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To amend section 124.341 and to enact sections 126.40 | 1 |
to 126.43 of the Revised Code to create an Office | 2 |
of Internal Auditing within the Office of Budget | 3 |
and Management, to establish the State Audit | 4 |
Committee, and to prescribe their respective and | 5 |
interrelated functions. | 6 |
Section 1. That section 124.341 be amended and sections | 7 |
126.40, 126.41, 126.42, and 126.43 of the Revised Code be enacted | 8 |
to read as follows: | 9 |
Sec. 124.341. (A) If an employee in the classified or | 10 |
unclassified civil service becomes aware in the course of | 11 |
employment of a violation of state or federal statutes, rules, or | 12 |
regulations or the misuse of public resources, and the employee's | 13 |
supervisor or appointing authority has authority to correct the | 14 |
violation or misuse, the employee may file a written report | 15 |
identifying the violation or misuse with the supervisor or | 16 |
appointing authority. In addition to or instead of filing a | 17 |
written report with the supervisor or appointing authority, the | 18 |
employee may file a written report with the office of internal | 19 |
auditing created under section 126.40 of the Revised Code. | 20 |
If the employee reasonably believes that a violation or | 21 |
misuse of public resources is a criminal offense, the employee, in | 22 |
addition to or instead of filing a written report with the | 23 |
supervisor or appointing authority, may report it to a prosecuting | 24 |
attorney, director of law, village solicitor, or similar chief | 25 |
legal officer of a municipal corporation, to a peace officer, as | 26 |
defined in section 2935.01 of the Revised Code, or, if the | 27 |
violation or misuse of public resources is within the jurisdiction | 28 |
of the inspector general, to the inspector general in accordance | 29 |
with section 121.46 of the Revised Code. In addition to that | 30 |
report, if the employee reasonably believes the violation or | 31 |
misuse is also a violation of Chapter 102., section 2921.42, or | 32 |
section 2921.43 of the Revised Code, the employee may report it to | 33 |
the appropriate ethics commission. | 34 |
(B) Except as otherwise provided in division (C) of this | 35 |
section, no officer or employee in the classified or unclassified | 36 |
civil service shall take any disciplinary action against an | 37 |
employee in the classified or unclassified civil service for | 38 |
making any report authorized by division (A) of this section, | 39 |
including, without limitation, doing any of the following: | 40 |
(1) Removing or suspending the employee from employment; | 41 |
(2) Withholding from the employee salary increases or | 42 |
employee benefits to which the employee is otherwise entitled; | 43 |
(3) Transferring or reassigning the employee; | 44 |
(4) Denying the employee promotion that otherwise would have | 45 |
been received; | 46 |
(5) Reducing the employee in pay or position. | 47 |
(C) An employee in the classified or unclassified civil | 48 |
service shall make a reasonable effort to determine the accuracy | 49 |
of any information reported under division (A) of this section. | 50 |
The employee is subject to disciplinary action, including | 51 |
suspension or removal, as determined by the employee's appointing | 52 |
authority, for purposely, knowingly, or recklessly reporting false | 53 |
information under division (A) of this section. | 54 |
(D) If an appointing authority takes any disciplinary or | 55 |
retaliatory action against a classified or unclassified employee | 56 |
as a result of the employee's having filed a report under division | 57 |
(A) of this section, the employee's sole and exclusive remedy, | 58 |
notwithstanding any other provision of law, is to file an appeal | 59 |
with the state personnel board of review within thirty days after | 60 |
receiving actual notice of the appointing authority's action. If | 61 |
the employee files such an appeal, the board shall immediately | 62 |
notify the employee's appointing authority and shall hear the | 63 |
appeal. The board may affirm or disaffirm the action of the | 64 |
appointing authority or may issue any other order as is | 65 |
appropriate. The order of the board is appealable in accordance | 66 |
with Chapter 119. of the Revised Code. | 67 |
(E) As used in this section: | 68 |
(1) "Purposely," "knowingly," and "recklessly" have the same | 69 |
meanings as in section 2901.22 of the Revised Code. | 70 |
(2) "Appropriate ethics commission" has the same meaning as | 71 |
in section 102.01 of the Revised Code. | 72 |
(3) "Inspector general" means the inspector general appointed | 73 |
under section 121.48 of the Revised Code. | 74 |
Sec. 126.40. (A) As used in sections 126.40 to 126.43 of the | 75 |
Revised Code, "state agency" means the administrative departments | 76 |
listed in section 121.02 of the Revised Code, the department of | 77 |
taxation, and the bureau of workers' compensation. | 78 |
(B) The office of internal auditing is hereby created in the | 79 |
office of budget and management to conduct internal audits of | 80 |
state agencies or divisions of state agencies to improve their | 81 |
operations in the areas of risk management, internal controls, and | 82 |
governance. The director of budget and management, with the | 83 |
approval of the governor, shall appoint for the office of internal | 84 |
auditing a chief internal auditor who meets the qualifications | 85 |
specified in division (C) of this section. The chief internal | 86 |
auditor shall serve at the director's pleasure and be responsible | 87 |
for the administration of the office of internal auditing | 88 |
consistent with sections 126.40 to 126.43 of the Revised Code. | 89 |
The office of internal auditing shall conduct programs for | 90 |
the internal auditing of state agencies. The programs shall | 91 |
include an annual internal audit plan, approved by the state audit | 92 |
committee, that utilizes risk assessment techniques and identifies | 93 |
the specific audits to be conducted during the year. The programs | 94 |
also shall include periodic audits of each state agency's major | 95 |
systems and controls, including those systems and controls | 96 |
pertaining to accounting, administration, and electronic data | 97 |
processing. Upon the request of the office of internal auditing, | 98 |
each state agency shall provide office employees access to all | 99 |
records and documents necessary for the performance of an internal | 100 |
audit. | 101 |
The director of budget and management shall assess a charge | 102 |
against each state agency for which the office of internal | 103 |
auditing conducts internal auditing programs under sections 126.40 | 104 |
to 126.43 of the Revised Code so that the total amount of these | 105 |
charges is sufficient to cover the costs of the operation of the | 106 |
office of internal auditing. | 107 |
(C) The chief internal auditor of the office of internal | 108 |
auditing shall hold at least a bachelor's degree and be one of the | 109 |
following: | 110 |
(1) A certified internal auditor, a certified government | 111 |
auditing professional, or a certified public accountant, who also | 112 |
has held a PA registration or a CPA certificate authorized by | 113 |
Chapter 4701. of the Revised Code for at least four years and has | 114 |
at least six years of auditing experience; | 115 |
(2) An auditor who has held a PA registration or a CPA | 116 |
certificate authorized by Chapter 4701. of the Revised Code for at | 117 |
least four years and has at least ten years of auditing | 118 |
experience. | 119 |
(D) The chief internal auditor, subject to the direction and | 120 |
control of the director of budget and management, may appoint and | 121 |
maintain any staff necessary to carry out the duties assigned by | 122 |
sections 126.40 to 126.43 of the Revised Code to the office of | 123 |
internal auditing or to the chief internal auditor. | 124 |
Sec. 126.41. (A)(1) There is hereby created the state audit | 125 |
committee, consisting of the following five members: one member | 126 |
appointed by the governor; two public members appointed by the | 127 |
speaker of the house of representatives; and two public members | 128 |
appointed by the president of the senate. Not more than two of the | 129 |
four public members appointed by the speaker of the house of | 130 |
representatives and the president of the senate shall belong to or | 131 |
be affiliated with the same political party. The member appointed | 132 |
by the governor shall be a person who is external to the | 133 |
management structure associated with the preparation of financial | 134 |
statements of state government and shall have the program and | 135 |
management expertise required to perform the duties of the | 136 |
committee's chairperson. | 137 |
Each public member of the committee shall serve a three-year | 138 |
term commencing on the first day of August in the appropriate year | 139 |
and ending on the thirty-first day of July in the appropriate | 140 |
year, except for the initial public members. With respect to the | 141 |
initial appointments of the public members, the term of the first | 142 |
public member appointed by the speaker of the house of | 143 |
representatives shall be for a one-year term, the term of the | 144 |
second public member appointed by the speaker of the house of | 145 |
representatives shall be for a three-year term, and the term of | 146 |
the initial public members appointed by the president of the | 147 |
senate shall be for two-year terms. The term for the initial | 148 |
public members shall begin on August 1, 2007. Public members may | 149 |
be reappointed to serve one additional term. | 150 |
The committee shall include one public member who is a | 151 |
financial expert; one public member who is an active, inactive, or | 152 |
retired certified public accountant; one public member who is | 153 |
familiar with governmental financial accounting; and one public | 154 |
member who is a representative of the public. | 155 |
Any vacancy on the committee shall be filled in the same | 156 |
manner as provided in this division, and, when applicable, the | 157 |
person appointed to fill a vacancy shall serve the remainder of | 158 |
the predecessor's term. | 159 |
(2) Members of the committee shall receive reimbursement for | 160 |
actual and necessary expenses incurred in the discharge of their | 161 |
duties. | 162 |
(3) The member of the committee appointed by the governor | 163 |
shall serve as the committee's chairperson. | 164 |
(B) The state audit committee shall do all of the following: | 165 |
(1) Ensure that the internal audits conducted by the office | 166 |
of internal auditing in the office of budget and management | 167 |
conform to the institute of internal auditors' international | 168 |
standards for the professional practice of internal auditing and | 169 |
to the institute of internal auditors' code of ethics; | 170 |
(2) Review the process used by the office of budget and | 171 |
management to prepare its annual budgetary financial report and | 172 |
the state's comprehensive annual financial report required under | 173 |
division (A)(9) of section 126.21 of the Revised Code; | 174 |
(3) Review unaudited financial statements submitted to the | 175 |
auditor of state and communicate with external auditors as | 176 |
required by government auditing standards; | 177 |
(4) Perform the additional functions imposed upon it by | 178 |
section 126.42 of the Revised Code. | 179 |
(C) As used in this section, "financial expert" means a | 180 |
person who has all of the following: | 181 |
(1) An understanding of generally accepted accounting | 182 |
principles and financial statements; | 183 |
(2) The ability to assess the general application of those | 184 |
principles in connection with accounting for estimates, accruals, | 185 |
and reserves; | 186 |
(3) Experience preparing, auditing, analyzing, or evaluating | 187 |
financial statements presenting accounting issues that generally | 188 |
are of comparable breadth and level of complexity to those likely | 189 |
to be presented by a state agency's financial statements, or | 190 |
experience actively supervising one or more persons engaged in | 191 |
those activities; | 192 |
(4) An understanding of internal controls and procedures for | 193 |
financial reporting; and | 194 |
(5) An understanding of audit committee functions. | 195 |
Sec. 126.42. (A) The state audit committee created by | 196 |
section 126.41 of the Revised Code shall ensure that the office of | 197 |
internal auditing in the office of budget and management has an | 198 |
annual internal audit plan that identifies the internal audits of | 199 |
state agencies or divisions of state agencies scheduled for the | 200 |
next fiscal year. The chief internal auditor of the office of | 201 |
internal auditing shall submit the plan to the state audit | 202 |
committee for approval before the beginning of each fiscal year. | 203 |
The chief internal auditor may submit a revised internal audit | 204 |
plan for approval at any time the director of budget and | 205 |
management believes there is reason to modify the previously | 206 |
submitted plan for a fiscal year. | 207 |
(B) To determine the state agencies or divisions of state | 208 |
agencies that are to be internally audited, the office of internal | 209 |
auditing, in the formulation of an annual or revised internal | 210 |
audit plan, and the state audit committee, in approving a | 211 |
submitted annual or revised internal audit plan, shall consider | 212 |
the following factors: | 213 |
(1) The risk for fraud, waste, or abuse of public money | 214 |
within an agency or division; | 215 |
(2) The length of time since an agency or division was last | 216 |
subject to an internal audit; | 217 |
(3) The size of an agency or division, and the amount of time | 218 |
and resources necessary to audit it; | 219 |
(4) Any other factor the state audit committee determines to | 220 |
be relevant. | 221 |
(C) All internal audits shall be conducted only by employees | 222 |
of the office of internal auditing. | 223 |
(D) After the conclusion of an internal audit, the chief | 224 |
internal auditor shall submit a preliminary report of the internal | 225 |
audit's findings and recommendations to the state audit committee | 226 |
and to the director of the state agency involved. The state agency | 227 |
or division of the state agency covered by the preliminary report | 228 |
shall be provided an opportunity to respond within thirty days | 229 |
after receipt of the preliminary report. The response shall | 230 |
include a corrective action plan for any recommendations in the | 231 |
preliminary report that are not disputed by the agency or | 232 |
division. Any response received by the office of internal auditing | 233 |
within that thirty-day period shall be included in the office's | 234 |
final report of the internal audit's findings and recommendations. | 235 |
The final report shall be issued by the office of internal | 236 |
auditing within thirty days after the termination of the | 237 |
thirty-day response period. Copies of the final report shall be | 238 |
submitted to the state audit committee, the governor, and the | 239 |
director of the state agency involved. The state audit committee | 240 |
shall determine an appropriate method for making the preliminary | 241 |
and final reports available for public inspection in a timely | 242 |
manner. | 243 |
Any suspected fraud or other illegal activity discovered by | 244 |
the office of internal auditing during the conduct of an internal | 245 |
audit shall be reported immediately to the state audit committee, | 246 |
the director of the state agency in which the fraud or illegal | 247 |
activity is suspected to have occurred, and the auditor of state. | 248 |
(E) The chief internal auditor shall prepare an annual report | 249 |
and submit the report to the governor, the president of the | 250 |
senate, the speaker of the house of representatives, and the | 251 |
auditor of state. The office of budget and management shall make | 252 |
the report available to the public by posting it on the office's | 253 |
web site before the first of July of each year. | 254 |
Sec. 126.43. Any preliminary or final report of an internal | 255 |
audit's findings and recommendations which is produced by the | 256 |
office of internal auditing in the office of budget and management | 257 |
and all work papers of the internal audit are confidential and are | 258 |
not public records under section 149.43 of the Revised Code until | 259 |
the final report of an internal audit's findings and | 260 |
recommendations is submitted to the state audit committee, the | 261 |
governor, and the director of the state agency involved. | 262 |
Section 2. That existing section 124.341 of the Revised Code | 263 |
is hereby repealed. | 264 |
Section 3. (A) It is the intent of the General Assembly in | 265 |
the enactment of section 126.40 of the Revised Code that the | 266 |
primary internal audit function of state agencies as defined in | 267 |
that section will be carried out by the Office of Internal | 268 |
Auditing of the Office of Budget and Management. | 269 |
(B) Before May 1, 2008, the Director of Budget and | 270 |
Management, in consultation with the Director of Administrative | 271 |
Services and the State Audit Committee created in section 126.41 | 272 |
of the Revised Code, shall develop a plan to commence operations | 273 |
of the Office of Internal Auditing. The plan shall do all of the | 274 |
following: | 275 |
(1) Identify those existing employees within state agencies | 276 |
as defined in section 126.40 of the Revised Code who perform the | 277 |
function of an internal auditor and who will be transferred to the | 278 |
Office of Internal Auditing; | 279 |
(2) Establish funds and appropriation authority that is | 280 |
necessary for the efficient and effective operation of the Office | 281 |
of Internal Auditing; | 282 |
(3) Provide for a method to assess charges against the | 283 |
various state agencies for which the Office of Internal Auditing | 284 |
conducts internal auditing programs under sections 126.40 to | 285 |
126.43 of the Revised Code that the total amount of these charges | 286 |
is sufficient to cover the costs of the operation of the Office of | 287 |
Internal Auditing; | 288 |
(4) Provide for the appropriate reduction in the | 289 |
appropriation authority of the state agencies from which existing | 290 |
employees who perform the function of internal auditor are | 291 |
transferred. | 292 |
(C) The Controlling Board shall approve the plan before the | 293 |
Office of Budget and Management implements it. | 294 |
(D) Subject to the layoff and displacement provisions of | 295 |
Chapter 124. of the Revised Code, all state agency employees who | 296 |
are identified by the plan as performing duties necessary to | 297 |
comply with sections 126.40 to 126.43 of the Revised Code shall be | 298 |
transferred, upon the approval of the Controlling Board, to the | 299 |
Office of Internal Auditing and shall retain their positions, | 300 |
compensation, and associated fringe benefits. | 301 |