[atlas:bill]

AN ACT Relating to local government audits; amending RCW 43.09.260, 43.09.280, and 43.09.281; and creating a new section.

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

NEW SECTION. Sec. 1. Local governments are subject to increasing mandates to reduce costs and operate more efficiently with reduced revenues. Audits of local governments are necessary and protect the public from waste and fraud, but the expense of audits borne by local governments have continued to increase. Current law does not allow for competition and innovation from the private sector as a tool to streamline governmental audits.

The legislature finds that in order to reduce expenditures by local governments as well as by state government, private contractors should be allowed to provide auditing services to local governments when they are able to provide such services at a lower cost while meeting or exceeding state-mandated performance standards.

Sec. 2. RCW 43.09.260 and 1995 c 301 s 15 are each amended to read as follows:

The examination of the financial affairs of all local governments shall be made at such reasonable, periodic intervals as the state auditor shall determine and pursuant to standards and guidelines established by the state auditor. However, an examination of the financial affairs of all local governments shall be made at least once in every three years, and an examination of individual local government health and welfare benefit plans and local government self-insurance programs shall be made at least once every two years. The term local governments for purposes of this chapter includes but is not limited to all counties, cities, and other political subdivisions, municipal corporations, and quasi-municipal corporations, however denominated.

The state auditor shall establish a schedule to govern the auditing of local governments which shall include: A designation of the various classifications of local governments; a designation of the frequency for auditing each type of local government; and a description of events which cause a more frequent audit to be conducted.

On every such examination, inquiry shall be made as to the financial condition and resources of the local government; whether the Constitution and laws of the state, the ordinances and orders of the local government, and the requirements of the state auditor have been properly complied with; and into the methods and accuracy of the accounts and reports.

A report of such examination shall be made and filed in the office of state auditor, and one copy shall be transmitted to the local government. A copy of any report containing findings of noncompliance with state law shall be transmitted to the attorney general. If any such report discloses malfeasance, misfeasance, or nonfeasance in office on the part of any public officer or employee, within thirty days from the receipt of his or her copy of the report, the attorney general shall institute, in the proper county, such legal action as is proper in the premises by civil process and prosecute the same to final determination to carry into effect the findings of the examination.

It shall be unlawful for any local government or the responsible head thereof, to make a settlement or compromise of any claim arising out of such malfeasance, misfeasance, or nonfeasance, or any action commenced therefor, or for any court to enter upon any compromise or settlement of such action, without the written approval and consent of the attorney general and the state auditor.

Sec. 3. RCW 43.09.280 and 1995 c 301 s 18 are each amended to read as follows:

The expense of auditing public accounts shall be borne by each entity subject to such audit for the auditing of all accounts under its jurisdiction ((~~and~~)). The state auditor shall ((~~certify~~)) provide an estimate of the expense of such audit to the fiscal or warrant-issuing officer of such entity at least four months in advance of the audit. If the cost of the audit exceeds the cost of the previous audit of that entity by a percentage that exceeds the fiscal growth factor as determined under chapter 43.135 RCW, the entity may contract with a private contractor to perform the audit. The private contractor must perform the audit and make reports pursuant to the standards and guidelines established by the state auditor and the requirements of RCW 43.09.260 and 43.09.265. For any audit performed by the state auditor, the expense of such audit may not exceed the estimate provided pursuant to this section. If the state auditor conducts the audit, the state auditor shall certify the expense of such audit to the fiscal or warrant-issuing officer of such entity, who shall immediately make payment to the state auditor. If the expense as certified is not paid by any local government within thirty days from the date of certification, the state auditor may certify the expense to the auditor of the county in which the local government is situated, who shall promptly issue his or her warrant on the county treasurer payable out of the current expense fund of the county, which fund, except as to auditing the financial affairs and making inspection and examination of the county, shall be reimbursed by the county auditor or chief financial officer out of the money due the local government at the next monthly settlement of the collection of taxes and shall be transferred to the current expense fund.

Sec. 4. RCW 43.09.281 and 1982 c 206 s 3 are each amended to read as follows:

The state auditor shall adopt appropriate rules pursuant to chapter 34.05 RCW, the administrative procedure act, to provide a procedure whereby a ((~~taxing district~~)) local government may appeal charges estimated or levied under RCW 43.09.280. Such procedure shall provide for an administrative review process and an external review process which shall be advisory to the state auditor's office. The number of appeals and their disposition shall be included in the auditor's annual report.