2013 -- S 0533

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LC01905

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2013

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A N A C T

RELATING TO THE GENERAL ASSEMBLY - THE LEGISLATIVE AUDIT BUREAU

     Introduced By: Senators Ciccone, Cote, McCaffrey, Raptakis, and Picard

     Date Introduced: February 28, 2013

     Referred To: Senate Finance

It is enacted by the General Assembly as follows:

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     SECTION 1. Chapter 22-13 of the General Laws entitled "Auditor General" is hereby

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amended by adding thereto the following section:

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     22-13-11. Audit provided for by finance committee of the house of representatives. –

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It shall be the duty of the finance committee of the house of representatives to provide annually

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for a complete post audit of the financial transactions and accounts of the state. The finance

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committee of the house of representatives shall be required to utilize the services of the auditor

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general to perform the post audit. The post audit shall commence as soon as possible after the

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close of each fiscal year and shall include the examination of all accounts from the date of the last

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post audit.

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     22-13-12. Specifications of audit - copies of report. – The director of administration

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and the general treasurer shall assist the finance committee of the house of representatives in

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determining the post audit specifications prior to the employment of the certified public

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accountant or accountants. Upon completion of the post audit the certified public accountant or

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accountants shall submit copies of the report to the members of the finance committee of the

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house of representatives, the governor, the director of administration, the general treasurer, and

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the legislative council. The report shall also be made available for public inspection.

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     22-13-13. Audit of quasi-public agencies. – All quasi-public agencies including

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corporations, authorities, commissions, and boards created by the authority of the general

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assembly, executive order, or state law, excluding cities and their subdivisions, towns and their

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subdivisions, regional school districts and school committees, water districts, fire districts, and

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any other municipal corporations and their agencies, subject to post audit, are hereby required to

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obtain the approval of the director of administration and the auditor general prior to the

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employment of private auditors. Audit workpapers of the private auditors shall be made available

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upon request, at the completion of the audit, to the auditor general and/or the director of

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administration for their review. The audit report shall be furnished to the auditor general and the

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director of administration.

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     22-13-14. Travel and entertainment expenses of quasi-public agencies. – Quasi-public

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agencies, as set forth in section 35-7-13, shall prepare and maintain documentation for all travel

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and entertainment expenses in sufficient detail to allow for post audit.

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     SECTION 2. Title 22 of the General Laws entitled "GENERAL ASSEMBLY" is hereby

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amended by adding thereto the following chapter:

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     CHAPTER 20

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THE BUREAU OF AUDITS COMMITTEE

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     22-20-1. Title. – This chapter shall be known as “The Bureau of Audits Committee.”

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     22-20-2. Bureau of audits committee created – Appointment of members - Officers.

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– (a) There is hereby created the bureau of audits committee that shall consist of five (5) members

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as follows: two (2) shall be appointed by the speaker of the house; two (2) shall be appointed by

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the senate president; one shall be appointed alternately by the senate president and the speaker of

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the house with the senate president making the first appointment.

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     (b) Appointments to the committee shall be made to provide demonstrated and

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acknowledged expertise in a diverse range of financial and auditing areas, including:

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     (1) Financial expert;

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     (2) Active certified public accountant;

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     (3) Certified internal auditor;

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     (4) Governmental financial accounting expert; and

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     (5) Information technology systems and services expert.

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     (c) Appointments to the committee shall consider the expertise of the other members so

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that the committee’s composition reflects a range and diversity of skills.

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     (d) No member of the committee shall be a current or former state legislator, or be

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employed by, a consultant to, or affiliated with the Rhode Island house of representatives or the

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Rhode Island senate.

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     (e) A committee member shall not receive compensation for his or her service on the

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committee, but may receive a per diem and reimbursement for travel and other necessary

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expenses while engaged in the performance of official duties of the committee.

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     (f) Each committee member shall, before entering upon his or her duties, take an oath to

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administer the duties of his or her office faithfully and impartially, and the oath shall be filed in

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the office of the secretary of state.

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     (g) A quorum shall consist of three (3) members of the committee. A majority vote of

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those present shall be required for action.

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     (h) There shall not be any liability in a private capacity on the part of the committee or

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any member of the committee, or any officer or employee of the committee or on account of any

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act performed or obligation entered into in an official capacity, when done in good faith, without

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intent to defraud, and in connection with the administration, management, or conduct of this

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chapter or affairs related to this chapter.

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     (i) The committee shall adopt a code of ethics applicable to each committee member,

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officer and employee that, at a minimum, includes standards established in chapter 36-14 (“code

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of ethics”).

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     22-20-3. Term of office – Officers - Vacancies. – (a) One of those members first

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appointed by the speaker of the house shall serve an initial term of two (2) years; one of those

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members first appointed by the senate president shall serve an initial term of two (2) years.

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Thereafter, all appointed members of the committee shall be appointed to serve for terms of three

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(3) years, except for the member alternately appointed who shall serve a term of four (4) years.

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     (b) The member alternately appointed shall serve as chairperson. The committee shall

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select a vice chairperson and secretary from among its membership.

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     (c) The committee members are eligible to succeed themselves. All appointed committee

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members shall be appointed to serve for not more than two (2) terms. A vacancy other than by

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expiration shall be filled in the manner of the original appointment but only for the unexpired

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portion of the term.

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     (d) A member of the committee appointed by the speaker of the house shall be removable

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by the speaker of the house with the consent of a majority of the senate. A member of the

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committee appointed by the senate president shall be removable by the senate president with the

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consent of a majority of the house. Removal in accordance with this subsection shall be for cause

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only and removal solely for partisan or personal reasons unrelated to capacity or fitness for the

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office shall be unlawful.

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     (e) Any committee member who fails to attend more than fifty percent (50%) of all

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meetings held during any calendar year shall be deemed to have resigned, unless the committee

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member requests in writing to the chairperson to serve the remaining term of his or her

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appointment, setting forth the reason or reasons for the absences, and the majority of the

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committee members approve the request.

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     22-20-4. Chief of the bureau of audits. – (a) The committee shall engage a chief of the

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bureau of audits who shall be an employee of the committee and who shall not be a member of

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the committee. At the time of appointment, the chief of the bureau of audits shall have had active

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experience in general accounting principles and practices in this state for a total period of at least

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five (5) years. The chief of the bureau of audits shall be in the unclassified service. The duties and

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powers of the chief of the bureau of audits shall be determined by the committee and the chief

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shall be subject to the direction and control of the committee. The committee shall not engage a

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chief for more than five (5) years; provided, however, that the committee may renew its contract

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with the chief of the bureau of audits.

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     (b) The committee shall employ qualified persons necessary for the efficient operation of

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the bureau of audits, shall determine their duties and compensation, shall be subject to the

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direction and control of the committee, and those persons shall be in the unclassified service.

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     (1) No person shall be employed as an auditor who does not have adequate technical

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training and proficiency, and a baccalaureate degree from a college or university, and no person

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shall be employed or retained as legal advisor on either a full-time or a part-time basis who is not

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a member of the Rhode Island bar.

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     (c) The chief, before entering upon the duties of his or her office, shall take and subscribe

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to the oath of office required of state officers by the state constitution.

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     (d) The chief shall be provided with suitable quarters, but to facilitate auditing and to

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eliminate unnecessary traveling, the committee may establish divisions and assign auditors to

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each division and determine their duties and the areas of the state to be served by the respective

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divisions. The chief shall be provided and furnished with any space that may be necessary to

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carry out his or her functions in other areas of the state.

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     (e) Subject to the direction of the committee, the chief may make and enforce reasonable

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rules and regulations necessary to facilitate audits which the committee authorizes the chief to

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perform.

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     (f) No employee of the bureau of audits shall serve as an executive, officer, or employee

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of any political party committee, organization, or association or be employed by, a consultant to,

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or affiliated with the house or senate. Neither the chief nor any employee of the bureau of audits

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shall become a candidate for election to public office unless he or she shall first resign from his or

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her office or employment.

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     22-20-5. Salaries and expenses. – (a) The expenses of the members of the committee

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shall be approved by the chairperson of the committee, and paid from the appropriation for

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legislative expense.

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     (b) The chief shall prepare and annually submit to the committee a proposed budget for

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the ensuing fiscal year. The committee shall review the budget request and may amend or change

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the budget request as it deems necessary. The budget request, as amended or changed by the

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committee, shall become the operating budget of the bureau of audits for the ensuing fiscal year;

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provided, that the budget so adopted may subsequently be amended under the same procedure.

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     (c) Within the limitations of the approved operating budget, the salaries and expenses of

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the chief and his or her staff shall be paid from the appropriation for legislative expense or any

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other moneys appropriated by the legislature for that purpose. The committee shall approve all

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bills for salaries and expenses.

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     (d) Commencing January 1, 2014, and every year thereafter, each quasi-public

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corporation shall be assessed an amount not to exceed one-sixteenth (1/16) of one percent (1%) of

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its total annual revenue for the previous fiscal year. The assessments shall be placed in a

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restricted receipt account of the joint committee on legislative services for the sole purpose of

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covering the operating costs of the bureau of audits. For purposes of this chapter, a quasi-public

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corporation means any body corporate and politic created or to be created pursuant to the general

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laws.

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     22-20-6. Access of chief to state property – Assistance to other departments. – For

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the purpose of making any investigation authorized by this chapter, the chief of the bureau of

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audits or his or her duly authorized agent may enter upon any state property at any reasonable

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time.

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     22-20-7. Audits performed by the bureau of audits. – (a) The bureau of audits is

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authorized to conduct audits of any state department, state agency, quasi-public corporation, or

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private entity that is a recipient of state funding or state grants. As deemed necessary or expedient

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by the bureau of audits, audits may be made relative to the financial affairs or the economy and

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efficiency of management of each department, agency and quasi-public corporations. The chief,

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at the direction of the committee, shall determine which such audits shall be performed in

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accordance with a risk-based evaluation. Unless there is an issue of misappropriation, the

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provisions of this section shall not apply to non-profit organizations.

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     (b) Within twenty (20) days following the date of the issuance of the final audit report,

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the head of the department, agency, quasi-public corporation, or private entity audited shall

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respond in writing to each recommendation made in the final audit report. This response shall

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address the department’s, agency’s, quasi-public corporation’s, or private entity’s plan of

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implementation for each specific audit recommendation and, if applicable, the reasons for

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disagreement with any recommendation proposed in the audit report. Within one year following

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the date on which the audit report was issued, the bureau of audits may perform a follow-up audit

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for the purpose of determining whether the department, agency, or quasi-public corporation, or

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private entity has implemented, in an efficient and effective manner, its plan of action for the

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recommendations proposed in the audit report.

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     (c) The bureau of audits shall maintain a full record of each audit. In the event that

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information gathered as a result of an audit indicates that criminal activity may have occurred, the

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chief of the bureau of audits may provide such information to a state or federal law enforcement

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agency. For any such information that is otherwise exempt from public disclosure under the

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provisions of chapter 38-2-1, the provision of such information to a law enforcement agency shall

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not therefore require that this information be further disclosed.

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     (d) Copies of each audit report, the written response to the audit report, and the results of

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each follow-up audit as described in subsection (b) above shall be submitted to the governor and

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the chairpersons of the house finance committee and the senate finance committee.

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     22-20-8. Cost of forensic examinations. – When it is determined by the chief at the

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direction of the committee that an audit is necessary because there is sufficient evidence to

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believe that there may have been fiscal impropriety, wrongdoing or fiscal mismanagement by any

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employee, board member, or commissioner of any state agency or authority as defined in section

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42-35-1, the bureau of audits may conduct a forensic examination of such entity. All costs

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associated with the forensic examination shall be paid, as deemed appropriate by the committee,

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either by the examined entity or by an appropriation proposed by the governor and enacted by the

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general assembly. Such costs shall include, but not be limited to, the following expenses:

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     (1) One hundred percent (100%) of the total salaries and benefits paid to the examining

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personnel of the bureau of audits engaged in those examinations;

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     (2) All costs associated with the procurement of a forensic consultant;

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     (3) All costs associated with a consultant that provides expertise pertinent to the

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examinee’s operations; and

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     (4) All reasonable technology costs related to the forensic examination process.

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Technology costs shall include the actual cost of software and hardware utilized in the

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examination process and the cost of training examination personnel in the proper use of the

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software/hardware.

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     22-20-9. Investigations or management advisory and consulting services upon

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request of governor or general assembly. – The bureau of audits shall, upon the written request

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of the governor, the director of the department of administration, or of either branch of the

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general assembly, conduct audits, provide management advisory and consulting services, or

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conduct investigations relative to the financial affairs or the economy and efficiency of

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management, or both, of any state department or agency. The chief, at the direction of the

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committee, may from time to time, make such investigations and additional reports to the

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governor, the director of the department of administration, and the general assembly as the chief,

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at the direction of the committee shall deem necessary or advisable.

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     22-20-10. Management advisory and consulting services provided to state agencies

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and departments. – When requested in writing by the head of a state department, agency or

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quasi-public corporation the chief, at the direction of the committee, may provide management

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advisory or consulting services to the department or agency. Any such request must include the

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scope of services requested and a schedule for the work to be performed.

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     22-20-11. Persons authorized to conduct audits – Reports of irregularities. – Any

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qualified person duly authorized by the committee to act as auditor may examine the books,

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papers, and documents of any department, or of the clerk of any court or office of the state having

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control of funds, and if the audit discloses any irregularities or improper handling of records or

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funds, the auditor shall report the same to the committee, the governor, the speaker of the house

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and the senate president.

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     22-20-12. Disclosure of confidential health care information. – A patient’s

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confidential health care information shall be released or transferred without the written consent of

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the patient or the patient’s authorized representative to the chief or his or her designated

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representative for the purpose of conducting financial audits, management audits, program

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evaluations, and research, provided the personnel shall not identify, directly or indirectly, any

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individual patient in any report of the audit, evaluation, or research, or otherwise disclose patient

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identities in any manner.

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     22-20-13. Access to executive sessions of a public agency – Access to records –

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Disclosure by the chief. – (a) Whenever a public agency goes into executive session, the chief or

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his or her designated representative shall be permitted to attend the executive session or if the

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chief or his or her designee is not in attendance at the executive session, the chief or his or her

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designee, upon written request, shall be furnished with copies of all data or materials furnished to

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the members of the public agency at the executive session. If the chief or his or her designee

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attends the executive session, the chief shall be furnished the same data in the same form and at

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the same time as members of the public agency.

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     (b) Within three (3) working days of a written request by the chief, the public agency

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shall furnish a copy, whether approved by the agency or not, of the minutes of any meeting,

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including any executive session of the public agency.

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     (c) The chief shall have full and unlimited access to any and all records of any public

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agency, in whatever form or mode the records may be, unless the chief’s access to the records is

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specifically prohibited or limited by federal or state law. In no case shall any confidentiality

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provisions of state law be construed to restrict the chief’s access to the records; provided, the

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chief’s access to any confidential data shall not in any way change the confidential nature of the

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data obtained. Where an audit or investigative finding emanates from confidential data, specific

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confidential information shall not be made public. The records shall include those in the

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immediate possession of a public agency as well as records which the agency itself has a right to.

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In the event of a dispute between the agency involved and the chief as to whether or not the data

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involved are confidential by law, the matter shall be referred to the attorney general for

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resolution.

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     (d) If, in the course of an executive session, any fact comes to the attention of the chief or

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his or her designated representative, which in his or her judgment constitutes an impropriety,

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irregularity, or illegal transaction, or points to the onset of an impropriety or illegal transaction,

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then the chief shall disclose that information to the bureau of audits committee, and the

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chairperson of the public agency involved. Where the facts or the data upon which the facts are

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based are deemed confidential pursuant to the provisions of federal or state law, the chief’s access

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to the information shall not in any way change the confidential nature of the data obtained.

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     (e) In the event of a dispute between the agency involved and the chief as to whether or

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not the data involved are confidential by law, the matter will be referred to the attorney general

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for resolution.

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     (f) The chief or his or her designated representative shall be immune from any liability to

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any party for claims arising out of disclosure authorized by this section.

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     (g) For the purposes of this section, the phrase “public agency” shall include the

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following: the Rhode Island industrial building authority, the Rhode Island recreational building

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authority, the Rhode Island economic development corporation, the Rhode Island industrial

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facilities corporation, the Rhode Island refunding bond authority, the Rhode Island housing and

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mortgage finance corporation, the Rhode Island resource recovery corporation, the Rhode Island

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public transit authority, the Rhode Island student loan authority, the water resources board, the

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Rhode Island health and educational building corporation, the Rhode Island higher education

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assistance authority, the Rhode Island turnpike and bridge authority, the Narragansett Bay

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commission, Rhode Island public telecommunications authority, the convention center authority,

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channel 36 foundation, their successors and assigns, and any other body corporate and politic

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which has been or which is subsequently created or established within this state.

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     22-20-14. Rules and regulations. – The committee may adopt rules or any amendments

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to rules in accordance with the provisions of chapter 42-35.

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     22-20-15. Applicability of other laws. – The exchange shall be subject to the provisions

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of chapter 22 (“open meetings”), chapter 36-14 (“code of ethics”) and chapter 38-2 (“access to

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public records”).

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     SECTION 3. Chapter 35-7 of the General Laws entitled "Post Audit of Accounts" is

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hereby repealed in its entirety.

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     CHAPTER 35-7

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Post Audit of Accounts

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     35-7-1. Bureau of audits. -- The director of administration shall create a bureau of audits

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which shall conduct all audits required by any department.

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     35-7-2. Repealed.. --

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     35-7-3. Audits performed by the bureau of audits. -- (a) The bureau of audits is

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authorized to conduct audits of any state department, state agency, or private entity that is a

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recipient of state funding or state grants. As deemed necessary or expedient by the bureau of

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audits, audits may be made relative to the financial affairs or the economy and efficiency of

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management of each department and agency. The bureau of audits shall determine which such

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audits shall be performed in accordance with a risk-based evaluation. Unless there is an issue of

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misappropriation, the provisions of this section shall not apply to non-profit organizations.

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      (b) Within twenty (20) days following the date of the issuance of the final audit report,

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the head of the department, agency or private entity audited shall respond in writing to each

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recommendation made in the final audit report. This response shall address the department's,

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agency's or private entity's plan of implementation for each specific audit recommendation and, if

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applicable, the reasons for disagreement with any recommendation proposed in the audit report.

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Within one year following the date on which the audit report was issued, the bureau of audits may

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perform a follow-up audit for the purpose of determining whether the department, agency or

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private entity has implemented, in an efficient and effective manner, its plan of action for the

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recommendations proposed in the audit report.

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      (c) The bureau of audits shall maintain a full record of each audit. In the event that

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information gathered as a result of an audit indicates that criminal activity may have occurred, the

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chief of the bureau of audits may provide such information to a state or federal law enforcement

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agency. For any such information that is otherwise exempt from public disclosure under the

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provisions of Rhode Island general law section 38-2-1 et seq., the provision of such information

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to a law enforcement agency shall not therefore require that this information be further disclosed.

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      (d) Copies of each audit report, the written response to the audit report, and the results of

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each follow-up audit as described in subsection (b) above shall be submitted to the chairpersons

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of the house finance committee and the senate finance committee.

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     35-7-3.1. Cost of forensic examinations. -- When it is determined by the bureau of

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audits that an audit is necessary because there is sufficient evidence to believe that there may

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have been fiscal impropriety, wrongdoing or fiscal mismanagement by any employee, board

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member, or commissioner of any state agency or authority as defined in section 42-35-1, the

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bureau of audits may conduct a forensic examination of such entity. All costs associated with the

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forensic examination shall be paid, as deemed appropriate, either by the examined entity or by an

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appropriation proposed by the governor and enacted by the general assembly. Such costs shall

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include, but not be limited to, the following expenses:

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      (1) One hundred percent (100%) of the total salaries and benefits paid to the examining

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personnel of the bureau of audits engaged in those examinations;

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      (2) All costs associated with the procurement of a forensic consultant;

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      (3) All costs associated with a consultant that provides expertise pertinent to the

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examinee's operations;

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      (4) All reasonable technology costs related to the forensic examination process.

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Technology costs shall include the actual cost of software and hardware utilized in the

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examination process and the cost of training examination personnel in the proper use of the

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software hardware.

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     35-7-4. Repealed.. --

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     35-7-5. Investigations or management advisory and consulting services upon request

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of governor or general assembly. -- The bureau of audits shall, upon the written request of the

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governor, the director of the department of administration, or of either branch of the general

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assembly, conduct audits, provide management advisory and consulting services, or conduct

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investigations relative to the financial affairs or the economy and efficiency of management, or

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both, of any state department or agency. The bureau of audits may from time to time make such

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investigations and additional reports to the governor, the director of the department of

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administration, and the general assembly as the chief of the bureau shall deem necessary or

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advisable.

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     35-7-5.1. Management advisory and consulting services provided to state agencies

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and departments. -- When requested in writing by the head of a state department or agency to

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the director of administration, the bureau of audits may provide management advisory or

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consulting services to the department or agency. Any such request must include the scope of

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services requested and a schedule for the work to be performed.

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     35-7-6. Repealed.. --

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     35-7-7. Persons authorized to conduct audits -- Reports of irregularities. -- Any

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qualified person duly authorized by the director of administration to act as auditor may examine

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the books, papers, and documents of any department, or of the clerk of any court or office of the

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state having control of funds, and if the audit discloses any irregularities or improper handling of

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records or funds, the auditor shall report the same to the director, who shall report to the governor

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with his or her recommendations.

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     35-7-8. Access of director to state property -- Assistance to other departments. -- For

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the purpose of making any investigation authorized by sections 35-7-1 -- 35-7-9, the director of

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administration or his or her duly authorized agent may enter upon any state property at any

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reasonable time. The director, upon request by the proper person, shall assist, so far as

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practicable, any state department or agency in the keeping of its accounts and financial records

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and the drawing of contracts and agreements, and may generally advise that person concerning

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the financial affairs and management of the department or agency.

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     35-7-9. Repealed.. --

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     35-7-10. Audit provided for by finance committee of house. -- It shall be the duty of

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the finance committee of the house of representatives to provide annually for a complete post

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audit of the financial transactions and accounts of the state. The finance committee of the house

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of representatives shall be required to utilize the services of the auditor general to perform the

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post audit. The post audit shall commence as soon as possible after the close of each fiscal year

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and shall include the examination of all accounts from the date of the last post audit.

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     35-7-11. Specifications of audit -- Copies of report. -- The director of administration

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and the general treasurer shall assist the finance committee of the house of representatives in

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determining the post audit specifications prior to the employment of the certified public

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accountant or accountants. Upon completion of the post audit the certified public accountant or

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accountants shall submit copies of the report to the members of the finance committee of the

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house of representatives, the governor, the director of administration, the general treasurer, and

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the legislative council. The report shall also be made available for public inspection.

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     35-7-12. Repealed.. --

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     35-7-13. Audit of quasi-public agencies. -- All quasi-public agencies including

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corporations, authorities, commissions, and boards created by the authority of the general

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assembly, executive order, or state law, excluding cities and their subdivisions, towns and their

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subdivisions, regional school districts and school committees, water districts, fire districts, and

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any other municipal corporations and their agencies, subject to post audit, are hereby required to

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obtain the approval of the director of administration and the auditor general prior to the

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employment of private auditors. Audit workpapers of the private auditors shall be made available

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upon request, at the completion of the audit, to the auditor general and/or the director of

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administration for their review. The audit report shall be furnished to the auditor general and the

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director of administration.

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     35-7-14. Travel and entertainment expenses of quasi-public agencies. -- Quasi-public

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agencies, as set forth in section 35-7-13, shall prepare and maintain documentation for all travel

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and entertainment expenses in sufficient detail to allow for post audit.

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     SECTION 4. This act shall take effect upon passage.

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LC01905

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO THE GENERAL ASSEMBLY - THE LEGISLATIVE AUDIT BUREAU

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     This act would create the bureau of audits committee, delete the provisions of the general

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laws relative to “post audit of accounts” and would relocate certain sections from the “post audit

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of accounts” chapter into the newly created “bureau of audits committee”.

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     This act would take effect upon passage.

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LC01905

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