SB550

Senate Bill No. 550–Committee on Finance

CHAPTER........

AN ACT relating to public financial administration; creating the division of internal audits of

the department of administration and the executive branch audit committee;

providing the powers and duties of the new division and committee; making an

appropriation; and providing other matters properly relating thereto.

THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN

SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS:

Section 1. NRS 232.213 is hereby amended to read as follows:

232.213 1. The department of administration is hereby created.

2. The department consists of a director and the following divisions:

(a) Budget division.

(b) Risk management division.

officers and appeals officers.

(d) Buildings and grounds division.

(e) Purchasing division.

(f) State printing division.

(g) Administrative services division.

(h) Division of internal audits.

3. The director may establish a motor pool division or may assign the

functions of the state motor pool to one of the other divisions of the

department.

Sec. 2. NRS 232.215 is hereby amended to read as follows:

232.215 The director:

1. Shall appoint a chief of the:

(a) Risk management division;

(b) Buildings and grounds division;

(d) State printing division;

(e) Administrative services division; [~~and]~~

(f) Division of internal audits; and

(g) Motor pool division , if separately established.

2. Shall appoint a chief of the budget division, or may serve in this

position if he has the qualifications required by NRS 353.175.

3. Shall serve as chief of the hearings division and shall appoint the

hearing officers and compensation officers. The director may designate one

of the appeals officers in the division to supervise the administrative,

technical and procedural activities of the division.

4. Shall serve as chairman of the state public works board.

5. Is responsible for the administration, through the divisions of the

department, of the provisions of chapters 331, 333, 336 and 344 of NRS,

NRS 353.150 to 353.246, inclusive, sections 7 to 15, inclusive, of this act,

and all other provisions of law relating to the functions of the divisions of

the department.

6. Is responsible for the administration of the laws of this state relating

to the negotiation and procurement of medical services and other benefits

for state agencies.

7. Has such other powers and duties as are provided by law.

Sec. 3. NRS 232.2165 is hereby amended to read as follows:

232.2165 1. The chief of:

(a) The buildings and grounds division;

(b) The purchasing division;

(d) The administrative services division; [~~and]~~

(e) The division of internal audits; and

(f) If separately established, the motor pool division,

of the department serves at the pleasure of the director, but, except as

otherwise provided in subsection 2, for all purposes except removal is in

the classified service of the state.

2. The chief of the motor pool division , if separately established [~~is]~~ ,

and the chief of the division of internal audits are in the unclassified

service of the state.

Sec. 4. NRS 232.217 is hereby amended to read as follows:

232.217 Unless federal law or regulation otherwise requires, the chief

of the:

1. Budget division;

2. Buildings and grounds division;

3. Purchasing division;

4. State printing division; [~~and]~~

5. Division of internal audits; and

6. Motor pool division , if separately established,

may appoint a deputy and a chief assistant in the unclassified service of the

state, who shall not engage in any other gainful employment or occupation

except as otherwise provided in NRS 284.143.

Sec. 5. NRS 232.219 is hereby amended to read as follows:

232.219 1. The department of administration’s operating fund for

administrative services is hereby created as an internal service fund.

2. The operating budget of each of the following entities must include

an amount representing that entity’s share of the operating costs of the

central accounting function of the department:

(a) State public works board;

(b) Budget division;

(d) Purchasing division;

(e) State printing division

;
(f) Hearings division;

(g) Risk management division;

(h) [~~Office of financial management, training and controls;]~~ Division of

internal audits; and

(i) If separately established, the motor pool division.

3. All money received for the central accounting services of the

department must be deposited in the state treasury for credit to the

operating fund.

4. All expenses of the central accounting function of the department

must be paid from the fund as other claims against the state are paid.

Sec. 6. Chapter 353A of NRS is hereby amended by adding thereto the

provisions set forth as sections 7 to 15, inclusive, of this act.

Sec. 7. As used in NRS 353A.045, 353A.055 and 353A.065 and

sections 7 to 15, inclusive, of this act, unless the context otherwise

requires, the words and terms defined in sections 8 and 9 of this act have

the meanings ascribed to them in those sections.

Sec. 8. "Chief" means the chief of the division.

Sec. 9. "Division" means the division of internal audits of the

department of administration.

Sec. 10. 1. The chief must:

(a) Be a certified public accountant licensed by this state or a public

accountant qualified pursuant to chapter 628 of NRS to practice public

accounting in this state; and

(b) Have at least 5 years of progressively responsible experience in

professional auditing and performing internal audits or postaudits. The

experience must include, without limitation, the performance of audits of

governmental entities or of private business organizations, whether or

not organized for profit.

2. The chief may employ, within the limits of legislative

appropriations, such staff as is necessary to the performance of his

duties.

Sec. 11. 1. The executive branch audit committee is hereby

created.

2. The committee must consist of one member who is a

representative of the general public appointed by the governor, who has

at least 5 years of progressively responsible experience in the field of

auditing and who does not engage in business with any agency, and the

following ex officio members:

(a) The governor, who shall serve as chairman of the committee;
(b) The lieutenant governor;

(c) The secretary of state;

(d) The state treasurer;

(e) The state controller; and

(f) The attorney general

.

3. The member of the committee who is a representative of the

general public is entitled to receive a salary of $80 per day while engaged

in the business of the committee.

4. While engaged in the business of the committee, each member of

the committee is entitled to receive the per diem allowance and travel

expenses provided for state officers and employees generally.

5. The committee shall:

(a) Adopt policies and procedures for the operation of the division;

(b) Approve, with or without revision, each annual plan for auditing

agencies presented by the chief pursuant to NRS 353A.045, and any

revisions to such a plan, before the plan is implemented; and

(c) Approve, with or without revision, each annual report submitted by

the chief pursuant to NRS 353A.065.

Sec. 12. 1. Except as otherwise provided in subsection 2, upon the

request of the chief or his authorized representative, all officers and

employees of each executive branch agency shall make available to the

division all books, accounts, claims, reports, vouchers or other records of

information, confidential or otherwise, in the possession or control of the

agency.

2. This section does not authorize the chief or his authorized

representative to have access to any books, accounts, claims, reports,

vouchers or other records or information of any business or activity

which NRS 665.130 and 668.085 require to be kept confidential.

Sec. 13. 1. After each audit is completed, the chief or his

designated representative shall submit a copy of the preliminary findings

and recommendations of the audit to the head of the audited agency.

Within 10 working days after receipt of the preliminary findings and

recommendations, the head of the agency shall submit to the chief a

written statement of acceptance, explanation or rebuttal concerning the

findings. The chief shall include the statement of the head of the agency

in the final report.

2. The chief shall submit a final report to the committee and the

head of the audited agency.

3. Except as otherwise provided in sections 7 to 15, inclusive, of this

act, the chief shall not disclose the content of any audit before the final

report is submitted to the committee pursuant to subsection 2 except in

the case of alleged illegal acts which must be reported immediately upon

discovery.

Sec. 14. Within 6 months after the date that the final report is

submitted pursuant to section 13 of this act, if corrective action is

recommended for an agency, the chief shall determine whether

appropriate corrective actions are being taken and whether those actions

are achieving the desired result. The chief shall inform the committee

and the head of the audited agency of the effect of any corrective actions

taken.

Sec. 15. 1. The chief shall keep or cause to be kept a complete file

of copies of all reports of audits, examinations, investigations and all

other reports or releases issued by him.

2. All working papers from an audit are confidential and may be

destroyed by the chief 5 years after the report is issued, except that the

chief:

(a) Shall release such working papers when subpoenaed by a court of

competent jurisdiction;

(b) Shall make such working papers available to the legislative auditor

upon his request; and

(c) May make such working papers available for inspection by an

authorized representative of any other governmental entity for a matter

officially before him.

Sec. 16. NRS 353A.010 is hereby amended to read as follows:

353A.010 As used in this chapter, unless the context otherwise

requires:

1. "Agency" means every agency, department, division, board,

commission or similar body, or elected officer, of the executive branch of

the state . [~~, except:~~

(a) A board or commission created by the provisions of chapters 623 to

625, inclusive, 628 to 644, inclusive, 654 and 656 of NRS.

(b) The University and Community College System of Nevada.

(c) The public employees’ retirement system.

(d) The state industrial insurance system.

(e) The housing division of the department of business and industry.

(f) The Colorado River commission.]

2. "Committee" means the executive branch audit committee created

pursuant to section 11 of this act.

3. "Director" means the director of the department of administration.

[~~3.]~~ 4. "Internal accounting and administrative control" means a

method through which agencies can safeguard assets, check the accuracy

and reliability of their accounting information, promote efficient operations

and encourage adherence to prescribed managerial policies.

Sec. 17. NRS 353A.020 is hereby amended to read as follows:

353A.020 1. The director, in consultation with the [~~state controller]~~

committee and legislative auditor, shall adopt a uniform system of internal

accounting and administrative control for agencies. The elements of the

system must include, without limitation:

(a) A plan of organization which provides for a segregation of duties

appropriate to safeguard the assets of the agency;

(b) A plan which limits access to assets of the agency to persons who

need the assets to perform their assigned duties;

control accounting of assets, liabilities, revenues and expenses;

(d) A system of practices to be followed in the performance of the duties

and functions of each agency; and
(e) An effective system of internal review.

2. The director, in consultation with the [~~state controller]~~ committee

and legislative auditor, may modify the system whenever he considers it

necessary.

3. Each agency shall develop written procedures to carry out the

system of internal accounting and administrative control adopted pursuant

to this section.

4. For the purposes of this section, "agency" does not include:

(a) A board or commission created by the provisions of chapters 623

to 625, inclusive, 628 to 644, inclusive, 654 and 656 of NRS.

(b) The University and Community College System of Nevada.

(c) The public employees’ retirement system.

(d) The state industrial insurance system.

(e) The housing division of the department of business and industry.

(f) The Colorado River Commission.

Sec. 18. NRS 353A.025 is hereby amended to read as follows:

353A.025 1. The head of each agency shall periodically review the

agency’s system of internal accounting and administrative control to

determine whether it is in compliance with the uniform system of internal

accounting and administrative control for agencies adopted pursuant to

subsection 1 of NRS 353A.020.

2. On or before July 1 of each even-numbered year, the head of each

agency shall report to the director whether the agency’s system of internal

accounting and administrative control is in compliance with the uniform

system adopted pursuant to subsection 1 of NRS 353A.020. The reports

must be made available for inspection by the members of the legislature.

3. For the purposes of this section, "agency" does not include:

(a) A board or commission created by the provisions of chapters 623

to 625, inclusive, 628 to 644, inclusive, 654 and 656 of NRS.

(b) The University and Community College System of Nevada.

(c) The public employees’ retirement system.

(d) The state industrial insurance system.

(e) The housing division of the department of business and industry.

(f) The Colorado River Commission.

Sec. 19. NRS 353A.045 is hereby amended to read as follows:

353A.045 The chief of the [~~office of financial management, training~~

~~and controls]~~ division shall:

1. Report to the director.

2. Develop long-term and annual work plans to be based on the results

of periodic documented risk assessments. The annual work plan must:

(a) List the agencies to which the [~~office]~~ division will provide training

and assistance;

[~~(b) Ensure that the internal accounting, administrative controls and~~

financial management of those agencies are to be reviewed periodically;

and

~~(c)]~~ an

(b) Be submitted to the director for approval.

3. Provide a copy of the approved annual work plan to the legislative

auditor.

4. In consultation with the director, prepare a plan for auditing

executive branch agencies for each fiscal year and present the plan to the

committee for its review and approval. Each plan for auditing must:

(a) State the agencies which will be audited, the proposed scope and

assignment of those audits and the related resources which will be used

for those audits; and

(b) Ensure that the internal accounting, administrative controls and

financial management of each agency are reviewed periodically.

5. Perform the audits of the programs and activities of the agencies

in accordance with the plan approved pursuant to subsection 5 of section

11 of this act and prepare audit reports of his findings.

6. Review each agency that is audited pursuant to subsection 5 and

advise those agencies concerning internal accounting, administrative

controls and financial management.

7. Submit to each agency that is audited pursuant to subsection 5

analyses, appraisals and recommendations concerning:

(a) The adequacy of the internal accounting and administrative

controls of the agency; and

(b) The efficiency and effectiveness of the management of the agency.

8. Report any possible abuses, illegal actions, errors, omissions and

conflicts of interest of which the division becomes aware during the

performance of an audit.

9. Adopt the standards of the Institute of Internal Auditors for

conducting and reporting on audits.

10. Consult with the legislative auditor concerning the plan for

auditing and the scope of audits to avoid duplication of effort and undue

disruption of the functions of agencies that are audited pursuant to

subsection 5.

Sec. 20. NRS 353A.055 is hereby amended to read as follows:

353A.055 1. The [~~office of financial management, training and~~

~~controls]~~ division shall:

(a) Determine the adequacy of the system of internal accounting,

administrative control and financial management of each agency to which

the [~~office]~~ division provides training and assistance.

(b) [~~Develop regulations for adoption by the state board of examiners]~~

Adopt regulations, approved by the committee, requiring the provision of

training to any employee of an agency who is responsible for administering

budgetary accounts. The training must address:

(1) The laws and regulations of this state and the Federal Government

applicable to the operations of the agency.

(2) Internal accounting, administrative controls and financial

management.

(3) Techniques to address the adequacy of controls of the agency

any training provided to an agency.

(d) Provide technical assistance to agencies in developing and carrying

out their systems of internal accounting, administrative controls and

financial management.

(e) Prepare separate reports for each agency which summarize the

results of the training and assistance provided to the agency.

2. The [~~office of financial management, training and controls]~~ division

shall not:

(a) Provide any services to an agency that is under the direct control or

administration of a constitutional officer unless the constitutional officer

requests such services.

(b) Conduct investigations, but shall refer such matters to the

appropriate agency.

Sec. 21. NRS 353A.065 is hereby amended to read as follows:

353A.065 1. Within 90 days after the end of each fiscal year, the

chief [~~of the office of financial management, training and controls shall~~

~~issue]~~ shall submit an annual report to the committee for its approval

which:

(a) Lists the agencies to which the [~~office provided training, evaluated~~

~~controls and carried out systems of internal accounting, administrative~~

~~controls and financial management;]~~ division provided training and

assistance;

(b) Separately lists any other [~~related]~~ activities undertaken by the

[~~chief]~~ division that are related to the provision of training and assistance

and the status of those activities; [~~and]~~

pursuant to section 13 of this act;

(d) Contains a separate list of any other activities undertaken by the

division that are related to the final reports submitted pursuant to section

13 of this act and the status of those activities; and

(e) Describes the accomplishments of the office.

2. The chief shall provide a copy of the annual report to the:

(a) [~~Governor;]~~ Committee;

(b) Director;

(d) Legislative auditor.

Sec. 22. Section 1 of Assembly Bill No. 255 of this session is hereby

amended to read as follows:

Section 1. NRS 353A.025 is hereby amended to read as

follows:

353A.025 1. The head of each agency shall periodically

review the agency’s system of internal accounting and

administrative control to determine whether it is in compliance with

the uniform system of internal accounting and administrative
control for agencies adopted pursuant to subsection 1 of NRS

353A.020.

2. On or before July 1 of each even-numbered year, the head of

each agency shall report to the director whether the agency’s system

of internal accounting and administrative control is in compliance

with the uniform system adopted pursuant to subsection 1 of NRS

353A.020. The reports must be made available for inspection by the

members of the legislature.

3. For the purposes of this section, "agency" does not include:

(a) A board or commission created by the provisions of chapters

623 to 625, inclusive, 628 to 644, inclusive, 654 and 656 of NRS.

(b) The University and Community College System of Nevada.

(d) The state industrial insurance system.

(e) The housing division of the department of business and

industry.

(f) The Colorado River Commission.

4. The director shall, on or before the first Monday in

February of each odd-numbered year, submit a report on the

status of internal accounting and administrative controls in

agencies to the:

(a) Director of the legislative counsel bureau for transmittal to

the:

(1) Senate standing committee on finance; and

(2) Assembly standing committee on ways and means;

(b) Governor; and

(c) Legislative auditor.

5. The report submitted by the director pursuant to subsection

4 must include, without limitation:

(a) The identification of each agency that has not complied

with the requirements of subsections 1 and 2;

(b) The identification of each agency that does not have an

effective method for reviewing its system of internal accounting

and administrative control; and

(c) The identification of each agency that has weaknesses in its

system of internal accounting and administrative control, and the

extent and types of such weaknesses.

Sec. 23. NRS 353A.035 is hereby repealed.

Sec. 24. 1. There is hereby appropriated from the state general fund

to the department of administration for the establishment of the division of

internal audits, including personnel costs, operating costs and expenses

related to travel, information services and the purchase of necessary

equipment, hardware and software:

For the fiscal year 1999-2000 $751,833

For the fiscal year 2000-2001 $1,168,60

2. Any balance of the sums appropriated by subsection 1

remaining at the end of the respective fiscal years must not be

committed for expenditure after June 30 of the respective fiscal years

and reverts to the state general fund as soon as all payments of money

committed have been made.

Sec. 25. This act becomes effective on July 1, 1999.