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HOUSE STATE GOVERNMENT COMMITTEE PUBLIC HEARING ...

HOUSE STATE GOVERNMENT COMMITTEE PUBLIC HEARING ...

ROUSE

ROUSE STATE GOVF,RNMENT COMMITTEE PUBLIC BEARING ON HOUSE BILLS 249 AND 250 Robert F. TepIitz Chief Counsel/Director of Policy & Planning Department of the Auditor General on belzalfof Auditov Geneva1 Jack Wagnm February 25,201t Good morning, Chairs Metcalfe and Josephs and committee mcmbers Auditor General Jack Wagner sends his regrets for not being able to appear before the collimittee in person, as he is currently testifying before the Senate Approp~iations Committee about our Departrncflt's budget request for the upcoming fiscal year. He has asked me to appear and present testimony on hls behalf, and it is my honor to do so. My name is Robert Telditz. I am the Chicf Counsel and the Director of Policy and Planning at the Pennsylvania Department of the Auditor General. My responsibil~ties over the past seven years have included overseeing our Department's compliance with, and exercise of, our audit authority and protecting tho Department - and, more important, the citizens that we represent - from encroachments on that authority. Thank you for the opportunity to discuss House Bill 249 (Printer's No. 200) and House Bill 250 (Printer's No. 201). We commend Rep. Seth Grove, the co-sponsors of the legislation, and the members of this committee for your interest in fiscal rcsponslbtlity, accountability, and transparency in government. Promoting those valucs for the benefit of the taxpayers and fa~nllies of this Commonweal(11 IS the coremission oS the Department Of the Auditor General - at thls very moment, Audltor General Wagner is d~scussing with your colleagues in the Sonate how we have hifilled that inission during his administration. However, we do have serious concerns about borh bills that we wish to present for your consideration. House Bill 249 would add specific performance audits to the statutory responsibilities of the Legislative Budget and Finance Commttee. Those new rcsponsib~lities are important enough that the bill requires a change in the coimnlttee's name to the "Legislative Budget, Finance ahd Audit Coimnittee." The committee would issue new annual reports on the broad topic areas of procurement, staffing, state properly and office space, budgeting, productivity and performance by state agencies and employees, delivery of services by state agencies, and privatization of state government services. The co~nrnittee would also be charged with developing policies to streamline government operations, recommending steps to reduce or eliminate expenditures in the event of a state budget shortfall, and detennin~ng the authority under the state constitution for each activity perfonned by each state agency.

As I explain our specific concerns about House Bill 249, pIease be assured that we are not attempting to ptotect our "turf," nor are we criticizing the Legislative Budget and Finance Committee, whose highly professional staff produces valuable reports and with whom we have an excellent working relationship. However, we are co~npelled to point out several significant issues of concern with the bill. First and foremost, based on our research and our review of the LB&FC's reports, it does not appear that the committee conducts its work in accordance with professional auditing standards. Our Department's performance audits are conducted pursuant to Government Auditing Standards, also known as "The Yellow Book." which is issued by the Comptroller General of the United States. One of the most important standards required by the Yellow Book is the independcncc of the auditor. Additionally, other standads are prescribed sn order fo ensure that the staff conducting the audit is trained properly and that staff proceeds during the aud~t in an appropriate manner. When professional auditing standards are followed, the users and readers of an audit report can be assurd of independent, objective, and credible conclusions and recommendations. Second, the new respons~bilities imposed on the committee will duplicate the work of other state agencies. With one exception, all of the aud~ts and other new functions in House Bill 249 that I have discussed are already rcqu~red of, and performed by, the Department of the Auditor General. The sole exception would be opining on the constitutionality of agency activ~ties, which is already the provmce of the Office of Attorney General. The new Independent: F~scal Office may also be involved in some of thesc areas. aven linuted financial and human resources throughout state government, it seems unwlse for multiple agencies to perfoim the same functions. This would be an additional cost to the taxpayers. It seems particularly unwise when one of those agencies, the Department of the Auditor General, has been performing those functions quite well for many decades. Finally, as a technical matter, please also note that the bill mistalcenly refers to the new "committee" as the "cr~~nmission" in subsections (9). (lo), (ll), and (13) of Section 3 (relating to powers and duties of committee) and in Section 7.1 (relakg to funding). We have different concerns with regard to House Bill 250, the Councll on Efficient Government Act. The purpose of the counal wouId be to analyze and pursue the potential for privatizing activities currently performed by state government agencies. The council would also issue annual reports in support of its efforts. The bill affects the Department of the Auditor General in two ways. First, it would require the Dqarhnent of the Auditor General to provide staff support to the council. Unfortunately, our involvement would confhct w~th our constitutioilal and statutory misslo11 of conducting post-aud~ts of state spending. Specifically, both Art~cle VIII, Section 10 of the state collstitution and Section 404 of The Fiscal Code prohtbit our Departnlent, as a matter of law, from being involved in a decision or a financial transaction that may later be subject to our own audits. The rationale for this prohibition is clear - to avoid conflicts of interest and allow our Department to conduct independent and objective audits.

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