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To amend sections 124.341 and 5703.21 and to enact | 1 |
sections 126.45 to 126.48 of the Revised Code to | 2 |
create an Office of Internal Auditing within the | 3 |
Office of Budget and Management, to establish | 4 |
the State Audit Committee, and to prescribe | 5 |
their respective and interrelated functions. | 6 |
Section 1. That sections 124.341 and 5703.21 be amended and | 7 |
sections 126.45, 126.46, 126.47, and 126.48 of the Revised Code | 8 |
be enacted 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 126.45 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 | 24 |
auditing, may report it to a prosecuting attorney, director of | 25 |
law, village solicitor, or similar chief legal officer of a | 26 |
municipal corporation, to a peace officer, as defined in section | 27 |
2935.01 of the Revised Code, or, if the violation or misuse of | 28 |
public resources is within the jurisdiction of the inspector | 29 |
general, to the inspector general in accordance with section | 30 |
121.46 of the Revised Code. In addition to that report, if the | 31 |
employee reasonably believes the violation or misuse is also a | 32 |
violation of Chapter 102., section 2921.42, or section 2921.43 of | 33 |
the Revised Code, the employee may report it to the appropriate | 34 |
ethics commission. | 35 |
(B) Except as otherwise provided in division (C) of this | 36 |
section, no officer or employee in the classified or unclassified | 37 |
civil service shall take any disciplinary action against an | 38 |
employee in the classified or unclassified civil service for | 39 |
making any report authorized by division (A) of this section, | 40 |
including, without limitation, doing any of the following: | 41 |
(1) Removing or suspending the employee from employment; | 42 |
(2) Withholding from the employee salary increases or | 43 |
employee benefits to which the employee is otherwise entitled; | 44 |
(3) Transferring or reassigning the employee; | 45 |
(4) Denying the employee promotion that otherwise would have | 46 |
been received; | 47 |
(5) Reducing the employee in pay or position. | 48 |
(C) An employee in the classified or unclassified civil | 49 |
service shall make a reasonable effort to determine the accuracy | 50 |
of any information reported under division (A) of this section. | 51 |
The employee is subject to disciplinary action, including | 52 |
suspension or removal, as determined by the employee's appointing | 53 |
authority, for purposely, knowingly, or recklessly reporting false | 54 |
information under division (A) of this section. | 55 |
(D) If an appointing authority takes any disciplinary or | 56 |
retaliatory action against a classified or unclassified employee | 57 |
as a result of the employee's having filed a report under division | 58 |
(A) of this section, the employee's sole and exclusive remedy, | 59 |
notwithstanding any other provision of law, is to file an appeal | 60 |
with the state personnel board of review within thirty days after | 61 |
receiving actual notice of the appointing authority's action. If | 62 |
the employee files such an appeal, the board shall immediately | 63 |
notify the employee's appointing authority and shall hear the | 64 |
appeal. The board may affirm or disaffirm the action of the | 65 |
appointing authority or may issue any other order as is | 66 |
appropriate. The order of the board is appealable in accordance | 67 |
with Chapter 119. of the Revised Code. | 68 |
(E) As used in this section: | 69 |
(1) "Purposely," "knowingly," and "recklessly" have the same | 70 |
meanings as in section 2901.22 of the Revised Code. | 71 |
(2) "Appropriate ethics commission" has the same meaning as | 72 |
in section 102.01 of the Revised Code. | 73 |
(3) "Inspector general" means the inspector general appointed | 74 |
under section 121.48 of the Revised Code. | 75 |
Sec. 126.45. (A) As used in sections 126.45 to 126.48 of the | 76 |
Revised Code, "state agency" means the administrative departments | 77 |
listed in section 121.02 of the Revised Code, the department of | 78 |
taxation, and the bureau of workers' compensation. | 79 |
(B) The office of internal auditing is hereby created in the | 80 |
office of budget and management to conduct internal audits of | 81 |
state agencies or divisions of state agencies to improve their | 82 |
operations in the areas of risk management, internal controls, and | 83 |
governance. The director of budget and management, with the | 84 |
approval of the governor, shall appoint for the office of internal | 85 |
auditing a chief internal auditor who meets the qualifications | 86 |
specified in division (C) of this section. The chief internal | 87 |
auditor shall serve at the director's pleasure and be responsible | 88 |
for the administration of the office of internal auditing | 89 |
consistent with sections 126.45 to 126.48 of the Revised Code. | 90 |
The office of internal auditing shall conduct programs for | 91 |
the internal auditing of state agencies. The programs shall | 92 |
include an annual internal audit plan, reviewed by the state audit | 93 |
committee, that utilizes risk assessment techniques and identifies | 94 |
the specific audits to be conducted during the year. The programs | 95 |
also shall include periodic audits of each state agency's major | 96 |
systems and controls, including those systems and controls | 97 |
pertaining to accounting, administration, and electronic data | 98 |
processing. Upon the request of the office of internal auditing, | 99 |
each state agency shall provide office employees access to all | 100 |
records and documents necessary for the performance of an internal | 101 |
audit. | 102 |
The director of budget and management shall assess a charge | 103 |
against each state agency for which the office of internal | 104 |
auditing conducts internal auditing programs under sections 126.45 | 105 |
to 126.48 of the Revised Code so that the total amount of these | 106 |
charges is sufficient to cover the costs of the operation of the | 107 |
office of internal auditing. | 108 |
(C) The chief internal auditor of the office of internal | 109 |
auditing shall hold at least a bachelor's degree and be one of the | 110 |
following: | 111 |
(1) A certified internal auditor, a certified government | 112 |
auditing professional, or a certified public accountant, who also | 113 |
has held a PA registration or a CPA certificate authorized by | 114 |
Chapter 4701. of the Revised Code for at least four years and has | 115 |
at least six years of auditing experience; | 116 |
(2) An auditor who has held a PA registration or a CPA | 117 |
certificate authorized by Chapter 4701. of the Revised Code for at | 118 |
least four years and has at least ten years of auditing | 119 |
experience. | 120 |
(D) The chief internal auditor, subject to the direction and | 121 |
control of the director of budget and management, may appoint and | 122 |
maintain any staff necessary to carry out the duties assigned by | 123 |
sections 126.45 to 126.48 of the Revised Code to the office of | 124 |
internal auditing or to the chief internal auditor. | 125 |
Sec. 126.46. (A)(1) There is hereby created the state audit | 126 |
committee, consisting of the following five members: one public | 127 |
member appointed by the governor; two public members appointed by | 128 |
the speaker of the house of representatives, one of which may be | 129 |
a person who is recommended by the minority leader of the house of | 130 |
representatives; and two public members appointed by the | 131 |
president of the senate, one of which may be a person who is | 132 |
recommended by the minority leader of the senate. Not more than | 133 |
two of the four members appointed by the speaker of the house of | 134 |
representatives and the president of the senate shall belong to | 135 |
or be affiliated with the same political party. The member | 136 |
appointed by the governor shall be a person who is external to | 137 |
the management structure associated with the preparation of | 138 |
financial statements of state government and shall have the | 139 |
program and management expertise required to perform the duties | 140 |
of the committee's chairperson. | 141 |
Each member of the committee shall serve a three-year term, | 142 |
except for the initial members. With respect to the initial | 143 |
appointments of the members, the first member appointed by the | 144 |
speaker of the house of representatives shall serve a one-year | 145 |
term, the second member appointed by the speaker of the house of | 146 |
representatives shall serve a three-year term, the initial members | 147 |
appointed by the president of the senate shall serve two-year | 148 |
terms, and the initial member appointed by the governor shall | 149 |
serve a three-year term. Members may be reappointed to serve one | 150 |
additional term. | 151 |
The committee shall include one member who is a financial | 152 |
expert; one member who is an active, inactive, or retired | 153 |
certified public accountant; one member who is familiar with | 154 |
governmental financial accounting; and one member who is a | 155 |
representative of the public. | 156 |
Any vacancy on the committee shall be filled in the same | 157 |
manner as provided in this division, and, when applicable, the | 158 |
person appointed to fill a vacancy shall serve the remainder of | 159 |
the predecessor's term. | 160 |
(2) Members of the committee shall receive reimbursement for | 161 |
actual and necessary expenses incurred in the discharge of their | 162 |
duties. | 163 |
(3) The member of the committee appointed by the governor | 164 |
shall serve as the committee's chairperson. | 165 |
(4) Initial appointments of committee members shall be made | 166 |
not later than thirty days after the effective date of this | 167 |
section. | 168 |
(5) Members of the committee shall be subject to the | 169 |
disclosure statement requirements of section 102.02 of the Revised | 170 |
Code. | 171 |
(B) The state audit committee shall do all of the following: | 172 |
(1) Ensure that the internal audits conducted by the office | 173 |
of internal auditing in the office of budget and management | 174 |
conform to the institute of internal auditors' international | 175 |
standards for the professional practice of internal auditing and | 176 |
to the institute of internal auditors' code of ethics; | 177 |
(2) Review and comment on the process used by the office of | 178 |
budget and management to prepare its annual budgetary financial | 179 |
report and the state's comprehensive annual financial report | 180 |
required under division (A)(9) of section 126.21 of the Revised | 181 |
Code; | 182 |
(3) Review and comment on unaudited financial statements | 183 |
submitted to the auditor of state and communicate with external | 184 |
auditors as required by government auditing standards; | 185 |
(4) Perform the additional functions imposed upon it by | 186 |
section 126.47 of the Revised Code. | 187 |
(C) As used in this section, "financial expert" means a | 188 |
person who has all of the following: | 189 |
(1) An understanding of generally accepted accounting | 190 |
principles and financial statements; | 191 |
(2) The ability to assess the general application of those | 192 |
principles in connection with accounting for estimates, accruals, | 193 |
and reserves; | 194 |
(3) Experience preparing, auditing, analyzing, or evaluating | 195 |
financial statements presenting accounting issues that generally | 196 |
are of comparable breadth and level of complexity to those likely | 197 |
to be presented by a state agency's financial statements, or | 198 |
experience actively supervising one or more persons engaged in | 199 |
those activities; | 200 |
(4) An understanding of internal controls and procedures for | 201 |
financial reporting; and | 202 |
(5) An understanding of audit committee functions. | 203 |
Sec. 126.47. (A) The state audit committee created by | 204 |
section 126.46 of the Revised Code shall ensure that the office of | 205 |
internal auditing in the office of budget and management has an | 206 |
annual internal audit plan that identifies the internal audits of | 207 |
state agencies or divisions of state agencies scheduled for the | 208 |
next fiscal year. The chief internal auditor of the office of | 209 |
internal auditing shall submit the plan to the state audit | 210 |
committee for review and comment before the beginning of each | 211 |
fiscal year. The chief internal auditor may submit a revised | 212 |
internal audit plan for review and comment at any time the | 213 |
director of budget and management believes there is reason to | 214 |
modify the previously submitted plan for a fiscal year. | 215 |
(B) To determine the state agencies or divisions of state | 216 |
agencies that are to be internally audited, the office of internal | 217 |
auditing, in the formulation of an annual or revised internal | 218 |
audit plan, and the state audit committee, in reviewing a | 219 |
submitted annual or revised internal audit plan, shall consider | 220 |
the following factors: | 221 |
(1) The risk for fraud, waste, or abuse of public money | 222 |
within an agency or division; | 223 |
(2) The length of time since an agency or division was last | 224 |
subject to an internal audit; | 225 |
(3) The size of an agency or division, and the amount of time | 226 |
and resources necessary to audit it; | 227 |
(4) Any other factor the state audit committee determines to | 228 |
be relevant. | 229 |
(C) All internal audits shall be conducted only by employees | 230 |
of the office of internal auditing. | 231 |
(D) After the conclusion of an internal audit, the chief | 232 |
internal auditor shall submit a preliminary report of the internal | 233 |
audit's findings and recommendations to the state audit committee | 234 |
and to the director of the state agency involved. The state agency | 235 |
or division of the state agency covered by the preliminary report | 236 |
shall be provided an opportunity to respond within thirty days | 237 |
after receipt of the preliminary report. The response shall | 238 |
include a corrective action plan for any recommendations in the | 239 |
preliminary report that are not disputed by the agency or | 240 |
division. Any response received by the office of internal auditing | 241 |
within that thirty-day period shall be included in the office's | 242 |
final report of the internal audit's findings and recommendations. | 243 |
The final report shall be issued by the office of internal | 244 |
auditing within thirty days after the termination of the | 245 |
thirty-day response period. Copies of the final report shall be | 246 |
submitted to the state audit committee, the governor, and the | 247 |
director of the state agency involved. The state audit committee | 248 |
shall determine an appropriate method for making the preliminary | 249 |
and final reports available for public inspection in a timely | 250 |
manner. | 251 |
Any suspected fraud or other illegal activity discovered by | 252 |
the office of internal auditing during the conduct of an internal | 253 |
audit shall be reported immediately to the state audit committee, | 254 |
the director of the state agency in which the fraud or illegal | 255 |
activity is suspected to have occurred, and the auditor of state. | 256 |
(E) The chief internal auditor shall prepare an annual report | 257 |
and submit the report to the governor, the president of the | 258 |
senate, the speaker of the house of representatives, and the | 259 |
auditor of state. The office of budget and management shall make | 260 |
the report available to the public by posting it on the office's | 261 |
web site before the first of July of each year. | 262 |
Sec. 126.48. Any preliminary or final report of an internal | 263 |
audit's findings and recommendations which is produced by the | 264 |
office of internal auditing in the office of budget and management | 265 |
and all work papers of the internal audit are confidential and are | 266 |
not public records under section 149.43 of the Revised Code until | 267 |
the final report of an internal audit's findings and | 268 |
recommendations is submitted to the state audit committee, the | 269 |
governor, and the director of the state agency involved. | 270 |
Sec. 5703.21. (A) Except as provided in divisions (B) and | 271 |
(C) of this section, no agent of the department of taxation, | 272 |
except in the agent's report to the department or when called on | 273 |
to testify in any court or proceeding, shall divulge any | 274 |
information acquired by the agent as to the transactions, | 275 |
property, or business of any person while acting or claiming to | 276 |
act under orders of the department. Whoever violates this | 277 |
provision shall thereafter be disqualified from acting as an | 278 |
officer or employee or in any other capacity under appointment or | 279 |
employment of the department. | 280 |
(B)(1) For purposes of an audit pursuant to section 117.15 of | 281 |
the Revised Code, or an audit of the department pursuant to | 282 |
Chapter 117. of the Revised Code, or an audit, pursuant to that | 283 |
chapter, the objective of which is to express an opinion on a | 284 |
financial report or statement prepared or issued pursuant to | 285 |
division (A)(7) or (9) of section 126.21 of the Revised Code, the | 286 |
officers and employees of the auditor of state charged with | 287 |
conducting the audit shall have access to and the right to examine | 288 |
any state tax returns and state tax return information in the | 289 |
possession of the department to the extent that the access and | 290 |
examination are necessary for purposes of the audit. Any | 291 |
information acquired as the result of that access and examination | 292 |
shall not be divulged for any purpose other than as required for | 293 |
the audit or unless the officers and employees are required to | 294 |
testify in a court or proceeding under compulsion of legal | 295 |
process. Whoever violates this provision shall thereafter be | 296 |
disqualified from acting as an officer or employee or in any other | 297 |
capacity under appointment or employment of the auditor of state. | 298 |
(2) For purposes of an internal audit pursuant to section | 299 |
126.45 of the Revised Code, the officers and employees of the | 300 |
office of internal auditing in the office of budget and management | 301 |
charged with conducting the internal audit shall have access to | 302 |
and the right to examine any state tax returns and state tax | 303 |
return information in the possession of the department to the | 304 |
extent that the access and examination are necessary for purposes | 305 |
of the internal audit. Any information acquired as the result of | 306 |
that access and examination shall not be divulged for any purpose | 307 |
other than as required for the internal audit or unless the | 308 |
officers and employees are required to testify in a court or | 309 |
proceeding under compulsion of legal process. Whoever violates | 310 |
this provision shall thereafter be disqualified from acting as an | 311 |
officer or employee or in any other capacity under appointment or | 312 |
employment of the office of internal auditing. | 313 |
(3) As provided by section 6103(d)(2) of the Internal Revenue | 314 |
Code, any federal tax returns or federal tax information that the | 315 |
department has acquired from the internal revenue service, through | 316 |
federal and state statutory authority, may be disclosed to the | 317 |
auditor of state or the office of internal auditing solely for | 318 |
purposes of an audit of the department. | 319 |
(C) Division (A) of this section does not prohibit any of the | 320 |
following: | 321 |
(1) Divulging information contained in applications, | 322 |
complaints, and related documents filed with the department under | 323 |
section 5715.27 of the Revised Code or in applications filed with | 324 |
the department under section 5715.39 of the Revised Code; | 325 |
(2) Providing information to the office of child support | 326 |
within the department of job and family services pursuant to | 327 |
section 3125.43 of the Revised Code; | 328 |
(3) Disclosing to the board of motor vehicle collision repair | 329 |
registration any information in the possession of the department | 330 |
that is necessary for the board to verify the existence of an | 331 |
applicant's valid vendor's license and current state tax | 332 |
identification number under section 4775.07 of the Revised Code; | 333 |
(4) Providing information to the administrator of workers' | 334 |
compensation pursuant to sections 4123.271 and 4123.591 of the | 335 |
Revised Code; | 336 |
(5) Providing to the attorney general information the | 337 |
department obtains under division (J) of section 1346.01 of the | 338 |
Revised Code; | 339 |
(6) Permitting properly authorized officers, employees, or | 340 |
agents of a municipal corporation from inspecting reports or | 341 |
information pursuant to rules adopted under section 5745.16 of the | 342 |
Revised Code; | 343 |
(7) Providing information regarding the name, account number, | 344 |
or business address of a holder of a vendor's license issued | 345 |
pursuant to section 5739.17 of the Revised Code, a holder of a | 346 |
direct payment permit issued pursuant to section 5739.031 of the | 347 |
Revised Code, or a seller having a use tax account maintained | 348 |
pursuant to section 5741.17 of the Revised Code, or information | 349 |
regarding the active or inactive status of a vendor's license, | 350 |
direct payment permit, or seller's use tax account; | 351 |
(8) Releasing invoices or invoice information furnished under | 352 |
section 4301.433 of the Revised Code pursuant to that section; | 353 |
(9) Providing to a county auditor notices or documents | 354 |
concerning or affecting the taxable value of property in the | 355 |
county auditor's county. Unless authorized by law to disclose | 356 |
documents so provided, the county auditor shall not disclose such | 357 |
documents; | 358 |
(10) Providing to a county auditor sales or use tax return or | 359 |
audit information under section 333.06 of the Revised Code. | 360 |
Section 2. That existing sections 124.341 and 5703.21 of the | 361 |
Revised Code are hereby repealed. | 362 |
Section 3. (A) It is the intent of the General Assembly in | 363 |
the enactment of section 126.45 of the Revised Code that the | 364 |
primary internal audit function of state agencies as defined in | 365 |
that section will be carried out by the Office of Internal | 366 |
Auditing of the Office of Budget and Management. | 367 |
(B) Before May 1, 2008, the Director of Budget and | 368 |
Management, in consultation with the Director of Administrative | 369 |
Services and the State Audit Committee created in section 126.46 | 370 |
of the Revised Code, shall develop a plan to commence operations | 371 |
of the Office of Internal Auditing. The plan shall do all of the | 372 |
following: | 373 |
(1) Identify those existing employees within state agencies | 374 |
as defined in section 126.45 of the Revised Code who perform the | 375 |
function of an internal auditor and who will be transferred to the | 376 |
Office of Internal Auditing; | 377 |
(2) Establish funds and appropriation authority that is | 378 |
necessary for the efficient and effective operation of the Office | 379 |
of Internal Auditing; | 380 |
(3) Provide for a method to assess charges against the | 381 |
various state agencies for which the Office of Internal Auditing | 382 |
conducts internal auditing programs under sections 126.45 to | 383 |
126.48 of the Revised Code so that the total amount of these | 384 |
charges is sufficient to cover the costs of the operation of the | 385 |
Office of Internal Auditing; | 386 |
(4) Provide for the appropriate reduction in the | 387 |
appropriation authority of the state agencies from which existing | 388 |
employees who perform the function of internal auditor are | 389 |
transferred. | 390 |
(C) The Controlling Board shall approve the plan before the | 391 |
Office of Budget and Management implements it. | 392 |
(D) Subject to the layoff and displacement provisions of | 393 |
Chapter 124. of the Revised Code, all state agency employees who | 394 |
are identified by the plan as performing duties necessary to | 395 |
comply with sections 126.45 to 126.48 of the Revised Code shall be | 396 |
transferred, upon the approval of the Controlling Board, to the | 397 |
Office of Internal Auditing and shall retain their positions, | 398 |
compensation, and associated fringe benefits. | 399 |
Section 4. Section 5703.21 of the Revised Code is presented | 400 |
in this act as a composite of the section as amended by both Am. | 401 |
Sub. H.B. 530 and Am. Sub. S.B. 7 of the 126th General Assembly. | 402 |
The General Assembly, applying the principle stated in division | 403 |
(B) of section 1.52 of the Revised Code that amendments are to be | 404 |
harmonized if reasonably capable of simultaneous operation, finds | 405 |
that the composite is the resulting version of the section in | 406 |
effect prior to the effective date of the section as presented in | 407 |
this act. | 408 |