STAND. COM. REP. NO. 2536

Honolulu, Hawaii

RE:    S.B. No. 2779

       S.D. 1

Honorable Donna Mercado Kim

President of the Senate

Twenty-Seventh State Legislature

Regular Session of 2014

State of Hawaii

Madam:

     Your Committee on Ways and Means, to which was referred S.B. No. 2779 entitled:

"A BILL FOR AN ACT RELATING TO FINANCIAL AUDIT OF THE STATE OF HAWAII BY THE LEGISLATIVE AUDITOR,"

begs leave to report as follows:

     The purpose and intent of this measure is to specifically authorize the Auditor to obtain tax return information necessary for conducting the Comprehensive Annual Financial Report audit of the State.

     This measure also requires the Auditor and the Auditor's authorized agents to maintain the confidentiality of tax return information obtained under this measure.

The Department of Accounting and General Services, Department of Budget and Finance, and the Office of the Auditor testified in support of this measure.  The Department of Taxation orally testified in support of the measure.  The Department of the Attorney General and the Tax Foundation of Hawaii submitted comments.

Your Committee finds section 23-5, Hawaii Revised Statutes, authorizes the Auditor to conduct audits of all departments, offices, and agencies of the State and its political subdivisions.  However, questions have been raised regarding the Auditor's authority to review tax returns and other tax records on file with the Department of Taxation that the Auditor requires to conduct the Comprehensive Annual Financial Report audit of the State.  This measure will provide the Auditor with clear authority to access relevant and necessary tax return information for financial audits of the State, while ensuring that taxpayer information will remain confidential.

     Your Committee has amended this measure by making technical nonsubstantive amendments for the purposes of clarity, consistency, and style.

     As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2779, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2779, S.D. 1, and be placed on the calendar for Third Reading.

Respectfully submitted on behalf of the members of the Committee on Ways and Means,

____________________________

DAVID Y. IGE, Chair