H-4149.2  _______________________________________________

                          HOUSE BILL 3012

          _______________________________________________

State of Washington      56th Legislature     2000 Regular Session

By Representative Dunshee

Read first time 01/25/2000.  Referred to Committee on State Government.

Enhancing legislative audit and review authority.

    AN ACT Relating to enhancing legislative auditing and review authority; amending RCW 44.28.005, 44.28.010, 44.28.020, 44.28.030, 44.28.050, 44.28.060, 44.28.065, 44.28.071, 44.28.075, 44.28.080, 44.28.083, 44.28.088, 44.28.094, 44.28.097, 44.28.100, 44.28.110, 44.28.120, 44.28.130, 44.28.150, 44.28.155, 44.28.800, 28A.630.830, 28B.20.382, 39.29.080, 41.06.070, 42.48.060, 43.09.310, 43.79.270, 43.79.280, 43.88.020, 43.88.090, 43.88.160, 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 74.09.415; reenacting and amending RCW 79.01.006; adding a new section to chapter 44.28 RCW; creating new sections; repealing RCW 43.21J.800; and providing expiration dates.

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

NEW SECTION. Sec. 1.  The purpose of this act is to enhance the performance audit and review authority of the legislature by:  (1) Restructuring the joint legislative audit and review committee, and the office of legislative auditor, to more closely resemble the federal general accounting office and comptroller general; (2) providing greater autonomy for the legislative auditor; and (3) renaming the legislative agency that performs the legislature's performance auditing and review authority as the performance audit office, which is headed by the legislative auditor.

                   PART I - LEGISLATIVE AUDITOR

    Sec. 101.  RCW 44.28.005 and 1996 c 288 s 2 are each amended to read as follows:

    Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

    (1) "Legislative auditor" means the executive officer of the ((joint legislative audit and review committee)) performance audit office.

    (2) (("Economy and efficiency audits" means performance audits that establish:  (a) Whether a state agency or unit of local government receiving state funds 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 agency or local government 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,)) prepared by the legislative auditor that states the specific actions a state agency or unit of local government receiving state funds 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 or the local government's practices, based on testimony received, must be included in the final compliance report.

    (((4))) (3) "Final performance audit report" means a written document ((adopted by the joint legislative audit and review committee)) that contains ((the)) findings and ((proposed recommendations made in the preliminary performance audit report, the)) final recommendations ((adopted by the joint committee,)) of the legislative auditor, after considering any comments to the preliminary performance audit report that are made by ((the joint committee, and any comments to the preliminary performance audit report by)) members of the performance audit office and the state agency or local government that was audited.

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

    (6))) (4) "Local government" means a city, town, county, special purpose district, political subdivision, municipal corporation, or quasi-municipal corporation, including a public corporation created by such an entity.

    (((7))) (5) "Performance audit" means an objective and systematic assessment of a state agency or any of its 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 and program audits)) elements establishing:  (a) Whether a state agency or unit of local government receiving state funds 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 agency or local government has complied with significant laws and rules in acquiring, protecting, and using its resources.  Performance audits also include program elements determining the extent to which desired outcomes or results are being achieved, the causes for not achieving intended outcomes or results, and compliance with significant laws and rules applicable to the program.  A performance audit of a local government may only be made to determine whether the local government is using state funds for their intended purpose in an efficient and effective manner.

    (((8))) (6) "Performance audit office" or "office" means the office created by this chapter to provide performance audits and other reviews for the legislature.

(7) "Performance measures" are a composite of key indicators of a program's or activity's inputs, outputs, outcomes, productivity, timeliness, and/or quality.  They are means of evaluating policies and programs by measuring results against agreed upon program goals or standards.

    (((9))) (8) "Preliminary compliance report" means a written document that states the specific actions a state agency or unit of local government receiving state funds has taken to implement any recommendations contained in the final performance audit report.

    (((10))) (9) "Preliminary performance audit report" means a written document prepared for review and comment by the ((joint legislative audit and review committee)) legislative auditor after the completion of a performance audit.  The preliminary performance audit report must contain the audit findings and any proposed recommendations to improve the efficiency, effectiveness, or accountability of the state agency or local government audited.

    (((11) "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.

    (12))) (10) "State agency" or "agency" means a state agency, department, office, officer, board, commission, bureau, division, institution, or institution of higher education.  "State agency" includes all elective offices in the executive branch of state government.

    Sec. 102.  RCW 44.28.010 and 1996 c 288 s 3 are each amended to read as follows:

    The ((joint legislative audit and review committee)) performance audit office is created, ((which)) consisting of members, the legislative auditor, and employees.  Members of the office shall consist of eight senators and eight representatives from the legislature and the state auditor serving, ex officio, as a nonvoting member.  The senate members of the ((committee)) office shall be appointed by the president of the senate, and the house members of the ((committee)) office 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.  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)) the appointments shall be made as a matter of closing business of ((such)) the 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, the members of the ((joint committee)) office from either house in which there is a failure to appoint or confirm shall be elected by the members of such house.

    Sec. 103.  RCW 44.28.020 and 1996 c 288 s 4 are each amended to read as follows:

    The term of office of the appointed members of the ((joint committee)) performance audit office 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 ((joint committee)) appointed members who do not continue to be members of the senate and house 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)) performance audit office 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. 104.  RCW 44.28.030 and 1996 c 288 s 5 are each amended to read as follows:

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

    Sec. 105.  RCW 44.28.050 and 1989 c 137 s 1 are each amended to read as follows:

    All expenses incurred by the ((committee)) performance audit office, including salaries and expenses of employees and the legislative auditor, shall be paid upon voucher forms as provided and signed by the legislative auditor, except that vouchers for the salary and expenses of the legislative auditor shall be signed by the chair or vice-chair.  ((The legislative auditor may be authorized by the legislative budget committee's executive committee to sign vouchers.  Such authorization shall specify a dollar limitation and be set out in writing.))  A monthly report of ((such)) the vouchers shall be submitted to the executive committee.  ((If authorization is not given to the legislative auditor then the chair, or the vice-chair in the chair's absence, is authorized to sign vouchers.  This authority shall continue until the chair's or vice-chair's successors are selected after each ensuing session of the legislature.))  Vouchers may be drawn on funds appropriated generally by the legislature for legislative expenses or upon any special appropriation which may be provided by the legislature for the expenses of the ((committee)) performance audit office or both.

    Sec. 106.  RCW 44.28.060 and 1996 c 288 s 7 are each amended to read as follows:

    The members of the ((joint committee)) performance audit office shall form an executive committee consisting of the state auditor and one member from each of the four major political caucuses((, which shall include)).  The executive committee shall select a chair and a vice-chair from among its legislative members.  The chair and vice-chair shall serve for a period not to exceed two years.  The chair and the vice-chair may not be members of the same political party.  The chair shall alternate between the members of the majority parties in the senate and the house of representatives.

    The executive committee is responsible for performing all ((general administrative and personnel duties assigned to it in the rules and procedures adopted by the joint committee, as well as other duties)) responsibilities delegated to it by the ((joint committee)) majority of all members of the office.  ((The executive committee shall recommend applicants for the position of the legislative auditor to the membership of the joint committee.  The legislative auditor shall be hired with the approval of a majority of the membership of the joint committee.  The executive committee shall set the salary of the legislative auditor.))

    The ((joint committee)) members of the performance audit office shall adopt rules and procedures for its orderly operation.  The ((joint committee)) members of the performance audit office may create subcommittees to perform duties under this chapter.

NEW SECTION. Sec. 107.  A new section is added to chapter 44.28 RCW to read as follows:

    The members of the performance audit office shall appoint the legislative auditor for a ten-year term of office and set the salary of the legislative auditor.  The legislative auditor may only be removed from office by concurrent resolution of both houses of the legislature, but only for permanent disability, inefficiency, neglect of duty, malfeasance, or conviction of a felony or conduct involving moral turpitude.

    Sec. 108.  RCW 44.28.065 and 1996 c 288 s 8 are each amended to read as follows:

    The legislative auditor shall:

    (1) Establish, hire employees for, and manage the performance audit 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 performance audits are performed in accordance with the "Government Auditing Standards" published by the comptroller general of the United States as applicable to the scope of the audit;

    (3) Investigate all matters related to the receipt, disbursement, and use of public money by state agencies and local governments;

(4) Estimate the cost to the state of a specific appropriation and report each estimate to the legislature with recommendations that the legislative auditor considers desirable;

(5) Analyze the expenditures of any state agency and expenditures of state funds distributed or provided to local governments, that the legislative auditor believes will help the legislature decide whether public money has been used and expended economically and efficiently;

(6) Make performance audits, together with findings and recommendations, to the ((joint committee and under its direction to the)) state legislature and committees of the state legislature concerning the organization and operation of state agencies and ((the expenditure of)) local government operations that are in whole or in part funded by state funds ((by units of local government)), that are included in the performance audit work plan;

    (((4) In consultation with and with the approval of the executive committee,)) (7) Hire staff necessary to carry out the purposes of this chapter.  Employee salaries, other than the legislative auditor, shall be set by the legislative auditor ((with the approval of the executive committee));

    (((5))) (8) Assist the several standing committees of the house and senate in consideration of legislation affecting state departments and their efficiency; appear before other legislative committees; and assist any ((other)) legislative committee upon instruction by the ((joint legislative audit and review committee)) members of the performance audit office;

    (((6))) (9) Provide the legislature with information obtained under the direction of the ((joint legislative audit and review committee)) members of the performance audit office; and

    (((7))) (10) Maintain a record of all work performed by the legislative auditor ((under the direction of the joint legislative  audit and review committee)) and keep and make available all documents, data, and reports submitted to the legislative auditor by any legislative committee.

    Sec. 109.  RCW 44.28.071 and 1996 c 288 s 9 are each amended to read as follows:

    (1) In conducting performance audits and other reviews, the legislative auditor shall work closely with the chairs and staff of standing committees of the senate and house of representatives, and may work in consultation with the ((state auditor and the)) director of financial management.

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

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

    (4) The legislative auditor shall work with the legislative office of performance review 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 should be a basis for performance audits conducted under this chapter.

    Sec. 110.  RCW 44.28.075 and 1996 c 288 s 10 are each amended to read as follows:

    (1) Subject to the requirements of the performance audit work plan approved by ((the joint committee)) members of the performance audit office under RCW 44.28.083, performance audits may, in addition to the ((determinations)) factors and matters that may be made in such an audit as specified in RCW 44.28.005, 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;

    (c) Identification of gaps and overlaps in service delivery, along with corrective action; and

    (d) Comparison with other states whose agencies perform similar functions, as well as their relative funding levels and performance.

    (2) As part of a performance audit, the legislative auditor 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. 111.  RCW 44.28.080 and 1996 c 288 s 11 are each amended to read as follows:

    The ((joint committee has the following powers)) legislative auditor shall:

    (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; 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)) the legislative auditor may find advisable, and ((to)) hear complaints, hold hearings, gather information, and make findings of fact with respect thereto.

    (3) ((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)) Perform other legislative staff studies of state government or the use of state funds.

    (5) ((To)) Conduct performance audits in accordance with the work plan adopted by ((the joint committee)) members of the performance audit office under RCW ((44.28.180)) 44.28.083.

    (6) ((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)) members of the performance audit office and ((to)) make recommendations as ((it)) the legislative auditor deems appropriate as a separate addendum to the report or audit.

    (7) ((To)) Develop internal tracking procedures that will allow the legislature to measure the effectiveness of performance audits conducted by the ((joint committee)) legislative auditor including, where appropriate, measurements of cost-savings and increases in efficiency and effectiveness in how state agencies deliver their services.

    (8) ((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. 112.  RCW 44.28.083 and 1996 c 288 s 12 are each amended to read as follows:

    (1) During the regular legislative session of each odd-numbered year, beginning with 1997, the ((joint legislative audit and review committee)) members of the performance audit office shall develop and approve a performance audit work plan for the legislative auditor to follow over the subsequent sixteen to twenty‑four‑month period and an overall work plan that identifies state agency programs, state agencies, and local government programs that are in whole or in part funded by state moneys, for which formal evaluation appears necessary.  Consideration shall be given to recommendations presented by legislative standing committees.  Among the factors to be considered in preparing the work plans 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 performance audit must include start and completion dates, the proposed approach, and cost estimates.

    (3) The legislative auditor may consult with the chairs and staff of appropriate legislative committees, the state auditor, and the director of financial management in developing the performance audit work plan.

    (4) The performance audit work plan and the overall work plan may include proposals to employ contract resources.  As conditions warrant, the performance audit work plan and the overall work plan may be amended from time to time.  All performance audit work plans shall be transmitted to the appropriate fiscal and policy committees of the senate and the house of representatives no later than the sixtieth day of the regular legislative session of each odd-numbered year((, beginning with 1997)).  All overall work plans shall be transmitted to the appropriate fiscal and policy committees of the senate and the house of representatives.

    Sec. 113.  RCW 44.28.088 and 1996 c 288 s 13 are each amended to read as follows:

    (1) When the legislative auditor has completed a performance audit authorized in the performance audit work plan, the legislative auditor shall transmit the preliminary performance audit report to the affected state agency or local government and the office of financial management for response or comment.  The state agency or local government and the office of financial management shall provide any response or comment to the legislative auditor within thirty days after receipt of the preliminary performance audit report unless a different time period is approved by the ((joint committee)) legislative auditor.  The legislative auditor shall incorporate or respond to the responses and comments of the state agency or local government and the office of financial management ((into)) in the final performance audit report.

    (2) Before releasing the results of a performance audit to the legislature or the public, the legislative auditor shall submit the preliminary performance audit report to the ((joint committee for its)) members of the performance audit office for review, comments, and ((final)) recommendations.  Any comments by the ((joint committee)) members of the performance audit office must be included as a separate addendum to the final performance audit report.  Upon consideration and incorporation of the review, comments, and recommendations of the ((joint committee)) members of the performance audit office, the legislative auditor 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 publish the results and make the report available to the public.  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.

    Sec. 114.  RCW 44.28.094 and 1996 c 288 s 15 are each amended to read as follows:

    Subject to ((the joint committee's)) approval by the members of the performance audit office, the ((office of the joint committee)) legislative auditor and the performance audit office shall undergo an external quality control review within three years of June 6, 1996, and at regular intervals thereafter.  The review must be conducted by an independent organization that has experience in conducting performance audits.  The quality control review must include, at a minimum, an evaluation of the quality of the audits conducted by the ((joint committee)) legislative auditor, an assessment of the audit procedures used by the ((joint committee)) legislative auditor, and an assessment of the qualifications of the ((joint committee)) legislative auditor and staff of the performance audit office to conduct performance audits.

    Sec. 115.  RCW 44.28.097 and 1996 c 288 s 18 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 ((joint committee)) legislative auditor, shall be furnished by the agency requested to provide such report.

    Sec. 116.  RCW 44.28.100 and 1996 c 288 s 19 are each amended to read as follows:

(1) The ((joint committee)) legislative auditor may make reports from time to time to the members of the legislature and to the public with respect to any of ((its)) the legislative auditor's findings or recommendations.

(2) The ((joint committee shall keep)) legislative auditor shall ensure that complete minutes of ((its)) the meetings of the members of the performance audit office are kept.

    Sec. 117.  RCW 44.28.110 and 1955 c 206 s 8 are each amended to read as follows:

    In the discharge of any duty herein imposed, the ((committee or any personnel under its authority and its subcommittees shall have)) legislative auditor has the authority to examine and inspect all properties, equipment, facilities, files, records and accounts of any state ((office, department, institution, board, committee, commission or)) agency((,)) or local government and to administer oaths((,)).  If authorized by majority vote of the members of the performance audit office, the legislative auditor may issue subpoenas, compel the attendance of witnesses and the production of any papers, books, accounts, documents and testimony, and to cause the deposition of witnesses, either residing within or without the state, to be taken in the manner prescribed by laws for taking depositions in civil actions in the superior courts.

    Sec. 118.  RCW 44.28.120 and 1996 c 288 s 20 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)) legislative auditor, 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)) legislative auditor, 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. 119.  RCW 44.28.130 and 1996 c 288 s 21 are each amended to read as follows:

    Each witness who appears before the ((joint committee)) legislative auditor by ((its)) order of the legislative auditor, 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((, verified)) and approved by the legislative auditor((, and approved by the chair and the vice-chair of the joint committee)).

    Sec. 120.  RCW 44.28.150 and 1996 c 288 s 22 are each amended to read as follows:

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

    Sec. 121.  RCW 44.28.155 and 1997 c 58 s 705 are each amended to read as follows:

    (1) The ((joint legislative audit and review committee)) legislative auditor shall conduct an evaluation of the effectiveness of the WorkFirst program described in chapter 58, Laws of 1997, including the job opportunities and basic skills training program and any approved private, county, or local government WorkFirst program.  The evaluation shall assess the success of the program in assisting clients to become employed and to reduce their use of temporary assistance for needy families.  The study shall include but not be limited to the following:

    (a) An assessment of employment outcomes, including hourly wages, hours worked, and total earnings, for clients;

    (b) A comparison of temporary assistance for needy families outcomes, including grant amounts and program exits, for clients; and

    (c) An audit of the performance-based contract for each private nonprofit contractor for job opportunities and basic skills training program services.  The ((joint legislative audit and review committee)) legislative auditor may contract with the Washington institute for public policy for appropriate portions of the evaluation required by this section.

    (2) Administrative data shall be provided by the department of social and health services, the employment security department, the state board for community and technical colleges, local governments, and private contractors.  The department of social and health services shall require contractors to provide administrative and outcome data needed for this study as a condition of contract compliance.

    Sec. 122.  RCW 44.28.800 and 1998 c 297 s 61 are each amended to read as follows:

    The ((joint legislative audit and review committee)) legislative auditor shall conduct an evaluation of the efficiency and effectiveness of chapter 297, Laws of 1998 in meeting its stated goals.  Such an evaluation shall include the operation of the state mental hospitals and the regional support networks, as well as any other appropriate entity.  The ((joint legislative audit and review committee)) legislative auditor shall prepare an interim report of ((its)) the legislative auditor's findings which shall be delivered to the appropriate legislative committees of the house of representatives and the senate no later than September 1, 2000.  In addition, the ((joint legislative audit and review committee)) legislative auditor shall prepare a final report of ((its)) the legislative auditor's findings which shall be delivered to the appropriate legislative committees of the house of representatives and the senate no later than January 1, 2001.

                       PART II - REFERENCES

    Sec. 201.  RCW 28A.630.830 and 1996 c 288 s 26 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 audit and review committee)) legislative auditor 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;

    (c) Review proposals and recommend demonstration projects for approval by the superintendent of public instruction; and

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

    Sec. 202.  RCW 28B.20.382 and 1999 c 346 s 3 are each amended to read as follows:

    (1) Until authorized by statute of the legislature, the board of regents of the university, with respect to the university tract, shall not sell the land or any part thereof or any improvement thereon, or lease the land or any part thereof or any improvement thereon or renew or extend any lease thereof for a term of more than eighty years.  Any sale of the land or any part thereof or any improvement thereon, or any lease or renewal or extension of any lease of the land or any part thereof or any improvement thereon for a term of more than eighty years made or attempted to be made by the board of regents shall be null and void until the same has been approved or ratified and confirmed by legislative act.

    (2) The board of regents shall have power from time to time to lease the land, or any part thereof or any improvement thereon for a term of not more than eighty years.  Any and all records, books, accounts, 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, the legislative auditor, and the ways and means committee of the senate((,)) and the appropriations committee of the house of representatives, ((and the joint legislative audit and review committee)) or any successor committees.  It is not intended that unrelated records, books, accounts, and agreements of lessees, sublessees, or related companies be open to such inspection.  The board of regents shall make a full, detailed report of all leases and transactions pertaining to the land or any part thereof or any improvement thereon to the ((joint legislative audit and review committee)) legislative auditor, including one copy to the staff of the committee, during odd-numbered years.

    (3) The net proceeds from the sale or lease of land in the university tract, or any part thereof or any improvement thereon, shall be deposited into the University of Washington facilities bond retirement account hereby established outside the state treasury as a nonappropriated local fund to be used exclusively for the purpose of erecting, altering, maintaining, equipping, or furnishing buildings at the University of Washington.  The board of regents shall transfer from the University of Washington facilities bond retirement account to the University of Washington building account under RCW 43.79.080 any funds in excess of amounts reasonably necessary for payment of debt service in combination with other nonappropriated local funds related to capital projects for which debt service is required under section 4, chapter 380, Laws of 1999.

    Sec. 203.  RCW 39.29.080 and 1997 c 373 s 1 are each amended to read as follows:

    A state agency may not enter into a personal services contract with a consultant under which the consultant could charge additional costs to the agency, the ((joint legislative audit and review committee)) legislative auditor, or the state auditor for access to data generated under the contract.  A consultant under such contract shall provide access to data generated under the contract to the contracting agency, the ((joint legislative audit and review committee)) legislative auditor, and the state auditor.  For purposes of this section, "data" includes all information that supports the findings, conclusions, and recommendations of the consultant's reports, including computer models and the methodology for those models.

    Sec. 204.  RCW 41.06.070 and 1998 c 245 s 40 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 the legislative auditor, state actuary, and members, officers, and employees of the ((legislative council, joint legislative audit and review committee)) performance audit office, statute law committee, and any ((interim)) other office, authority, agency, or 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;

    (c) Officers, academic personnel, and employees of technical colleges;

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

    (((w))) (v) 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))) (w) 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))) (x) 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;

    (aa))) (y) Staff employed by the department of community, trade, and economic development to administer energy policy functions and manage energy site evaluation council activities under RCW 43.21F.045(2)(m);

    (((bb))) (z) Staff employed by Washington State University to administer energy education, applied research, and technology transfer programs under RCW 43.21F.045 as provided in RCW 28B.30.900(5).

    (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 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), (y), (z))) (u), (x), and (2) of this section, shall be determined by the Washington personnel resources board.  However, beginning with changes proposed for the 1997-99 fiscal biennium, changes to the classification plan affecting exempt salaries must meet the same provisions for classified salary increases resulting from adjustments to the classification plan as outlined in RCW 41.06.152.

    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. 205.  RCW 42.48.060 and 1996 c 288 s 34 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 audit and review committee)) legislative auditor.

    Sec. 206.  RCW 43.09.310 and 1996 c 288 s 35 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 audit and review committee)) legislative auditor, 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. 207.  RCW 43.79.270 and 1998 c 177 s 1 are each amended to read as follows:

    (1) 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 audit and review committee)) legislative auditor 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.

    (2) Notwithstanding subsection (1) of this section, whenever money from any source that was not anticipated in the transportation budget approved by the legislature has actually been received and is designated to be spent for a specific purpose, the head of a department, agency, board, or commission through which the expenditure must be made shall 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 the expenditure and the estimated amount to be expended.  However, no expenditure may be made in excess of the actual amount received, and no money may 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 transportation fund or account in excess of appropriations provided by law that is based on the receipt of unanticipated revenues must be submitted, at a minimum, to the standing committees on transportation of the house and senate, if the legislature is in session, at the same time as it is transmitted to the governor.  During the legislative interim, any such proposal must be submitted to the legislative transportation committee.

    Sec. 208.  RCW 43.79.280 and 1998 c 177 s 2 are each amended to read as follows:

    (1) 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 audit and review committee)) legislative auditor 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.

    (2) If the governor approves an estimate with transportation funding implications, 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 of a proposal to expend transportation money in excess of appropriations provided by law and a statement of the amount approved for expenditure must be transmitted simultaneously to the standing committees on transportation of the house and senate.  During the legislative interim, all estimate approvals endorsed by the governor along with a statement of the amount approved in the form of an allotment amendment must be transmitted simultaneously to the legislative transportation committee.

    Sec. 209.  RCW 43.88.020 and 1996 c 288 s 23 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 audit and review committee)) legislative auditor, 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) "State tax revenue limit" means the limitation created by chapter 43.135 RCW.

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

    (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.

    (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.

    (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.

    (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.

    (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.

    (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.

    (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.

     (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.

    (27) "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.

    (28) "Performance audit" has the same meaning as it is defined in RCW 44.28.005.

    Sec. 210.  RCW 43.88.090 and 1997 c 372 s 1 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 reflect that the agency considered any alternatives to reduce costs or improve service delivery identified in the findings of a performance audit of the agency by the ((joint legislative audit and review committee)) legislative auditor.  Nothing in this subsection requires performance audit findings to be published as part of the budget.

    (2) Each state agency shall define its mission and establish measurable goals for achieving desirable results for those who receive its services and the taxpayers who pay for those services.  Each agency shall also develop clear strategies and timelines to achieve its goals.  This section does not require an agency to develop a new mission or goals in place of identifiable missions or goals that meet the intent of this section.  The mission and goals of each agency must conform to statutory direction and limitations.

    (3) For the purpose of assessing program performance, each state agency shall establish program objectives for each major program in its budget.  The objectives must be consistent with the missions and goals developed under this section.  The objectives must be expressed to the extent practicable in outcome-based, objective, and measurable form unless an exception to adopt a different standard is granted by the office of financial management and approved by the legislative committee on performance review.  The office of financial management shall provide necessary professional and technical assistance to assist state agencies in the development of strategic plans that include the mission of the agency and its programs, measurable goals, strategies, and performance measurement systems.

    (4) Each state agency shall adopt procedures for continuous self-assessment of each program and activity, using the mission, goals, objectives, and measurements required under subsections (2) and (3) of this section.

    (5) It is the policy of the legislature that each agency's budget proposals must be directly linked to the agency's stated mission and program goals and objectives.  Consistent with this policy, agency budget proposals must include integration of performance measures that allow objective determination of a program's success in achieving its goals.  The office of financial management shall develop a plan to merge the budget development process with agency performance assessment procedures.  The plan must include a schedule to integrate agency strategic plans and performance measures into agency budget requests and the governor's budget proposal over three fiscal biennia.  The plan must identify those agencies that will implement the revised budget process in the 1997-1999 biennium, the 1999-2001 biennium, and the 2001-2003 biennium.  In consultation with the legislative fiscal committees, the office of financial management shall recommend statutory and procedural modifications to the state's budget, accounting, and reporting systems to facilitate the performance assessment procedures and the merger of those procedures with the state budget process.  The plan and recommended statutory and procedural modifications must be submitted to the legislative fiscal committees by September 30, 1996.

    (6) 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. 211.  RCW 43.88.160 and 1998 c 135 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 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) 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 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 state auditor may, in the state 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 state 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 state 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 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)) members of the performance audit office.  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)) legislative auditor or ((other)) appropriate committees of the legislature, in a manner prescribed by the ((joint legislative audit and review committee)) legislative auditor, 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 state auditor may make such a report to the legislative auditor or a legislative committee only if the state auditor has determined that the agency has been given an opportunity and has failed to resolve the management or performance issues raised by the state auditor.  If the state auditor makes a report to the legislative auditor or a legislative committee, the agency may submit to the legislative auditor or committee a response to the report.  This subsection (6) shall not be construed to authorize the state 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)) legislative auditor must only be transmitted to the ((joint legislative audit and review committee)) legislative auditor.

    (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)) legislative auditor 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)) legislative auditor may in ((its)) the legislative auditor's 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)) the legislative auditor 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. 212.  RCW 43.88.205 and 1996 c 288 s 39 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 ((chair of the joint legislative audit and review committee)) legislative auditor, 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. 213.  RCW 43.88.230 and 1996 c 288 s 40 are each amended to read as follows:

    For the purposes of this chapter, the statute law committee, the ((joint legislative audit and review committee)) legislative auditor, 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. 214.  RCW 43.88.310 and 1996 c 288 s 41 are each amended to read as follows:

    (1) The legislative auditor ((of the office of the joint legislative audit and review committee, with the concurrence of the joint legislative 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 audit and review committee)) legislative auditor, 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 audit and review committee)) legislative auditor of the status of exceptions or findings referred under this section.

    Sec. 215.  RCW 43.88.510 and 1996 c 288 s 42 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 audit and review committee, including a copy to the staff of the committee)) legislative auditor;

    (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. 216.  RCW 43.131.050 and 1996 c 288 s 43 are each amended to read as follows:

    The ((joint legislative audit and review committee shall cause to be conducted)) legislative auditor shall conduct 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)) the preliminary report, the ((joint legislative audit and review committee)) legislative auditor 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 audit and review committee)) legislative auditor.  The ((joint legislative audit and review committee)) legislative auditor shall prepare a final report that includes the reports of both the office of financial management and the ((joint legislative audit and review committee)) legislative auditor.  The ((joint legislative audit and review committee)) legislative auditor 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 audit and review committee)) legislative auditor shall transmit the final report to the legislature, to the state agency concerned, to the governor, and to the state library.

    Sec. 217.  RCW 43.131.060 and 1996 c 288 s 44 are each amended to read as follows:

    In conducting the review of a regulatory entity, the ((joint legislative audit and review committee)) legislative auditor 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. 218.  RCW 43.131.070 and 1996 c 288 s 45 are each amended to read as follows:

    In conducting the review of a state agency other than a regulatory entity, the ((joint legislative audit and review committee)) legislative auditor 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. 219.  RCW 43.131.080 and 1996 c 288 s 46 are each amended to read as follows:

    (1) Following receipt of the final report from the ((joint legislative audit and review committee)) legislative auditor, 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 legislative auditor and 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. 220.  RCW 43.131.110 and 1996 c 288 s 47 are each amended to read as follows:

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

    Sec. 221.  RCW 43.250.080 and 1996 c 288 s 48 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 audit and review committee)) legislative auditor 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. 222.  RCW 44.40.025 and 1996 c 288 s 49 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 audit and review committee)) legislative auditor, 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 audit and review committee)) legislative auditor, 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. 223.  RCW 67.70.310 and 1996 c 288 s 50 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 audit and review committee)) legislative auditor, 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. 224.  RCW 74.09.415 and 1998 c 245 s 144 are each amended to read as follows:

    (1) There is hereby established a program to be known as the children's health program.

    To the extent of available funds:

    (a) Health care services may be provided to persons who are under eighteen years of age with household incomes at or below the federal poverty level and not otherwise eligible for medical assistance or the limited casualty program for the medically needy.

    (b) The determination of eligibility of recipients for health care services shall be the responsibility of the department.  The application process shall be easy to understand and, to the extent possible, applications shall be made available at local schools and other appropriate locations.  The department shall make eligibility determinations within the timeframes for establishing eligibility for children on medical assistance, as defined by RCW 74.09.510.

    (c) The amount, scope, and duration of health care services provided to eligible children under the children's health program shall be the same as that provided to children under medical assistance, as defined in RCW 74.09.520.

    (2) The legislature is interested in assessing the effectiveness of the prenatal care program.  However, the legislature recognizes the cost and complexity associated with such assessment.

    The legislature accepts the effectiveness of prenatal and maternity care at improving birth outcomes when these services are received by eligible persons.  Therefore, the legislature intends to focus scarce assessment resources to determine the extent to which support services such as child care, psychosocial and nutritional assessment and counseling, case management, transportation, and other support services authorized by chapter 296, Laws of 1990, result in receipt of prenatal and maternity care by eligible persons.

    The University of Washington shall conduct a study, based on a statistically significant state-wide sampling of data, to evaluate the effectiveness of the maternity care access program set forth in RCW 74.09.760 through 74.09.820 based on the principles set forth in RCW 74.09.770.

    The University of Washington shall develop a plan and budget for the study in consultation with the ((joint legislative audit and review committee)) legislative auditor.  The ((joint legislative audit and review committee)) legislative auditor shall also monitor the progress of the study.

    The department of social and health services shall make data and other information available as needed to the University of Washington as required to conduct this study.

    The study shall determine:

    (a) The characteristics of women receiving services, including health risk factors;

    (b) The extent to which access to maternity care and support services have improved in this state as a result of this program;

    (c) The utilization of services and birth outcomes for women and infants served by this program by type of practitioner;

    (d) The extent to which birth outcomes for women receiving services under this program have improved in comparison to birth outcomes of nonmedicaid mothers;

    (e) The impact of increased medicaid reimbursement to physicians on provider participation;

    (f) The difference between costs for services provided under this program and medicaid reimbursement for the services;

    (g) The gaps in services, if any, that may still exist for women and their infants as defined by RCW 74.09.790 (1) and (4) served by this program, excluding pregnant substance abusers, and women covered by private health insurance; and

    (h) The number and mix of services provided to eligible women as defined by subsection (2)(g) of this section and the effect on birth outcomes as compared to nonmedicaid birth outcomes.

    Sec. 225.  RCW 79.01.006 and 1996 c 288 s 51 and 1996 c 261 s 1 are each reenacted and 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 audit and review committee)) legislative auditor.

    (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 leases of real property to a consortium of three or more counties in order for the counties to construct or otherwise acquire correctional facilities for juveniles or adults or 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.

                         PART III - OTHER

NEW SECTION. Sec. 301.  RCW 43.21J.800 (Joint legislative audit and review committee report) and 1996 c 288 s 36 & 1993 c 516 s 11 are each repealed.

NEW SECTION. Sec. 302.  Part headings used in this act are not part of the law.

NEW SECTION. Sec. 303.  (1) Section 201 of this act expires September 1, 2001.

    (2) Sections 216 through 220 of this act expire June 30, 2000.

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