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A07467
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
2209
Session of
2018
INTRODUCED BY RYAN, BERNSTINE, CORR, COX, CUTLER, GROVE,
PHILLIPS-HILL, KEEFER, ROTHMAN AND WARD, APRIL 2, 2018
REFERRED TO COMMITTEE ON STATE GOVERNMENT, APRIL 2, 2018
AN ACT
Providing for duties of Department of the Auditor General;
establishing a performance audit pilot program; and providing
for initial performance audit of State agencies, for
continuing performance audits of State agencies, for duties
of State agencies and for progress report by State agencies.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Short title.
This act shall be known and may be cited as The the Lean
State Government Act.
Section 2. Findings and declarations.
The General Assembly finds and declares as follows:
(1) The purpose of this act is to require a State agency
to implement a lean process improvement system to analyze and
improve the State agency's operations.
(2) A lean process improvement system has been
successfully used by private and public entities around the
world to create efficient and goal-oriented operations.
(3) A State agency benefits by examining the State
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agency's operations and determining which activities
accomplish the State agency's mission, vision and strategic
objectives.
(4) A State agency should focus the State agency's
operations around value-adding activities and eliminating
wasteful operations which do not add value.
(5) A critical step in a lean process improvement system
is the use of a performance audit to determine the
effectiveness of programs and operations.
(6) Implementing a lean process improvement system will
assist a State agency to reduce costs and improve operations
and delivery of services.
Section 3. Definitions.
The following words and phrases when used in this act shall
have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Certified fraud examiner." An individual who has satisfied
the requirements of the Association of Certified Fraud Examiners
to become a certified fraud examiner.
"Certified internal auditor." An individual who has
satisfied the requirements of The Institute of Internal Auditors
to become a certified internal auditor.
"Certified public accountant." As defined in the act of May
26, 1947 (P.L.318, No.140), known as the CPA Law.
"Chartered Global Management Accountant." An individual who
meets the requirements specified by the Association of Certified
Fraud Examiners or the Chartered Institute of Management
Accountants as a Chartered Global Management Accountant.
"Cost-drivers." Anything that causes cost in providing a
service or producing a good. When aggregated, the marginal cost
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of producing a good or service.
"Department." The Department of the Auditor General of the
Commonwealth.
"Lean process improvement system." A management methodology
system for a State agency that improves process speed and
quality, reduces waste and lowers cost through the use of data-
driven project or service analysis. The term includes any of the
following practices:
(1) Developing a process map that describes a widely
accepted business process improvement system by which the
State agency engages in specific activities that increase
efficiency and reduce waste at the State agency.
(2) Engaging in specific activities to rapidly improve
the State agency's processes that will increase value or
decrease staff time, inventory, defects, overproduction,
complexity, delays or excessive movement.
(3) Utilizing the State agency's employees to map the
State agency's processes and recommend improvements to the
processes with an emphasis on involving the State agency's
employees who directly provide a product or service to an end
user.
(4) Providing the means to measure the State agency's
processes in order to demonstrate the effectiveness of the
processes.
(5) Training the State agency employees to mentor and
train other State agency employees in business improvement
process systems.
"Management letter." A written communication that states or
implies all of the following:
(1) Assurance as to the reliability of attested
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information, compiled financial statements or assessments of
the status or performance of a State agency.
(2) The issuer of the written communication has special
knowledge or competence in accounting or auditing arising
from any of the following:
(i) The issuer of the communication has a name or
title indicating that the issuer or any individual
employed by or affiliated with the issuer is an
accountant or auditor.
(ii) The language of the written communication.
"Performance audit." A comprehensive evaluation of a State
agency's performance, including all of the following:
(1) The effectiveness, efficiency and economy with which
resources are managed and consumed.
(2) Findings and recommendations based on the
comprehensive evaluation which are submitted to a State
agency in a management letter.
"Qualified performance auditor." A certified internal
auditor, certified fraud examiner, certified public accountant
or Chartered Global Management Accountant who possesses a
minimum of five years of experience conducting performance or
operational audits of private or public entities.
"State agency." An office, department, authority, board or
commission of the executive branch.
Section 4. Duties of department.
The department shall have the following duties:
(1) Entering into contracts with a qualified performance
auditor to conduct performance audits of State agencies.
(2) Recommending the State agencies that will be
subject to the pilot program under section 5.
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(3) Except for a State agency subject to the pilot
program under section 5, recommending a schedule of
performance audits and State agencies that will be the
subject of performance audits at least once during an initial
three-year period after the effective date of this act.
(4) Recommending a regular schedule of performance
audits for State agencies after the expiration of the
initial period under paragraph (3) at least once every three
years.
Section 5. Performance audit pilot program.
(a) Establishment.--The department shall establish a pilot
program for the performance of audits of two State agencies.
(b) Selection.--Selection of the State agencies for
participation in the pilot program shall be as follows:
(1) The department shall submit a recommendation of the
two State agencies which shall be audited under the pilot
program to the chairperson and minority chairperson of the
Appropriations Committee of the Senate and the chairperson
and minority chairperson of the Appropriations Committee of
the House of Representatives no later than 60 days after the
effective date of this act.
(2) The Appropriations Committee of the Senate and
the Appropriations Committee of the House of Representatives
shall meet to approve or disapprove the department's
recommendation under paragraph (1) no later than 15
legislative session days after the date of submission.
(3) If the Appropriations Committee of the Senate or
the Appropriations Committee of the House of Representatives
fails to approve or disapprove the department's
recommendation under paragraph (1) within 15 legislative
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session days or votes to disapprove the department's
recommendation, the department may shall submit additional
recommendations for consideration. Additional recommendations
shall be approved or disapproved in the same manner as
specified under this subsection.
(c) Audit.--The State agencies selected by the department
for participation in the pilot program under this section and
approved under subsection (b) shall be subject to performance
audits conducted by a qualified performance auditor, who is not
currently employed by the Commonwealth, contracted by the
department. The performance audits shall contain findings and
recommendations regarding the operations of the State agencies
and the qualified performance auditor shall submit the findings
and recommendations to the department upon completion of the
performance audits.
(d) Submission.--Upon receipt of the performance audits
under subsection (c), the department shall provide copies of the
performance audits to all of the following:
(1) The Governor.
(2) The chairperson and minority chairperson of the
Appropriations Committee of the Senate.
(3) The chairperson and minority chairperson of the
Appropriations Committee of the House of Representatives.
(4) The State agencies subject to the performance
audits.
(e) Expiration.--Upon providing copies of the performance
audits, the department shall submit a notice of the expiration
of the pilot program to the Legislative Reference Bureau for
publication in the Pennsylvania Bulletin. The pilot program
under this section shall expire upon the date of publication of
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the notice in the Pennsylvania Bulletin.
Section 6. Initial performance audit of State agencies.
(a) Schedule.--Except for the State agencies participating
in the pilot program under section 5, all State agencies shall
be subject to a performance audit during an initial three-year
period after the effective date of this act submission of the
performance audits under section 5(d). The schedule of
performance audits for the initial three-year period shall be
determined as follows:
(1) Within 60 days after the submission of the
performance audits under section 5(d), the department shall
submit a recommendation of the schedule of performance audits
to the chairperson and minority chairperson of the
Appropriations Committee of the Senate and the chairperson
and minority chairperson of the Appropriations Committee of
the House of Representatives.
(2) The Appropriations Committee of the Senate and
the Appropriations Committee of the House of Representatives
shall meet to approve or disapprove the department's
recommendation under paragraph (1) no later than 15
legislative session days after the date of submission.
(3) If the Appropriations Committee of the Senate or the
Appropriations Committee of the House of Representatives
fails to approve or disapprove the department's
recommendation under paragraph (1) within 15 legislative
session days or votes to disapprove the department's
recommendation, the department may shall submit additional
recommendations for consideration. Additional recommendations
must be approved or disapproved in the same manner as
specified under this subsection.
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(b) Audit.--Upon approval of the schedule recommended by the
department under subsection (a), all State agencies shall be
subject to performance audits by a qualified performance
auditor, who is not currently employed by the Commonwealth,
contracted by the department. The performance audits shall be
completed no later than three years after the submission of the
performance audits under section 5(d). A performance audit shall
contain findings and recommendations regarding the operations of
the State agency being audited and the qualified performance
auditor shall submit the findings and recommendations to the
department upon completion of the performance audit.
(c) Submission.--Upon receipt of a performance audit under
subsection (b), the department shall provide a copy of each
performance audit to all of the following:
(1) The Governor.
(2) The chairperson and minority chairperson of the
Appropriations Committee of the Senate.
(3) The chairperson and minority chairperson of the
Appropriations Committee of the House of Representatives.
(4) The State agencies subject to the performance
audits.
Section 7. Continuing performance audits of State agencies.
(a) Schedule.--A State agency may be subject to a continuing
performance audit every three years after the lapse of the
initial three-year period under section 6. The schedule of
continuing performance audits shall be determined as follows:
(1) No later than October 1 after the lapse of the
initial three-year period under section 6, the department
shall submit a recommendation of the schedule of continuing
performance audits to the chairperson and minority
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chairperson of the Appropriations Committee of the Senate and
the chairperson and minority chairperson of the
Appropriations Committee of the House of Representatives.
(2) In making a recommendation under paragraph (1), the
department shall consider a State agency's size and financial
status. The department may use discretion and choose not to
recommend smaller and financially stable State agencies for
continuing performance audits under paragraph (1).
(3) The Appropriations Committee of the Senate and
the Appropriations Committee of the House of Representatives
shall meet to approve or disapprove the department's
recommendation under paragraph (1) no later than 15
legislative session days after the date of submission.
(4) If the Appropriations Committee of the Senate or the
Appropriations Committee of the House of Representatives
fails to approve or disapprove the department's
recommendation under paragraph (1) within 15 legislative
session days or votes to disapprove the department's
recommendation, the department may submit additional
recommendations for consideration. Additional recommendations
must be approved or disapproved in the same manner as
specified under this subsection.
(5) The department may recommend revisions to the
continuing performance audit schedule no later than October 1
after the lapse of the initial three-year period under
section 6 and each October 1 thereafter. Revisions must be
approved or disapproved in the same manner as specified under
this subsection.
(b) Audit.--Upon approval of the schedule recommended by the
department under subsection (a), a State agency specified in the
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schedule shall be subject to a continuing performance audit
every three years by a qualified performance auditor contracted
by the department. Performance audits shall contain findings and
recommendations regarding the operations of the State agency and
the qualified performance auditor shall submit the findings and
recommendations to the department upon completion of the
performance audit.
(c) Submission.--The department shall provide a copy of each
performance audit to all of the following:
(1) The Governor.
(2) The chairperson and minority chairperson of the
Appropriations Committee of the Senate.
(3) The chairperson and minority chairperson of the
Appropriations Committee of the House of Representatives.
(4) The State agencies subject to the performance
audits.
Section 8. Duties of State agencies.
(a) Records.--Except as prohibited by the laws of this
Commonwealth, a State agency shall provide the department all
the records that the department determines to be necessary to
allow the qualified performance auditor to conduct the
performance audit as required under this act.
(b) System.--Based on the findings and recommendations of a
performance audit conducted under this act, a State agency shall
utilize a lean process improvement system as follows:
(1) Identifying and documenting all of the following:
(i) The mission and purpose of the State agency.
(ii) The services to be accomplished by the State
agency.
(iii) Cost-drivers at the State agency.
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(iv) Critical success factors at the State agency.
(v) Measures of effectiveness at the State agency.
(vi) Processes utilized by the State agency.
(2) Taking corrective steps to eliminate inefficiencies
in the State agency's processes.
Section 9. Progress report by State agencies.
(a) Submission.--A State agency shall submit a report, which
shall be a public record, each year by December 31 for five
years after the State agency receives a performance audit under
this act to all of the following:
(1) The Governor.
(2) The chairperson and minority chairperson of the
Appropriations Committee of the Senate.
(3) The chairperson and minority chairperson of the
Appropriations Committee of the House of Representatives.
(4) The department.
(b) Contents.--The report under this section shall contain
the following information:
(1) The State agency's progress in remedying concerns
and implementing suggestions detailed in the performance
audit.
(2) The State agency's implementation of a lean process
improvement system as specified under section 8(b).
Section 10. Effective date.
This act shall take effect in 60 days.
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