S-1900

AN ACT Relating to internal audits by state agencies and institutions; and adding a new chapter to Title 43 RCW.

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

NEW SECTION. Sec. 1. The purpose of this chapter is to strengthen the internal control of state agencies. Each state agency meeting the criteria in section 2 of this act shall establish a full-time program of internal auditing. Such a function will furnish independent analyses, assessment, and recommendations concerning the adequacy and effectiveness of an agency's systems of internal control, and provide for evaluation of the economy and efficiency by which the agencies carry out their assigned responsibilities.

NEW SECTION. Sec. 2. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "State agency" means any department, agency, commission, bureau, office, or any other entity or authority of state government as determined by the office of financial management and the office of state auditor based on an assessment of business exposure. The assessment shall include, but not be limited to, the volume of transactions and dollar value of financial activity, the nature of the agency's mission and related internal control structure, compliance requirements, marketability and level of liquid assets, and information systems development.

(2) "Agency administrator" means the executive head of an agency.

(3) "Internal audit" means an independent appraisal activity within an agency for the review of operations as a service to management.

NEW SECTION. Sec. 3. Each internal audit program shall conform to the standards for the professional practice of internal auditing, the certified internal auditor code of professional ethics, and the statement of responsibilities of internal auditing, as promulgated by the institute of internal auditors. It shall also conform to policies and manuals of the office of financial management and government auditing standards issued by the comptroller general of the United States, as appropriate.

NEW SECTION. Sec. 4. (1) The scope and assignment of internal audits for each agency shall be determined by the agency administrator or designee. The internal audit manager and staff shall have access to any and all records, and other information of the state agency they deem necessary to carry out their duties.

(2) No person involved in internal audit activities may wrongfully disclose any information that is confidential or privileged under any general statute or any statute specifically applicable to the programs of the agency within which the internal audit is being performed.

(3) If any audit discloses malfeasance, misfeasance, or nonfeasance in office on the part of any public officer or employee, the agency administrator or internal audit manager shall make a report of such activity to the state auditor for review and possible further action under RCW 43.09.330. If any audit reveals any suspected loss, the internal auditor shall immediately report such loss to the state auditor in accordance with accounting manual procedures required under RCW 43.88.160.

(4) Internal audits shall be performed in compliance with requirements established by the office of financial management.

NEW SECTION. Sec. 5. Each agency administrator shall ensure that the internal audit program includes the following at a minimum:

(1) A biennial plan, identifying the areas to be audited and the time period in which the audits will be conducted subject to revision as needed.

(2) A review of the agency's internal control structure at least once every three years.

(3) Review of the design of major new electronic data processing systems and major modifications of existing systems before their installation to ensure the systems provide for adequate audit trails and internal control accountability. Such review shall conform to the standards adopted by the department of information systems.

NEW SECTION. Sec. 6. Sections 1 through 5 of this act shall constitute a new chapter in Title 43 RCW.