H. B. 2393
(By Mr. Speaker, Mr. Kiss, and Delegate Trump)
[By Request of the Executive]
[Introduced January 26, 1999; referred to the
Committee on Finance.]
/A BILL to amend article nine, chapter six of the code of West
Virginia, one thousand nine hundred thirty-one, as amended,
by adding thereto a new section, designated section one-a;
to amend and reenact section seven of said article; and to
amend and reenact section thirteen, article nine-b, chapter
eighteen of said code, all relating to the supervision of
public offices; definitions; audits and reviews of public
offices; permitting offices with annual expenditures equal
to or less than three hundred thousand dollars to satisfy
financial examination requirements by review; and continuing
misdemeanor penalties for refusal to appear or testify or
produce records and for false swearing.
Be it enacted by the Legislature of West Virginia:
That article nine, chapter six of the code of West Virginia,
one thousand nine hundred thirty-one, as amended, be amended by adding thereto a new section, designated section one-a; that
section seven of said article be amended and reenacted; and that
section thirteen, article nine-b, chapter eighteen of said code
be amended and reenacted, all to read as follows:
CHAPTER 6. GENERAL PROVISIONS RESPECTING OFFICERS.
ARTICLE 9. SUPERVISION OF PUBLIC OFFICES.
§6-9-1a. Definitions.
As used in this article:
(a) "Audit" means a systematic examination and collection of
sufficient, competent evidential matter needed for an auditor to
attest to the fairness of management's assertions in the
financial statements and to evaluate whether management has
sufficiently and effectively carried out its responsibilities and
complied with applicable laws and regulations. An audit shall be
conducted in accordance with generally accepted auditing
standards, standards issued by the chief inspector, and, as
applicable, the single audit requirement of OMB Circular A-133
audits of states, local governments and nonprofit organizations
as amended or revised from time to time, or any successor
circular.
(b) "Examination" includes an audit or review as defined in
this section.
(c) "Federal awards" means federal financial assistance and
federal cost-reimbursement contracts that nonfederal entities receive directly from federal awarding agencies or indirectly
from pass-through entities.
(d) "Federal financial assistance" means assistance that
nonfederal entities receive or administer in the form of grants,
loans, loan guarantees, property, cooperative agreements,
interest subsidies, insurance, food commodities, direct
appropriations, or other assistance, but does not include amounts
received as reimbursement for service rendered to individuals in
accordance with guidance issued by the director of the federal
office of management and budget.
(e) "Financial audit" includes financial statement audits
and financial related audits, as defined by government auditing
standards.
(f) "Government auditing standards" means the government
auditing standards issued by the comptroller general of the
United States which are applicable to financial audits of
government organizations, programs and activities.
(g) "Local government" means any unit of local government
within the state, including a county, county board of education,
municipality, and any other authority, board, commission,
district, office, public authority, public corporation or other
instrumentality of a county, county board of education or
municipality or any combination of two or more local governments.
(h) "Nonfederal entity" means a state, local government or nonprofit organization.
(i) "Office of management and budget (OMB)" means the
executive office of the president of the United States, office of
management and budget.
(j) "Review" means an inquiry of the analytical procedures
that provide the auditor with a reasonable basis for expressing
limited assurance that there are no material modifications that
should be made to the financial statements in order for them to
be in conformity with generally accepted accounting principles
or, if applicable, with another comprehensive basis of
accounting.
§6-9-7. Examinations into affairs of local public officers
(federal fund compliance; boards of education; list of examiners; standards; compliance; report;
inquiries; local government review in lieu of audit;
powers of reviewing authority; reports; penalties).
(a) The chief inspector shall have power by himself or
herself, or by any person appointed
or approved by him or her to
perform the service, to examine into all financial affairs of
every local governmental office or political subdivision and all
boards, commissions, authorities, agencies or other offices
created under authority thereof.
and shall make an An
examination
shall be made annually, if required, to comply with
the Single Audit Act. When that act does not apply, the examination shall be made at least once a year, if practicable.
Provided, That when
(b) When required for compliance with regulations for
federal funds
received expended by
county boards of education
local governments, the chief inspector
or his designee including
any certified public accountant approved by the chief inspector
shall conduct
the audits of all county boards of education and
issue an audit report within
twelve months after the end of the
fiscal year and issue the reports within thirty days after
completion of the audit work or assign the work to a certified
public accountant in a timely manner so that the work is
completed within the specified time limits the time specified in
controlling federal regulations. Examinations of other local
governments shall be conducted and applicable reports issued in
accordance with uniform procedures of the chief inspector.
(c) A county board of education may elect, by the first day
of May of the fiscal year to have its annual examination
performed by a certified public accountant approved by the chief
inspector to perform such examinations. When this election is
made, a copy of the order of the board making the election shall
be filed with the chief inspector and the state board of school
finance. The county board of education shall be allowed to
contract with any certified public accountant on the chief
inspector's then current list of approved certified public accountants, unless the state board of school finance or the
prosecuting attorney of the county in which the board is located
timely submits to the chief inspector a written request for the
examination to be performed by the chief inspector or a person
appointed by the chief inspector or the chief inspector
determines that a special or unusual situation exists.
(d) The chief inspector shall, at least annually, prepare a
list of certified public accountants approved by the chief
inspector to perform examinations of local governments. Names
shall be added to or deleted from that list in accordance with
uniform procedures of the chief inspector. When each list or
updated list is issued, the chief inspector shall promptly file
a copy of the list in the state register and send a copy to the
state board of education, the state board of school finance and
to local governments who request a copy.
(e) A county board of education, when procuring the services
of a certified public accountant on the list of the chief
inspector, shall follow the procurement standards prescribed by
the grants management common rule, OMB Circular A-102 "Grants and
Cooperative Agreements with State and Local Governments" in
effect for the fiscal year being examined, or in any replacement
circular or regulation of the office of management and budget.
(f) The approved independent certified public accountant
making examinations under this section shall comply with requirements of this section applicable to examinations performed
by the chief inspector, including applicable requirements of the
federal government and uniform procedures of the chief inspector
applicable to examinations of county boards of education.
(1) Upon completion of the certified public accountant's
examination and issuance of an audit or review report, the
certified public accountant shall promptly send two copies of the
certified report to the county board of education who shall file
one copy with the federal audit clearing house. The certified
public accountant shall also send one copy of the certified
report to the state board of school finance and one copy to the
chief inspector.
(2) If any examination discloses misfeasance, malfeasance or
nonfeasance in office on the part of any public officer or
employee, the certified public accountant shall submit his or her
recommendation to the chief inspector regarding the legal action
the approved certified public accountant considers appropriate,
including, but not limited to, whether criminal prosecution or
civil action to effect restitution is appropriate, and three
additional copies of the certified audit report. After review of
the recommendations and the audit report, the chief inspector
shall proceed as provided in subsection (n) of this section. For
purposes of this section and section thirteen, article nine-b,
chapter eighteen of this code, a certified audit report of an approved certified public accountant shall be treated in the same
manner as a report of the chief inspector.
(g) On every examination, inquiry shall be made as to the
financial conditions and resources of the agency having
jurisdiction over the appropriations and levies disbursed by the
office and whether the requirements of the constitution and
statutory laws of the state and the ordinances and orders of the
agency have been properly complied with and also inquire into the
methods and accuracy of the accounts and such other matters of
audit and accounting as the chief inspector may prescribe.
(h) A local government office that is subject to separate
examination under this section by the chief inspector may elect
to have a review performed to satisfy the annual examination
requirement if it is not required to be subject to a single audit
under federal regulations and its expenditures from all sources
are less than three hundred thousand dollars during the fiscal
year for which the election is made: Provided, That an annual
audit must be performed at least once every five years and shall
be performed whenever during the course of a review the chief
inspector determines that special or unusual circumstances
warrant making a full audit.
(i) When not required to have an audit by then existing
federal regulations and the financial affairs of a local
government are not examined annually but are examined on a biennial or other periodic basis, the chief inspector may, in his
discretion, after making an audit of one of the fiscal years,
make a review of the years remaining to be examined.
(j) He or she The chief inspector or any authorized
assistant may issue subpoenas and compulsory process, direct the
service thereof by any sheriff, compel the attendance of
witnesses and the production of books and papers at any
designated time and place, selected in their respective county,
and administer oaths. If any person refuses to appear before the
chief inspector or his or her authorized assistant when required
to do so, refuses to testify on any matter or refuses to produce
any books or papers in his or her possession or under his or her
control, he or she is guilty of a misdemeanor, and, upon
conviction thereof, shall be fined not more than one hundred
dollars and imprisoned in the county jail not more than six
months.
(k) A person convicted of willful false swearing in an
examination is guilty of a misdemeanor, and, upon conviction
thereof, shall be fined not more than one hundred dollars and
imprisoned in the county jail not more than six months.
(l) A Except as otherwise provided in this section, a copy
of the certified report of each examination shall be
made in
duplicate, one copy to be filed in the office of the state tax
commissioner,
and one in the auditing department of the agency with the governing body of the local government and with other
offices as prescribed in uniform procedures of the chief
inspector.
(m) If any examination discloses misfeasance, malfeasance or
nonfeasance in office on the part of any public officer or
employee, a certified copy of the report shall be filed
by the
chief inspector with the proper legal authority of the agency,
the prosecuting attorney of the county wherein the agency is
located and with the attorney general for such legal action as is
proper. At the time
of the filing of such the certified audit
report is filed, the chief inspector shall notify the proper
legal authority
of the agency, the prosecuting attorney and the
attorney general in writing of his or her recommendation as to
the legal action that the chief inspector considers proper,
including, but not limited to, whether criminal prosecution or
civil action to effect restitution, or both,
is appropriate under
the circumstances.
(n) If the proper legal authority or prosecuting attorney,
within nine months of
the receipt of the certified audit
report
and recommendations, refuses, neglects or fails to take efficient
legal action by a civil suit to effect restitution or by
prosecuting criminal proceedings to a final conclusion, in
accordance with the recommendations, the chief inspector may
institute the necessary proceedings or participate therein and prosecute the proceedings in any court of the state to a final
conclusion.
(b) (o) When requested by the governing body of a
municipality local government other than a county board of
education, the chief inspector shall take bids on the
audit
examination of that
municipality local government and, if he or
she finds that a reputable certified public accountant or
registered public accountant outside the
state tax department tax
division of the department of tax and revenue can conduct the
audit examination required by this section at a cost lower than
if the
department chief inspector did it, and if the accountant
meets all criteria set forth by the chief inspector,
he or she
the chief inspector shall contract with the accountant for the
audit examination: Provided, That the chief inspector may elect
to conduct the
audit examination of a
municipality local
government with one or more members of his or her
audit staff
where, in the opinion of the chief inspector, a special or
unusual situation exists.
CHAPTER 18. EDUCATION.
ARTICLE 9B. STATE BOARD OF SCHOOL FINANCE.
§18-9B-13. Inspection and audit of school finance administration.
The board of finance may, through its duly authorized
representatives, make inspections and examinations of the fiscal
administration of a county school district. The inspection and examination may extend to any matter or practice subject to
regulation by the state board. Regular and special audits
examinations shall be made by the tax commissioner, as required
by law, but the a certified public accountant approved pursuant
to section seven, article nine, chapter six of this code and
selected by the county board of education, or by the chief
inspector. All examinations shall be made as provided in section
seven, article six of this code. The board may make selective
audits to determine the accuracy of statements and reports made
by a county board or superintendent.
The report of the examination shall be certified to the
county board of education, together with instructions for the
correction of procedures and practices found to be not in
accordance with the requirements of the state board. The county
board shall comply with the instructions forthwith.
The state board, through its duly authorized
representatives, shall have full access to all books, records,
papers and documents of the county board of education.
NOTE: The purpose of this bill is to permit public offices
that have annual expenditures of three hundred thousand dollars
or less to fulfill financial examination requirements by having
a review rather than an audit.
Strike-throughs indicate language that would be stricken
from the present law, and underscoring indicates new language
that would be added.