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AN ACT Relating to legislative oversight of state and local government programs; amending RCW 44.28.010, 44.28.020, 44.28.030, 44.28.040, 44.28.060, 44.28.140, 44.28.080, 44.28.180, 44.28.087, 44.28.100, 44.28.120, 44.28.130, 44.28.150, 43.88.020, 43.88.090, 43.88.160, 28A.630.830, 28B.20.382, 39.19.060, 39.29.016, 39.29.018, 39.29.025, 39.29.055, 41.06.070, 42.48.060, 43.09.310, 43.21J.800, 43.79.270, 43.79.280, 43.88.205, 43.88.230, 43.88.310, 43.88.510, 43.131.050, 43.131.060, 43.131.070, 43.131.080, 43.131.110, 43.250.080, 44.40.025, 67.70.310, and 79.01.006; adding new sections to chapter 44.28 RCW; creating a new section; recodifying RCW 44.28.140, 44.28.180, and 44.28.087; and repealing RCW 44.28.050, 44.28.085, and 44.28.086.

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

NEW SECTION. Sec. 1. The public expects the legislature to address citizens' increasing demand for the basic services of state government, while limiting the growth in spending. The public demands that public officials and state employees be accountable to provide maximum value for every dollar entrusted to state government. The public believes that it is possible to improve the responsiveness of state government and to save the taxpayers' money, and that efficiency and effectiveness should result in savings.

The legislature, public officials, state employees, and citizens need to know the extent to which state agencies, programs, and activities are achieving the purposes for which they were created. It is essential to compare the conditions, problems, and priorities that led to the creation of government programs with current conditions, problems, and priorities, and to examine the need for and performance of those programs in the current environment.

Along with examining the performance of state agencies and programs, the legislature, public officials, state employees, and citizens must also consider the effect that state government programs can reasonably expect to have on citizens' lives, how the level of programs and services of Washington state government compares with that of other states, and alternatives for service delivery, including other levels of government and the private sector. It is essential that the legislature, public officials, state employees, and citizens share a common understanding of the role of state government. The performance and relative priority of state agency programs and activities must be the basis for managing and allocating resources within Washington state government.

It is the intent of the legislature to strengthen the role of the current legislative budget committee so that it may more effectively examine how efficiently state agencies perform their responsibilities and whether the agencies are achieving their goals. It is also the intent of the legislature to enact a clear set of definitions for different types of audits in order to eliminate confusion with regard to government reviews.

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

(1) "Director" means the director of the office of the joint legislative audit and review committee.

(2) "Economy and efficiency audits" means performance audits that establish: (a) Whether the state is acquiring, protecting, and using its resources such as personnel, property, and space economically and efficiently; (b) the causes of inefficiencies or uneconomical practices; and (c) whether the state has complied with significant laws and rules in acquiring, protecting, and using its resources.

(3) "Final compliance report" means a written document, as approved by the joint committee, that states the specific actions an agency or local government has taken to implement recommendations contained in the final performance audit report and the preliminary compliance report. Any recommendations, including proposed legislation and changes in the agency's rules and practices, based on testimony received, must be included in the final compliance report.

(4) "Joint committee" means the joint legislative audit and review committee.

(5) "Performance audit" means an objective and systematic assessment of state government or any of its agencies, programs, functions, or activities, or a unit of local government receiving state funds, by an independent evaluator in order to help public officials improve efficiency, effectiveness, and accountability. Performance audits include economy and efficiency audits, program audits, and performance verifications.

(6) "Performance measures" means realistic estimates, generally in quantifiable terms, of what the state or any of its agencies or programs is expected to achieve.

(7) "Performance verification" means an analysis that verifies: (a) The accuracy of data used by a state agency in quantifying intended results and measuring performance toward those results; and (b) whether the reported results were achieved.

(8) "Preliminary compliance report" means a written document that states the specific actions an agency has taken to implement any recommendations contained in the final performance audit report.

(9) "Program audits" means performance audits that determine: (a) The extent to which desired outcomes or results are being achieved; (b) the causes for not achieving intended outcomes or results; and (c) compliance with significant laws and rules applicable to the program.

(10) "State agency" means a state agency, department, office, officer, board, commission, bureau, division, institution, or institution of higher education financed in whole or in part from funds appropriated by the legislature. "State agency" includes all elective offices in the executive branch of state government.

Sec. 3. RCW 44.28.010 and 1983 c 52 s 1 are each amended to read as follows:

((~~There is hereby created a~~)) (1) The joint legislative ((~~budget~~)) audit and review committee is created, which shall consist of eight senators and eight representatives from the legislature, and two nonvoting members of the general public appointed under subsection (2) of this section. The senate members of the committee shall be appointed by the president of the senate, and the house members of the committee shall be appointed by the speaker of the house. Not more than four members from each house shall be from the same political party. Members shall be appointed before the close of each regular session of the legislature during an odd-numbered year((~~: PROVIDED, That if prior to~~)). If before the close of a regular session during an odd-numbered year, the governor issues a proclamation convening the legislature into special session, or the legislature by resolution convenes the legislature into special session, following such regular session, then such appointments shall be made as a matter of closing business of such special session. Members shall be subject to confirmation, as to the senate members by the senate, and as to the house members by the house. In the event of a failure to appoint or confirm joint committee members, ((either on the part of the president of the senate or on the part of the speaker of the house, or in the event of a refusal by either the senate or the house to confirm appointments on the committee, then)) the members of the joint committee from either house in which there is a failure to appoint or confirm shall be elected ((~~forthwith~~)) by the members of such house.

(2) The speaker of the house shall appoint one of the members representing the general public, and the president of the senate shall appoint the other member representing the general public. The general public members must be appointed before the close of each regular session of the legislature during an odd-numbered year. The term for the general public members commences upon appointment and expires at the close of session in the next odd-numbered year and continues until a successor is appointed. The speaker of the house or the president of the senate, as appropriate, shall make an appointment to fill a vacancy in the general public member positions for the unexpired term.

Sec. 4. RCW 44.28.020 and 1980 c 87 s 31 are each amended to read as follows:

The term of office of the members of the joint committee who continue to be members of the senate and house shall be from the close of the session in which they were appointed or elected as provided in RCW 44.28.010 until the close of the next regular session during an odd-numbered year or special session following such regular session, or, in the event that such appointments or elections are not made, until the close of the next regular session during an odd-numbered year during which successors are appointed or elected. The term of office of ((~~such~~)) joint committee members ((~~as shall~~)) who do not continue to be members of the senate and house ((~~shall~~)) ceases upon the convening of the next regular session of the legislature during an odd-numbered year after their confirmation, election or appointment. Vacancies on the joint committee, except for vacancies in the positions designated for members of the general public, shall be filled by appointment by the remaining members. All such vacancies shall be filled from the same political party and from the same house as the member whose seat was vacated.

Sec. 5. RCW 44.28.030 and 1955 c 206 s 6 are each amended to read as follows:

On and after the commencement of a succeeding general session of the legislature, those members of the joint committee who continue to be members of the senate and house, respectively, shall continue as members of the joint committee as indicated in RCW 44.28.020 and the joint committee shall continue with all its powers, duties, authorities, records, papers, personnel and staff, and all funds made available for its use.

Sec. 6. RCW 44.28.040 and 1975-'76 2nd ex.s. c 34 s 134 are each amended to read as follows:

The legislative members of the joint committee shall serve without additional compensation, but shall be reimbursed for their travel expenses((,)) in accordance with RCW 44.04.120 ((~~as now existing or hereafter amended, incurred while~~)) for attending ((~~sessions~~)) meetings of the joint committee or ((~~meetings of any~~)) a subcommittee of the joint committee, or while engaged on other ((~~committee~~)) business authorized by the joint committee((~~, and while going to and coming from committee sessions or committee meetings~~)). The general public members of the joint committee shall serve without compensation but shall be reimbursed for their travel expenses in accordance with RCW 43.03.050 and 43.03.060.

Sec. 7. RCW 44.28.060 and 1975 1st ex.s. c 293 s 13 are each amended to read as follows:

The members of the joint committee shall ((have the power and duty to appoint its own chairman, vice chairman, and other officers; to make rules and regulations for orderly procedure; to perform, either through the legislative budget committee or through subcommittees of the legislative budget committee, all duties and functions relating to improving the economy, efficiency, and effectiveness of state agency management by performance audits and other staff studies of state government, its officers, boards, committees, commissions, institutions, and other state agencies)) select a chair and a vice‑chair, to serve for a period not to exceed one year. The chair shall alternate between the members of the senate and the house of representatives, and between each political party. The general public members of the joint committee may not serve as chair or vice-chair.

The chair shall appoint an executive committee consisting of two senators and two representatives from the members of the joint committee. The function of the executive committee is to appoint the director. Approval by an affirmative vote of at least three members of the executive committee is required for a decision regarding employment of the director. The executive committee shall set the salary of the director.

Sec. 8. RCW 44.28.140 and 1975 1st ex.s. c 293 s 17 are each amended to read as follows:

((The committee is hereby authorized and empowered to appoint an officer to be known as the legislative auditor, and to fix his compensation, who shall be the executive officer of the committee and assist in its duties and shall compile information for the committee. The committee is hereby authorized and empowered to select and employ other clerical, legal, accounting, research and other personnel that it may deem desirable in the performance of its duties, and the compensation and salaries shall be fixed by the legislative budget committee.))

The ((~~duties of the legislative auditor~~)) director shall ((~~be as follows~~)):

(1) ((~~To ascertain the facts and make recommendations to the committee and under their direction to the committees of the state legislature concerning~~

~~(a) revenues and expenditures of the state; and~~

~~(b) the organization and functions of the state, its departments, subdivisions and agencies.~~

~~(2) To~~)) Establish and manage the office of the joint legislative audit and review committee to carry out the functions of this chapter;

(2) Direct the audit and review functions described in this chapter and ensure that all audits are performed in accordance with the "Government Auditing Standards" published by the comptroller general of the United States;

(3) In consultation with and with the approval of the executive committee, hire staff necessary to carry out the purposes of this chapter. Employee salaries, other than the director, shall be set by the director with the approval of the executive committee, the secretary of the senate, and the chief clerk of the house of representatives;

(4) Assist the several standing committees of the house and senate in consideration of legislation affecting state departments and their efficiency; ((to)) appear before other legislative committees; and ((to)) assist any other legislative committee upon instruction by the joint legislative ((~~budget~~)) audit and review committee.

((~~(3) To~~)) (5) Provide the legislature with information obtained under the direction of the joint legislative ((~~budget~~)) audit and review committee((.));

((~~(4) To~~)) (6) Maintain a record of all work performed by the ((~~legislative auditor~~)) director under the direction of the joint legislative ((~~budget~~)) audit and review committee and ((to)) keep and make available all documents, data, and reports submitted to ((~~him~~)) the director by any legislative committee.

NEW SECTION. Sec. 9. (1) In conducting performance audits, the director shall work in consultation with the state auditor. The director shall also work closely with the chairs and staff of standing committees of the senate and house of representatives.

(2) The director shall contract with and consult with public and private independent professional and technical experts as necessary in conducting the performance audits. The director shall also involve front-line employees and internal auditors in the performance audit process to the highest possible degree.

(3) The director shall work with the legislative evaluation and accountability program committee to develop information system capabilities necessary for the performance audit requirements of this chapter.

(4) The director shall work with the Washington performance partnership and the office of financial management to facilitate the implementation of effective performance measures throughout state government. In agencies and programs where effective systems for performance measurement exist, the measurements incorporated into those systems must be the basis for performance audits conducted under this chapter.

NEW SECTION. Sec. 10. (1) Subject to the requirements of the annual performance audit work plan approved by the joint committee under RCW 44.28.180, as recodified by this act, performance audits may, in addition to the determinations that may be made in such an audit as specified in section 2 of this act, include the following:

(a) An examination of the costs and benefits of agency programs, functions, and activities;

(b) Identification of viable alternatives for reducing costs or improving service delivery, including the elimination of functions or transferring functions to the private sector;

(2) As part of a performance audit, the director may review the costs of programs recently implemented by the legislature to compare actual agency costs with the appropriations provided and the cost estimates that were included in the fiscal note for the program at the time the program was enacted.

Sec. 11. RCW 44.28.080 and 1975 1st ex.s. c 293 s 14 are each amended to read as follows:

The joint committee ((~~shall have~~)) has the following powers:

(1) To make examinations and reports concerning whether or not appropriations are being expended for the purposes and within the statutory restrictions provided by the legislature; ((~~concerning the economic outlook and estimates of revenue to meet expenditures;~~)) and concerning the organization and operation of procedures necessary or desirable to promote economy, efficiency, and effectiveness in state government, its officers, boards, committees, commissions, institutions, and other state agencies, and to make recommendations and reports to the legislature.

(2) To make such other studies and examinations of economy, efficiency, and effectiveness of state government and its state agencies as it may find advisable, and to hear complaints, hold hearings, gather information, and make findings of fact with respect thereto.

(3) ((~~The committee shall have the power~~)) To conduct program and fiscal reviews of any state agency or program scheduled for termination under the process provided under chapter 43.131 RCW.

(4) To receive a copy of each report of examination or audit issued by the state auditor for examinations or audits that were conducted at the request of the joint committee, to review the report or audit, and make recommendations to the legislature and the state auditor as it deems appropriate as a separate addendum to the report or audit.

(5) To develop internal tracking procedures that will allow the legislature to measure the effectiveness of performance audits conducted by the joint committee. At a minimum, the procedures must measure cost-savings and increases in efficiency and effectiveness in how state agencies deliver their services. The internal tracking procedures must be consistent with the "Government Auditing Standards" published by the comptroller general of the United States.

(6) To receive messages and reports in person or in writing from the governor or any other state officials and to study generally any and all business relating to economy, efficiency, and effectiveness in state government and state agencies.

Sec. 12. RCW 44.28.180 and 1993 c 406 s 5 are each amended to read as follows:

(1) ((~~In conducting program evaluations as defined in RCW 43.88.020, the legislative budget committee may establish a biennial work plan~~)) Before the completion of each legislative session, the joint legislative audit and review committee shall develop and approve a performance audit work plan for the subsequent twelve to fifteen-month period that identifies state agency programs for which formal evaluation appears necessary. Among the factors to be considered in preparing the work plan are:

(a) Whether a program newly created or significantly altered by the legislature warrants continued oversight because (i) the fiscal impact of the program is significant, or (ii) the program represents a relatively high degree of risk in terms of reaching the stated goals and objectives for that program;

(b) Whether implementation of an existing program has failed to meet its goals and objectives by any significant degree; and

(c) Whether a follow-up audit would help ensure that previously identified recommendations for improvements were being implemented.

(2) The project description for each ((~~program evaluation shall~~)) performance audit must include start and completion dates, the proposed research approach, and cost estimates.

(3) The director shall consult with the state auditor, the director of financial management, and the chairs and staff of appropriate legislative committees in developing the work plan. The work plan must identify the role of the joint committee, the state auditor, and public and private sector experts necessary to complete each performance audit.

(4) The overall work plan may include proposals to employ contract evaluators. As conditions warrant, the ((~~program evaluation~~)) performance audit work plan may be amended from time to time. All ((~~biennial~~)) performance audit work plans shall be transmitted to the appropriate fiscal and policy committees of the senate and the house of representatives.

NEW SECTION. Sec. 13. (1) When the director has completed a performance audit authorized in the annual performance audit work plan, the director shall transmit the audit to the affected state agency or local government for its comments. The agency or local government shall provide any response to the director within thirty days after receipt of the performance audit. The director shall incorporate the response of the agency or local government into the final performance audit report.

(2) Before releasing the results of a performance audit to the legislature or the public, the director shall submit the performance audit to the joint committee for its review and comment. Any comments by the joint committee must be included as a separate addendum to the performance audit. Upon consideration and incorporation of the review and comments of the joint committee, the director shall transmit the final performance audit report to the affected agency or local government, the director of financial management, the leadership of the senate and the house of representatives, and the appropriate standing committees of the house of representatives and the senate and shall make the report available for public review. For purposes of this section, "leadership of the senate and the house of representatives" means the speaker of the house, the majority leaders of the senate and the house of representatives, the minority leaders of the senate and the house of representatives, the caucus chairs of both major political parties of the senate and the house of representatives, and the floor leaders of both major political parties of the senate and the house of representatives.

NEW SECTION. Sec. 14. (1) No later than nine months after the final performance audit has been transmitted by the joint committee to the appropriate standing committees of the house of representatives and the senate, the joint committee in consultation with the standing committees shall produce a preliminary compliance report on the agency's or local government's compliance with the final performance audit recommendations. The agency or local government may attach its comments to the joint committee's preliminary compliance report as a separate addendum.

(2) Within three months after the issuance of the preliminary compliance report, the joint committee must hold at least one public hearing and receive public testimony regarding the findings and recommendations contained in the preliminary compliance report. The joint committee may waive the public hearing requirement if the preliminary compliance report demonstrates that the agency or local government is in compliance with the audit recommendations. The joint committee shall issue a final compliance report within four weeks after the public hearing or hearings. The director shall transmit the final compliance report in the same manner as a final performance audit is transmitted under section 13 of this act.

NEW SECTION. Sec. 15. The joint committee shall undergo a quality control review every three years. The review must be conducted by an organization that has experience in conducting performance audits but that is not affiliated with state government. The quality control review must include, at a minimum, an evaluation of the quality of the audits conducted by the joint committee, an assessment of the audit procedures used by the joint committee, and an assessment of the qualifications of the joint committee staff to conduct performance audits.

NEW SECTION. Sec. 16. The performance audit revolving fund is established in the state treasury. Expenditures from the fund may be made recovering the costs of performance audits from the audited agency or program. Subject to appropriation, the director shall assess agencies all or a portion of the cost of performance audits.

The cost of performance audits must include all direct and indirect costs and any other expenses incurred by the director in fulfilling his or her statutory responsibilities. The costs of audits may also be paid from other funds appropriated to the office of the joint legislative audit and review committee.

NEW SECTION. Sec. 17. To ensure the accuracy and timeliness of information used as the basis for performance audits and other responsibilities of the legislature, the director or the director's staff must be provided direct access to information held by any state agency. Agencies shall submit directly to the legislature, on a confidential basis, all data and other information requested, including tax records and client data.

Sec. 18. RCW 44.28.087 and 1973 1st ex.s. c 197 s 2 are each amended to read as follows:

All agency reports concerning program performance, including administrative review, quality control, and other internal audit or performance reports, as requested by the ((~~legislative budget~~)) joint committee, shall be furnished by the agency requested to provide such report.

Sec. 19. RCW 44.28.100 and 1987 c 505 s 45 are each amended to read as follows:

The joint committee ((~~shall have the power to~~)) may make reports from time to time to the members of the legislature and to the public with respect to any of its findings or recommendations. The joint committee shall keep complete minutes of its meetings.

Sec. 20. RCW 44.28.120 and 1951 c 43 s 9 are each amended to read as follows:

In case of the failure on the part of any person to comply with any subpoena issued in behalf of the joint committee, or on the refusal of any witness to testify to any matters regarding which he or she may be lawfully interrogated, it shall be the duty of the superior court of any county, or of the judge thereof, on application of the joint committee, to compel obedience by proceedings for contempt, as in the case of disobedience of the requirements of a subpoena issued from such court or a refusal to testify therein.

Sec. 21. RCW 44.28.130 and 1951 c 43 s 10 are each amended to read as follows:

Each witness who appears before the joint committee by its order, other than a state official or employee, shall receive for his or her attendance the fees and mileage provided for witnesses in civil cases in courts of record, which shall be audited and paid upon the presentation of proper vouchers signed by such witness and approved by the ((~~secretary and chairman~~)) chair of the joint committee.

Sec. 22. RCW 44.28.150 and 1975 1st ex.s. c 293 s 18 are each amended to read as follows:

The joint committee shall cooperate, act, and function with legislative committees and with the councils or committees of other states similar to this joint committee and with other interstate research organizations.

Sec. 23. RCW 43.88.020 and 1995 c 155 s 1 are each amended to read as follows:

(1) "Budget" means a proposed plan of expenditures for a given period or purpose and the proposed means for financing these expenditures.

(2) "Budget document" means a formal statement, either written or provided on any electronic media or both, offered by the governor to the legislature, as provided in RCW 43.88.030.

(3) "Director of financial management" means the official appointed by the governor to serve at the governor's pleasure and to whom the governor may delegate necessary authority to carry out the governor's duties as provided in this chapter. The director of financial management shall be head of the office of financial management which shall be in the office of the governor.

(4) "Agency" means and includes every state office, officer, each institution, whether educational, correctional, or other, and every department, division, board, and commission, except as otherwise provided in this chapter.

(5) "Public funds", for purposes of this chapter, means all moneys, including cash, checks, bills, notes, drafts, stocks, and bonds, whether held in trust, for operating purposes, or for capital purposes, and collected or disbursed under law, whether or not such funds are otherwise subject to legislative appropriation, including funds maintained outside the state treasury.

(6) "Regulations" means the policies, standards, and requirements, stated in writing, designed to carry out the purposes of this chapter, as issued by the governor or the governor's designated agent, and which shall have the force and effect of law.

(7) "Ensuing biennium" means the fiscal biennium beginning on July 1st of the same year in which a regular session of the legislature is held during an odd-numbered year pursuant to Article II, section 12 of the Constitution and which biennium next succeeds the current biennium.

(8) "Dedicated fund" means a fund in the state treasury, or a separate account or fund in the general fund in the state treasury, that by law is dedicated, appropriated, or set aside for a limited object or purpose; but "dedicated fund" does not include a revolving fund or a trust fund.

(9) "Revolving fund" means a fund in the state treasury, established by law, from which is paid the cost of goods or services furnished to or by a state agency, and which is replenished through charges made for such goods or services or through transfers from other accounts or funds.

(10) "Trust fund" means a fund in the state treasury in which designated persons or classes of persons have a vested beneficial interest or equitable ownership, or which was created or established by a gift, grant, contribution, devise, or bequest that limits the use of the fund to designated objects or purposes.

(11) "Administrative expenses" means expenditures for: (a) Salaries, wages, and related costs of personnel and (b) operations and maintenance including but not limited to costs of supplies, materials, services, and equipment.

(12) "Fiscal year" means the year beginning July 1st and ending the following June 30th.

(13) "Lapse" means the termination of authority to expend an appropriation.

(14) "Legislative fiscal committees" means the joint legislative ((~~budget~~)) audit and review committee, the legislative evaluation and accountability program committee, the ways and means committees of the senate and house of representatives, and, where appropriate, the legislative transportation committee.

(15) "Fiscal period" means the period for which an appropriation is made as specified within the act making the appropriation.

(16) "Primary budget driver" means the primary determinant of a budget level, other than a price variable, which causes or is associated with the major expenditure of an agency or budget unit within an agency, such as a caseload, enrollment, workload, or population statistic.

(17) ((~~"Stabilization account" means the budget stabilization account created under RCW 43.88.525 as an account in the general fund of the state treasury.~~

~~(18)~~)) "State tax revenue limit" means the limitation created by chapter 43.135 RCW.

((~~(19)~~)) (18) "General state revenues" means the revenues defined by Article VIII, section 1(c) of the state Constitution.

((~~(20)~~)) (19) "Annual growth rate in real personal income" means the estimated percentage growth in personal income for the state during the current fiscal year, expressed in constant value dollars, as published by the office of financial management or its successor agency.

((~~(21)~~)) (20) "Estimated revenues" means estimates of revenue in the most recent official economic and revenue forecast prepared under RCW 82.33.020, and prepared by the office of financial management for those funds, accounts, and sources for which the office of the economic and revenue forecast council does not prepare an official forecast including estimates of revenues to support financial plans under RCW 44.40.070, that are prepared by the office of financial management in consultation with the interagency task force.

((~~(22)~~)) (21) "Estimated receipts" means the estimated receipt of cash in the most recent official economic and revenue forecast prepared under RCW 82.33.020, and prepared by the office of financial management for those funds, accounts, and sources for which the office of the economic and revenue forecast council does not prepare an official forecast.

((~~(23)~~)) (22) "State budgeting, accounting, and reporting system" means a system that gathers, maintains, and communicates fiscal information. The system links fiscal information beginning with development of agency budget requests through adoption of legislative appropriations to tracking actual receipts and expenditures against approved plans.

((~~(24)~~)) (23) "Allotment of appropriation" means the agency's statement of proposed expenditures, the director of financial management's review of that statement, and the placement of the approved statement into the state budgeting, accounting, and reporting system.

((~~(25)~~)) (24) "Statement of proposed expenditures" means a plan prepared by each agency that breaks each appropriation out into monthly detail representing the best estimate of how the appropriation will be expended.

((~~(26)~~)) (25) "Undesignated fund balance (or deficit)" means unreserved and undesignated current assets or other resources available for expenditure over and above any current liabilities which are expected to be incurred by the close of the fiscal period.

((~~(27)~~)) (26) "Internal audit" means an independent appraisal activity within an agency for the review of operations as a service to management, including a systematic examination of accounting and fiscal controls to assure that human and material resources are guarded against waste, loss, or misuse; and that reliable data are gathered, maintained, and fairly disclosed in a written report of the audit findings.

(((28) "Performance verification" means an analysis that (a) verifies the accuracy of data used by state agencies in quantifying intended results and measuring performance toward those results, and (b) verifies whether or not the reported results were achieved.

(29) "Program evaluation" means the use of a variety of policy and fiscal research methods to (a) determine the extent to which a program is achieving its legislative intent in terms of producing the effects expected, and (b) make an objective judgment of the implementation, outcomes, and net cost or benefit impact of programs in the context of their goals and objectives. It includes the application of systematic methods to measure the results, intended or unintended, of program activities.))

(27) "Performance audit" has the same meaning as it is defined in section 2 of this act.

(28) "Performance verification" has the same meaning as it is defined in section 2 of this act.

Sec. 24. RCW 43.88.090 and 1994 c 184 s 10 are each amended to read as follows:

(1) For purposes of developing budget proposals to the legislature, the governor shall have the power, and it shall be the governor's duty, to require from proper agency officials such detailed estimates and other information in such form and at such times as the governor shall direct. The estimates for the legislature and the judiciary shall be transmitted to the governor and shall be included in the budget without revision. The estimates for state pension contributions shall be based on the rates provided in chapter 41.45 RCW. Copies of all such estimates shall be transmitted to the standing committees on ways and means of the house and senate at the same time as they are filed with the governor and the office of financial management.

The estimates shall include statements or tables which indicate, by agency, the state funds which are required for the receipt of federal matching revenues. The estimates shall be revised as necessary to reflect legislative enactments and adopted appropriations and shall be included with the initial biennial allotment submitted under RCW 43.88.110. The estimates must include consideration of findings made by the director of the office of the joint legislative audit and review committee under a performance audit of the agency.

(2) In the year of the gubernatorial election, the governor shall invite the governor-elect or the governor-elect's designee to attend all hearings provided in RCW 43.88.100; and the governor shall furnish the governor-elect or the governor-elect's designee with such information as will enable the governor-elect or the governor-elect's designee to gain an understanding of the state's budget requirements. The governor-elect or the governor-elect's designee may ask such questions during the hearings and require such information as the governor-elect or the governor-elect's designee deems necessary and may make recommendations in connection with any item of the budget which, with the governor-elect's reasons therefor, shall be presented to the legislature in writing with the budget document. Copies of all such estimates and other required information shall also be submitted to the standing committees on ways and means of the house and senate.

Sec. 25. RCW 43.88.160 and 1994 c 184 s 11 are each amended to read as follows:

This section sets forth the major fiscal duties and responsibilities of officers and agencies of the executive branch. The regulations issued by the governor pursuant to this chapter shall provide for a comprehensive, orderly basis for fiscal management and control, including efficient accounting and reporting therefor, for the executive branch of the state government and may include, in addition, such requirements as will generally promote more efficient public management in the state.

(1) Governor; director of financial management. The governor, through the director of financial management, shall devise and supervise a modern and complete accounting system for each agency to the end that all revenues, expenditures, receipts, disbursements, resources, and obligations of the state shall be properly and systematically accounted for. The accounting system shall include the development of accurate, timely records and reports of all financial affairs of the state. The system shall also provide for central accounts in the office of financial management at the level of detail deemed necessary by the director to perform central financial management. The director of financial management shall adopt and periodically update an accounting procedures manual. Any agency maintaining its own accounting and reporting system shall comply with the updated accounting procedures manual and the rules of the director adopted under this chapter. An agency may receive a waiver from complying with this requirement if the waiver is approved by the director. Waivers expire at the end of the fiscal biennium for which they are granted. The director shall forward notice of waivers granted to the appropriate legislative fiscal committees. The director of financial management may require such financial, statistical, and other reports as the director deems necessary from all agencies covering any period.

(2) The director of financial management is responsible for quarterly reporting of primary operating budget drivers such as applicable workloads, caseload estimates, and appropriate unit cost data. These reports shall be transmitted to the legislative fiscal committees or by electronic means to the legislative evaluation and accountability program committee. Quarterly reports shall include actual monthly data and the variance between actual and estimated data to date. The reports shall also include estimates of these items for the remainder of the budget period.

(3) The director of financial management shall report at least annually to the appropriate legislative committees regarding the status of all appropriated capital projects, including transportation projects, showing significant cost overruns or underruns. If funds are shifted from one project to another, the office of financial management shall also reflect this in the annual variance report. Once a project is complete, the report shall provide a final summary showing estimated start and completion dates of each project phase compared to actual dates, estimated costs of each project phase compared to actual costs, and whether or not there are any outstanding liabilities or unsettled claims at the time of completion.

(4) In addition, the director of financial management, as agent of the governor, shall:

(a) Develop and maintain a system of internal controls and internal audits comprising methods and procedures to be adopted by each agency that will safeguard its assets, check the accuracy and reliability of its accounting data, promote operational efficiency, and encourage adherence to prescribed managerial policies for accounting and financial controls. The system developed by the director shall include criteria for determining the scope and comprehensiveness of internal controls required by classes of agencies, depending on the level of resources at risk.

Each agency head or authorized designee shall be assigned the responsibility and authority for establishing and maintaining internal audits following the standards of internal auditing of the institute of internal auditors;

(b) Make surveys and analyses of agencies with the object of determining better methods and increased effectiveness in the use of manpower and materials; and the director shall authorize expenditures for employee training to the end that the state may benefit from training facilities made available to state employees;

(d) Report to the governor with regard to duplication of effort or lack of coordination among agencies;

(e) Review any pay and classification plans, and changes thereunder, developed by any agency for their fiscal impact: PROVIDED, That none of the provisions of this subsection shall affect merit systems of personnel management now existing or hereafter established by statute relating to the fixing of qualifications requirements for recruitment, appointment, or promotion of employees of any agency. The director shall advise and confer with agencies including appropriate standing committees of the legislature as may be designated by the speaker of the house and the president of the senate regarding the fiscal impact of such plans and may amend or alter said plans, except that for the following agencies no amendment or alteration of said plans may be made without the approval of the agency concerned: Agencies headed by elective officials;

(f) Fix the number and classes of positions or authorized man years of employment for each agency and during the fiscal period amend the determinations previously fixed by the director except that the director shall not be empowered to fix said number or said classes for the following: Agencies headed by elective officials;

(g) ((~~Provide for transfers and repayments between the budget stabilization account and the general fund as directed by appropriation and RCW 43.88.525 through 43.88.540;~~

~~(h)~~)) Adopt rules to effectuate provisions contained in (a) through ((~~(g)~~)) (f) of this subsection.

(5) The treasurer shall:

(a) Receive, keep, and disburse all public funds of the state not expressly required by law to be received, kept, and disbursed by some other persons: PROVIDED, That this subsection shall not apply to those public funds of the institutions of higher learning which are not subject to appropriation;

(b) Receive, disburse, or transfer public funds under the treasurer's supervision or custody;

(c) Keep a correct and current account of all moneys received and disbursed by the treasurer, classified by fund or account;

(d) Coordinate agencies' acceptance and use of credit cards and other payment methods, if the agencies have received authorization under RCW 43.41.180;

(e) Perform such other duties as may be required by law or by regulations issued pursuant to this law.

It shall be unlawful for the treasurer to disburse public funds in the treasury except upon forms or by alternative means duly prescribed by the director of financial management. These forms or alternative means shall provide for authentication and certification by the agency head or the agency head's designee that the services have been rendered or the materials have been furnished; or, in the case of loans or grants, that the loans or grants are authorized by law; or, in the case of payments for periodic maintenance services to be performed on state owned equipment, that a written contract for such periodic maintenance services is currently in effect and copies thereof are on file with the office of financial management; and the treasurer shall not be liable under the treasurer's surety bond for erroneous or improper payments so made. When services are lawfully paid for in advance of full performance by any private individual or business entity other than as provided for by RCW 42.24.035, such individual or entity other than central stores rendering such services shall make a cash deposit or furnish surety bond coverage to the state as shall be fixed in an amount by law, or if not fixed by law, then in such amounts as shall be fixed by the director of the department of general administration but in no case shall such required cash deposit or surety bond be less than an amount which will fully indemnify the state against any and all losses on account of breach of promise to fully perform such services. No payments shall be made in advance for any equipment maintenance services to be performed more than three months after such payment. Any such bond so furnished shall be conditioned that the person, firm or corporation receiving the advance payment will apply it toward performance of the contract. The responsibility for recovery of erroneous or improper payments made under this section shall lie with the agency head or the agency head's designee in accordance with regulations issued pursuant to this chapter. Nothing in this section shall be construed to permit a public body to advance funds to a private service provider pursuant to a grant or loan before services have been rendered or material furnished.

(6) The state auditor shall:

(a) Report to the legislature the results of current post audits that have been made of the financial transactions of each agency; to this end the auditor may, in the auditor's discretion, examine the books and accounts of any agency, official, or employee charged with the receipt, custody, or safekeeping of public funds. Where feasible in conducting examinations, the auditor shall utilize data and findings from the internal control system prescribed by the office of financial management. The current post audit of each agency may include a section on recommendations to the legislature as provided in (c) of this subsection.

(b) Give information to the legislature, whenever required, upon any subject relating to the financial affairs of the state.

(c) Make the auditor's official report on or before the thirty-first of December which precedes the meeting of the legislature. The report shall be for the last complete fiscal period and shall include determinations as to whether agencies, in making expenditures, complied with the laws of this state. The state auditor is authorized to perform or participate in performance verifications ((~~only~~)) and performance audits as expressly authorized by the legislature in the omnibus biennial appropriations acts or in the annual performance audit work plan approved by the joint legislative audit and review committee. The state auditor, upon completing an audit for legal and financial compliance under chapter 43.09 RCW ((~~or a performance verification~~)), may report to the joint legislative ((~~budget~~)) audit and review committee or other appropriate committees of the legislature, in a manner prescribed by the joint legislative ((~~budget~~)) audit and review committee, on facts relating to the management or performance of governmental programs where such facts are discovered incidental to the legal and financial audit ((~~or performance verification~~)). The auditor may make such a report to a legislative committee only if the auditor has determined that the agency has been given an opportunity and has failed to resolve the management or performance issues raised by the auditor. If the auditor makes a report to a legislative committee, the agency may submit to the committee a response to the report. ((~~This subsection (6) shall not be construed to authorize the auditor to allocate other than de minimis resources to performance audits except as expressly authorized in the appropriations acts.~~)) The results of a performance audit or performance verification conducted by the state auditor must be transmitted to the joint legislative audit and review committee and the affected state agency for review and comment in the same manner as a performance audit conducted under section 13 of this act. The auditor may then publish the results of the audit or verification.

(d) Be empowered to take exception to specific expenditures that have been incurred by any agency or to take exception to other practices related in any way to the agency's financial transactions and to cause such exceptions to be made a matter of public record, including disclosure to the agency concerned and to the director of financial management. It shall be the duty of the director of financial management to cause corrective action to be taken promptly, such action to include, as appropriate, the withholding of funds as provided in RCW 43.88.110.

(e) Promptly report any irregularities to the attorney general.

(f) Investigate improper governmental activity under chapter 42.40 RCW.

(7) The joint legislative ((~~budget~~)) audit and review committee may:

(a) Make post audits of the financial transactions of any agency and management surveys and program reviews as provided for in chapter 44.28 RCW ((~~44.28.085~~)) as well as performance audits and program evaluations. To this end the joint committee may in its discretion examine the books, accounts, and other records of any agency, official, or employee.

(b) Give information to the legislature or any legislative committee whenever required upon any subject relating to the performance and management of state agencies.

(i) Determinations as to the extent to which agencies in making expenditures have complied with the will of the legislature and in this connection, may take exception to specific expenditures or financial practices of any agencies; and

(ii) Such plans as it deems expedient for the support of the state's credit, for lessening expenditures, for promoting frugality and economy in agency affairs, and generally for an improved level of fiscal management.

Sec. 26. RCW 28A.630.830 and 1994 c 13 s 5 are each amended to read as follows:

(1) The selection advisory committee is created. The committee shall be composed of up to three members from the house of representatives, up to three members from the senate, up to two members from the office of the superintendent of public instruction, and one member from each of the following: The office of financial management, Washington state special education coalition, transitional bilingual instruction educators, and Washington education association.

(2) The joint legislative ((~~budget~~)) audit and review committee and the superintendent of public instruction shall provide staff for the selection advisory committee.

(3) The selection advisory committee shall:

(a) Develop appropriate criteria for selecting demonstration projects;

(b) Issue requests for proposals in accordance with RCW 28A.630.820 through 28A.630.845 for demonstration projects;

(d) Advise the superintendent of public instruction on the evaluation design.

Sec. 27. RCW 28B.20.382 and 1987 c 505 s 13 are each amended to read as follows:

Until authorized and empowered to do so by statute of the legislature, the board of regents of the university, with respect to that certain tract of land in the city of Seattle originally known as the "old university grounds" and more recently known as the "Metropolitan Tract" and any land contiguous thereto, shall not sell ((~~said~~)) the land or any part thereof or any improvement thereon, or lease ((~~said~~)) the land or any part thereof or any improvement thereon or renew or extend any lease thereof for a term ending more than sixty years beyond midnight, December 31, 1980. Any sale of ((~~said~~)) the land or any part thereof or any improvement thereon, or any lease or renewal or extension of any lease of ((~~said~~)) the land or any part thereof or any improvement thereon for a term ending more than sixty years after midnight, December 31, 1980, made or attempted to be made by the board of regents shall be null and void unless and until the same has been approved or ratified and confirmed by legislative act.

The board of regents shall have power from time to time to lease ((~~said~~)) the land, or any part thereof or any improvement thereon for a term ending not more than sixty years beyond midnight, December 31, 1980: PROVIDED, That the board of regents shall make a full, detailed report of all leases and transactions pertaining to ((~~said~~)) the land or any part thereof or any improvement thereon to the joint legislative ((~~budget~~)) audit and review committee, including one copy to the staff of the committee, during an odd-numbered year: PROVIDED FURTHER, That any and all records, books, accounts ((~~and/or~~)), and agreements of any lessee or sublessee under this section, pertaining to compliance with the terms and conditions of such lease or sublease, shall be open to inspection by the board of regents ((~~and/or~~)), the ways and means committee((s)) of the senate ((or)), the appropriations committee of the house of representatives ((or)), and the joint legislative ((~~budget~~)) audit and review committee or any successor committees. It is not intended by this proviso that unrelated records, books, accounts ((~~and/or~~)), and agreements of lessees, sublessees, or related companies be open to such inspection.

Sec. 28. RCW 39.19.060 and 1993 c 512 s 9 are each amended to read as follows:

Each state agency and educational institution shall comply with the annual goals established for that agency or institution under this chapter for public works and procuring goods or services. This chapter applies to all public works and procurement by state agencies and educational institutions, including all contracts and other procurement under chapters 28B.10, 39.04, 39.29, 43.19, and 47.28 RCW. Each state agency shall adopt a plan, developed in consultation with the director and the advisory committee, to insure that minority and women-owned businesses are afforded the maximum practicable opportunity to directly and meaningfully participate in the execution of public contracts for public works and goods and services. The plan shall include specific measures the agency will undertake to increase the participation of certified minority and women-owned businesses. The office shall annually notify the governor, the state auditor, and the joint legislative ((~~budget~~)) audit and review committee of all agencies and educational institutions not in compliance with this chapter.

Sec. 29. RCW 39.29.016 and 1987 c 414 s 4 are each amended to read as follows:

Emergency contracts shall be filed with the office of financial management and the joint legislative ((~~budget~~)) audit and review committee and made available for public inspection within three working days following the commencement of work or execution of the contract, whichever occurs first. Documented justification for emergency contracts shall be provided to the office of financial management and the joint legislative ((~~budget~~)) audit and review committee when the contract is filed.

Sec. 30. RCW 39.29.018 and 1993 c 433 s 5 are each amended to read as follows:

(1) Sole source contracts shall be filed with the office of financial management and the joint legislative ((~~budget~~)) audit and review committee and made available for public inspection at least ten working days prior to the proposed starting date of the contract. Documented justification for sole source contracts shall be provided to the office of financial management and the joint legislative ((~~budget~~)) audit and review committee when the contract is filed. For sole source contracts of ten thousand dollars or more that are state funded, documented justification shall include evidence that the agency attempted to identify potential consultants by advertising through state-wide or regional newspapers.

(2) The office of financial management shall approve sole source contracts of ten thousand dollars or more that are state funded, before any such contract becomes binding and before any services may be performed under the contract. These requirements shall also apply to sole source contracts of less than ten thousand dollars if the total amount of such contracts between an agency and the same consultant is ten thousand dollars or more within a fiscal year. Agencies shall ensure that the costs, fees, or rates negotiated in filed sole source contracts of ten thousand dollars or more are reasonable.

Sec. 31. RCW 39.29.025 and 1993 c 433 s 3 are each amended to read as follows:

(1) Substantial changes in either the scope of work specified in the contract or in the scope of work specified in the formal solicitation document must generally be awarded as new contracts. Substantial changes executed by contract amendments must be submitted to the office of financial management and the joint legislative ((~~budget~~)) audit and review committee, and are subject to approval by the office of financial management.

(2) An amendment or amendments to personal service contracts, if the value of the amendment or amendments, whether singly or cumulatively, exceeds fifty percent of the value of the original contract must be provided to the office of financial management and the joint legislative ((~~budget~~)) audit and review committee.

(3) The office of financial management shall approve amendments provided to it under this section before the amendments become binding and before services may be performed under the amendments.

(4) The amendments must be filed with the office of financial management and made available for public inspection at least ten working days prior to the proposed starting date of services under the amendments.

(5) The office of financial management shall approve amendments provided to it under this section only if they meet the criteria for approval of the amendments established by the director of the office of financial management.

Sec. 32. RCW 39.29.055 and 1993 c 433 s 7 are each amended to read as follows:

(1) State-funded personal service contracts subject to competitive solicitation shall be filed with the office of financial management and the joint legislative ((~~budget~~)) audit and review committee and made available for public inspection at least ten working days before the proposed starting date of the contract.

(2) The office of financial management shall review and approve state-funded personal service contracts subject to competitive solicitation that provide services relating to management consulting, organizational development, marketing, communications, employee training, or employee recruiting.

Sec. 33. RCW 41.06.070 and 1995 c 163 s 1 are each amended to read as follows:

(1) The provisions of this chapter do not apply to:

(a) The members of the legislature or to any employee of, or position in, the legislative branch of the state government including members, officers, and employees of the legislative council, joint legislative ((~~budget~~)) audit and review committee, statute law committee, and any interim committee of the legislature;

(b) The justices of the supreme court, judges of the court of appeals, judges of the superior courts or of the inferior courts, or to any employee of, or position in the judicial branch of state government;

(d) The officers of the Washington state patrol;

(e) Elective officers of the state;

(f) The chief executive officer of each agency;

(g) In the departments of employment security and social and health services, the director and the director's confidential secretary; in all other departments, the executive head of which is an individual appointed by the governor, the director, his or her confidential secretary, and his or her statutory assistant directors;

(h) In the case of a multimember board, commission, or committee, whether the members thereof are elected, appointed by the governor or other authority, serve ex officio, or are otherwise chosen:

(i) All members of such boards, commissions, or committees;

(ii) If the members of the board, commission, or committee serve on a part-time basis and there is a statutory executive officer: The secretary of the board, commission, or committee; the chief executive officer of the board, commission, or committee; and the confidential secretary of the chief executive officer of the board, commission, or committee;

(iii) If the members of the board, commission, or committee serve on a full-time basis: The chief executive officer or administrative officer as designated by the board, commission, or committee; and a confidential secretary to the chair of the board, commission, or committee;

(iv) If all members of the board, commission, or committee serve ex officio: The chief executive officer; and the confidential secretary of such chief executive officer;

(i) The confidential secretaries and administrative assistants in the immediate offices of the elective officers of the state;

(j) Assistant attorneys general;

(k) Commissioned and enlisted personnel in the military service of the state;

(l) Inmate, student, part-time, or temporary employees, and part-time professional consultants, as defined by the Washington personnel resources board;

(m) The public printer or to any employees of or positions in the state printing plant;

(n) Officers and employees of the Washington state fruit commission;

(o) Officers and employees of the Washington state apple advertising commission;

(p) Officers and employees of the Washington state dairy products commission;

(q) Officers and employees of the Washington tree fruit research commission;

(r) Officers and employees of the Washington state beef commission;

(s) Officers and employees of any commission formed under chapter 15.66 RCW;

(t) Officers and employees of the state wheat commission formed under chapter 15.63 RCW;

(u) Officers and employees of agricultural commissions formed under chapter 15.65 RCW;

(v) Officers and employees of the nonprofit corporation formed under chapter 67.40 RCW;

(w) Executive assistants for personnel administration and labor relations in all state agencies employing such executive assistants including but not limited to all departments, offices, commissions, committees, boards, or other bodies subject to the provisions of this chapter and this subsection shall prevail over any provision of law inconsistent herewith unless specific exception is made in such law;

(x) In each agency with fifty or more employees: Deputy agency heads, assistant directors or division directors, and not more than three principal policy assistants who report directly to the agency head or deputy agency heads;

(y) All employees of the marine employees' commission;

(z) Up to a total of five senior staff positions of the western library network under chapter 27.26 RCW responsible for formulating policy or for directing program management of a major administrative unit. This subsection (1)(z) shall expire on June 30, 1997.

(2) The following classifications, positions, and employees of institutions of higher education and related boards are hereby exempted from coverage of this chapter:

(a) Members of the governing board of each institution of higher education and related boards, all presidents, vice-presidents, and their confidential secretaries, administrative, and personal assistants; deans, directors, and chairs; academic personnel; and executive heads of major administrative or academic divisions employed by institutions of higher education; principal assistants to executive heads of major administrative or academic divisions; other managerial or professional employees in an institution or related board having substantial responsibility for directing or controlling program operations and accountable for allocation of resources and program results, or for the formulation of institutional policy, or for carrying out personnel administration or labor relations functions, legislative relations, public information, development, senior computer systems and network programming, or internal audits and investigations; and any employee of a community college district whose place of work is one which is physically located outside the state of Washington and who is employed pursuant to RCW 28B.50.092 and assigned to an educational program operating outside of the state of Washington;

(b) Student, part-time, or temporary employees, and part-time professional consultants, as defined by the Washington personnel resources board, employed by institutions of higher education and related boards;

(c) The governing board of each institution, and related boards, may also exempt from this chapter classifications involving research activities, counseling of students, extension or continuing education activities, graphic arts or publications activities requiring prescribed academic preparation or special training as determined by the board: PROVIDED, That no nonacademic employee engaged in office, clerical, maintenance, or food and trade services may be exempted by the board under this provision;

(d) Printing craft employees in the department of printing at the University of Washington.

(3) In addition to the exemptions specifically provided by this chapter, the Washington personnel resources board may provide for further exemptions pursuant to the following procedures. The governor or other appropriate elected official may submit requests for exemption to the Washington personnel resources board stating the reasons for requesting such exemptions. The Washington personnel resources board shall hold a public hearing, after proper notice, on requests submitted pursuant to this subsection. If the board determines that the position for which exemption is requested is one involving substantial responsibility for the formulation of basic agency or executive policy or one involving directing and controlling program operations of an agency or a major administrative division thereof, the Washington personnel resources board shall grant the request and such determination shall be final as to any decision made before July 1, 1993. The total number of additional exemptions permitted under this subsection shall not exceed one percent of the number of employees in the classified service not including employees of institutions of higher education and related boards for those agencies not directly under the authority of any elected public official other than the governor, and shall not exceed a total of twenty-five for all agencies under the authority of elected public officials other than the governor. The Washington personnel resources board shall report to each regular session of the legislature during an odd-numbered year all exemptions granted under subsections (1)(w) and (x) and (2) of this section, together with the reasons for such exemptions.

The salary and fringe benefits of all positions presently or hereafter exempted except for the chief executive officer of each agency, full-time members of boards and commissions, administrative assistants and confidential secretaries in the immediate office of an elected state official, and the personnel listed in subsections (1)(j) through (v) and (2) of this section, shall be determined by the Washington personnel resources board.

Any person holding a classified position subject to the provisions of this chapter shall, when and if such position is subsequently exempted from the application of this chapter, be afforded the following rights: If such person previously held permanent status in another classified position, such person shall have a right of reversion to the highest class of position previously held, or to a position of similar nature and salary.

Any classified employee having civil service status in a classified position who accepts an appointment in an exempt position shall have the right of reversion to the highest class of position previously held, or to a position of similar nature and salary.

A person occupying an exempt position who is terminated from the position for gross misconduct or malfeasance does not have the right of reversion to a classified position as provided for in this section.

Sec. 34. RCW 42.48.060 and 1985 c 334 s 6 are each amended to read as follows:

Nothing in this chapter is applicable to, or in any way affects, the powers and duties of the state auditor or the joint legislative ((~~budget~~)) audit and review committee.

Sec. 35. RCW 43.09.310 and 1995 c 301 s 22 are each amended to read as follows:

The state auditor shall annually audit the state-wide combined financial statements prepared by the office of financial management and make post-audits of state agencies. Post-audits of state agencies shall be made at such periodic intervals as is determined by the state auditor. Audits of combined financial statements shall include determinations as to the validity and accuracy of accounting methods, procedures and standards utilized in their preparation, as well as the accuracy of the financial statements themselves. A report shall be made of each such audit and post-audit upon completion thereof, and one copy shall be transmitted to the governor, one to the director of financial management, one to the state agency audited, one to the joint legislative ((~~budget~~)) audit and review committee, one each to the standing committees on ways and means of the house and senate, one to the chief clerk of the house, one to the secretary of the senate, and at least one shall be kept on file in the office of the state auditor. A copy of any report containing findings of noncompliance with state law shall be transmitted to the attorney general.

Sec. 36. RCW 43.21J.800 and 1993 c 516 s 11 are each amended to read as follows:

On or before June 30, 1998, the joint legislative ((~~budget~~)) audit and review committee shall prepare a report to the legislature evaluating the implementation of the environmental restoration jobs act of 1993, chapter 516, Laws of 1993.

Sec. 37. RCW 43.79.270 and 1973 c 144 s 2 are each amended to read as follows:

Whenever any money, from the federal government, or from other sources, which was not anticipated in the budget approved by the legislature has actually been received and is designated to be spent for a specific purpose, the head of any department, agency, board, or commission through which such expenditure shall be made is to submit to the governor a statement which may be in the form of a request for an allotment amendment setting forth the facts constituting the need for such expenditure and the estimated amount to be expended: PROVIDED, That no expenditure shall be made in excess of the actual amount received, and no money shall be expended for any purpose except the specific purpose for which it was received. A copy of any proposal submitted to the governor to expend money from an appropriated fund or account in excess of appropriations provided by law which is based on the receipt of unanticipated revenues shall be submitted to the joint legislative ((~~budget~~)) audit and review committee and also to the standing committees on ways and means of the house and senate if the legislature is in session at the same time as it is transmitted to the governor.

Sec. 38. RCW 43.79.280 and 1973 c 144 s 3 are each amended to read as follows:

If the governor approves such estimate in whole or part, he shall endorse on each copy of the statement his approval, together with a statement of the amount approved in the form of an allotment amendment, and transmit one copy to the head of the department, agency, board, or commission authorizing the expenditure. An identical copy of the governor's statement of approval and a statement of the amount approved for expenditure shall be transmitted simultaneously to the joint legislative ((~~budget~~)) audit and review committee and also to the standing committee on ways and means of the house and senate of all executive approvals of proposals to expend money in excess of appropriations provided by law.

Sec. 39. RCW 43.88.205 and 1979 c 151 s 141 are each amended to read as follows:

(1) Whenever an agency makes application, enters into a contract or agreement, or submits state plans for participation in, and for grants of federal funds under any federal law, the agency making such application shall at the time of such action, give notice in such form and manner as the director of financial management may prescribe, or the ((~~chairman~~)) chair of the joint legislative ((~~budget~~)) audit and review committee, standing committees on ways and means of the house and senate, the chief clerk of the house, or the secretary of the senate may request.

(2) Whenever any such application, contract, agreement, or state plan is amended, such agency shall notify each such officer of such action in the same manner as prescribed or requested pursuant to subsection (1) of this section.

(3) Such agency shall promptly furnish such progress reports in relation to each such application, contract, agreement, or state plan as may be requested following the date of the filing of the application, contract, agreement, or state plan; and shall also file with each such officer a final report as to the final disposition of each such application, contract, agreement, or state plan if such is requested.

Sec. 40. RCW 43.88.230 and 1981 c 270 s 12 are each amended to read as follows:

For the purposes of this chapter, the statute law committee, the joint legislative ((~~budget~~)) audit and review committee, the legislative transportation committee, the legislative evaluation and accountability program committee, the office of state actuary, and all legislative standing committees of both houses shall be deemed a part of the legislative branch of state government.

Sec. 41. RCW 43.88.310 and 1993 c 157 s 1 are each amended to read as follows:

(1) The ((~~legislative auditor~~)) director of the office of the joint legislative audit and review committee, with the concurrence of the joint legislative ((~~budget~~)) audit and review committee, may file with the attorney general any audit exceptions or other findings of any performance audit, management study, or special report prepared for the joint legislative ((~~budget~~)) audit and review committee, any standing or special committees of the house or senate, or the entire legislature which indicate a violation of RCW 43.88.290, or any other act of malfeasance, misfeasance, or nonfeasance on the part of any state officer or employee.

(2) The attorney general shall promptly review each filing received from the legislative auditor and may act thereon as provided in RCW 43.88.300, or any other applicable statute authorizing enforcement proceedings by the attorney general. The attorney general shall advise the joint legislative ((~~budget~~)) audit and review committee of the status of exceptions or findings referred under this section.

Sec. 42. RCW 43.88.510 and 1987 c 505 s 37 are each amended to read as follows:

Not later than ninety days after the beginning of each biennium, the director of financial management shall submit the compiled list of boards, commissions, councils, and committees, together with the information on each such group, that is required by RCW 43.88.505 to:

(1) The speaker of the house and the president of the senate for distribution to the appropriate standing committees, including one copy to the staff of each of the committees;

(2) The chair of the joint legislative ((~~budget~~)) audit and review committee, including a copy to the staff of the committee;

(3) The chairs of the committees on ways and means of the senate and house of representatives; and

(4) Members of the state government committee of the house of representatives and of the governmental operations committee of the senate, including one copy to the staff of each of the committees.

Sec. 43. RCW 43.131.050 and 1990 c 297 s 2 are each amended to read as follows:

The joint legislative ((~~budget~~)) audit and review committee shall cause to be conducted a program and fiscal review of any state agency or program scheduled for termination by the processes provided in this chapter. Such program and fiscal review shall be completed and a preliminary report prepared on or before June 30th of the year prior to the date established for termination. Upon completion of its preliminary report, the joint legislative ((~~budget~~)) audit and review committee shall transmit copies of the report to the office of financial management. The office of financial management may then conduct its own program and fiscal review of the agency scheduled for termination and shall prepare a report on or before September 30th of the year prior to the date established for termination. Upon completion of its report the office of financial management shall transmit copies of its report to the joint legislative ((~~budget~~)) audit and review committee. The joint legislative ((~~budget~~)) audit and review committee shall prepare a final report that includes the reports of both the office of financial management and the joint legislative ((~~budget~~)) audit and review committee. The joint legislative ((~~budget~~)) audit and review committee and the office of financial management shall, upon request, make available to each other all working papers, studies, and other documents which relate to reports required under this section. The joint legislative ((~~budget~~)) audit and review committee shall transmit the final report to the legislature, to the state agency concerned, to the governor, and to the state library.

Sec. 44. RCW 43.131.060 and 1988 c 17 s 1 are each amended to read as follows:

In conducting the review of a regulatory entity, the joint legislative ((~~budget~~)) audit and review committee shall consider, but not be limited to, the following factors where applicable:

(1) The extent to which the regulatory entity has operated in the public interest and fulfilled its statutory obligations;

(2) The duties of the regulatory entity and the costs incurred in carrying out those duties;

(3) The extent to which the regulatory entity is operating in an efficient, effective, and economical manner;

(4) The extent to which the regulatory entity inhibits competition or otherwise adversely affects the state's economic climate;

(5) The extent to which the regulatory entity duplicates the activities of other regulatory entities or of the private sector, where appropriate; and

(6) The extent to which the absence or modification of regulation would adversely affect, maintain, or improve the public health, safety, or welfare.

Sec. 45. RCW 43.131.070 and 1977 ex.s. c 289 s 7 are each amended to read as follows:

In conducting the review of a state agency other than a regulatory entity, the joint legislative ((~~budget~~)) audit and review committee shall consider, but not be limited to, the following factors where applicable:

(1) The extent to which the state agency has complied with legislative intent;

(2) The extent to which the state agency is operating in an efficient and economical manner which results in optimum performance;

(3) The extent to which the state agency is operating in the public interest by effectively providing a needed service that should be continued rather than modified, consolidated, or eliminated;

(4) The extent to which the state agency duplicates the activities of other state agencies or of the private sector, where appropriate; and

(5) The extent to which the termination or modification of the state agency would adversely affect the public health, safety, or welfare.

Sec. 46. RCW 43.131.080 and 1989 c 175 s 109 are each amended to read as follows:

(1) Following receipt of the final report from the joint legislative ((~~budget~~)) audit and review committee, the appropriate committees of reference in the senate and the house of representatives shall each hold a public hearing, unless a joint hearing is held, to consider the final report and any related data. The committees shall also receive testimony from representatives of the state agency or agencies involved, which shall have the burden of demonstrating a public need for its continued existence; and from the governor or the governor's designee, and other interested parties, including the general public.

(2) When requested by either of the presiding members of the appropriate senate and house committees of reference, a regulatory entity under review shall mail an announcement of any hearing to the persons it regulates who have requested notice of agency rule-making proceedings as provided in RCW 34.05.320, or who have requested notice of hearings held pursuant to the provisions of this section. On request of either presiding member, such mailing shall include an explanatory statement not exceeding one page in length prepared and supplied by the member's committee.

(3) The presiding members of the senate committee on ways and means and the house committee on appropriations may designate one or more liaison members to each committee of reference in their respective chambers for purposes of participating in any hearing and in subsequent committee of reference discussions and to seek a coordinated approach between the committee of reference and the committee they represent in a liaison capacity.

(4) Following any hearing under subsection (1) of this section by the committees of reference, such committees may hold additional meetings or hearings to come to a final determination as to whether a state agency has demonstrated a public need for its continued existence or whether modifications in existing procedures are needed. In the event that a committee of reference concludes that a state agency shall be reestablished or modified or its functions transferred elsewhere, it shall make such determination as a bill. No more than one state agency shall be reestablished or modified in any one bill.

Sec. 47. RCW 43.131.110 and 1977 ex.s. c 289 s 11 are each amended to read as follows:

Any reference in this chapter to a committee of the legislature including the joint legislative ((~~budget~~)) audit and review committee shall also refer to the successor of that committee.

Sec. 48. RCW 43.250.080 and 1986 c 294 s 8 are each amended to read as follows:

At the end of each fiscal year, the state treasurer shall submit to the governor, the state auditor, and the joint legislative ((~~budget~~)) audit and review committee a summary of the activity of the investment pool. The summary shall indicate the quantity of funds deposited; the earnings of the pool; the investments purchased, sold, or exchanged; the administrative expenses of the investment pool; and such other information as the state treasurer deems relevant.

Sec. 49. RCW 44.40.025 and 1981 c 270 s 15 are each amended to read as follows:

In addition to the powers and duties authorized in RCW 44.40.020, the committee and the standing committees on transportation of the house and senate shall, in coordination with the joint legislative ((~~budget~~)) audit and review committee, the legislative evaluation and accountability program committee, and the ways and means committees of the senate and house of representatives, ascertain, study, and/or analyze all available facts and matters relating or pertaining to sources of revenue, appropriations, expenditures, and financial condition of the motor vehicle fund and accounts thereof, the highway safety fund, and all other funds or accounts related to transportation programs of the state.

The joint legislative ((~~budget~~)) audit and review committee, the legislative evaluation and accountability program committee, and the ways and means committees of the senate and house of representatives shall coordinate their activities with the legislative transportation committee in carrying out the committees' powers and duties under chapter 43.88 RCW in matters relating to the transportation programs of the state.

Sec. 50. RCW 67.70.310 and 1982 2nd ex.s. c 7 s 31 are each amended to read as follows:

The director of financial management may conduct a management review of the commission's lottery operations to assure that:

(1) The manner and time of payment of prizes to the holder of winning tickets or shares is consistent with this chapter and the rules adopted under this chapter;

(2) The apportionment of total revenues accruing from the sale of lottery tickets or shares and from all other sources is consistent with this chapter;

(3) The manner and type of lottery being conducted, and the expenses incidental thereto, are the most efficient and cost‑effective; and

(4) The commission is not unnecessarily incurring operating and administrative costs.

In conducting a management review, the director of financial management may inspect the books, documents, and records of the commission. Upon completion of a management review, all irregularities shall be reported to the attorney general, the joint legislative ((~~budget~~)) audit and review committee, and the state auditor. The director of financial management shall make such recommendations as may be necessary for the most efficient and cost-effective operation of the lottery.

Sec. 51. RCW 79.01.006 and 1991 c 204 s 1 are each amended to read as follows:

(1) Every five years the department of social and health services and other state agencies that operate institutions shall conduct an inventory of all real property subject to the charitable, educational, penal, and reformatory institution account and other real property acquired for institutional purposes or for the benefit of the blind, deaf, mentally ill, developmentally disabled, or otherwise disabled. The inventory shall identify which of those real properties are not needed for state-provided residential care, custody, or treatment. By December 1, 1992, and every five years thereafter the department shall report the results of the inventory to the house of representatives committee on capital facilities and financing, the senate committee on ways and means, and the joint legislative ((~~budget~~)) audit and review committee.

(2) Real property identified as not needed for state-provided residential care, custody, or treatment shall be transferred to the corpus of the charitable, educational, penal, and reformatory institution account. This subsection shall not apply to real property subject to binding conditions that conflict with the other provisions of this subsection.

(3) The department of natural resources shall manage all property subject to the charitable, educational, penal, and reformatory institution account and, in consultation with the department of social and health services and other affected agencies, shall adopt a plan for the management of real property subject to the account and other real property acquired for institutional purposes or for the benefit of the blind, deaf, mentally ill, developmentally disabled, or otherwise disabled.

(a) The plan shall be consistent with state trust land policies and shall be compatible with the needs of institutions adjacent to real property subject to the plan.

(b) The plan may be modified as necessary to ensure the quality of future management and to address the acquisition of additional real property.

NEW SECTION. Sec. 52. Sections 2, 9, 10, and 13 through 17 of this act are each added to chapter 44.28 RCW.

NEW SECTION. Sec. 53. RCW 44.28.140, 44.28.180, and 44.28.087, as amended by this act, are each recodified within chapter 44.28 RCW in the order in which they appear in this act.

NEW SECTION. Sec. 54. The following acts or parts of acts are each repealed:

(1) RCW 44.28.050 and 1989 c 137 s 1, 1955 c 206 s 7, & 1951 c 43 s 15;

(2) RCW 44.28.085 and 1993 c 406 s 6, 1975 1st ex.s. c 293 s 15, & 1971 ex.s. c 170 s 3; and

(3) RCW 44.28.086 and 1973 1st ex.s. c 197 s 1.