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Sub. H. B. No. 166 As Reported by the Senate Finance and Financial Institutions CommitteeAs Reported by the Senate Finance and Financial Institutions Committee
127th General Assembly | Regular Session | 2007-2008 |
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Cosponsors:
Representatives Adams, Bubp, Combs, DeWine, Flowers, Gibbs, Seitz, Stebelton, Widener, Zehringer, Aslanides, Bacon, Batchelder, Blessing, Coley, Collier, Daniels, Dolan, Evans, Fessler, Hagan, J., Hite, Hottinger, Huffman, Hughes, McGregor, R., Patton, Schneider, Setzer, Uecker, Wachtmann, Wagner, Wagoner, Widowfield
Senators Niehaus, Cates, Miller, D., Gardner, Faber, Padgett
A BILL
To amend sections 124.341 and 5703.21 and to enact
sections 126.45
to 126.48 of the Revised
Code to
create an Office
of Internal Auditing
within the
Office of Budget
and Management, to
establish
the State Audit
Committee, and to
prescribe
their respective and
interrelated
functions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:
Section 1. That sections 124.341 and 5703.21 be amended and
sections
126.45, 126.46, 126.47, and 126.48
of the Revised Code
be enacted
to read as follows:
Sec. 124.341. (A) If
an employee in the classified
or
unclassified civil service becomes aware in the course of
employment of a violation of state or federal statutes, rules, or
regulations or the misuse of public resources, and the employee's
supervisor or appointing authority has authority to correct the
violation or misuse, the employee may file a written report
identifying the violation or misuse with
the supervisor or
appointing authority. In addition to or instead of filing a
written report with the supervisor or appointing authority, the
employee may file a written report with the office of internal
auditing created under section 126.45 of the Revised Code.
If the employee reasonably believes that a violation or
misuse of public resources is a criminal offense, the employee,
in
addition to or instead of filing a written report with the
supervisor or, appointing authority, or the office of internal
auditing, may report it to a
prosecuting
attorney, director of
law, village solicitor, or
similar chief
legal officer of a
municipal corporation, to a
peace officer, as
defined in section
2935.01 of the Revised Code,
or, if the
violation or misuse of
public resources is within the
jurisdiction
of the inspector
general, to the inspector general
in accordance
with section
121.46 of the Revised Code. In
addition to that
report, if the
employee reasonably believes the
violation or
misuse is also a
violation of Chapter 102., section
2921.42, or
section 2921.43 of
the Revised Code,
the employee may report it to
the
appropriate
ethics commission.
(B) Except as otherwise provided in division (C) of this
section, no
officer or
employee
in the classified or
unclassified
civil service shall take any
disciplinary action
against
an
employee
in the classified or unclassified
civil service for
making any
report authorized by division (A) of
this section,
including,
without limitation, doing any of the
following:
(1) Removing or suspending the employee from employment;
(2) Withholding from the employee salary increases or
employee benefits to which the employee is otherwise entitled;
(3) Transferring or reassigning the employee;
(4) Denying the employee promotion that otherwise would
have
been received;
(5) Reducing the employee in pay or position.
(C)
An employee
in the classified or unclassified
civil
service shall make a reasonable effort to
determine the
accuracy
of any information reported under division
(A) of this
section.
The employee is subject to disciplinary
action,
including
suspension or removal, as determined by the
employee's
appointing
authority, for purposely, knowingly, or
recklessly
reporting false
information under division (A) of this
section.
(D) If an appointing authority takes any disciplinary or
retaliatory action against a classified or unclassified employee
as a result of the employee's having filed a report under
division
(A) of this section, the employee's sole and exclusive
remedy,
notwithstanding any other provision of law, is to file an
appeal
with the state personnel board of review within thirty
days after
receiving actual notice of the appointing authority's
action. If
the employee files such an appeal, the board shall
immediately
notify the employee's appointing authority and shall
hear the
appeal. The board may affirm or disaffirm the action of
the
appointing authority or may issue any other order as is
appropriate. The order of the board is appealable in accordance
with
Chapter 119. of the Revised Code.
(E) As used in this section:
(1) "Purposely," "knowingly," and "recklessly" have the
same
meanings as in section 2901.22 of the Revised Code.
(2) "Appropriate ethics commission" has the same meaning
as
in section 102.01 of the Revised Code.
(3) "Inspector general" means the inspector general
appointed
under section 121.48 of the Revised Code.
Sec. 126.45. (A) As used in sections 126.45 to 126.48 of the
Revised Code, "state agency" means the administrative departments
listed in section 121.02 of the Revised Code, the department of
taxation, and the bureau of workers' compensation.
(B) The office of internal auditing is hereby created in the
office of budget and management to conduct internal audits of
state agencies or divisions of state agencies to improve their
operations in the areas of risk management, internal controls, and
governance. The director of budget and management, with the
approval of the governor, shall appoint for the office of internal
auditing a chief
internal auditor who meets the qualifications
specified in
division (C) of this section. The chief internal
auditor shall
serve at the director's pleasure and be responsible
for the
administration of the office of internal auditing
consistent with
sections 126.45 to 126.48 of the Revised Code.
The office of internal auditing shall conduct programs for
the internal auditing of state agencies. The programs shall
include an annual internal audit plan, reviewed by the state audit
committee, that utilizes risk assessment techniques and identifies
the specific audits to be conducted during the year. The programs
also shall include periodic audits of each state agency's major
systems and controls, including those systems and controls
pertaining to accounting, administration, and electronic data
processing. Upon the request of the office of internal auditing,
each state agency shall provide office employees access to all
records and documents necessary for the performance of an internal
audit.
The director of budget and management shall assess a charge
against each state agency for which the office of internal
auditing conducts internal auditing programs under sections 126.45
to 126.48 of the Revised Code so that the total amount of these
charges is sufficient to cover the costs of the operation of the
office of internal auditing.
(C) The chief internal auditor of the office of internal
auditing shall hold at least a bachelor's degree and be one of the
following:
(1) A certified internal auditor, a certified government
auditing professional, or a certified public accountant, who also
has held a PA registration or a CPA certificate authorized by
Chapter 4701. of the Revised Code for at least four years and has
at least six years of auditing experience;
(2) An auditor who has held a PA registration or a CPA
certificate authorized by Chapter 4701. of the Revised Code for at
least four years and has at least ten years of auditing
experience.
(D) The chief internal auditor, subject to the direction and
control of the director of budget and management, may appoint and
maintain any staff necessary to carry out the duties assigned by
sections 126.45 to 126.48 of the Revised Code to the office of
internal auditing or to the chief internal auditor.
Sec. 126.46. (A)(1) There is hereby created the state audit
committee, consisting of the following five members: one public
member
appointed by the governor; two public members appointed by
the
speaker of the house of representatives, one of which may be
a person who is recommended by the minority leader of the house of
representatives; and two public members
appointed by the
president of the senate, one of which may be a person who is
recommended by the minority leader of the senate. Not more than
two of the
four members appointed by the speaker of the
house of
representatives and the president of the senate shall
belong to
or
be affiliated with the same political party. The
member
appointed
by the governor shall be a person who is
external to
the
management structure associated with the
preparation of
financial
statements of state government and shall
have the
program and
management expertise required to perform the
duties
of the
committee's chairperson.
Each member of the committee shall serve a three-year
term,
except for the initial members. With respect to the
initial
appointments of the members, the first member appointed by the
speaker of the house of
representatives shall serve a one-year
term, the second member appointed by the speaker of the house of
representatives shall serve a three-year term,
the initial members
appointed by the president of the
senate shall serve two-year
terms, and the
initial member appointed by the governor shall
serve a three-year
term. Members may
be reappointed to serve one
additional term.
The committee shall include one member who is a
financial
expert; one member who is an active, inactive, or
retired
certified public accountant; one member who is
familiar with
governmental financial accounting; and one
member who is a
representative of the public.
Any vacancy on the committee shall be filled in the same
manner as provided in this division, and, when applicable, the
person appointed to fill a vacancy shall serve the remainder of
the predecessor's term.
(2) Members of the committee shall receive reimbursement for
actual and necessary expenses incurred in the discharge of their
duties.
(3) The member of the committee appointed by the governor
shall serve as the
committee's chairperson.
(4) Initial appointments of committee members shall be made
not later than thirty days after the effective date of this
section.
(5) Members of the committee shall be subject to the
disclosure statement requirements of section 102.02 of the Revised
Code.
(B) The state audit committee shall do all of the following:
(1) Ensure that the internal audits conducted by the office
of internal auditing in the office of budget and management
conform to the institute of internal auditors' international
standards for the professional practice of internal auditing and
to the institute of internal auditors' code of ethics;
(2) Review and comment on the process used by the office of
budget and
management to prepare its annual budgetary financial
report and
the state's comprehensive annual financial report
required under
division (A)(9) of section 126.21 of the Revised
Code;
(3) Review and comment on unaudited financial statements
submitted to the
auditor of state and communicate with external
auditors as
required by government auditing standards;
(4) Perform the additional functions imposed upon it by
section 126.47 of the Revised Code.
(C) As used in this section, "financial expert" means a
person who has all of the following:
(1) An understanding of generally accepted accounting
principles and financial statements;
(2) The ability to assess the general application of those
principles in connection with accounting for estimates, accruals,
and reserves;
(3) Experience preparing, auditing, analyzing, or evaluating
financial statements presenting accounting issues that generally
are of comparable breadth and level of complexity to those likely
to be presented by a state agency's financial statements, or
experience actively supervising one or more persons engaged in
those activities;
(4) An understanding of internal controls and procedures for
financial reporting; and
(5) An understanding of audit committee functions.
Sec. 126.47. (A) The state audit committee created by
section 126.46 of the Revised Code shall ensure that the office of
internal auditing in the office of budget and management has an
annual internal audit plan that identifies the internal audits of
state agencies or divisions of state agencies scheduled for the
next fiscal year. The chief internal auditor of the office of
internal auditing shall submit the plan to the state audit
committee for review and comment before the beginning of each
fiscal year.
The chief internal auditor may submit a revised
internal audit
plan for review and comment at any time the
director of budget and
management believes there is reason to
modify the previously
submitted plan for a fiscal year.
(B) To determine the state agencies or divisions of state
agencies that are to be internally audited, the office of internal
auditing, in the formulation of an annual or revised internal
audit plan, and the state audit committee, in reviewing a
submitted annual or revised internal audit plan, shall consider
the following factors:
(1) The risk for fraud, waste, or abuse of public money
within an agency or division;
(2) The length of time since an agency or division was last
subject to an internal audit;
(3) The size of an agency or division, and the amount of time
and resources necessary to audit it;
(4) Any other factor the state audit committee determines to
be relevant.
(C) All internal audits shall be conducted only by employees
of the office of internal auditing.
(D) After the conclusion of an internal audit, the chief
internal auditor shall submit a preliminary report of the internal
audit's findings and recommendations to the state audit committee
and to the director of the state agency involved. The state agency
or division of the state agency covered by the preliminary report
shall be provided an opportunity to respond within thirty days
after receipt of the preliminary report. The response shall
include a corrective action plan for any recommendations in the
preliminary report that are not disputed by the agency or
division. Any response received by the office of internal auditing
within that thirty-day period shall be included in the office's
final report of the internal audit's findings and recommendations.
The final report shall be issued by the office of internal
auditing within thirty days after the termination of the
thirty-day response period. Copies of the final report shall be
submitted to the state audit committee, the governor, and the
director of the state agency involved. The state audit committee
shall determine an appropriate method for making the preliminary
and final reports available for public inspection in a timely
manner.
Any suspected fraud or other illegal activity discovered by
the office of internal auditing during the conduct of an internal
audit shall be reported immediately to the state audit committee,
the director of the state agency in which the fraud or illegal
activity is suspected to have occurred, and the auditor of state.
(E) The chief internal auditor shall prepare an annual report
and submit the report to the governor, the president of the
senate, the speaker of the house of representatives, and the
auditor of state. The office of budget and management shall make
the report available to the public by posting it on the office's
web site before the first of July of each year.
Sec. 126.48. Any preliminary or final report of an internal
audit's findings and recommendations which is produced by the
office of internal auditing in the office of budget and management
and all work papers of the internal audit are confidential and are
not public records under section 149.43 of the Revised Code until
the final report of an internal audit's findings and
recommendations is submitted to the state audit committee, the
governor, and the director of the state agency involved.
Sec. 5703.21. (A) Except as provided in divisions (B) and
(C) of this section, no agent
of the department of taxation,
except in the agent's report to the department or when called on
to
testify in any court or proceeding, shall divulge any
information
acquired by the agent as to the transactions,
property, or business
of any person while acting or claiming to
act under orders of the
department. Whoever violates this
provision shall thereafter be
disqualified from acting as an
officer or employee or in any
other capacity under appointment or
employment of the department.
(B)(1) For purposes of an audit pursuant to section 117.15
of
the Revised Code, or an audit of the department pursuant to
Chapter 117. of the Revised Code, or an audit, pursuant to that
chapter, the objective of which is to express an opinion on a
financial report or statement prepared or issued pursuant to
division (A)(7) or (9) of section
126.21 of
the Revised Code, the
officers and employees of the auditor of state charged with
conducting the audit shall have access to and the right to
examine
any state tax returns and state tax return information in
the
possession of the department to the extent that the
access
and
examination are necessary for purposes of the audit. Any
information acquired as the result of that access and
examination
shall not be divulged for any purpose other than as required for
the audit or unless the officers and employees are required
to
testify in a court or proceeding under compulsion of legal
process. Whoever violates this provision shall thereafter be
disqualified from acting as an officer or employee or in any
other
capacity under appointment or employment of the auditor of
state.
(2) For purposes of an internal audit pursuant to section
126.45 of the Revised Code, the officers and employees of the
office of internal auditing in the office of budget and management
charged with conducting the internal audit shall have access to
and the right to examine any state tax returns and state tax
return information in the possession of the department to the
extent that the access and examination are necessary for purposes
of the internal audit. Any information acquired as the result of
that access and examination shall not be divulged for any purpose
other than as required for the internal audit or unless the
officers and employees are required to testify in a court or
proceeding under compulsion of legal process. Whoever violates
this provision shall thereafter be disqualified from acting as an
officer or employee or in any other capacity under appointment or
employment of the office of internal auditing.
(3) As provided by section 6103(d)(2) of the Internal
Revenue
Code, any federal tax returns or federal tax information
that the
department has acquired from the internal revenue
service, through
federal and state statutory authority, may be
disclosed to the
auditor of state or the office of internal auditing solely for
purposes of an audit
of the department.
(C) Division (A) of this section does not prohibit
any of
the
following:
(1) Divulging information contained in applications,
complaints, and
related documents filed with the department under
section 5715.27
of the Revised Code or in applications filed with
the department
under section 5715.39 of the Revised Code;
(2) Providing
information to the office of child support
within the department of job and family services pursuant to
section 3125.43 of the Revised
Code;
(3) Disclosing to the board of
motor vehicle collision
repair
registration any information
in the possession of the
department
that is necessary for the
board to
verify the existence
of an
applicant's valid vendor's license and
current state tax
identification number under section 4775.07 of the
Revised Code;
(4) Providing information to the administrator
of workers'
compensation pursuant
to sections 4123.271 and 4123.591 of the
Revised Code;
(5) Providing to the attorney general
information the
department obtains
under division (J) of section 1346.01 of the
Revised Code;
(6) Permitting properly authorized officers, employees, or
agents of a
municipal corporation from inspecting reports or
information pursuant to
rules adopted under section 5745.16 of the
Revised Code;
(7) Providing information regarding the name, account
number,
or business
address of a holder of a vendor's
license
issued
pursuant to section 5739.17 of the Revised Code, a holder
of a
direct payment permit issued pursuant to section 5739.031 of
the
Revised Code, or a seller having a use tax account maintained
pursuant to
section 5741.17 of the Revised Code, or information
regarding the active or inactive status of a vendor's license,
direct payment permit, or seller's use tax account;
(8) Releasing invoices or invoice information furnished under
section 4301.433 of
the Revised Code pursuant to
that section;
(9) Providing to a county auditor notices or documents
concerning or affecting the taxable value of property in the
county auditor's county. Unless authorized by law to disclose
documents so provided, the county auditor shall not disclose such
documents;
(10) Providing to a county auditor sales or use tax return or
audit information under section 333.06 of the Revised Code.
Section 2. That existing sections 124.341 and 5703.21 of the
Revised Code
are hereby repealed.
Section 3. (A)
It is the intent of the General Assembly in
the enactment of section 126.45 of the Revised Code that the
primary internal audit function of state agencies as defined in
that section will be carried out by the Office of Internal
Auditing of the Office of Budget and Management.
(B) Before May 1, 2008, the Director of Budget and
Management, in consultation with the Director of Administrative
Services and the State Audit Committee created in section 126.46
of the Revised Code, shall develop a plan to commence operations
of the Office of Internal Auditing. The plan shall do all of the
following:
(1) Identify those existing employees within state agencies
as defined in section 126.45 of the Revised Code who perform the
function of an internal auditor and who will be transferred to the
Office of Internal Auditing;
(2) Establish funds and appropriation authority that is
necessary for the efficient and effective operation of the Office
of Internal Auditing;
(3) Provide for a method to assess charges against the
various state agencies for which the Office of Internal Auditing
conducts internal auditing programs under sections 126.45 to
126.48 of the Revised Code so that the total amount of these
charges
is sufficient to cover the costs of the operation of the
Office of
Internal Auditing;
(4) Provide for the appropriate reduction in the
appropriation authority of the state agencies from which existing
employees who perform the function of internal auditor are
transferred.
(C) The Controlling Board shall approve the plan before the
Office of Budget and Management implements it.
(D) Subject to the layoff and displacement provisions of
Chapter 124. of the Revised Code, all state agency employees who
are identified by the plan as performing duties necessary to
comply with sections 126.45 to 126.48 of the Revised Code shall be
transferred, upon the approval of the Controlling Board, to the
Office of Internal Auditing and shall retain their positions,
compensation, and associated fringe benefits.
Section 4. Section 5703.21 of the Revised Code is
presented
in
this act as a composite of the section as amended by
both Am.
Sub. H.B. 530 and Am. Sub. S.B. 7 of
the 126th General
Assembly.
The General Assembly, applying the
principle stated in
division
(B) of section 1.52 of the Revised
Code that amendments
are to be
harmonized if reasonably capable of
simultaneous
operation, finds
that the composite is the resulting
version of
the section in
effect prior to the effective date of
the section
as presented in
this act.
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