Illinois General Assembly - Full Text of SB3794
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Full Text of SB3794  97th General Assembly




State of Illinois
2011 and 2012


Introduced 2/10/2012, by Sen. Linda Holmes - Thomas Johnson


New Act

    Creates the External Auditing and Standards Board Act. Provides that the Board shall consist of 8 members, and sets forth the membership of the Board. Provides that the Board shall assist the Legislative Audit Commission, the Office of the Auditor General, and the Governor in improving the timeliness, transparency, and process of financial reporting by State agencies. Provides that the Board has certain powers, including the power to suspend or dismiss an internal auditor of any State agency who is deemed unqualified by the Board based on current best practices and qualifications. Requires the Board to develop a certification program for all internal and external auditors. Requires the Board to submit certain reports to the Governor, the General Assembly, and the State agency.

LRB097 20441 HLH 65939 b






SB3794LRB097 20441 HLH 65939 b

1    AN ACT concerning State government.
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
4    Section 1. Short title. This Act may be cited as the
5External Auditing and Standards Board Act.
6    Section 5. Findings. The General Assembly finds that:
7    (a) Over the last 9 years, the Auditor General's audits of
8the State's financial statements have repeatedly concluded
9that the State of Illinois does not have adequate controls to
10ensure that information reported by individual State agencies
11is fairly stated and compliant with generally accepted
12accounting principles (GAAP).
13    (b) In February of 2011, the Auditor General's Management
14Audit of the State's Financial Reporting System found that the
15State's financial reporting system is comprised of over 250
16disparate financial reporting systems that are antiquated,
17costly to operate, and, for over 80% of those systems, not
18compliant with GAAP. The Management Audit also found that only
19slightly more than half of the financial systems were
20interrelated, requiring manual intervention to convert data
21from one system so that it can be used in another system. These
22systems have resulted, and will continue to result, in untimely
23financial reporting of the true financial position of the



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1State. Additionally, the Management Audit highlights how the
2deficiencies in these systems continues to limit the effective
3oversight of State finances, adversely affecting the State's
4bond rating, and jeopardizing federal funding.
5    (c) The Management Audit also contained a section on the
6standard challenges faced by other states that attempted to
7transition from a collection of decentralized systems to a
8centralized financial reporting system. The challenges listed
9include a lack of experience defining the functional
10requirements of financial systems, lack of communication, poor
11or no quality assurance processes, and inadequate training and
13    (d) In order to properly facilitate any standardized system
14initiation and address the immediate need to produce
15GAAP-compliant financial reports in a timely manner requires
16clarifying governance structure and utilizing best practices
17in project management.
18    (e) Implementing a modern, agile process for the uniform
19collection and assembly of financial information so that the
20State can produce timely GAAP-compliant financial reports
21through a centralized system, is desirable and necessary for
22the State but will require changes to the structure and
23internal management of State government.
24    Section 10. Definitions. As used in this Act:
25    "Auditor General" means the Auditor General of the State of



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2    "Board" means the External Auditing and Standards Board
3created under Section 10 of this Act.
4    "Comptroller" means the Comptroller of the State of
6    "External auditor" means an auditor employed by the Board.
7    "Internal auditor" means an auditor employed by a State
8agency under the Fiscal Control and Internal Auditing Act.
9    "Licensed Certified Public Accountant" has the meaning
10provided in Section 0.03 of the Illinois Public Accounting Act.
11    "Registered Certified Public Accountant" has the meaning
12provided in Section 0.03 of the Illinois Public Accounting Act.
13    "Schedule of Expenditures of Federal Awards" and "SEFA"
14mean the supplemental information required by the federal
15Office of Management and Budget, Circular A-133.
16    "State agency" means all departments, officers,
17commissions, boards, institutions, and bodies politic and
18corporate of the State that are required to submit financial
19reporting information to the Office of the Auditor General, the
20Office of the Comptroller, or the federal government. The term
21does not include: the judicial branch, including, without
22limitation, the several courts of the State, the offices of the
23clerk of the Supreme Court and the clerks of the Appellate
24Court, and the Administrative Office of the Illinois Courts;
25the legislature or its agencies, committees, or commissions; or
26any unit of local government.



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1    Section 15. External Auditing and Standards Board;
3    (a) There is created the External Auditing and Standards
4Board. The Board shall assist the Legislative Audit Commission,
5the Office of the Auditor General, and the Governor in
6improving the timeliness, transparency, and process of
7financial reporting.
8    (b) The Board shall be composed of the following 8 members:
9        (1) the Auditor General, or his or her designee;
10        (2) the Comptroller, or his or her designee;
11        (3) one member of the general public representing State
12    employees unions, appointed by the Governor; and
13        (4) five members of the general public, each licensed
14    or registered as a certified public accountant, one
15    appointed by each of the following: the Governor, the
16    President of the Senate, the Minority Leader of the Senate,
17    the Speaker of the House of Representatives, and the
18    Minority Leader of the House of Representatives.
19    (c) The public members of the Board shall serve for a term
20of 2 years and may be reappointed; the Auditor General and
21Comptroller shall serve during their respective terms of
22office. A vacancy on the Board shall be filled for the
23remainder of the unexpired term, in the same manner and by the
24same officer who made the original appointment.
25    (d) The members of the Board shall elect from their number



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1a chairperson and such other officers as they may choose. The
2Board shall meet at least 2 times each year and at other times
3at the call of the chairperson.
4    (e) The members of the Board shall serve without
5compensation, but may be reimbursed for actual expenses from
6funds appropriated for that purpose.
7    Section 20. Powers. The External Auditing and Standards
8Board shall have the following powers:
9        (1) to have a corporate seal, and to alter that seal at
10    pleasure, and to use it by causing it or a facsimile to be
11    affixed or impressed or reproduced in any other manner;
12        (2) to use the services of the Office of the
13    Comptroller necessary to carry out the Board's purposes;
14        (3) to receive and expend funds appropriated to it by
15    the General Assembly;
16        (4) to employ personnel that are necessary to fulfill
17    the Board's purposes and to make expenditures for that
18    purpose within the appropriations for that purpose; the
19    Board shall employ and train external auditors, who shall
20    be assigned to specific State agencies to ensure that those
21    agencies comply with generally accepted accounting
22    principles (GAAP) for governments as promulgated and
23    established by the Governmental Accounting Standards Board
24    (GASB);
25        (5) to maintain an office or offices at such place or



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1    places in the State as it may determine;
2        (6) to request information, and to make any inquiry,
3    investigation, survey, or study that the Board may deem
4    necessary to enable it effectively to carry out the
5    provisions of this Act;
6        (7) to engage in any activity or operation that is
7    incidental to and in furtherance of efficient operation to
8    accomplish the Board's purposes;
9        (8) to adopt, revise, amend, and repeal rules with
10    respect to its operations, properties, and facilities as
11    may be necessary or convenient to carry out the purposes of
12    this Act, subject to the provisions of the Illinois
13    Administrative Procedure Act;
14        (9) to freeze spending of federal moneys for programs
15    with a delayed Schedule of Expenditures of Federal Awards
16    (SEFA);
17        (10) to suspend or dismiss an internal auditor of any
18    State agency who is deemed unqualified by the Board based
19    on current best practices and qualifications;
20        (11) to require remedial training or continuing
21    education for its employees or for employees of a State
22    agency;
23        (12) to consult with other states and private
24    businesses that have successfully modernized and
25    streamlined their financial reporting systems; and
26        (13) to use current State resources that are already



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1    available inside of State government, and to use current
2    financial reporting principles and practices, including,
3    but not limited to, principles and practices of the Auditor
4    General and the Comptroller.
5    Section 25. Reports.
6    (a) As soon as possible after each initial member of the
7Board is appointed, the Board shall review the internal
8auditing practices of each State agency. Upon completion of its
9review, the Board shall generate a report for each State
10agency, which shall contain the following information:
11        (1) the identity, tenure, and qualifications of all
12    agency personnel whose job description directly or
13    indirectly includes the audit of public funds of the State;
14        (2) whether the agency is or has been delinquent in the
15    submission of any comprehensive annual financial report
16    and the number of days during which the report was
17    delinquent;
18        (3) whether the agency is or has been delinquent in the
19    submission of any Schedule of Expenditures of Federal
20    Awards (SEFA); and
21        (4) any errors in any financial report published by the
22    agency.
23    (b) In addition, the Board shall publish an annual report
24on the status of each agency's financial reporting. The report
25shall, at a minimum, confer a letter grade in each of the



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1following categories:
2        (1) timeliness of financial reports;
3        (2) transparency in operations; and
4        (3) technology and interagency communication.
5    (c) The Board shall submit the reports created under
6subsections (a) and (b) to the Governor, the General Assembly,
7and the applicable State agency.
8    (d) Within 6 months after the effective date of this Act,
9the Board shall submit a best practices report to the Governor
10and each State agency. The report shall contain, but not be
11limited to, the following information:
12        (1) recommendations of statewide software and hardware
13    to be implemented for financial reporting, with the goal of
14    adopting one centralized statewide system for all State
15    agencies for external and internal auditors;
16        (2) certification and continuing education
17    requirements;
18        (3) personnel requirements;
19        (4) transparency and accountability;
20        (5) cost;
21        (6) ease of training;
22        (7) adaptability to current systems.
23    Section 30. Training and certification.
24    (a) The Board shall compile, create, and institute a
25required standard curriculum for the certification of all



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1internal and external auditors. The curriculum shall be based
2on the following: (i) generally accepted accounting principles
3(GAAP); (ii) minimum required accounting skills; (iii) the use
4of approved computer software and reporting functions; and (iv)
5any other component the Board deems necessary. The curriculum
6shall include classroom instruction and a certification
7examination administered by the Board. All internal and
8external auditors are required to successfully complete the
9certification and examination within one year after the Board
10adopts the curriculum or within 6 months after being hired,
11whichever occurs later.
12    (b) In addition, the Board shall require each auditor to
13complete a continuing education program developed by the Board
14and administered not less frequently than every 2 years.
15    (c) The Board shall develop a process for waiver
16applications for those auditors whose prior training and
17experience as auditors may qualify them for a waiver. The Board
18may issue a waiver at its discretion, based solely on the prior
19training and experience of an auditor.
20    Section 35. Rights under Personnel Code and collective
21bargaining agreements. The rights of State employees, the
22State, and its agencies under the Personnel Code and applicable
23collective bargaining agreements and retirement plans are not
24affected by this Act. Any rights of State employees affected by
25this Act shall be governed by the existing collective



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1bargaining agreements.
2    Section 40. Cooperation. All State agencies must render
3full cooperation to the Board and its employees.