Date: 12/13/2013

Final
OSA Presentation

COMMITTEE ON JOINT FINANCE

Votes: View--> Action Taken:
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08:36 AM -- Office of the State Auditor Presentation

Representative Court, Chair, called the meeting to order.

Matt Devlin, Deputy Director, and Nina Frant, Legislative Auditor, Office of the State Auditor (OSA), came to the table, and distributed a summary of the OSA's Medical Marijuana Regulatory System, Part I Audit (Attachment A). Ms. Frant gave an overview of the audits that the office performed pursuant to SMART Act requirements. She then summarized the Medical Marijuana I Audit.

13JtFinance1213AttachA.pdf13JtFinance1213AttachA.pdf

Ms. Frant went on to give an overview of findings related to the SMART Government Act. She also spoke to the auditor's approach to performance measurements in the audit.


08:47 AM

Representative Priola asked Ms. Frant for clarification on the revenue decrease for medical marijuana seen in the audit from 2011 to 2012. Ms. Frant described why lower revenue resulted in 2012.

Representative Labuda asked about pending versus approved licenses and the status of this process. Ms. Frant explained the auditor's concern over the delays in license processing and what was found in their audit of the regulatory system.


08:52 AM

Reed Larsen, Information Technology Audit Supervisor, and Greg Fugate, Audit Manager, joined Mr. Devlin at the table. Mr. Devlin began the presentation on the Annual Report of Audit Recommendations Not Fully Implemented, which was distributed to the committee (Attachment B), and described the office's oversight of state agencies. He gave a background of the Office of the State Auditor and why it was created by Colorado state law.

13JtFinance1213AttachB.pdf13JtFinance1213AttachB.pdf

Mr. Devlin described the structure of the annual report. He mentioned that the office only tracks the status of audits to which departments agree or partially agree.


08:56 AM

Representative Labuda asked Mr. Devlin asked about the difference between the terminologies of "agreed to" or "partially agreed to" for audit recommendations. Mr. Devlin explained that the office attempts to work with the agencies as closely and reasonably as possible. Committee questioning and discussion ensued about the reasoning behind why departments agree or partially agree to implement various audit recommendations and how this is managed by the OSA.

Mr. Fugate walked the committee through a summary of the audits performed by the office that are relevant to the Joint Finance Committee and the SMART Act Hearings. Mr. Fugate went on to explain the categorizations that the office uses for financial audit recommendations, and how many audit recommendations the OSA considered as high priority in 2013.


09:04 AM

Representative Labuda asked about the different categorizations used by the office for the outstanding audit recommendations. Mr. Fugate replied that none of the outstanding audit recommendations for departments that the committee oversees are considered as high priority or of high concern.

Representative Wilson asked what the penalty was if a department does not implement a recommendation, or if an audit recommendation is considered as high priority. Mr. Fugate responded that the office does not have enforcement powers, and that recommendations and the status of recommendations is turned over to management at the different agencies so that they can be enforced.


09:09 AM

Representative Court made a statement that it is the duty of the committee to highlight any great deficiencies it witnesses or any concerns it has to the executive branch.

Representative Priola asked if the OSA could provide examples of serious deficiencies it had found in previous years. Mr. Fugate defined what the OSA considers to be material and serious weaknesses when it conducts its audits and makes recommendations to state agencies.


09:11 AM

Mr. Fugate continued discussing the OSA's performance and IT audit recommendations. According to him, about 51 percent of the OSA's audit recommendations in 2013 were performance and IT-based. He also explained the increase in the number of outstanding recommendations for the Department of Revenue in 2013, resulting from the medical marijuana audit presented by Ms. Frant.


09:15 AM

 Mr. Larsen gave an overview of the process that the OSA follows with different departments and the audit recommendations it makes to each of them. He then spoke specifically to the recommendations made to the Department of Revenue, and where the recommendations originated. He stated that the department does not currently have any significant deficiencies, in the eyes of the Office of the State Auditor.


09:21 AM

Representative Labuda asked if some recommendations were outstanding because they haven't been funded. Mr. Larsen explained that funding delayed the implementation of some recommendations, and described the status of outstanding recommendations.

Representative Wilson asked the office how the committee might know why a department disagreed with an audit recommendation, and spoke specifically to an audit recommendation the Department of Revenue has not agreed to implement. Mr. Larsen gave a background of the specific audit recommendation and why the department did not agree with it. Mr. Devlin then provided more commentary on the process that is followed when an agency disagrees with a recommendation, explaining that they do need to provide a detailed report on why they do not agree with it.

Committee discussion and questioning surrounding OSA recommendations not agreed with or implemented and how to make departments address recommendations more urgently ensued.


09:32 AM

Representative Court asked Mr. Devlin to explain the role of the Legislative Audit Committee (LAC). Mr. Devlin explained that legislators can make a request of the LAC to consider any aspect of a state agency where they perceive a risk, and that the LAC reviews requests for audits before passing them on to the OSA for consideration. He then described the entire audit consideration process.


09:36 AM

Mr. Larsen continued by walking the committee through the office's high priority recommendations for the Department of Revenue.


09:41 AM

Representative Labuda asked the office about the recommendations partially agreed to by the Public Employees Retirement Association. Mr. Larsen described the considerations made by the office for these recommendations.

Committee discussion and questioning of numerous OSA audits and recommendations ensued.