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SB273 SUB1 Senate Bill 273 History

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Key: Green = existing Code. Red = new code to be enacted

WEST virginia legislature

2019 regular session

Committee Substitute

for

Senate Bill 273

Senators Carmichael (Mr. President), Trump, Woelfel, Palumbo, and Tarr, original sponsors

[Originating in the Committee on the Judiciary; Reported on February 22, 2019]

 

 

A BILL to  to amend and reenact §6-9-7 of the Code of West Virginia, 1931, as amended; to amend and reenact §12-4A-1, §12-4A-2, §12-4A-3, and §12-4A-4 of said code; and amend said code by adding thereto two sections, designated §12-4A-2a and §12-4A-5, all relating generally to the Commission on Special Investigations and the State Auditor duties; authorizing reporting of evidence of governmental waste, fraud, mismanagement, malfeasance, misfeasance, or nonfeasance to the State Auditor; clarifying that such reports shall relate to all public funds rather than state funds alone; directing that the Commission on Special Investigations have primacy in investigating reports of possible fraud, misappropriation, mismanagement, or waste of state funds by state agencies, officials, and employees; clarifying applicability of freedom of information law to documents which are part of an investigation; defining terms; establishing time requirement for the delivery of required information or reports from the State Auditor to the commission; clarifying that the State Auditor must share all reports of fraud, misappropriation, mismanagement, or waste of public funds with the commission; authorizing publication of reports of completed investigations and underlying documentation; requiring redaction of certain information from published reports; requiring the State Auditor to track investigations and issue reports; setting dates for reporting; and defining terms.

Be it enacted by the Legislature of West Virginia:

CHAPTER 6. GENERAL PROVISIONS RESPECTING OFFICERS.


ARTICLE 9. SUPERVISION OF LOCAL GOVERNMENT OFFICES.   

§6-9-7. Examinations into affairs of local public offices; penalties.

(a) The chief inspector has the power by himself or herself, or by ­or any person appointed, designated, or approved by the chief inspector 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. An examination shall be made annually, if required, to comply with the Single Audit Act and when otherwise required by law or contract. When that act does not apply, unless otherwise required by law or by contract, the examination shall be made at least once a year, if practicable. Furthermore, the chief inspector shall furnish annually to the Legislature a list of each local government office or political subdivision and all boards, commissions, authorities, agencies, or other offices created under authority thereof and the year of its most recent completed audit.

(b) When required for compliance with regulations for federal funds received or expended by county boards of education the chief inspector or his or her designee, including any certified public accountant approved by the chief inspector shall conduct and issue an audit report within the time specified in controlling federal regulations. Examinations of other local governments shall be conducted and audit, review, or monitoring reports issued in accordance with uniform procedures of the chief inspector.

(c) In cooperation with institutions of higher education located in the state of West Virginia, the chief inspector may establish and maintain a small government monitoring program. The small government monitoring program shall authorize local governments which are not otherwise required to undergo a single audit or a financial audit to apply to the chief inspector, on an annual basis, for participation in the program. The chief inspector shall prescribe and oversee monitoring procedures that shall be performed by higher education students in the field of accounting. Participating institutions of higher education shall enter into a cooperative agreement with the chief inspector to provide the service. The chief inspector shall prescribe policies and procedures for the administration of the small government monitoring program. 

(d) A county board of education may elect, by May 1 of the fiscal year to be audited, to have its annual examination performed by a certified public accountant approved by the chief inspector to perform the examinations. When this election is made, a copy of the order of the county board making the election shall be filed with the chief inspector and the State Board of School Finance. The county board of education is 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. The county board shall follow the audit bid procurement procedures established by the chief inspector in obtaining the audit.

(e) 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 The chief inspector shall add or delete names 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.

(f) A county board of education, when procuring the services of a certified public accountant on the chief inspector’s list, shall follow the procurement standards prescribed by the Uniform Guidance, Title 2 of the Code of Federal Regulations, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, in effect for the fiscal year being examined, or in any replacement circular or regulation of the Office of Management and Budget and in addition shall follow those standards as determined by the office of chief inspector.

(g) 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 audit or review report, the certified public accountant shall promptly send two copies of the certified report to the county board of education who which shall file one copy with the federal Audit Clearing House. The certified public accountant shall 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 §6-9-7(n) subsection (n) of this code section. For purposes of this section and §18-9B-13 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.

(h) 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 prescribed by the chief inspector may prescribe.

(i) If a local government office is not subject to a single audit requirement under federal regulations or if it is not otherwise required by law or contract to undergo an annual audit and its expenditures from all sources are less than $500,000 during the fiscal year the chief inspector may choose to perform either a review or audit on the local government office and may in his or her discretion determine the frequency of such review or audit.

(j) The chief inspector or any authorized assistant his or her designee 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.

(k) If any person refuses to appear before the chief inspector or his or her authorized assistant designee 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 $100 and confined for not more than six months.

(l) 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 $100 and confined in jail not more than six months.

(m) Except as otherwise provided in this section, a copy of the certified report of each examination shall be filed in the office of the commissioner, chief inspector with the governing body of the local government, and with other offices as prescribed in uniform procedures of the chief inspector.

(n) If any audit, examination, or investigation discloses misfeasance, malfeasance, or nonfeasance in office on the part of any public officer or employee, the chief inspector shall publish electronically a certified copy of the report: shall be published electronically by the chief inspector with notice of the publishing sent in writing to the proper legal authority of the entity being audited, examined, or investigated the chief inspector deems appropriate for such legal action as is proper. Provided, That the chief inspector shall provide the Director of the Commission on Special Investigations, or his or her designee, with a copy of the certified audit, examination, or investigation report within five business days of its completion and prior to its publication. At the time the certified audit, examination, or investigation report is published, the chief inspector shall notify the proper legal authority of the entity being audited, examined, or investigated he or she deems considers appropriate in writing of his or her recommendation as to the legal action that the chief inspector considers proper, whether criminal prosecution or civil action to effect restitution, or both.

(o) If the proper legal authority or prosecuting attorney, within 90 days of 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, in accordance with the recommendations, the chief inspector may institute the necessary proceedings or participate therein in the proceeding and prosecute the proceedings in any court of the state to a final conclusion.

(p) A local government that is not a county board of education may elect, by May 1 of the fiscal year to be audited, to have its annual examination performed by a certified public accountant approved by the chief inspector to perform the examinations. When this election is made, a copy of the order of the governing body making the election shall be filed with the chief inspector. An electing local government is allowed to contract with any certified public accountant on the chief inspector’s then current list of approved certified public accountants, unless the prosecuting attorney of the county in which the local government 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: Provided, That the audit of a local government may be performed by the chief inspector at his or her discretion. The local government shall follow the audit bid procurement procedures established by the chief inspector in obtaining the audit: Provided, however, That the chief inspector may elect to conduct the audit of a local unit of 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 12. PUBLIC MONEYS AND SECURITIES.

ARTICLE 4A. CENTRALIZED MANAGEMENT OF COMPLAINTS.

§12-4A-1. Legislative findings.

(a) The Legislature finds that there is no centralized state authority the office of the State Auditor is the appropriate executive branch entity to be responsible for receiving and referring reports of possible fraud, misappropriation of, mismanagement, or waste of state public funds. It is the intent of the Legislature to see that all state public funds are utilized used for the maximum benefit of the people of the State of West Virginia. The Legislature finds that it is important to provide the people of this state with both a forum and an opportunity to report suspected fraud, waste, or abuse of state public funds, and to have those reports properly investigated.

(b) The Legislature finds that it is an appropriate use of state resources to assist county prosecutors and law enforcement in the investigation of possible fraud, misappropriation, mismanagement, or waste of public funds which often requires extensive document collection and review, as well as the use of forensic accountants and other experts.

§12-4A-2. General purpose; primacy of Commission on Special Investigations in certain matters.  


(a) The State Auditor shall have authority to may receive, investigate, and refer for investigation reports of possible fraud, misappropriation, mismanagement, or waste of state funds of the State of West Virginia public funds, and to confer, assist, and cooperate with and to refer such reports to the Commission on Special Investigations, county prosecutors, and law-enforcement agencies in furtherance of the investigations.  When the State Auditor receives reports, or discovers evidence, of possible fraud, misappropriation, mismanagement, or waste of public funds, the State Auditor shall notify the Director of the Commission on Special Investigations to ensure efficiency of operations between the commission and the State Auditor and shall provide the director with copies of all reports pertaining thereto and, if requested by the director, all evidence identified or acquired by the State Auditor. 

(b) Notwithstanding any provision of this article to the contrary, the Commission on Special Investigations shall have primacy in the investigation of reports of possible fraud, misappropriation, mismanagement, or waste of public funds by state agencies, state public officials, and state employees.

§12-4A-2a. Definitions.


As used in this article:

(1) “Anonymously” means:

(A) An unknown source making a report of possible fraud, misappropriation, mismanagement, or waste of public funds; or

(B) A known source who has intentionally designated and indicated an intent to remain anonymous at the time of the report, the Auditor shall not disclose the identity of the known source without the consent of the known source or pursuant to an order of a court of competent jurisdiction.

(2) “Auditor” or “State Auditor” means the State Auditor of West Virginia, or his or her designee.

(3) “CSI” or “Commission on Special Investigations” means the legislative committee on special investigations, the director of the commission, or any person appointed, designated or approved by the commission to perform the service.

(4) “Modes of communication” means a manner of communication free of cost to the user including but not limited to, a telephone hotline, electronic mail, or social media.

(5) “Political subdivision” means that as defined in §29-12-3c of this code.

(6) “Public Funds” means moneys, funds, or assets, of any character, including federal moneys, belonging to or in the custody of the state, a state governmental office, a political subdivision, or any spending unit thereof.

(7) “Staff” means persons employed or contracted by the State Auditor or CSI to perform or assist in an investigation.

(8) “State governmental office” means a state department, office, board, commission, bureau, division, institution, or institution of higher education under the direction and organization of the executive branch, legislative branch, or judicial branch of state government.  It includes individual state agencies and programs, elected offices, as well as those programs and activities that cross agency lines. 


§12-4A-3. Duties generally.

(a) The State Auditor may employ staff, including, but not limited to, a certified fraud examiner or a forensic a certified public accountant specializing in fraud and forensics to receive and review investigate reports of suspected fraud, misappropriation, mismanagement, or waste of state public funds which shall be are filed in that office. Such reports and investigations shall be confidential, except that the State Auditor or his or her designee may supply information necessary to effectuate the purposes of this article to the appropriate governmental entities.

(b) The State Auditor shall establish modes of communication sufficient to receive reports of suspected fraud, misappropriation of, mismanagement, or waste of state public funds. Reports of suspected fraud, misappropriation, mismanagement, or waste may be filed by any citizen or employee of the State of West Virginia. The Auditor shall make available an option for making a report under this article anonymously.  

 (c) Nothing in this article shall be construed to limit the authority of any other governmental entity to conduct an internal investigation of suspected fraud, misappropriation, mismanagement or waste.


§12-4A-4. Enforcement. 

(a) The authority to enforce the provisions of this article shall be vested in the State Auditor. 

(b) Upon receipt of a report or the discovery of possible fraud, misappropriation, mismanagement, or waste of public moneys, the State Auditor may examine, subject to the provisions of §12-4A-2(b) of this code, the financial affairs of a state governmental office, or political subdivision and all boards, commissions, authorities, agencies, or other offices created under authority thereof, as considered necessary.

(c) The State Auditor may issue subpoenas and subpoenas duces tecum, administer oaths, examine persons under oath, and compel the attendance of witnesses and the production of books and papers at any designated time and place: Provided, That a request for production directed to a state governmental office or political subdivision may be in the form of a written letter from the State Auditor in lieu of a subpoena.

(d)  The State Auditor may interview witnesses and require the production from governmental offices or political subdivisions of books, records, documents, papers, computers, laptops, computer hard drives, electronic records including, but not limited to, emails, electronic files, electronic documents, and metadata, or any other thing.  Notes of interviews and investigation reports, commentary, and memoranda prepared by the staff of the State Auditor in conjunction with an investigation shall be confidential and not subject to public disclosure under the provisions of §29B-1-1 et seq. of this code; however, public records which are otherwise subject to disclosure shall not be withheld merely on the basis that such records are evidence in an investigation under this article.

(e) The State Auditor shall assist the Commission on Special Investigations in the investigation of unlawful acts related to fraud, misappropriation, mismanagement, or waste of public funds in the matters investigated by the commission.

(f) The State Auditor may share otherwise confidential documents, materials, or information with the Commission on Special Investigations, county prosecutors, United States Attorneys, and state and federal law-enforcement agencies, including municipal police departments and county sheriff departments, appropriate governmental entities, and agencies in furtherance of an investigation: Provided, That the recipient agrees to maintain the confidentiality and privileged status of the document, material, or information.

(g) Within five days after the commencement of an investigation under this article, the State Auditor shall alert the Director of the Commission on Special Investigations of the investigation and provide a summary of the allegations underlying the investigation. 

(h) Upon completion of an investigation in which evidence of potential criminal violations is found, The the State Auditor shall promptly within five days, forward all complaints and findings, along with a summary report if it exists, and any evidence of suspected fraud, misappropriation of, mismanagement, or waste of state public funds to the Director of the Commission on Special Investigations and, if potentially criminal in nature, to the prosecuting attorney of the county in which such potential criminal violation is alleged to have taken place, and to the law-enforcement agency with jurisdiction over the potential criminal violation. in the area as well as to the Commission on Special Investigations.

(b) (i) If such reports are made about an agency that has its own investigative body, then the State Auditor may refer evidence of the fraud, misappropriation, mismanagement, or waste to that investigative body.

            (j) Nothing in this article shall be construed to:

            (1) Preempt the authority of the Commission on Special Investigations;

(2) Preempt the authority or relieve the duty of other law-enforcement or regulatory agencies to investigate, examine, and prosecute suspected violations of law;

(3) Prevent or prohibit a person from disclosing voluntarily information concerning possible fraud, misappropriation, mismanagement, or waste of public funds to a law-enforcement or regulatory agency other than the State Auditor; or

(4) Limit the powers granted elsewhere by the laws of this state to the State Auditor or his or her designee to investigate and examine possible violations of law.


§12-4A-5. Tracking and reporting.

(a) Beginning July 1, 2019, the State Auditor shall track and compile all instances of possible fraud, misappropriation, mismanagement, or waste of public funds reported to or discovered by the Auditor’s office.

(b) On or before the first day of February of each year, the State Auditor shall publish a report detailing the compiled instances tracked in subsection (a) of this section for the prior calendar year. The report shall not identify the alleged subject of each report unless the matter is of public record, but shall provide the following numerical data:

(1) The number of reports made to the State Auditor;

(2) The type of alleged misconduct;

(3) Whether an investigation was undertaken;

(4) The alleged amount of public funds involved;

(5) The type of governmental office or entity that is the subject of the reported misconduct; and

(6) The disposition of the reports.

(c) On or before the first day of February of each year, the State Auditor shall provide an annual report to the Commission on Special Investigations disclosing the nature and disposition of completed investigated reports received pursuant to this article and referred to a prosecutor’s office or other entity.

(d) At the conclusion of an investigation, the State Auditor may issue and make public an audit, special report, or fraud report detailing the nature of an investigation and any findings or recommendations made as a part of the investigation.  If the investigation is made public, the Auditor shall make publicly available material and information specifically referenced in the released report: Provided, That the Auditor shall redact from public disclosure information to protect the privacy of any person: Provided, however, That the State Auditor shall forgo release of information considered potentially detrimental to, or the subject of, a criminal prosecution.

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