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Legal Authority for Legislative Audits

Constitution

The Montana Constitution, specifically, Article V, Section 10(4), Constitution of Montana, provides in part:

"The Legislature shall establish a legislative post-audit committee which shall supervise post-auditing duties provided by law."

Legislative Audit Act

The Legislative Audit Act became law as Chapter 249, Session Laws of 1967. The statutory authority and responsibilities relating to the legislative audit function are contained in Title 5, chapter 13, Montana Codes Annotated:

5-13-101. Title and purpose of chapter. (1) This chapter may be cited as "The Legislative Audit Act."

(2) Because the legislature is responsible for authorizing the expenditure of public moneys, designating the sources from which money may be collected, and shaping the administration to perform the work of state government and is held finally accountable for fiscal policy, the legislature should also be responsible for the audit of books, accounts, activities, and records so that it may be assured that its directives have been carried out. It is the intent of this chapter that each agency of state government be audited for the purpose of furnishing the legislature with factual information vital to the discharge of its legislative duties.

5-13-102. Definitions. In this chapter:

(1) "committee" means the legislative audit committee.

(2) "state agency" means all offices, departments, boards, commissions, institutions, universities, colleges, and any other person or any other administrative unit of state government that spends or encumbers public moneys by virtue of an appropriation from the legislature or that handles money on behalf of the state or that holds any trust or agency moneys from any source.

5-13-201. Legislative audit committee. There is a legislative audit committee which is a permanent joint committee of the legislature.

5-13-202. Appointment and term of members -- officers -- vacancies. (1) The legislative audit committee consists of six members of the Senate and six members of the House of Representatives appointed before the end of each regular session in the same manner as standing committees of the respective houses are appointed. Subject to 5-5-234, three of the appointees of each house must be members of the majority political party and three of the appointees of each house must be members of the minority party.

(2) A member of the committee shall serve until the member's term of office as a legislator ends or until a successor is appointed, whichever occurs first.

(3) The committee shall elect one of its members as presiding officer and other officers as it considers necessary.

(4) A vacancy on the committee occurring when the legislature is not in session must be filled by the selection of a member of the legislature by the remaining members of the committee. If there is a vacancy on the committee at the beginning of a legislative session because a member's term of office as a legislator has ended, a member of the same political party must be appointed in the same manner as the original appointment, no later than the 10th legislative day, to serve until a successor is appointed under subsection (1).

5-13-203. Meetings -- compensation. (1) The committee shall meet:

(a) as often as may be necessary during and between legislative sessions to advise and consult with the legislative auditor; and

(b) to review privatization plans and to make findings, conclusions, and recommendations as required under provisions of 2-8-302.

(2) Committee members are entitled to receive compensation and expenses as provided in 5-2-302.

5-13-301. Legislative Audit Division. There is a legislative audit division. The legislative auditor is responsible to manage the division in order to perform the duties imposed by this chapter.

5-13-302. Appointment and qualifications. (1) The committee shall appoint the legislative auditor and set the legislative auditor's salary in accordance with the rules for classification and pay adopted by the legislative council.

(2) The legislative auditor shall hold a degree from an accredited college or university with a major in accounting or an allied field and shall have at least 2 years' experience in the field of governmental accounting and auditing.

5-13-303. Term and removal. The legislative auditor is responsible solely to the legislature. The legislative auditor shall hold office for a term of 2 years beginning with July 1 of each even-numbered year. The committee may remove the legislative auditor for misfeasance, malfeasance, or nonfeasance in office at any time after notice and hearing.

5-13-304. Powers and duties. The legislative auditor shall: (1) conduct a financial and compliance audit of every state agency every 2 years covering the 2-year period since the last audit, unless otherwise required by state law;

(2) conduct a an audit to meet the standards and accomplish the objectives required in 5-13-308 whenever the legislative auditor determines it necessary and shall advise the members of the legislative audit committee;

(3) make a complete written report of each audit. A copy of each report must be furnished to the department of administration, the state agency that was audited, each member of the committee, and the legislative services division;

(4) report immediately in writing to the attorney general and the governor any apparent violation of penal statutes disclosed by the audit of a state agency and furnish the attorney general with all information available relative to the violation;

(5) report immediately in writing to the governor any instances of misfeasance, malfeasance, or nonfeasance by a state officer or employee disclosed by the audit of a state agency;

(6) report immediately to the commissioner of political practices any instances of apparent violations of the state code of ethics provided for in Title 2, chapter 2, part 1;

(7) report immediately to the surety upon the bond of an official or employee when an audit discloses a shortage in the accounts of the official or employee. Failure to notify the surety does not release the surety from any obligation under the bond;

(8) have the authority to audit records of organizations and individuals receiving grants from or on behalf of the state to determine that the grants are administered in accordance with the grant terms and conditions. Whenever a state agency enters into an agreement to grant resources under its control to others, the agency shall obtain the written consent of the grantee to the audit provided for in this subsection.

5-13-305. Employees, consultants, and legal counsel - cure for impairment. (1)The legislative auditor may appoint and define the duties of employees and consultants who are necessary to carry out the provisions of this chapter, within the limitations of legislative appropriations. The legislative auditor shall set the pay for employees in accordance with the rules for classification and pay adopted by the legislative council. The legislative auditor may employ legal counsel to conduct proceedings under this chapter.

(2) The legislative auditor shall inform the legislative council and the legislative audit committee in writing of an administrative policy or rule adopted under 5-11-105 that may impair the independence of the division, along with a statement of the reasons for the opinion and suggested changes to cure the impairment. The legislative council shall review the rule in question and adopt a revision that is generally applicable to the legislative branch and that is designed to cure the impairment. While the impairment exists, the legislative audit committee may adopt a specific exemption to the questioned rule that states the alternative rule to be employed under the exemption.

5-13-306. Legislative auditor to assist legislature during sessions. During sessions of the legislature, the legislative auditor and the audit staff, when requested, shall assist the legislature, its committees, and its members by gathering and analyzing information relating to the fiscal affairs of state government.

5-13-307. Recommendations of legislative auditor - implementation costs. (1) The reports of the legislative auditor may include comments, recommendations, and suggestions, but the legislative auditor does not have the power to enforce them and may not otherwise influence or direct executive or legislative action.

(2) Whenever significant costs are associated with the implementation of audit recommendations, the legislative auditor shall, if practicable, note this fact and the estimated amount of such costs in the appropriate audit report.

5-13-308. Audit standards and objectives. The objectives of financial compliance, performance, and information system audits of state agencies or their programs conducted by the legislative auditor are formulated, defined, and conducted in accordance with industry standards established for auditing to determine whether:

(1) the agency is carrying out only those activities or programs authorized by the legislature and is conducting them efficiently, effectively, and in accordance with legislative intent;

(2) expenditures are made only in furtherance of authorized activities and in accordance with the requirements of applicable laws and regulations;

(3) the agency collects and accounts properly for all revenues and receipts arising from its activities;

(4) the assets, including information technology, of the agency or in its custody are adequately safeguarded and controlled and utilized in an efficient manner;

(5) reports and financial statements by the agency to the governor, the legislature, and central control agencies disclose fully the nature and scope of the activities conducted and provide a proper basis for evaluating the agency's operations.

5-13-309. Information from state agencies. (1) All state agencies shall aid and assist the legislative auditor in the auditing of books, accounts, activities, and records.

(2) The legislative auditor may examine at any time the books, accounts, activities, and records, confidential or otherwise, of a state agency. This section may not be construed as authorizing the publication of information prohibited by law.

(3) The head of each state agency shall immediately notify both the attorney general and the legislative auditor in writing upon the discovery of any theft, actual or suspected, involving state money or property under that agency's control or for which the agency is responsible.

5-13-310. Prosecution -- discipline of professionals. (1) The attorney general shall conduct on behalf of the state all prosecutions for public offenses involving a state agency that are reported to the attorney general by the legislative auditor.

(2) If the attorney general declines the prosecution or fails to commence action on a public offense within a reasonable time, the county attorney of the appropriate county shall conduct on behalf of the state the prosecution.

(3) In an action taken by the attorney general or a county attorney under this section, in which a professional person in the state of Montana is charged or may have engaged in unethical conduct, all records or certified copies of the records, including investigative materials, must be turned over to the appropriate disciplinary authority for the profession immediately upon completion of the action.

5-13-311. Legislative auditor to establish and maintain toll-free number for reporting fraud, waste, and abuse -- procedures. (1) The legislative auditor shall establish and maintain a toll-free telephone number for use by Montana residents for the reporting of fraud, waste, and abuse in state government. The legislative auditor shall review all telephone calls received at the toll-free number and shall maintain a record of each call. The legislative auditor shall:
(a) analyze and verify the information received from each telephone call; or
(b) refer the information for appropriate action to the agency that is or appears to be the subject of the call.

(2) A state agency that receives information referred to it by the legislative auditor pursuant to this section shall take adequate and appropriate action to investigate and remedy any fraud, waste, or abuse discovered as a result of the referral. The agency shall report in writing to the legislative auditor concerning the results of its investigation and those measures taken to correct any fraud, waste, or abuse discovered as a result of the referral.

(3) Information received at the toll-free number is confidential until the time that the legislative auditor or other appropriate agency determines the validity of the information and takes corrective action. After the legislative auditor or other appropriate agency takes action to verify the fraud, waste, or abuse complained of and takes any corrective action, information concerning the subject of the complaint and the remedy, if any, is public information unless precluded by law.

(4) The legislative auditor shall, as directed by the legislative audit committee, periodically report to the committee on:
(a) the use of the toll-free number;
(b) the results of the reviews, verifications, and referrals; and
(c) any corrective actions taken by the appropriate agencies.

(5) Information received at the toll-free number concerning a governmental entity other than state government may be referred by the legislative auditor to an appropriate federal, state, or local government agency.

(6) If the legislative auditor determines that as a result of a review and verification or referral pursuant to this section, a waste of state resources has occurred, the legislative auditor shall report the matter in writing to the legislative fiscal analyst.

(7) The legislative auditor shall advertise the existence and purpose of the toll-free number in an appropriate manner.

5-13-312. Deposit of money recovered. Unless otherwise provided by law, money recovered as a result of an action taken pursuant to 5-13-311 must be deposited in the state general fund.

5-13-313. Audit selection based on risk. (1) In selecting and prioritizing the agencies or programs for audit under 5-13-304, the legislative auditor shall consider the agency's or program's financial, operational, and technological risks associated with meeting its intended purpose, goals, objectives, and legal mandates.

(2) To aid in identifying agencies and programs for audit, the committee shall, before July 1 of each odd-numbered year, request that the governor, the board of regents, and the judiciary furnish the committee with a list of any recommendations for agencies and programs within the governor's, board of regents' or judiciary's respective jurisdiction to be considered for audit during the next biennium pursuant to this chapter. The list may be prioritized and must set forth the reasons for recommending each agency or program to be considered based on the risk criteria in subsection (1).

(3) The legislative auditor shall review the lists, suggestions from legislators and legislative committees, staff recommendations, and any other relevant information and consult with the committee as necessary.

5-13-314. Employment protection. An employee of the state of Montana or an authorized contractor who provides information to the committee, the legislative auditor, or the legislative auditor's authorized designee may not be subject to any penalties, sanctions, retaliation, or restrictions in connection with the employee's or contractor's employment as a result of the disclosure of information unless the employee or contractor disclosing the information has violated state law.

5-13-321. Joint audits. (1) The legislative auditor may participate with audit oversight organizations on joint audits of Montana programs or services. For the purpose of the joint audits, the legislative auditor may cooperate with the a audit oversight organizations, accept and provide information necessary to the success of the joint audits, and enter into contracts for the performance of the joint audits. Audits authorized by this section may examine all or any part of the financing or performance of program, whether operated directly by a state agency or by a contractor with a state agency. Joint audits are subject to the audit standards, objectives, and reporting procedures required by state law and as required in applicable federal laws, regulations, and policies.

(2) Audit costs of the legislative auditor for conducting joint audits authorized by subsection (1) are considered direct costs of the state agency or program subject to the audit. Funds for the payment of the expenses of the legislative auditor must be deposited in the state special revenue fund as provided in 5-13-403. To the maximum extent allowable under federal regulations, the legislative auditor shall charge audit costs of joint audits to federal funds.

(3) Audits conducted pursuant to this section must be approved by the committee as part of the operational plan of the legislative auditor.

5-13-401. Definitions. As used in this part, the following definitions apply:

(1) "Agency" means each state office, department, division, board, commission, council, committee, institution, university system unit, or other entity or instrumentality of the executive branch, office of the judicial branch, or office of the legislative branch of state government.

(2) "Audit services" means financial compliance post audits as required by this chapter.

(3) "University system unit" means the board of regents or its units.

5-13-402. Audit costs. (1) Prior to July 1 of each even-numbered year, the legislative auditor shall advise each agency and the budget director of the estimated audit costs for the following biennium. Each agency shall include the estimated audit costs in its proposed budget submitted to the budget director pursuant to 17-7-112. The budget director shall notify the legislative auditor if the executive budget recommendation to the legislature for audit costs differs from that proposed by the legislative auditor.

(2) Not later than 60 days after adjournment of each legislature, the budget director shall provide to the legislative auditor a schedule reflecting, by fund, amounts appropriated to each agency for audit costs.

(3) The legislative auditor shall bill agencies for audit services that the legislative auditor considers necessary. The legislative auditor may not bill an agency for audit services in excess of amounts appropriated for audit services. Additional audit related services may be provided by the legislative auditor at a cost agreed to by an agency and billed to the agency.

5-13-403. Audit account - appropriation and expenditures. All money for audits transferred to the legislative auditor as provided in 5-13-402 must be deposited in the state special revenue fund in the state treasury to the credit of the office of the legislative auditor. The money deposited that is in excess of general and pay plan appropriations is statutorily appropriated, as provided in 17-7-502, and may be expended by the legislative auditor to pay expenses incurred in auditing state agencies pursuant to an operational plan approved by the legislative audit committee.

5-13-411. Legislative auditor to approve contracts for audit services. No contract for an audit of a state agency may be entered into without the approval of the legislative auditor.

Sunset Law

The Sunset Law, when originally enacted in 1977, scheduled specific boards and agencies for periodic (every six years) sunset reviews (sections 2-8-101 through 2-8-122, MCA). Chapter 321, Laws of 1983, eliminated the six-year reaudit feature and deleted those agencies then scheduled for reaudit under sunset. Under the statutory changes, each session of the legislature may designate agencies or programs it believes warrant sunset review.

The Legislative Audit Committee, based upon recommendations solicited from the legislature and from the governor, may recommend programs or agencies for sunset review to the legislature in the form of a bill which would be subject to legislative hearings The agencies approved by the legislature would be subject to sunset review prior to the next legislative session. Any state program could be subject to the sunset process, and the method of designating programs for sunset audits would match audit resources to programs currently of legislative interest or concern.

Privatization Plan Review

2-8-301. Definitions. As used in this part, the following definitions apply:

(1) "Agency" means an office, position, commission, committee, board, department, council, division, bureau, section, or any other entity or instrumentality of the executive, legislative, or judicial branch of state government.

(2) "Private sector" means any entity or individual not principally a part of or associated with a governmental unit that is associated with or involved in commercial activity.

(3) (a) "Privatize" means an agency contracting with the private sector to provide services that are currently or normally conducted directly by the employees of the agency.

(b) The term does not include contracting with the private sector to provide services on a temporary or emergency basis.

(4) "Program" means a legislatively or administratively created function, project, or duty of an agency.

2-8-302. Privatization plan -- hearing -- role of legislative audit committee -- action by governor. (1) Before an agency may privatize a program it shall prepare a privatization plan as provided in 2-8-303.

(2) The privatization plan must be released to the public and to all unions that represent state employees and must be submitted to the legislative audit committee at least 180 days prior to the proposed implementation date.

(3) At least 90 days prior to the proposed implementation date, the legislative audit committee shall conduct a public hearing on the proposed privatization plan at which public comments and testimony must be received.

(4) At least 45 days prior to the proposed implementation date, the legislative audit committee shall release to the public a summary of the results of the hearing and the findings and conclusions of the legislative audit committee.

(5) (a) At least 30 days prior to the proposed implementation date, the legislative audit committee shall vote to recommend approval or disapproval of the privatization plan to the governor and transmit the recommendation in writing to the governor.

(b) The recommendation of the legislative audit committee is advisory only.

(6) At least 15 days prior to the proposed implementation date, the governor shall approve or disapprove the privatization plan, stating in writing the reasons for approval or disapproval.

2-8-303. Privatization plan -- contents. (1) An agency proposing to privatize a program shall prepare a privatization plan that includes the following:
(a) a description of the program to be privatized, including references to the legal authority under which the program was created;
(b) detailed budget information that includes a list of expenditures for the 2 most recent fiscal years and the sources of revenue for the program;
(c) a list of all personnel currently employed in the program and the estimated effect of the proposed privatization on the employment status of each employee afftected;
(d) a listing of the assets of the program and their proposed disposition if the plan is implemented;
(e) an estimate of the cost savings or any additional costs resulting from privatizing the program, compared to the costs of the existing, nonprivatized program. Additional costs must include the estimated cost to the state of inspection, supervision, and monitoring of the proposed privatization and the costs incurred in the discontinuation of such a contract.
(f) the estimated current and future economic impacts of the implementation of the plan on other state programs, including public assistance programs, unemployment insurance programs, retirement programs, and agency personal services budgets used to pay out accrued vacation and sick leave benefits;
(g) the estimated increases or decreases in costs and quality of goods or services to the public if the plan is implemented;
(h) the estimated changes in individual wages and benefits resulting from the proposed privatization;
(i) the ways in which the proposed privatization will deliver the same or better services at a lowercost; and
(j) a narrative explanation and justification for the proposed privatization.
(2) To implement the privatization plan, an agency may transfer funds between budget categories.

2-8-304. Review of privatized programs. (1) If during audits of state agencies, the legislative auditor identifies programs being conducted by an agency under contract that may be administered more cost effectively directly by the agency or identifies services performed by an agency that may be performed more cost effectively by the private sector, the legislative auditor shall submit this information to the legislative audit committee.

(2) Members of the public, elected bargaining agents or employee representatives, elected officials, legislators, and agency directors may submit to the legislative audit committee a request to review programs being conducted under contract by an agency that may be administered more cost effectively directly by the agency.

(3) The office of budget and program planning shall submit to the legislative audit committee, by July 1 of each odd-numbered year:
(a) a list of all programs accounted for in an enterprise fund or an internal service fund; and
(b) a request for privatization review under subsection (1) of at least two of the programs identified in subsection (3)(a), including any available information and criteria required under 2-8-303.

(4) The legislative audit committee shall review the information and requests provided under subsections (1) and (2) and may direct the legislative auditor to conduct a review of any contracted program or program administered directly by the agency, or both. The review must include a report to the legislative audit committee that includes the information required in a privatization plan under 2-8-303.

(5) The report required by subsection (4) must be provided to the legislative audit committee and released to the public. Not less than 30 days after the release of the report, the legislative audit committee shall conduct a public hearing on the report at which public comments and testimony must be received. Upon completion of the hearing on the report, the legislative audit committee may make recommendations that it believes appropriate concerning the program.

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Last Modified:
10/3/2012 9:09:59 AM