BILL REQ. #:  H-0959.2 

READ FIRST TIME 01/27/03.   

     AN ACT Relating to government accountability; amending RCW 43.88.160; adding new sections to chapter 43.41 RCW; adding a new section to chapter 43.09 RCW; and creating a new section.

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

NEW SECTION.  Sec. 1   The legislature finds that:
     (1) Public confidence in government is essential. Public programs must continuously improve in quality, efficiency, and effectiveness in order to increase public trust;
     (2) Washington state government and other entities that receive tax dollars must continuously improve the way they operate and deliver services so citizens receive maximum value for their tax dollars;
     (3) An independent citizen board is necessary to establish an annual assessment and performance grading program to ensure that government services, customer satisfaction, program efficiency, and management systems are world class in performance; and
     (4) Fair, independent, professional performance audits of state agencies by the state auditor are essential to improving the efficiency and effectiveness of government.

NEW SECTION.  Sec. 2   A new section is added to chapter 43.41 RCW to read as follows:
     (1) The citizen oversight board is created to guide and assist agencies in developing data-driven, valid, and reliable performance standards, measures, outcomes, and goals, designed to effectively and efficiently manage the money agencies spend, the services they provide, the employees and processes they control, and the businesses, people, and resources they regulate. The board shall seek, review, and recommend best practices for all agencies.
     (2) The board shall consist of nine members selected as follows:
     (a) One member shall be the chair of the joint legislative audit and review committee; and
     (b) Eight members shall be appointed by the governor. Four of the members shall be selected as follows: Each major caucus of the house of representatives and the senate shall submit a list of three names. The lists may not include the names of members of the legislature. The governor shall select a member from each list provided by each caucus.
     (3) The governor shall appoint a chair from among the board members.
     (4) Appointees shall be individuals from a diverse range of backgrounds who have a basic understanding of state government operations with knowledge and expertise in performance management, quality management, strategic planning, or closely related fields.
     (5) Appointed members shall serve for terms of four years, with the terms expiring on June 30th on the fourth year of the term. However, in the case of the initial members, four members shall serve four-year terms, three members shall serve three-year terms, and two members shall serve two-year terms, with each of the terms expiring on June 30th of the applicable year. Appointees may be reappointed to serve more than one term.
     (6) The department of community, trade, and economic development, office of community development, shall provide clerical, technical, and management personnel to the board to serve as the board's staff. Staff from the office of financial management and the state auditor's office shall assist the board as needed.
     (7) The board shall meet at least once a quarter and may hold additional meetings at the call of the chair or by a majority vote of the members of the board.
     (8) The members of the board shall be compensated in accordance with RCW 43.03.220 and reimbursed for travel expenses in accordance with RCW 43.03.050 and 43.03.060.

NEW SECTION.  Sec. 3   A new section is added to chapter 43.41 RCW to read as follows:
     The citizen oversight board shall:
     (1) Review the various government performance measurement, audit, quality, and accountability systems currently in place and develop recommendations to integrate into one performance measurement system for all state government by December 15, 2004, and continually review and provide recommendations for improvement every two years;
     (2) Establish the annual assessment and performance grading program. The program shall consist of conducting annual performance assessments and grading state agency performance. Assessments shall be implemented on a phased-in schedule. Initial areas to be assessed shall include quality management, productivity and fiscal efficiency, program effectiveness, contract management and oversight, internal audit, internal and external customer satisfaction, statutory and regulatory compliance, and technology systems and on-line services. As part of this program, the board shall:
     (a) Consult with and seek input from elected officials, state employees, and professionals with a background in performance management for establishing the grading standards. Before the assessment, the agencies shall be given the criteria for the assessment and the standards for grading;
     (b) Contract or partner with public or private entities that have expertise in public sector reviews and/or technical expertise in individual assessment areas to perform the assessments and grading of all state agencies. The board may contract or partner with more than one entity for different assessment areas; and
     (c) Submit the results of the assessment and grading program to the governor, the president of the senate, and the speaker of the house of representatives by December 15th of each year. The report shall include recommendations for improved efficiency and effectiveness of state government and recognition of excellent performance. The board shall make available to the public the annual assessment and grading report on the internet;
     (3) Review, evaluate, and comment on the state auditor's plan for performance audits of all state agencies;
     (4) Review, evaluate, and comment on the results of the state auditor's performance audits of state agencies. The board's comments shall be included as part of the state auditor's final reports;
     (5) Collect, disseminate, and share appropriate best practices with all state agencies; and
     (6) Make recommendations that would improve agency efficiency and effectiveness based on findings from the annual assessment and grading program and the state auditor's performance audits to the governor, the president of the senate, and the speaker of the house of representatives.

NEW SECTION.  Sec. 4   A new section is added to chapter 43.09 RCW to read as follows:
     (1) The state auditor shall develop and implement a phased-in, recurring plan for conducting performance audits of state agency systems and operations. Audits shall be designed to be completed within a six-month period. In developing this plan, the state auditor shall consult with the citizen oversight board. In conducting audits, the state auditor shall seek input from employees and from the public.
     (2) The state auditor shall conduct performance audits in accordance with generally accepted government auditing standards. The audits may include, but not be limited to:
     (a) Planning, budgeting, and program evaluation policies and practices;
     (b) Personnel systems operations and management;
     (c) State purchasing operations and management policies and practices;
     (d) Information processing and telecommunications systems policy, organization, and management; and
     (e) Organizational structure and staffing levels, particularly in terms of the ratio of managers and supervisors to nonmanagement personnel.
     (3) The state auditor and the citizen oversight board shall develop a grading system for the audits. The audit report shall include the agency grade, evaluation and identification of best practices, and findings and recommendations for efficiency and effectiveness of state programs. The state auditor shall submit the performance audit reports to the citizen oversight board for the board's review, evaluation, and comment. The state auditor shall include the board's comments in its final reports. The reports shall be submitted to the governor, the president of the senate and the speaker of the house of representatives. The final reports shall be available to the public on the internet.
     (4) As used in this section, "state agency" has the meaning in section 5 of this act.

NEW SECTION.  Sec. 5   A new section is added to chapter 43.41 RCW to read as follows:
     For purposes of sections 1 through 4 of this act, "state agency" means the executive branch of government including any board, commission, and department, and institutions of higher education.

Sec. 6   RCW 43.88.160 and 2002 c 260 s 1 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) Except as provided in chapter 43.88C RCW, 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;
     (c) Establish policies for allowing the contracting of child care services;
     (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 the plans, except that for the following agencies no amendment or alteration of the 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 employee 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 the number or the classes for the following: Agencies headed by elective officials;
     (g) Adopt rules to effectuate provisions contained in (a) through (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 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 equipment maintenance providers or 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 twelve 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 and performance audits, independently or as ((expressly)) authorized by the legislature in the omnibus biennial appropriations acts or in the 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 audit and review committee or other appropriate committees of the legislature, in a manner prescribed by the joint legislative 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 or in the performance audit work plan.)) The results of a performance audit conducted by the state auditor that has been requested by the joint legislative audit and review committee must only be transmitted to the joint legislative audit and review committee.
     (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 within six months, such action to include, as appropriate, the withholding of funds as provided in RCW 43.88.110. The director of financial management shall annually report by December 31st the status of audit resolution to the appropriate committees of the legislature, the state auditor, and the attorney general. The director of financial management shall include in the audit resolution report actions taken as a result of an audit including, but not limited to, types of personnel actions, costs and types of litigation, and value of recouped goods or services.
     (e) Promptly report any irregularities to the attorney general.
     (f) Investigate improper governmental activity under chapter 42.40 RCW.
     (7) The joint legislative 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 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.
     (c) Make a report to the legislature which shall include at least the following:
     (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.