To amend sections 126.02 and 126.022 and to enact sections 117.46, 117.461, and 126.18 of the Revised Code to require performance budgeting by most state agencies and to require performance audits of those agencies.

Section 1. That sections 126.02 and 126.022 be amended and sections 117.46, 117.461, and 126.18 of the Revised Code be enacted to read as follows:

Sec. 117.46. Each biennium the auditor of state shall conduct a performance audit of a minimum of four state agencies that have been required to file performance data with the director of budget and management under section 126.18 of the Revised Code for at least one biennium. At least two of the audits shall be of agencies selected from a list comprised of the administrative departments listed in section 121.02 of the Revised Code and the department of education and at least two of the audits shall be of other state agencies.

The auditor shall select each agency to be audited and shall determine whether to audit the entire agency or a portion of the agency by auditing one or more programs, offices, boards, councils, or other entities within that agency. The auditor may make the selection and determination in consultation with the governor.

An audit of a portion of an agency shall be considered an audit of one agency. The authority to audit a portion of an agency in no way limits the auditor's ability to audit an entire agency if it is in the best interest of the state.

The performance audits under this section shall be conducted pursuant to sections 117.01 and 117.13 of the Revised Code.

Sec. 117.461. A state agency shall implement the recommendations of a performance audit conducted pursuant to section 117.46 of the Revised Code. If an agency does not commence implementation of such recommendations within three months after the release date of the audit, the agency shall do both of the following:

(A) File a report explaining why the agency has not commenced implementation of the recommendations with the governor, auditor of state, speaker and minority leader of the house of representatives, and president and minority leader of the senate;

(B) Provide testimony explaining why the agency has not commenced implementation of the recommendations to the house of representatives and senate committees dealing primarily with the programs and activities of the agency.

Sec. 126.02.  The director of budget and management shall prepare and submit to the governor, biennially, not later than the first day of January preceding the convening of the general assembly, state budget estimates of revenues and expenditures for each state fund and budget estimates for each state agency, except such estimates as are required under section 126.022 of the Revised Code, and, as applicable, the performance measures required to be submitted by state agencies by division (A) of section 126.18 of the Revised Code. The budget estimates for each state agency for which direct appropriations are proposed shall include the following details:

(A) Estimates of the operating budget;

(B) Estimates of the subsidy appropriations necessary, delineated by a distinct subsidy program;

(C) Estimates for special purposes, delineated by a distinct special purpose program;

(D) Estimates of appropriations necessary from each fund in reasonable detail to allow for adequate planning and oversight of programs and activities.

In the preparation of state revenue and expenditure estimates, the director of budget and management shall, not later than the fifteenth day of September in the year preceding the first regular session of the general assembly, distribute to all affected state agencies the forms necessary for the preparation of budget requests, which shall be in the form prescribed by the director in consultation with the legislative service commission to procure information concerning the revenues and expenditures for the preceding and current bienniums, an estimate of the revenues and expenditures of the current fiscal year, and an estimate of the revenues and proposed expenditures for the respective agencies for the two succeeding fiscal years for which appropriations have to be made, and, as applicable, the performance data required by division (A) of section 126.18 of the Revised Code. Each such agency shall, not later than the first day of November, file with the director its estimate of revenues and proposed expenditures for the succeeding biennium and, where required by section 126.18 of the Revised Code, a comprehensive and integrated statement of agency missions and outcome and performance measures.

Each such agency shall, not later than the first day of December, file with the chairperson of the finance committees of the senate and house of representatives and the legislative service commission a duplicate copy of such budget request.

The budget request shall be accompanied by a statement in writing giving facts and explanation of reasons for the items requested. The director and the legislative service commission may make further inquiry and investigation as to any item desired. The director may approve, disapprove, or alter the requests, excepting those for the legislative and judicial branches of the state. The requests as revised by the director constitute the state budget estimates of revenues and expenditures which the director is required to submit to the governor.

The director shall determine a method to incorporate the principles of zero-based budgeting into the forms prescribed in this section.

Sec. 126.022.  Not later than four weeks after the general assembly convenes in each even-numbered year, the director of budget and management shall prepare and recommend to the general assembly, subject to the concurrence of the governor, estimates of revenues from, or derived from, payments to the state under the tobacco master settlement agreement and, expenditures of such revenues for the biennium beginning on the following first day of July, and, as applicable, the performance data required by division (A) of section 126.18 of the Revised Code. Each state agency affected by such revenues or expenditures shall submit to the director of budget and management any related information the director requires, in such form and at such times as the director prescribes, and, where required by section 126.18 of the Revised Code, a comprehensive and integrated statement of agency missions and outcome and performance measures.

Sec. 126.18. (A) Except for the offices of the attorney general, auditor of state, governor, secretary of state, and treasurer of state and agencies of the legislative and judicial branches, each state agency filing budget requests under section 126.02 of the Revised Code shall, in accordance with the schedule set forth in division (B) of this section, include with its requests data that measure the performance of the programs and activities of the agency in meeting program goals and objectives. Data reported shall include indicators of output, efficiency, outcomes, and other measures relevant to each program and activity. The agency shall also include historical data needed for an understanding of major trends and shall set targets for future performance where feasible and appropriate. All such data shall be presented in a manner that serves to assist legislative review of and decision making concerning the programs and activities of the agency.

(B)(1) Division (A) of this section shall apply to the budget requests of the department of education, department of job and family services, and all other state agencies audited pursuant to Section 3 of ....B. No. ... of the 129th general assembly beginning with their budget requests for the biennium ending June 30, 2015.

(2) The director of budget and management shall divide all other agencies subject to division (A) of this section into the following three categories:

(a) Agencies to which division (A) shall apply beginning with their budget requests for the biennium ending June 30, 2015;

(b) Agencies to which division (A) shall apply beginning with their budget requests for the biennium ending June 30, 2017;

(c) Agencies to which division (A) shall apply beginning with their budget requests for the biennium ending June 30, 2019.

(C) The director shall provide all agencies subject to division (A) of this section with substantial technical assistance in carrying out the requirements of that division and shall review the appropriateness, validity, and reliability of agency performance measures and data.

(D) Beginning with the biennium after the biennium in which the budget requests of the Ohio board of regents first become subject to division (A) of this section, the board shall offer assistance to each state university or college as defined in section 3345.12 of the Revised Code in developing relevant performance measures for the university's or college's programs and activities and in setting targets for future performance where feasible and appropriate.

Section 2. That existing sections 126.02 and 126.022 of the Revised Code are hereby repealed.

Section 3. (A) The initial performance audits conducted by the Auditor of State pursuant to section 117.46 of the Revised Code shall be of the following state agencies:

(1) The Department of Education;

(2) The Department of Job and Family Services;

(3)(a) A minimum of two other state agencies, which shall include at least two agencies not listed in section 121.02 of the Revised Code;

(b) Any state agency may request an audit under division (A)(3)(a) of this section. If fewer than two agencies not listed in section 121.02 of the Revised Code request an audit, the Governor shall select the required number of agencies. The Auditor shall conduct an audit of every agency that requests an audit and every agency selected by the Governor.

(B) Notwithstanding anything to the contrary in section 117.46 of the Revised Code, an agency audited under this section shall not be required to file performance data with the Director of Budget and Management prior to the audit.

(C) The Auditor shall commence the audits required by this section within 90 days of the effective date of this act.