Initiative 900 allows for Transportation Performance Audits

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12/8/05Page 1

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INITIATIVE 900

I, Sam Reed, Secretary of State of the State of Washington and

custodian of its seal, hereby certify that, according to the records on

file in my office, the attached copy of Initiative Measure No. 900 to

the People is a true and correct copy as it was received by this

office.

AN ACT Relating to performance audits of governmental entities;

amending RCW 82.08.020 and 43.88.160; adding new sections to chapter

43.09 RCW; adding a new section to chapter 82.12 RCW; creating new

sections; and providing an effective date.

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

POLICIES AND PURPOSES

NEW SECTION.

Sec. 1.

It is essential that state and local

governments establish credibility with the taxpayers by implementing

long-overdue performance audits to ensure accountability and guarantee

that tax dollars are spent as cost-effectively as possible. Are

politicians spending our current tax revenues as cost-effectively as

possible? Voters don't know because politicians have repeatedly

blocked our state auditor from conducting independent, comprehensive

performance audits on state and local governments, agencies, programs,

and accounts. Currently, Washington is the only state in the nation

that prohibits the independently elected state auditor from doing the

job he or she was hired to do without explicit legislative permission.

This handicap is costing the taxpayers billions of dollars in potential

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savings. Thankfully, this common sense initiative remedies this

egregious failure of politicians to enact this reform. It is absurd

for politicians to unilaterally impose tax increases or to seek voter

approval for tax increases without first learning if we're getting the

biggest bang for the buck from our current tax revenues. This measure

requires the state auditor to conduct independent, comprehensive

performance audits on state and local governments, agencies, programs,

and accounts. This act dedicates a portion of the state's existing

sales and use tax (1/100th of 1%) to fund these comprehensive

performance audits. Similar performance reviews in Texas have saved

taxpayers there nine billion dollars out of nineteen billion dollars in

identified savings over the past decade. The performance audits

required by this common sense initiative will identify solutions to our

public policy problems, saving the taxpayers billions of dollars.

REQUIRING INDEPENDENT, COMPREHENSIVE PERFORMANCE AUDITS OF STATE AND

LOCAL GOVERNMENTS, AGENCIES, PROGRAMS, AND ACCOUNTS

NEW SECTION. Sec. 2. A new section is added to chapter 43.09 RCW

to read as follows:

In addition to audits authorized under RCW 43.88.160, the state

auditor shall conduct independent, comprehensive performance audits of

state government and each of its agencies, accounts, and programs;

local governments and each of their agencies, accounts, and programs;

state and local education governmental entities and each of their

agencies, accounts, and programs; state and local transportation

governmental entities and each of their agencies, accounts, and

programs; and other governmental entities, agencies, accounts, and

programs. The term "government" means an agency, department, office,

officer, board, commission, bureau, division, institution, or

institution of higher education. This includes individual agencies and

programs, as well as those programs and activities that cross agency

lines. "Government" includes all elective and nonelective offices in

the executive branch and includes the judicial and legislative

branches. The state auditor shall review and analyze the economy,

efficiency, and effectiveness of the policies, management, fiscal

affairs, and operations of state and local governments, agencies,

programs, and accounts. These performance audits shall be conducted in

accordance with the United States general accounting office government

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auditing standards. The scope for each performance audit shall not be

limited and shall include nine specific elements: (1) identification

of cost savings; (2) identification of services that can be reduced or

eliminated; (3) identification of programs or services that can be

transferred to the private sector; (4) analysis of gaps or overlaps in

programs or services and recommendations to correct gaps or overlaps;

(5) feasibility of pooling information technology systems within the

department; (6) analysis of the roles and functions of the department,

and recommendations to change or eliminate departmental roles or

functions; (7) recommendations for statutory or regulatory changes that

may be necessary for the department to properly carry out its

functions; (8) analysis of departmental performance data, performance

measures, and self-assessment systems; and (9) identification of best

practices. The state auditor may contract out any performance audits.

For counties and cities, the audit may be conducted as part of audits

otherwise required by state law. Each audit report shall be submitted

to the corresponding legislative body or legislative bodies and made

available to the public on or before thirty days after the completion

of each audit or each follow-up audit. On or before thirty days after

the performance audit is made public, the corresponding legislative

body or legislative bodies shall hold at least one public hearing to

consider the findings of the audit and shall receive comments from the

public.

The state auditor is authorized to issue subpoenas to

governmental entities for required documents, memos, and budgets to

conduct the performance audits. The state auditor may, at any time,

conduct a performance audit to determine not only the efficiency, but

also the effectiveness, of any government agency, account, or program.

No legislative body, officeholder, or employee may impede or restrict

the authority or the actions of the state auditor to conduct

independent, comprehensive performance audits. To the greatest extent

possible, the state auditor shall instruct and advise the appropriate

governmental body on a step-by-step remedy to whatever ineffectiveness

and inefficiency is discovered in the audited entity. For performance

audits of state government and its agencies, programs, and accounts,

the legislature must consider the state auditor reports in connection

with the legislative appropriations process. An annual report will be

submitted by the joint legislative audit and review committee by July

1st of each year detailing the status of the legislative implementation

of the state auditor's recommendations. Justification must be provided

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for recommendations not implemented. Details of other corrective

action must be provided as well. For performance audits of local

governments and their

agencies, programs, and accounts, the

corresponding legislative body must consider the state auditor reports

in connection with its spending practices. An annual report will be

submitted by the legislative body by July 1st of each year detailing

the status of the legislative implementation of the state auditor's

recommendations. Justification must be provided for recommendations

not implemented. Details of other corrective action must be provided

as well. The people encourage the state auditor to aggressively pursue

the largest, costliest governmental entities first but to pursue all

governmental entities in due course. Follow-up performance audits on

any state and local government, agency, account, and program may be

conducted when determined necessary by the state auditor. Revenues

from the Performance Audits of Government Account, created in section

5 of this act, shall be used for the cost of the audits.

DEDICATING A PORTION OF THE STATE'S EXISTING SALES AND USE TAX

(1/100TH OF 1%) TO FUND THE PERFORMANCE AUDITS

Sec. 3.

RCW 82.08.020 and 2003 c 361 s 301 are each amended to

read as follows:

(1) There is levied and there shall be collected a tax on each

retail sale in this state equal to six and five-tenths percent of the

selling price.

(2) There is levied and there shall be collected an additional tax

on each retail car rental, regardless of whether the vehicle is

licensed in this state, equal to five and nine-tenths percent of the

selling price. The revenue collected under this subsection shall be

deposited in the multimodal transportation account created in RCW

47.66.070.

(3) Beginning July 1, 2003, there is levied and collected an

additional tax of three-tenths of one percent of the selling price on

each retail sale of a motor vehicle in this state, other than retail

car rentals taxed under subsection (2) of this section. The revenue

collected under this subsection shall be deposited in the multimodal

transportation account created in RCW 47.66.070.

(4) For purposes of subsection (3) of this section, "motor vehicle"

has the meaning provided in RCW 46.04.320, but does not include farm

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tractors or farm vehicles as defined in RCW 46.04.180 and 46.04.181,

off-road and nonhighway vehicles as defined in RCW 46.09.020, and

snowmobiles as defined in RCW 46.10.010.

(5) Beginning on December 8, 2005, 0.16 percent of the taxes

collected under subsection (1) of this section shall be dedicated to

funding comprehensive performance audits required under section 2 of

this act. The revenue identified in this subsection shall be deposited

in the Performance Audits of Government Account created in section 5 of

this act.

(6) The taxes imposed under this chapter shall apply to successive

retail sales of the same property.

(((6))) (7) The rates provided in this section apply to taxes

imposed under chapter 82.12 RCW as provided in RCW 82.12.020.

NEW SECTION. Sec. 4. A new section is added to chapter 82.12 RCW

to read as follows:

Beginning on December 8, 2005, 0.16 percent of the taxes collected

under RCW 82.12.020 based on the rate in RCW 82.08.020(1) shall be

dedicated to funding comprehensive performance audits under section 2

of this act. Revenue identified in this section shall be deposited in

the Performance Audits of Government Account created in section 5 of

this act.

CREATING THE PERFORMANCE AUDITS OF GOVERNMENT ACCOUNT

NEW SECTION. Sec. 5. A new section is added to chapter 43.09 RCW

to read as follows:

The Performance Audits of Government Account is hereby created in

the custody of the state treasurer.

Revenue identified in RCW

82.08.020(5) and section 4 of this act shall be deposited in the

account. Money in the account shall be used to fund the performance

audits and follow-up performance audits under section 2 of this act and

shall be expended by the state auditor in accordance with this act.

Only the state auditor or the state auditor's designee may authorize

expenditures from the account. The account is subject to allotment

procedures under chapter 43.88 RCW, but an appropriation is not

required for expenditures.

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Sec. 6. RCW 43.88.160 and 2002 c 260 s 1 are each amended to

read as follows:

This section sets forth the major fiscal duties and

responsibilities of officers and agencies of the executive branch.

The regulations issued by the governor pursuant to this chapter shall

provide for a comprehensive, orderly basis for fiscal management and

control, including efficient accounting and reporting therefor, for

the executive branch of the state government and may include, in

addition, such requirements as will generally promote more efficient

public management in the state.

(1) Governor; director of financial management. The governor,

through the director of financial management, shall devise and

supervise a modern and complete accounting system for each agency to

the end that all revenues, expenditures, receipts, disbursements,

resources, and obligations of the state shall be properly and

systematically accounted for. The accounting system shall include

the development of accurate, timely records and reports of all

financial affairs of the state. The system shall also provide for

central accounts in the office of financial management at the level

of detail deemed necessary by the director to perform central

financial management. The director of financial management shall

adopt and periodically update an accounting procedures manual. Any

agency maintaining its own accounting and reporting system shall

comply with the updated accounting procedures manual and the rules of

the director adopted under this chapter. An agency may receive a

waiver from complying with this requirement if the waiver is approved

by the director. Waivers expire at the end of the fiscal biennium

for which they are granted. The director shall forward notice of

waivers granted to the appropriate legislative fiscal committees.

The director of financial management may require such financial,

statistical, and other reports as the director deems necessary from

all agencies covering any period.

(2) Except as provided in chapter 43.88C RCW, the director of

financial management is responsible for quarterly reporting of

primary operating budget drivers such as applicable workloads,

caseload estimates, and appropriate unit cost data. These reports

shall be transmitted to the legislative fiscal committees or by

electronic means to the legislative evaluation and accountability

program committee. Quarterly reports shall include actual monthly

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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;

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(e) Review any pay and classification plans, and changes

thereunder, developed by any agency for their fiscal impact:

PROVIDED, That none of the provisions of this subsection shall affect

merit systems of personnel management now existing or hereafter

established by statute relating to the fixing of qualifications

requirements for recruitment, appointment, or promotion of employees

of any agency. The director shall advise and confer with agencies

including appropriate standing committees of the legislature as may

be designated by the speaker of the house and the president of the

senate regarding the fiscal impact of such plans and may amend or

alter the plans, except that for the following agencies no amendment

or alteration of the plans may be made without the approval of the

agency concerned: Agencies headed by elective officials;

(f) Fix the number and classes of positions or authorized

employee years of employment for each agency and during the fiscal

period amend the determinations previously fixed by the director

except that the director shall not be empowered to fix the number or

the classes for the following: Agencies headed by elective

officials;

(g) Adopt rules to effectuate provisions contained in (a) through

(f) of this subsection.

(5) The treasurer shall:

(a) Receive, keep, and disburse all public funds of the state not

expressly required by law to be received, kept, and disbursed by some

other persons: PROVIDED, That this subsection shall not apply to

those public funds of the institutions of higher learning which are

not subject to appropriation;

(b) Receive, disburse, or transfer public funds under the

treasurer's supervision or custody;

(c) Keep a correct and current account of all moneys received and

disbursed by the treasurer, classified by fund or account;

(d) Coordinate agencies' acceptance and use of credit cards and

other payment methods, if the agencies have received authorization

under RCW 43.41.180;

(e) Perform such other duties as may be required by law or by

regulations issued pursuant to this law.

It shall be unlawful for the treasurer to disburse public funds

in the treasury except upon forms or by alternative means duly

prescribed by the director of financial management. These forms or

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alternative means shall provide for authentication and certification

by the agency head or the agency head's designee that the services

have been rendered or the materials have been furnished; or, in the

case of loans or grants, that the loans or grants are authorized by

law; or, in the case of payments for periodic maintenance services to

be performed on state owned equipment, that a written contract for

such periodic maintenance services is currently in effect; and the

treasurer shall not be liable under the treasurer's surety bond for

erroneous or improper payments so made. When services are lawfully

paid for in advance of full performance by any private individual or

business entity other than equipment maintenance providers or as

provided for by RCW 42.24.035, such individual or entity other than

central stores rendering such services shall make a cash deposit or

furnish surety bond coverage to the state as shall be fixed in an

amount by law, or if not fixed by law, then in such amounts as shall

be fixed by the director of the department of general administration

but in no case shall such required cash deposit or surety bond be

less than an amount which will fully indemnify the state against any

and all losses on account of breach of promise to fully perform such

services. No payments shall be made in advance for any equipment

maintenance services to be performed more than twelve months after

such payment. Any such bond so furnished shall be conditioned that

the person, firm or corporation receiving the advance payment will

apply it toward performance of the contract. The responsibility for

recovery of erroneous or improper payments made under this section

shall lie with the agency head or the agency head's designee in

accordance with regulations issued pursuant to this chapter. Nothing

in this section shall be construed to permit a public body to advance

funds to a private service provider pursuant to a grant or loan

before services have been rendered or material furnished.

(6) The state auditor shall:

(a) Report to the legislature the results of current post audits

that have been made of the financial transactions of each agency; to

this end the auditor may, in the auditor's discretion, examine the

books and accounts of any agency, official, or employee charged with

the receipt, custody, or safekeeping of public funds. Where feasible

in conducting examinations, the auditor shall utilize data and

findings from the internal control system prescribed by the office of

financial management. The current post audit of each agency may

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include a section on recommendations to the legislature as provided

in (c) of this subsection.

(b) Give information to the legislature, whenever required, upon

any subject relating to the financial affairs of the state.

(c) Make the auditor's official report on or before the thirty-

first of December which precedes the meeting of the legislature. The

report shall be for the last complete fiscal period and shall include

determinations as to whether agencies, in making expenditures,

complied with the laws of this state. The state auditor is

authorized to perform or participate in performance verifications and

performance audits as expressly authorized by the legislature in the

omnibus biennial appropriations acts or in the performance audit work

plan approved by the joint legislative audit and review committee.

The state auditor, upon completing an audit for legal and financial

compliance under chapter 43.09 RCW or a performance verification, may

report to the joint legislative audit and review committee or other

appropriate committees of the legislature, in a manner prescribed by

the joint legislative audit and review committee, on facts relating

to the management or performance of governmental programs where such

facts are discovered incidental to the legal and financial audit or

performance verification. The auditor may make such a report to a

legislative committee only if the auditor has determined that the

agency has been given an opportunity and has failed to resolve the

management or performance issues raised by the auditor. If the

auditor makes a report to a legislative committee, the agency may

submit to the committee a response to the report. This subsection

(6) shall not be construed to authorize the auditor to allocate other

than de minimis resources to performance audits except as expressly

authorized in the appropriations acts or in the performance audit

work plan. The results of a performance audit conducted by the state

auditor that has been requested by the joint legislative audit and

review committee must only be transmitted to the joint legislative

audit and review committee.

(d) Be empowered to take exception to specific expenditures that

have been incurred by any agency or to take exception to other

practices related in any way to the agency's financial transactions

and to cause such exceptions to be made a matter of public record,

including disclosure to the agency concerned and to the director of

financial management. It shall be the duty of the director of

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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.

(g) In addition to the authority given to the state auditor in

this subsection (6), the state auditor is authorized to conduct

performance audits identified in section 2 of this act. Nothing in

this subsection (6) shall limit, impede, or restrict the state

auditor from conducting performance audits identified in section 2 of

this act.

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

(a) Make post audits of the financial transactions of any agency

and management surveys and program reviews as provided for in chapter

44.28 RCW as well as performance audits and program evaluations. To

this end the joint committee may in its discretion examine the books,

accounts, and other records of any agency, official, or employee.

(b) Give information to the legislature or any legislative

committee whenever required upon any subject relating to the

performance and management of state agencies.

(c) Make a report to the legislature which shall include at least

the following:

(i) Determinations as to the extent to which agencies in making

expenditures have complied with the will of the legislature and in

this connection, may take exception to specific expenditures or

financial practices of any agencies; and

(ii) Such plans as it deems expedient for the support of the

state's credit, for lessening expenditures, for promoting frugality

and economy in agency affairs, and generally for an improved level of

fiscal management.

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CONSTRUCTION CLAUSE

NEW SECTION.

Sec. 7.

The provisions of this act are to be

liberally construed to effectuate the intent, policies, and purposes of

this act.

SEVERABILITY CLAUSE

NEW SECTION.

Sec. 8.

If any provision of this act or its

application to any person or circumstance is held invalid, the

remainder of the act or the application of the provision to other

persons or circumstances is not affected.

MISCELLANEOUS

NEW SECTION. Sec. 9. Part headings used in this act are not part

of the law.

EFFECTIVE DATE

NEW SECTION. Sec. 10. This act shall be called the Performance

Audits of Government Act and takes effect December 8, 2005.

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