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

NEW SECTION.  Sec. 2   A new section is added to chapter 43.09 RCW to read as follows:
     For purposes of sections 3 through 6, 8, 9, and 11 of this act:
     (1) "Board" means the citizen advisory board created in section 3 of this act.
     (2) "Draft work plan" means the work plan for conducting performance audits of state agencies proposed by the board and state auditor after the statewide performance review.
     (3) "Final performance audit report" means a written document jointly released by the citizen advisory board and the state auditor that includes the findings and comments from the preliminary performance audit report.
     (4) "Final work plan" means the work plan for conducting performance audits of state agencies adopted by the board and state auditor.
     (5) "Performance audit" means an objective and systematic assessment of a state agency or any of its programs, functions, or activities 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.
     (6) "Preliminary performance audit report" means a written document prepared after the completion of a performance audit to be submitted for comment before the final performance audit report. 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 being audited.
     (7) "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 offices of executive branch state government elected officials.

NEW SECTION.  Sec. 3   A new section is added to chapter 43.09 RCW to read as follows:
     (1) The citizen advisory board is created to improve efficiency, effectiveness, and accountability in state government.
     (2) The board shall consist of ten members as follows:
     (a) One member shall be the state auditor, who shall be a nonvoting member;
     (b) One member shall be the legislative auditor, who shall be a nonvoting member;
     (c) One member shall be the director of the office of financial management, who shall be a nonvoting member;
     (d) Four of the members shall be selected by the governor as follows: Each major caucus of the house of representatives and the senate shall submit a list of three names. The lists may not include the names of members of the legislature or employees of the state. The governor shall select a person from each list provided by each caucus; and
     (e) The governor shall select three citizen members who are not state employees.
     (3) The board shall elect a chair. The legislative auditor, the state auditor, and the director of the office of financial management may not serve as chair.
     (4) Appointees shall be individuals who have a basic understanding of state government operations with knowledge and expertise in performance management, quality management, strategic planning, performance assessments, or closely related fields.
     (5) Members selected under subsection (2)(d) and (e) of this section shall serve for terms of four years, with the terms expiring on June 30th on the fourth year of the term. However, in the case of the initial members, two members shall serve four-year terms, two members shall serve three-year terms, and one member shall serve a two-year term, with each of the terms expiring on June 30th of the applicable year. Appointees may be reappointed to serve more than one term.
     (6) The joint legislative audit and review committee shall provide clerical, technical, and management personnel to the board to serve as the board's staff.
     (7) The board shall meet at least once a quarter and may hold additional meetings at the call of the chair or by a majority vote of the members of the board.
     (8) The members of the board shall be compensated in accordance with RCW 43.03.220 and reimbursed for travel expenses in accordance with RCW 43.03.050 and 43.03.060.

NEW SECTION.  Sec. 4   A new section is added to chapter 43.09 RCW to read as follows:
     The board shall establish an annual assessment and performance grading program. The program shall consist of conducting annual performance assessments and grading state agency performance. Assessments shall be implemented on a phased-in schedule. Initial areas to be assessed shall include quality management, productivity and fiscal efficiency, program effectiveness, contract management and oversight, internal audit, internal and external customer satisfaction, statutory and regulatory compliance, and technology systems and on-line services. As part of this program, the board shall:
     (1) Consult with and seek input from elected officials, state employees including front-line employees, and professionals with a background in performance management for establishing the grading standards. In developing the criteria, the board shall consider already developed best practices and audit criteria used by government or nongovernment organizations. Before the assessment, the agencies shall be given the criteria for the assessment and the standards for grading;
     (2) Contract or partner with public or private entities that have expertise in public sector reviews and/or technical expertise in individual assessment areas to perform the assessments and grading of all state agencies. The board may contract or partner with more than one entity for different assessment areas; and
     (3) Submit the results of the assessment and grading program to the governor, the office of financial management, appropriate legislative committees, and the public by December 15th of each year. The results of the annual assessments and performance grading shall be posted on the internet.

NEW SECTION.  Sec. 5   A new section is added to chapter 43.09 RCW to read as follows:
     (1) The board and the state auditor shall work together regarding performance audits of state government.
     (a) The board shall establish criteria for performance audits. Agencies shall be audited using criteria that include generally accepted government auditing standards as well as legislative mandates and performance objectives established by state agencies and the legislature. Mandates include, but are not limited to, agency strategies, timelines, program objectives, and mission and goals as required in RCW 43.88.090.
     (b) Using the criteria developed in (a) of this subsection, the state auditor shall contract for a statewide performance review to be completed within one year of contracting as a preliminary to a draft work plan for conducting performance audits. The board and the state auditor shall develop a schedule and common methodology for conducting these reviews.
     (c) The board and the state auditor shall develop the draft work plan for performance audits based on input from citizens, state employees, including front-line employees, state managers, chairs and ranking members of appropriate legislative committees, the joint legislative audit and review committee, public officials, and others. The draft work plan may include a list of agencies, programs, or systems to be audited on a timeline decided by the board and the state auditor based on a number of factors including risk, importance, and citizen concerns. When putting together the draft work plan, there should be consideration of all audits and reports already required. On average, audits shall be designed to be completed within a six-month period.
     (d) Before adopting the final work plan, the board shall consult with the legislative auditor and other appropriate oversight and audit entities to coordinate work plans and avoid duplication of effort in their planned performance audits of state government agencies. The board shall defer to the joint legislative audit and review committee work plan if a similar audit is included on both work plans for auditing.
     (e) The state auditor shall contract out for performance audits. In conducting the audits, agency front-line employees and internal auditors should be involved.
     (f) All audits must include consideration of reports prepared by other government oversight entities.
     (g) The audits may include:
     (i) Identification of programs and services that can be eliminated, reduced, consolidated, or enhanced;
     (ii) Identification of funding sources to the state agency, to programs, and to services that can be eliminated, reduced, consolidated, or enhanced;
     (iii) Analysis of gaps and overlaps in programs and services and recommendations for improving, dropping, blending, or separating functions to correct gaps or overlaps;
     (iv) Analysis and recommendations for pooling information technology systems used within the state agency, and evaluation of information processing and telecommunications policy, organization, and management;
     (v) Analysis of the roles and functions of the state agency, its programs, and its services and their compliance with statutory authority and recommendations for eliminating or changing those roles and functions and ensuring compliance with statutory authority;
     (vi) Recommendations for eliminating or changing statutes, rules, and policy directives as may be necessary to ensure that the agency carry out reasonably and properly those functions vested in the agency by statute;
     (vii) Verification of the reliability and validity of agency performance data, self-assessments, and performance measurement systems as required under RCW 43.88.090;
     (viii) Identification of potential cost savings in the state agency, its programs, and its services;
     (ix) Identification and recognition of best practices;
     (x) Evaluation of planning, budgeting, and program evaluation policies and practices;
     (xi) Evaluation of personnel systems operation and management;
     (xii) Evaluation of state purchasing operations and management policies and practices; and
     (xiii) Evaluation of organizational structure and staffing levels, particularly in terms of the ratio of managers and supervisors to nonmanagement personnel.
     (h) The state auditor must solicit comments on preliminary performance audit reports from the audited state agency, the office of the governor, the office of financial management, the board, the chairs and ranking members of appropriate legislative committees, and the joint legislative audit and review committee for comment. Comments must be received within thirty days after receipt of the preliminary performance audit report unless a different time period is approved by the state auditor. All comments shall be incorporated into the final performance audit report. The final performance audit report shall include the objectives, scope, and methodology; the audit results, including findings and recommendations; conclusions; and identification of best practices.
     (i) The board and the state auditor shall jointly release final performance audit reports to the governor, the citizens of Washington, and the appropriate legislative committees. Final performance audit reports shall be posted on the internet.
     (j) For institutions of higher education, performance audits shall not duplicate, and where applicable, shall make maximum use of existing audit records, accreditation reviews, and performance measures required by the office of financial management, the higher education coordinating board, and nationally or regionally recognized accreditation organizations including accreditation of hospitals licensed under chapter 70.41 RCW and ambulatory care facilities.
     (2) The citizen board created under RCW 44.75.030 shall be responsible for performance audits for transportation related agencies as defined under RCW 44.75.020.

NEW SECTION.  Sec. 6   A new section is added to chapter 43.09 RCW to read as follows:
     If the legislative authority of a local jurisdiction requests a performance audit of programs under its jurisdiction, the state auditor has the discretion to conduct such a review under separate contract and funded by local funds.

NEW SECTION.  Sec. 7   A new section is added to chapter 43.88 RCW to read as follows:
     In addition to the authority given the state auditor in RCW 43.88.160(6), the state auditor is authorized to contract for and oversee performance audits pursuant to section 5 of this act.

NEW SECTION.  Sec. 8   A new section is added to chapter 43.09 RCW to read as follows:
     By June 30, 2007, and each four years thereafter, the joint legislative audit and review committee shall contract with a private entity for a performance audit of the performance audit program established in section 5 of this act and the board's responsibilities under the performance audit program.

NEW SECTION.  Sec. 9   A new section is added to chapter 43.09 RCW to read as follows:
     The audited agency is responsible for follow-up and corrective action on all performance audit findings and recommendations. The audited agency's plan for addressing each audit finding and recommendation shall be included in the final audit report. The plan shall provide the name of the contact person responsible for each action, the action planned, and the anticipated completion date. If the audited agency does not agree with the audit findings and recommendations or believes action is not required, then the action plan shall include an explanation and specific reasons.
     For agencies under the authority of the governor, the governor may require periodic progress reports from the audited agency until all resolution has occurred.
     For agencies under the authority of an elected official other than the governor, the auditor and the board may require periodic reports of the action taken by the audited agency until all resolution has occurred.
     The board may request status reports on specific audits or findings.

NEW SECTION.  Sec. 10   A new section is added to chapter 2.56 RCW to read as follows:
     The office of the administrator for the courts is encouraged to conduct performance audits of courts under the authority of the supreme court, in conformity with criteria and methods developed by the board for judicial administration that have been approved by the supreme court. In developing criteria and methods for conducting performance audits, the board for judicial administration is encouraged to consider quality improvement programs, audits, and scoring. The judicial branch is encouraged to submit the results of these efforts to the chief justice of the supreme court or his or her designee, and with any other applicable boards or committees established under the authority of the supreme court to oversee government accountability."