              S.B. NO.           38
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO ANNUAL STATE AND COUNTY GOVERNMENT FINANCIAL AUDITS.



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

 1      SECTION 1.  The legislature finds that there is an immediate
 
 2 need for comprehensive annual financial audits of Hawaii state
 
 3 and county governments.
 
 4      The goal of an annual audit is to ascertain the financial
 
 5 viability of state and county governments and to provide the
 
 6 management reports which will lay the groundwork to reshape
 
 7 government for a new and improved way of doing business.  The
 
 8 purpose of the audit is to verify the financial standing of state
 
 9 and county governments, examine their organization, management,
 
10 operations, and programs, and identify opportunities for
 
11 reorganization, consolidation, and elimination of duplicated
 
12 functions.  In addition, the legislature finds that each audit
 
13 should be conducted by one or more independent auditors to
 
14 provide an outsider's view and determine where reductions can be
 
15 made in state and county spending.
 
16      The legislature further finds that an annual financial audit
 
17 of state and county governments will call attention to
 
18 irregularities in the procurement process, such as has occurred
 
19 at the city and county of Honolulu's Ewa Villages housing
 

 
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 1 project, and will also improve government operations and
 
 2 efficiency by identifying existing problems or potential future
 
 3 problems involving internal controls.  If the auditor finds that
 
 4 an annual financial audit of state and county governments is not
 
 5 feasible because of time, cost, or other limitations, the auditor
 
 6 is to determine in its discretion which agencies are to be
 
 7 audited by the independent auditor each year, as long as each
 
 8 state and county agency is audited at least once every two years.
 
 9      The purpose of this Act is, therefore, to provide for the
 
10 auditor to contract with one or more independent auditing firms
 
11 to conduct an annual financial audit of Hawaii state and county
 
12 governments.  The audit is to provide for a complete review of
 
13 all state and county agencies and programs, services, and
 
14 activities operated by those agencies for the purpose of
 
15 evaluating efficiency in operations and effectiveness in state
 
16 and county spending, including a determination of where cutbacks
 
17 may take place.
 
18      SECTION 2.  Definitions.  For purposes of this Act:
 
19      "Agency" means any state or county board, commission,
 
20 department, committee, institution, agency, or office within the
 
21 legislative, executive, or judicial branch of state or county
 
22 government, including institutions of higher education.
 
23      "Independent auditor" means an independent accounting or
 

 
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 1 auditing firm of national standing that has experience in
 
 2 conducting financial audits of state and county governments
 
 3 agencies.
 
 4      SECTION 3.  Annual financial audit of state and county
 
 5 governments.  The auditor, through competitive sealed bidding or
 
 6 proposals pursuant to chapter 103D, shall contract with one or
 
 7 more independent auditors to annually conduct a comprehensive
 
 8 financial audit of state and county government operations to:
 
 9      (1)  Challenge and question the basic assumptions underlying
 
10           all agencies and the programs and services they provide
 
11           to identify those that are vital to the best interests
 
12           of the people of the State of Hawaii and those that no
 
13           longer meet that goal;
 
14      (2)  Review the functions, organizational structures, and
 
15           staffing levels of all agencies and the programs,
 
16           services, and activities operated by those agencies;
 
17      (3)  Evaluate the efficiency with which agencies operate the
 
18           programs under their jurisdictions and fulfill the
 
19           duties assigned to them by law;
 
20      (4)  Determine methods to maximize the amount of federal
 
21           funds received by the State and the counties for their
 
22           programs in order to better ensure that the people of
 
23           Hawaii receive a greater share of the taxes levied on
 

 
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 1           them by the federal government;
 
 2      (5)  Determine methods to establish a system for the
 
 3           reporting of measurements related to performance and
 
 4           for integrating the information so reported into the
 
 5           State's and counties' fiscal planning processes;
 
 6      (6)  Identify any agency, program, or service now offered by
 
 7           an agency that can be eliminated or transferred to the
 
 8           private sector without injury to the public good and
 
 9           well-being, and determine where any additional cutbacks
 
10           may take place;
 
11      (7)  Make recommendations, including but not limited to the
 
12           following:
 
13           (A)  Any necessary changes in organizational structure,
 
14                management style, and administrative procedures to
 
15                improve the overall administration and operation
 
16                of state and county governments;
 
17           (B)  The use of automated technology;
 
18           (C)  The privatization of certain operations, or other
 
19                alternative service delivery approaches including
 
20                managed (public-private) competition; and
 
21           (D)  The elimination of or reduction in funding to
 
22                various agencies, programs, or services; and
 
23      (8)  Make recommendations to the legislature as to
 

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

 
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 1 improving government operations or to report instances of fraud,
 
 2 waste, or other abuse.  To the greatest extent possible, the
 
 3 independent auditor shall seek input from state and county
 
 4 employees at all levels.
 
 5      (c)  If the auditor determines that an annual financial
 
 6 audit of state and county governments is not feasible due to
 
 7 time, cost, or other limitations, the auditor shall determine
 
 8 which agencies shall be audited by the independent auditor each
 
 9 year; provided that each state and county agency shall be audited
 
10 at least once every two years.
 
11      (d)  The independent auditor, consistent with generally
 
12 accepted accounting principles and auditing standards, shall
 
13 report its findings and recommendations to the legislature and
 
14 the governor no later than twenty days before the convening of
 
15 the regular session of 2000.
 
16      SECTION 6.  There is appropriated out of the general
 
17 revenues of the State of Hawaii the sum of $          , or so
 
18 much thereof as may be necessary for fiscal year 1999-2000, for
 
19 the purposes of this Act, including costs incurred under this Act
 
20 in contracting with one or more independent auditors to conduct
 
21 financial audits of state and county government agencies in
 
22 accordance with this Act and for costs incurred in the conduct of
 
23 those audits.  The sum appropriated shall be expended by the
 

 
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 1 auditor for the purposes of this Act.
 
 2      SECTION 7.  There is appropriated out of the general
 
 3 revenues of the State of Hawaii the following sums, or so much
 
 4 thereof as may be necessary for fiscal year 1999-2000, to assist
 
 5 the counties in implementing this Act:
 
 6      City and county of Honolulu                 $
 
 7      County of Kauai                             $
 
 8      County of Maui                              $
 
 9      County of Hawaii                            $             
 
10           Total                                  $
 
11      The sums appropriated shall constitute the State's share of
 
12 the cost of mandated programs under Article VIII, section 5, of
 
13 the State Constitution.
 
14      SECTION 8.  This Act shall take effect on July 1, 1999.
 
15 
 
16                           INTRODUCED BY:  _______________________