HOUSE BILL No.

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______________, 2009, Introduced by Reps. ___________ and _________ and referred to the Committee on __________________. A bill to amend 2003 PA 1, entitled "AUDITS AND EXAMINATIONS" (MCL 13.101) by adding the term “annual” in section 1 and by adding sections 1a, 1b, 2a, 2b and 2c to chapter 13. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: CHAPTER 13 13.101 Auditor general; duties; powers; employment and compensation; influencing action of examiner as misdemeanor; definitions. Sec. 1. (1) The auditor general shall conduct ANNUAL audits and examinations of all branches, departments, offices, boards, commissions, agencies, authorities, and institutions of this state. (a) THE AUDITOR GENERAL SHALL IMMEDIATELY REPORT ALL FINDINGS OF AUDITS AND EXAMINATIONS OF ALL BRANCHES, AGENCIES, AUTHORITIES, BOARDS, COMMISSIONS, DEPARTMENTS, INSTITUTIONS AND OFFICES OF THIS STATE TO THE LEGISLATURE. (b) THE AUDITOR GENERAL SHALL IMMEDIATELY REFER

VIOLATIONS OF STATE AND FEDERAL LAW TO THE ATTORNEY GENERAL. (2) In connection with the audits and examinations described in this act, the auditor general may examine, or cause to be examined, the books, accounts, documents, records, performance activities, and financial affairs of each branch, department, office, board, commission, agency, authority, and institution of this state. (3) Upon demand of the auditor general, deputy auditor general, or any person appointed by the auditor general to make the audits and examinations provided in this act, the officers and employees of all branches, departments, offices, boards, commissions, agencies, authorities, and institutions of this state shall produce for examination all books, accounts, documents, and records of their respective branch, department, office, board, commission, agency, authority, and institution and truthfully answer all questions relating to their books, accounts, documents, and records of their respective activities and affairs. (4) In connection with audits and examinations described in this act, the auditor general, deputy auditor general, or any person appointed to make audits and examinations may issue subpoenas, direct the service of the subpoena by any police officer, and compel the attendance and testimony of witnesses; may administer oaths and examine any person as may be necessary; and may compel the

production of books, accounts, papers, documents, and records. The orders and subpoenas issued by the auditor general, deputy auditor general, or any person appointed with the duty of making the examinations provided in this subsection may be enforced upon application to any circuit court as provided by law. (5) The auditor general may employ and compensate auditors, examiners, and assistants as he or she considers necessary. In addition, the auditors, examiners, and assistants shall be paid their necessary traveling expenses while engaging in the duties provided under this act. Compensation and expenses shall be paid out of the funds appropriated for that purpose. The auditor general and the deputy auditor general shall receive their actual traveling expenses incurred while engaging in the duties provided under this act, which shall be paid out of the funds appropriated for that purpose. (6) Any person who gives or offers to any examiner, accountant, clerk, or other employee of the auditor general, any money, gift, emolument, or thing of value for the purpose of influencing the action of the examiner or other employee, in any matter relating to the examination of any public account authorized by this act, or for the purpose of preventing or delaying the examination of any public account, or for the purpose of influencing the action of the examiner or other employee, in framing, changing, withholding, or delaying any report of any examination of any public account, is guilty of a misdemeanor,

punishable by a fine of not more than $1,000.00 nor less than $200.00, or imprisonment for not more than 6 months and not less than 30 days, or both. (7) Any person appointed by the auditor general to make the examinations provided for under this act, or any officer, clerk, or other employee of the auditor general, who receives or solicits any money, gift, emolument, or anything of value for the purpose of being influenced in the matter of the examination of any public account authorized by this act, or for the purpose of being influenced to prevent or delay the examination of any public account, is guilty of a misdemeanor, punishable by a fine of not more than $1,000.00 and not less than $200.00, or imprisonment for not more than 6 months and not less than 30 days, or both. (8) As used in this act: (a) “Audit” means a post audit of financial transactions and accounts or performance audit as described in section 53 of article IV of the state constitution of 1963. (b) “Auditor general” means the individual appointed auditor general under section 53 of article IV of the state constitution of 1963. (c) “Examination” means an inquiry, compilation, or review within the scope of the auditor general's authority under section 53 of article IV of the state constitution of 1963. SEC. 2. SPECIAL ASSISTANT AUDITORS.

(a) THE AUDITOR GENERAL MAY CONTRACT WITH THE FOLLOWING STATE LICENSED ENTITIES: CERTIFIED PUBLIC ACCOUNTANS; QUALIFIED MANAGEMENT CONSULTANTS; LICENSED ATTORNEYS; AND OTHER PERSONS OR FIRMS NECESSARY TO CARRY OUT THE DUTIES OF THE OFFICE. FOR THE PURPOSE OF ASSISTING IN PERFORMAANCE AUDITS, THE AUDITOR GENERAL MAY CONTRACT WITH ANY STATE AGENCY. THE AUDITOR GENERAL MAY CONTRACT WITH OTHER GOVERNMENTAL AGENCIES FOR THE CONDUCT OF JOINT AUDITS OF A STATE AGENCY OR A PORTION THEREOF. (b) THE AUDITOR GENERAL SHALL ADOPT RULES ESTABLISHING QUALIFICATIONS FOR NON-LICENSED PERSONS WITH WHOM HE MAY CONTRACT. (c) THE AUDITOR GENERAL MAY DESIGNATE ANY PERSON WITH WHOM HE CONTRACTS AS A SPECIAL ASSISTANT AUDITOR FOR THE PURPOSE OF CONDUCTING A POST AUDIT OR INVESTIGATION UNDER HIS SUPERVISION. THE AUDITOR GENERAL MAY DELEGATE HIS POWERS AND AUTHORITY RESPECTING POST AUDITS AND INVESTIGATIONS TO SPECIAL ASSISTANT AUDITORS OTHER THAN THE POWER OF SUBPOENA, BUT ANY DELEGATION OF AUTHORITY TO ADMINISTER OATHS OR TAKE DEPOSITIONS MUST BE MADE IN WRITING AND LIMITED TO A

PARTICULAR AUDIT OR INVESTIGATION.

AN ARRA MODEL OF ACCOUNTABILITY AND TRANSPARENCY On February 17, 2009, President Obama signed into law the American and Reinvestment Act of 2009, Public Law 111-5 (ARRA). This Act provided $787 billion of federally financed economic stimulus finding through a combination for spending programs and reductions in business and individual taxes. Michigan will receive hundreds of millions of dollars of the ARRA funds. A main component of the ARRA is to have in place an effective process to prevent and ameliorate waste, abuse, and fraud. As Michigan has been selected as one of sixteen states that will be monitored over the next three years to provide an analysis of the use of funds under the ARRA, the opportunity exists to create new businesses and jobs by developing a model of accountability and transparency that may be implemented across the nation. LEGISLATIVE ANALYSIS REVISED STATUTES OF 1846 (EXCERPT) MCL 14.29 § 29, CL. 1948: The auditor general is vested with the power to request the attorney general to prosecute matters within its department. CONSTITUTION OF MICHIGAN OF 1963, ARTICLE IV, § 53, Eff. Jan. 1, 1964: This establishes the appointment, qualifications, term, removal, post audits, and authority of the auditor general and his authority. EXECUTIVE ORGANIZATION ACT OF 1965 (EXCERPT) Act 380 of 1965 MCL 16.182 § 82, Eff. July 23, 1965: Transfers by a type III transfer to the department of treasury and abolishes the office of the elected auditor general. THE MANAGEMENT AND BUDGET ACT (EXCERPT) Act 431 of 1984, MCL 18.1461 § 461 Eff. March 22, 1999: Established audit of federal grants awarded to state in accordance to Public Law 104-156, chapter 75 of title 31 of the United States Code, 31 U.S.C. 7501 to 7507 pertaining to audit evaluation of the internal controls of this state and the state's compliance with material features of laws and regulations related to major federal assistance programs. EXECUTIVE REORGANIZATION ORDER (EXCERPT) E.R.O. No. 2007-22, Off. October 1, 2007: MCL 18.46 Transfer of powers and duties of internal auditors of principal departments under MCL 18.1486 and 18.1487 to office of the state budget director; transfer of powers and duties of principal departments to appoint and supervise internal auditor under MCL 18.1486 to state budget director.

COST BENEFIT ANALYSIS Costs: There are no costs associated with this bill, as its purpose is to reduce and ameliorate waste, abuse, and fraud. Benefits: 1. The reduction and amelioration of waste, abuse, and fraud in federally funded grants will provide for the opportunity to more efficiently utilize funding and resources by targeting and capturing the recoupment of funding from fraudulent activities. 2. In turn, this will allow the state to receive 10 percent of the recoupment of the federal share of fraudulent claims. 3. There will be a decrease in the state percentage of the formula match of its federal grants, further improving resources and operations of the state. 4. Public image of the state as an ARRA accountability and transparency demonstration improves, encouraging new economic development. IMPACT ANALYSIS The impact of this bill will increase efficiency of state operations in the reduction and amelioration of waste, abuse, and fraud of federal funding and will demonstrate compliance with the ARRA and the U.S. Office of Management Budget Circular A-133.