House Study Bill 100 - Introduced SENATE/HOUSE FILE _____ BY (PROPOSED AUDITOR OF STATE BILL) A BILL FOR An Act concerning the duties and responsibilities of the 1 auditor of state. 2 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 3 TLSB 1179XD (14) 84 aw/sc

S.F. _____ H.F. _____ Section 1. Section 11.1, Code 2011, is amended to read as 1 follows: 2 11.1 Definitions. 3 1. For purposes of this chapter, unless the context 4 otherwise requires: 5 a. The term “department” shall be construed to mean 6 “Department” means any authority charged by law with official 7 responsibility for the expenditure of public money of the state 8 and any agency receiving money from the general revenues of the 9 state. 10 b. “Examination” means procedures that are less in scope 11 than an audit but which are directed toward reviewing financial 12 activities and compliance with legal requirements. 13 c. “Governmental subdivision” means cities and 14 administrative agencies established by cities, hospitals or 15 health care facilities established by a city, counties, county 16 hospitals organized under chapters 347 and 347A, memorial 17 hospitals organized under chapter 37, entities organized under 18 chapter 28E, community colleges, area education agencies, and 19 school districts. 20 d. “Regents institutions” means the institutions governed by 21 the board of regents under section 262.7. 22 2. As used in this chapter , unless the context otherwise 23 requires, “book” , “list” , “record” , or “schedule” kept by a 24 county auditor, assessor, treasurer, recorder, sheriff, or 25 other county officer means the county system as defined in 26 section 445.1 . 27 Sec. 2. Section 11.2, subsection 1, Code 2011, is amended 28 to read as follows: 29 1. The auditor of state shall annually, and more often if 30 deemed necessary, make a full settlement between audit the 31 state and all state officers and departments and all persons 32 receiving or expending state funds, and shall annually make a 33 complete audit of the books and accounts of every department 34 of the state. 35 -1- LSB 1179XD (14) 84 aw/sc 1/ 25

S.F. _____ H.F. _____ a. Provided, except that the accounts, records, and 1 documents of the treasurer of state shall be audited daily. 2 b. Provided further, that a preliminary audit of the 3 educational institutions and the state fair board shall be made 4 periodically, at least quarterly, to check the monthly reports 5 submitted to the director of the department of administrative 6 services as required by section 8A.502, subsection 10 , and that 7 a final audit of such state agencies shall be made at the close 8 of each fiscal year. 9 Sec. 3. Section 11.2, Code 2011, is amended by adding the 10 following new subsection: 11 NEW SUBSECTION . 1A. Departments shall immediately notify 12 the auditor of state regarding any suspected embezzlement, 13 theft, or other significant financial irregularities. 14 Sec. 4. Section 11.2, subsection 2, paragraphs a, b, and c, 15 Code 2011, are amended to read as follows: 16 a. The state board of regents shall make available to the 17 auditor of state and treasurer of state the most recent annual 18 report of any investment entity or investment professional 19 employed by an a regents institution governed by the board . 20 b. All contracts or agreements with an investment entity or 21 investment professional employed by an a regents institution 22 governed by the state board of regents shall require the 23 investment entity or investment professional employed by an a 24 regents institution governed by the state board of regents to 25 notify in writing the state board of regents within thirty days 26 of receipt of all communication from an independent auditor 27 or the auditor of state or any regulatory authority of the 28 existence of a material weakness in internal control structure , 29 or regulatory orders or sanctions against the investment 30 entity or investment professional, with regard to the type of 31 services being performed under the contracts or agreements. 32 This provision shall not be limited or avoided by another 33 contractual provision. 34 c. The audit under this section shall not be certified until 35 -2- LSB 1179XD (14) 84 aw/sc 2/ 25

S.F. _____ H.F. _____ the most recent annual reports of any investment entity or 1 investment professional employed by an a regents institution 2 governed by the state board of regents are reviewed by the 3 auditor of state. 4 Sec. 5. Section 11.4, subsection 1, Code 2011, is amended 5 to read as follows: 6 1. The auditor of state shall make or cause to be made and 7 filed and kept in the auditor’s office written reports of all 8 audits and examinations, which reports shall set out in detail 9 include, if applicable, the following: 10 a. The actual financial condition of such the state or 11 department found to exist on every examination . 12 b. Whether, in the auditor’s opinion, 13 (1) All funds Funds have been expended for the purpose for 14 which appropriated. 15 (2) The department so audited and or examined is efficiently 16 conducted, and if the maximum results for the money expended 17 are obtained. 18 (3) The work of the departments so audited or examined 19 needlessly conflicts with or duplicates the work done by any 20 other department. 21 c. All illegal or unbusinesslike practices. 22 d. Any recommendations for greater simplicity, accuracy, 23 efficiency, or economy in the operation of the business of the 24 several departments and institutions. 25 e. Comparisons of prices paid and terms obtained by the 26 various departments for goods and services of like character 27 and reasons for differences therein, if any. 28 f. e. Any other information which, in the auditor’s 29 judgment, may be of value to the auditor . 30 Sec. 6. Section 11.4, subsection 2, Code 2011, is amended by 31 striking the subsection. 32 Sec. 7. Section 11.5A, Code 2011, is amended to read as 33 follows: 34 11.5A Audit costs. 35 -3- LSB 1179XD (14) 84 aw/sc 3/ 25

S.F. _____ H.F. _____ When requested by the auditor of state, the department of 1 management shall transfer from any unappropriated funds in 2 the state treasury an amount not exceeding the expenses and 3 prorated salary costs already paid to perform examinations 4 audits of state executive departments and agencies , and 5 the offices of the judicial branch, and federal financial 6 assistance , as defined in Pub. L. No. 98-502 the federal Single 7 Audit Act, 31 U.S.C. § 7501, et seq. , received by all other 8 departments , as listed in section 11.5B, for which payments by 9 agencies have not been made. Upon payment by the departments, 10 the auditor of state shall credit the payments to the state 11 treasury. 12 Sec. 8. Section 11.5B, unnumbered paragraph 1, Code 2011, 13 is amended to read as follows: 14 The auditor of state shall be reimbursed by a department 15 or agency for performing audits or examinations of the 16 following state departments or agencies, or funds received by 17 a department or agency: 18 Sec. 9. Section 11.5B, subsection 13, Code 2011, is amended 19 to read as follows: 20 13. Federal financial assistance, as defined in Pub. L. No. 21 98-502 the federal Single Audit Act, 31 U.S.C. § 7501, et seq. , 22 received by all other departments. 23 Sec. 10. Section 11.6, subsection 1, paragraph a, Code 2011, 24 is amended to read as follows: 25 a. (1) The Except for entities organized under chapter 26 28E having gross receipts of one hundred thousand dollars or 27 less in a fiscal year, the financial condition and transactions 28 of all cities and city offices, counties, county hospitals 29 organized under chapters 347 and 347A , memorial hospitals 30 organized under chapter 37 , entities organized under chapter 31 28E having gross receipts in excess of one hundred thousand 32 dollars in a fiscal year, merged areas, area education 33 agencies, and all school offices in school districts, 34 government subdivisions shall be examined audited at least once 35 -4- LSB 1179XD (14) 84 aw/sc 4/ 25

S.F. _____ H.F. _____ each year, except that cities having a population of seven 1 hundred or more but less than two thousand shall be examined at 2 least once every four years, and cities having a population of 3 less than seven hundred may be examined as otherwise provided 4 in this section . The examination shall cover the fiscal year 5 next preceding the year in which the audit is conducted. The 6 examination audit of school offices districts shall include 7 an audit of all school funds including categorical funding 8 provided by the state, the certified annual financial report, 9 the certified enrollment as provided in section 257.6 , 10 supplementary weighting as provided in section 257.11 , and the 11 revenues and expenditures of any nonprofit school organization 12 established pursuant to section 279.62 . Differences in 13 certified enrollment shall be reported to the department of 14 management. The examination audit of school offices districts 15 shall include at a minimum a determination that the laws of 16 the state are being followed, that categorical funding is not 17 used to supplant other funding except as otherwise provided, 18 that supplementary weighting is pursuant to an eligible 19 sharing condition, and that postsecondary courses provided in 20 accordance with section 257.11 and chapter 261E supplement, 21 rather than supplant, school district courses. The examination 22 audit of a city that owns or operates a municipal utility 23 providing local exchange services pursuant to chapter 476 shall 24 include an audit performing tests of the city’s compliance with 25 section 388.10 . The examination audit of a city that owns 26 or operates a municipal utility providing telecommunications 27 services pursuant to section 388.10 shall include an audit 28 performing tests of the city’s compliance with section 388.10 . 29 (2) Subject to the exceptions and requirements of 30 subsection subsections 2 and 3, and subsection 4 , paragraph 31 “a” , subparagraph (3), examinations audits shall be made as 32 determined by the governmental subdivision either by the 33 auditor of state or by certified public accountants, certified 34 in the state of Iowa, and they shall be paid from the proper 35 -5- LSB 1179XD (14) 84 aw/sc 5/ 25

S.F. _____ H.F. _____ public funds of the governmental subdivision. 1 Sec. 11. Section 11.6, subsection 1, Code 2011, is amended 2 by adding the following new paragraph: 3 NEW PARAGRAPH . 0b. The financial condition and transactions 4 of community mental health centers organized under chapter 5 230A, substance abuse programs organized under chapter 125, and 6 community action agencies organized under chapter 216A, shall 7 be audited at least once each year. 8 Sec. 12. Section 11.6, subsection 1, paragraph b, Code 2011, 9 is amended to read as follows: 10 b. (1) In conjunction with the audit of the governmental 11 subdivision required under this section , the person performing 12 the audit auditor shall also perform tests for compliance with 13 the investment policy of a reasonable number of investment 14 transactions in relation to the total investments and quantity 15 of transactions in the period audited the governmental 16 subdivision . The results of the compliance testing shall 17 be reported in accordance with generally accepted auditing 18 standards. The person performing the audit auditor may also 19 make recommendations for changes to investment policy or 20 practices. The governmental subdivision is responsible for the 21 remedy of reported noncompliance with its policy or practices. 22 (2) (a) As part of its audit, the governmental subdivision 23 is responsible for obtaining and providing to the person 24 performing the audit auditor the audited financial statements 25 and related report on internal control structure of outside 26 persons, performing any of the following during the period 27 under audit for the governmental subdivision: 28 (i) Investing public funds. 29 (ii) Advising on the investment of public funds. 30 (iii) Directing the deposit or investment of public funds. 31 (iv) Acting in a fiduciary capacity for the governmental 32 subdivision. 33 (b) The audit under this section shall not be certified 34 until all material information required by this subparagraph is 35 -6- LSB 1179XD (14) 84 aw/sc 6/ 25

S.F. _____ H.F. _____ reviewed by the person performing the audit auditor . 1 (3) The review by the person performing the audit auditor of 2 the most recent annual report to shareholders of an open-end 3 management investment company or an unincorporated investment 4 company or investment trust registered with the federal 5 securities and exchange commission under the federal Investment 6 Company Act of 1940, 15 U.S.C. § 80a, pursuant to 17 C.F.R. 7 § 270.30d-1 or the review, by the person performing the audit 8 auditor , of the most recent annual report to shareholders, call 9 reports, or the findings pursuant to a regular examination 10 under state or federal law, to the extent the findings are 11 not confidential, of a bank, savings and loan association, or 12 credit union shall satisfy the review requirements of this 13 paragraph. 14 (4) All contracts or agreements with outside persons 15 performing any of the functions listed in subparagraph (2) 16 shall require the outside person to notify in writing the 17 governmental subdivision within thirty days of receipt of all 18 communication from the person performing the audit auditor 19 or any regulatory authority of the existence of a material 20 weakness in internal control structure , or regulatory orders or 21 sanctions against the outside person, with regard to the type 22 of services being performed under the contracts or agreements. 23 This provision shall not be limited or avoided by another 24 contractual provision. 25 (5) As used in this subsection , “outside person” excludes a 26 bank, savings and loan association, or credit union when acting 27 as an approved depository pursuant to chapter 12C . 28 (6) A joint investment trust organized pursuant to chapter 29 28E shall file the audit reports required by this chapter with 30 the administrator of the securities and regulated industries 31 bureau of the insurance division of the department of commerce 32 within ten days of receipt from the auditor. The auditor of 33 a joint investment trust shall provide written notice to the 34 administrator of the time of delivery of the reports to the 35 -7- LSB 1179XD (14) 84 aw/sc 7/ 25

S.F. _____ H.F. _____ joint investment trust. 1 (7) If during the course of an audit of a joint investment 2 trust organized pursuant to chapter 28E , the auditor determines 3 the existence of a material weakness in the internal control 4 structure or a material violation of the internal control 5 structure , the auditor shall report the determination to the 6 joint investment trust which shall notify the administrator in 7 writing within twenty-four hours, and provide a copy of the 8 notification to the auditor. The auditor shall provide, within 9 twenty-four hours of the receipt of the copy of the notice, 10 written acknowledgment of the receipt to the administrator. 11 If the joint investment trust does not make the notification 12 within twenty-four hours, or the auditor does not receive a 13 copy of the notification within twenty-four hours, the auditor 14 shall immediately notify the administrator in writing of the 15 material weakness in the internal control structure or the 16 material violation of the internal control structure . 17 Sec. 13. Section 11.6, subsection 2, Code 2011, is amended 18 to read as follows: 19 2. a. A city, community college, school district, area 20 education agency, entity organized under chapter 28E , county, 21 county hospital, or memorial hospital governmental subdivision, 22 community mental health center, substance abuse program, or 23 community action agency desiring to contract with or employ 24 certified public accountants shall utilize procedures which 25 include a written request for proposals. 26 b. The governing body of a city, community college, school 27 district, area education agency, entity organized under chapter 28 28E , county, county hospital, or memorial hospital utilizing 29 the auditor of state instead of a certified public accountant 30 to perform an audit shall notify the auditor of state by June 31 1 of the year to be audited. If the governing body fails 32 to notify the auditor of state of the decision to use the 33 auditor of state, the auditor of state may perform the audit 34 required in subsection 1 only if provisions are not made by the 35 -8- LSB 1179XD (14) 84 aw/sc 8/ 25

S.F. _____ H.F. _____ governing body to contract for the audit. 1 Sec. 14. Section 11.6, subsection 3, Code 2011, is amended 2 to read as follows: 3 3. A township or city for which examinations audits are not 4 required under subsection 1 may contract with or employ the 5 auditor of state or certified public accountants for an audit 6 or examination of its financial transactions and condition of 7 its funds. A financial examination An audit is mandatory on 8 application by one hundred or more taxpayers, or if there are 9 fewer than five hundred taxpayers in the township or city, then 10 by fifteen percent of the taxpayers. Payment for the audit or 11 examination shall be made from the proper public funds of the 12 township or city. 13 Sec. 15. Section 11.6, subsection 4, Code 2011, is amended 14 to read as follows: 15 4. a. In addition to the powers and duties under other 16 provisions of the Code, the auditor of state may at any time 17 cause to be made a complete or partial reaudit of the financial 18 condition and transactions of any city, county, county 19 hospital, memorial hospital, entity organized under chapter 20 28E , merged area, area education agency, school corporation, 21 township, or other governmental subdivision, or an office 22 of any of these governmental subdivision , if one any of the 23 following conditions exists: 24 (1) The auditor of state has probable cause to believe 25 such action is necessary in the public interest because of a 26 material deficiency in an audit of the governmental subdivision 27 filed with the auditor of state or because of a substantial 28 failure of the audit to comply with the standards and 29 procedures established and published by the auditor of state. 30 (2) The auditor of state receives from an elected official 31 or employee of the governmental subdivision a written 32 request for a complete or partial reaudit of the governmental 33 subdivision. 34 (3) The auditor of state receives a petition signed by at 35 -9- LSB 1179XD (14) 84 aw/sc 9/ 25

S.F. _____ H.F. _____ least fifty one hundred eligible electors of the governmental 1 subdivision requesting a complete or partial reaudit of the 2 governmental subdivision. If the governmental subdivision has 3 not contracted with or employed a certified public accountant 4 to perform an audit of the fiscal year in which the petition 5 is received by the auditor of state, the auditor of state may 6 perform an audit required by subsection 1 or 3 . 7 b. The state audit reaudit shall be paid from the proper 8 public funds available in the office of the auditor of 9 state. In the event the audited governmental subdivision 10 recovers damages from a person performing a previous audit 11 due to negligent performance of that audit or breach of the 12 audit contract, the auditor of state shall be entitled to 13 reimbursement on an equitable basis for funds expended from any 14 recovery made by the governmental subdivision. 15 c. An examination under this subsection shall include 16 a determination of whether investments by the governmental 17 subdivision are authorized by state law. 18 Sec. 16. Section 11.6, subsection 7, Code 2011, is amended 19 to read as follows: 20 7. The auditor of state shall make guidelines available 21 to the public setting forth accounting and auditing standards 22 and procedures and audit and legal compliance programs to 23 be applied in the examination audit of the governmental 24 subdivisions of the state, which shall require a review of the 25 internal control structure and specify testing of transactions 26 for compliance. The guidelines shall include a requirement 27 that the certified public accountant and governmental 28 subdivision immediately notify the auditor of state regarding 29 any suspected embezzlement , or theft , or other significant 30 financial irregularities . The auditor of state shall also 31 provide standard reporting formats for use in reporting the 32 results of an examination audit of a governmental subdivision. 33 Sec. 17. Section 11.6, subsection 9, Code 2011, is amended 34 to read as follows: 35 -10- LSB 1179XD (14) 84 aw/sc 10/ 25

S.F. _____ H.F. _____ 9. The Accounts of the Iowa state association of counties 1 shall keep accounts as required by the auditor of state. These 2 accounts , the Iowa league of cities, and the Iowa association 3 of school boards shall be audited annually by either the 4 auditor of state or a certified public accountant certified in 5 the state of Iowa. The audit shall state all moneys expended 6 for expenses incurred by and salaries paid to legislative 7 representatives and lobbyists of the association audited . 8 Sec. 18. Section 11.6, subsection 10, Code 2011, is amended 9 to read as follows: 10 10. The auditor of state shall adopt rules in accordance 11 with chapter 17A to establish and collect a filing fee for 12 the filing of each report of audit or examination conducted 13 pursuant to subsections 1 through 3. The funds collected shall 14 be maintained in a segregated account for use by the office of 15 the auditor of state in performing audits conducted its duties 16 pursuant to subsection 4 and for work paper reviews conducted 17 pursuant to subsection 5 this section . Any funds collected 18 by the auditor pursuant to subsection 4 shall be deposited in 19 this account. Notwithstanding section 8.33 , the funds in this 20 account shall not revert at the end of any fiscal year. 21 Sec. 19. Section 11.6, Code 2011, is amended by adding the 22 following new subsection: 23 NEW SUBSECTION . 11. Each governmental subdivision shall 24 keep its records and accounts in such form and by such methods 25 as to be able to exhibit in its reports the matters required 26 by the auditor of state, unless a form or method is otherwise 27 specifically prescribed by law. Each governmental subdivision 28 shall keep its records and accounts in current condition. 29 Sec. 20. Section 11.11, Code 2011, is amended by striking 30 the section and inserting in lieu thereof the following: 31 11.11 Scope of audits. 32 The written report of the audit of a governmental 33 subdivision shall include the auditor’s opinion as to whether a 34 governmental subdivision’s financial statements are presented 35 -11- LSB 1179XD (14) 84 aw/sc 11/ 25

S.F. _____ H.F. _____ fairly in all material respects in conformity with generally 1 accepted accounting principles or with an other comprehensive 2 basis of accounting. As a part of conducting an audit of a 3 governmental subdivision, an evaluation of internal control 4 and tests for compliance with laws and regulations shall be 5 performed. 6 Sec. 21. Section 11.14, Code 2011, is amended to read as 7 follows: 8 11.14 Reports —— public inspection. 9 1. A written report of such examination an audit or 10 examination shall be made in triplicate signed and verified by 11 the officers making the examination; one copy to be provided 12 to the governmental subdivision and filed with the auditor of 13 state , one copy with the officer under investigation, and one 14 copy to the county auditor who shall transmit same to the board 15 of supervisors if a county office is under investigation, or 16 with the president of the school board if a school is under 17 investigation, or with the mayor and the council if a city 18 office is under examination . All reports shall be open to 19 public inspection, including copies on file in the office 20 of the state auditor, and refusal on the part of any public 21 official to permit such inspection when such reports have 22 been filed with the state auditor shall constitute a simple 23 misdemeanor. 24 2. In addition to the foregoing subsection 1 , notice that 25 the report has been filed shall be forwarded immediately to 26 each newspaper, radio station , or television station located 27 in the county, municipality or school district which is under 28 investigation or audit; except that governmental subdivision 29 that was audited or examined. However, if there is no 30 newspaper, radio station , or television station located therein 31 in the governmental subdivision , such notice shall be sent to 32 the official newspapers of the county. 33 Sec. 22. Section 11.19, Code 2011, is amended to read as 34 follows: 35 -12- LSB 1179XD (14) 84 aw/sc 12/ 25

S.F. _____ H.F. _____ 11.19 Auditor’s powers and duties. 1 1. Where an audit or examination is made under contract 2 with, or employment of, certified or registered public 3 accountants, the auditor shall, in all matters pertaining to 4 an authorized audit or examination, have all of the powers and 5 be vested with all the authority of state auditors employed by 6 the auditor of state, and the cost and expense of the audit 7 or examination shall be paid by the city, school district, 8 or township governmental subdivision procuring the audit or 9 examination. An itemized sworn A detailed statement of the 10 per diem and expense cost of the auditor audit or examination 11 shall be filed with the clerk of the city, township, or school 12 district, before payment thereof governmental subdivision . 13 Upon completion of such audit or examination, a signed copy 14 thereof of the report and a detailed, itemized statement 15 of cost, including hours spent performing the audit or 16 examination, shall be filed by the accountant employed with the 17 auditor of state in a manner specified by the auditor of state . 18 All reports shall be open to public inspection, including 19 copies on file in the office of the state auditor, and refusal 20 on the part of any public official to permit such inspection 21 when such reports have been filed with the state auditor, shall 22 constitute a simple misdemeanor. 23 In addition to the foregoing, notice that the report has 24 been filed shall be forwarded immediately to each newspaper, 25 radio station or television station located in the city, 26 school district or township which is under investigation or 27 audit; except that if there is no newspaper, radio station or 28 television station located therein, the notice shall be sent to 29 the official newspapers of the county. 30 2. Failure to file the report and the statement of cost 31 with the auditor of state within thirty days after receiving 32 notification of not receiving the audit report and the 33 statement of cost shall bar the accountant from making any 34 governmental subdivision audits or examinations under section 35 -13- LSB 1179XD (14) 84 aw/sc 13/ 25

S.F. _____ H.F. _____ 11.6 for the following fiscal year. 1 Sec. 23. Section 11.20, Code 2011, is amended to read as 2 follows: 3 11.20 Bills —— audit and payment. 4 If the audit or examination is made by the auditor of state 5 under this chapter , each auditor shall file with the auditor 6 of state an itemized, certified and sworn voucher of time and 7 expense for the time that the auditor is actually engaged in 8 the audit or examination. The salaries shall be included in 9 a two-week payroll period. Upon approval of the auditor of 10 state the director of the department of administrative services 11 may issue warrants for the payment of the vouchers and salary 12 payments , including a prorated amount for vacation and sick 13 leave, from any unappropriated funds in the state treasury. 14 Repayment to the state shall be made as provided by section 15 11.21 . 16 Sec. 24. Section 11.21, Code 2011, is amended to read as 17 follows: 18 11.21 Repayment —— objections. 19 1. Upon payment by the state of the salary and expenses, 20 the auditor of state shall file with the warrant-issuing 21 officer of the county, municipality or school, governmental 22 subdivision whose offices were audited or examined , a sworn 23 statement consisting of the itemized expenses paid and prorated 24 salary costs paid under section 11.20 . Upon audit and approval 25 by the board of supervisors, council or school board, the 26 warrant-issuing officer shall draw a warrant for the amount 27 on the county, or on the general fund of the municipality or 28 school in favor of the auditor of state, which warrant shall be 29 placed to the credit of the general fund of the state governing 30 body of the governmental subdivision, payment shall be made 31 from the proper public funds of the governmental subdivision . 32 In the event of the disapproval by the governing body of the 33 governmental subdivision of any items of said included on the 34 statement by the county, municipality, or school authorities , 35 -14- LSB 1179XD (14) 84 aw/sc 14/ 25

S.F. _____ H.F. _____ written objections shall be filed with the auditor of state 1 within thirty days from the filing thereof of the sworn 2 statement with the warrant-issuing officer of the governmental 3 subdivision . Disapproved items of the statement shall be paid 4 the auditor of state upon receiving final decisions emanating 5 from public hearing established by the auditor of state. 6 2. Whenever the county board of supervisors, the school 7 board, or the council shall file governing body of the 8 governmental subdivision files written objections on the 9 question of compensation and expenses with the auditor of 10 state, the auditor or the auditor’s representative shall hold 11 a public hearing in the municipality governmental subdivision 12 where the audit or examination was made and shall give the 13 complaining board notice of the time and place of hearing. 14 After such hearing the auditor shall have the power to reduce 15 the compensation and expenses of the auditor whose bills have 16 been questioned. Any auditor who shall be found guilty of 17 falsifying an expense voucher or engagement report shall be 18 immediately discharged by the auditor of state and shall not 19 be eligible for re-employment. Such auditor must thereupon 20 reimburse the auditor of state for all such compensation and 21 expenses so found to have been overpaid and in the event of 22 failure to do so, the auditor of state may collect the same 23 amount from the auditor’s surety by suit, if necessary. 24 Sec. 25. Section 11.28, Code 2011, is amended to read as 25 follows: 26 11.28 Individual audit or examination reports —— copies . 27 1. The individual audit Audit or examination reports 28 shall include applicable exhibits , and schedules to report 29 data similar to that required by section 11.4 , findings, and 30 recommendations . The format of the reports shall as nearly 31 as possible correspond and be prepared similar in form to 32 the audit reports rendered by certified public accountants 33 comply with applicable professional accounting and auditing 34 standards or procedures established by the auditor of state . 35 -15- LSB 1179XD (14) 84 aw/sc 15/ 25

S.F. _____ H.F. _____ The reports shall include information as to the assets and 1 liabilities of the various departments and institutions audited 2 as of the beginning and close of the fiscal year audited, the 3 receipts and expenditures of cash, the disposition of materials 4 and other properties, and the net income and net operating 5 cost. The Where applicable, the reports shall also set forth 6 the average cost per year for the inmates, members, clients, 7 patients, and students served in the various classifications 8 of expenses . The reports shall make comparisons of the 9 average costs and classifications, and shall give such other 10 information, suggestions, and recommendations as may be deemed 11 of advantage and to the best interests of the taxpayers of the 12 state. 13 2. The daily audit report of the state treasury shall be 14 submitted to the director of the department of administrative 15 services and the director of the department of management. 16 Copies of all individual audit reports of all state departments 17 and establishments shall be transmitted to the directors’ 18 offices after the completion of each audit, and copies of all 19 local government audits shall, until otherwise provided, be 20 also supplied to the directors’ offices. Copies of the local 21 government audit reports shall also be supplied to the officers 22 of the counties, schools, and cities, as provided by law. 23 Summaries of the findings, recommendations, and comparisons, 24 together with any other information deemed essential, shall be 25 printed and distributed to members of the general assembly. 26 Sec. 26. Section 11.32, Code 2011, is amended to read as 27 follows: 28 11.32 Certified accountants employed. 29 Nothing in this chapter will shall prohibit the auditor 30 of state, with the prior written permission of the state 31 executive council, from employing certified public accountants 32 or registered public accountants for specific assignments. 33 Under the provision of this section , the The auditor of state 34 may employ such accountants for any assignment now expressly 35 -16- LSB 1179XD (14) 84 aw/sc 16/ 25

S.F. _____ H.F. _____ reserved to the auditor of state. Payments, after approval 1 by the executive council, will be made to the accountants so 2 employed from funds from which the auditor of state would have 3 been paid had the auditor of state performed the assignment, or 4 if no such specific funds are indicated, then payment will be 5 made from the funds of the executive council. 6 Sec. 27. Section 11.41, Code 2011, is amended by adding the 7 following new subsection: 8 NEW SUBSECTION . 1A. Auditors shall have the right while 9 conducting audits or examinations to have full access to all 10 papers, books, records, and documents of any officers or 11 employees and shall have the right, in the presence of the 12 custodian or the custodian’s designee, to have full access 13 to the cash drawers and cash in the official custody of the 14 officer or employee and, during business hours, to examine the 15 public accounts of the department or governmental subdivision 16 in any depository which has public funds in its custody 17 pursuant to the law. 18 Sec. 28. NEW SECTION . 11.42 Disclosures prohibited. 19 1. Notwithstanding chapter 22, information received during 20 the course of any audit or examination, including allegations 21 of misconduct or noncompliance, and all audit or examination 22 work papers shall be maintained as confidential. 23 2. Information maintained as confidential as provided by 24 this section may be disclosed for any of the following reasons: 25 a. As necessary to complete the audit or examination. 26 b. To the extent the auditor is required by law to report 27 the same or to testify in court. 28 3. Upon completion of an audit or examination, a report 29 shall be prepared as required by section 11.28 and all 30 information included in the report shall be public information. 31 4. Any violation of this section shall be grounds for 32 termination of employment with the auditor of state. 33 Sec. 29. NEW SECTION . 11.51 Subpoenas. 34 The auditor of state shall, in all matters pertaining to an 35 -17- LSB 1179XD (14) 84 aw/sc 17/ 25