REPORT TITLE:
Procurement Code; Audits


DESCRIPTION:
Amends the procurement code to require the compliance audit unit
within the office of the auditor to review and approve all
contracts by state or county government agencies for independent
audits in order to avoid conflicts of interest.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
THE SENATE                              S.B. NO.           2
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO THE PUBLIC PROCUREMENT CODE.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  The legislature finds that state or county
 
 2 agencies that are required by law to contract out for independent
 
 3 audits of those agencies may unfairly limit those contracts in
 
 4 such a manner as to render the audits meaningless, particularly
 
 5 if those agencies have a conflict of interest in conducting an
 
 6 audit.
 
 7      For example, if an agency does not want an independent
 
 8 auditor to find out about various financial transactions
 
 9 conducted by that agency that reflect badly upon the agency, the
 
10 agency may seek to limit the contract with the independent
 
11 auditor to omit all references to those types of transactions.
 
12 These audits, which do not address the potential shortcomings of
 
13 those agencies, are practically worthless to state and county
 
14 legislative bodies and others who seek to review the performance
 
15 of those agencies.
 
16      Accordingly, the purpose of this Act is to amend the public
 
17 procurement code to require the office of the auditor to review
 
18 and approve all contracts entered into by state or county
 
19 government agencies with independent auditors to conduct audits
 

 
Page 2                                                     
                                     S.B. NO.           2
                                                        
                                                        

 
 1 of those agencies, in order to ensure that those contracts
 
 2 provide for audits that are truly independent and disclose all
 
 3 relevant information about the agency in question.  Under this
 
 4 Act, the auditor shall review those contracts in accordance with
 
 5 generally acceptable auditing standards and such that the
 
 6 independent audits are comparable to the manner in which the
 
 7 auditor would conduct such an audit if the audit were being
 
 8 conducted by the auditor.
 
 9      SECTION 2.  Chapter 103D, Hawaii Revised Statutes, is
 
10 amended by adding a new section to be appropriately designated
 
11 and to read as follows:
 
12      "§103D-    Auditor; review of contracts with independent
 
13 auditors.  The auditor shall review and approve all contracts
 
14 entered into by governmental bodies with independent auditors to
 
15 conduct audits of those bodies, to ensure that those contracts
 
16 provide for audits that are:
 
17      (1)  Performed in accordance with generally acceptable
 
18           auditing standards;
 
19      (2)  Comparable to the manner in which the office of the
 
20           auditor would conduct such an audit if the audit were
 
21           being conducted by the office of the auditor; and
 
22      (3)  In accordance with such other standards as may be
 
23           adopted by the auditor by rules adopted pursuant to
 

 
Page 3                                                     
                                     S.B. NO.           2
                                                        
                                                        

 
 1           chapter 91."
 
 2      SECTION 3.  This Act shall apply to contracts entered into
 
 3 on or after the effective date of this Act.
 
 4      SECTION 4.  New statutory material is underscored.
 
 5      SECTION 5.  This Act shall take effect upon its approval.
 
 6 
 
 7                              INTRODUCED BY:______________________