HB-5457, As Passed House, September 8, 2004

SUBSTITUTE FOR

HOUSE BILL NO. 5457

                                                                             A bill to amend 1976 PA 451, entitled                                             

"The revised school code,"                                                  

(MCL 380.1 to 380.1852) by adding section 622a.                             

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

1   Sec. 622a.  (1) In addition to the annual financial audit                   

2   required under section 622, an intermediate school district is              

3   subject to an audit of the matters described in this section                

4   conducted by an independent auditor under the direction of the              

5   department of treasury under this section.  An audit conducted              

6   under this section shall be based in part on an examination of an           

7   intermediate school district's accounts, financial records, and             

8   accounting procedures and shall address at least 3 of the                   

9   following aspects of the intermediate school district's                     

10  operations, as directed by the department of treasury:                      

11      (a) Whether intermediate school board members, intermediate                 

1   school district administrators, and intermediate school district            

2   employees are adhering to ethics policies adopted by the                    

3   intermediate school board or required by state law.                         

4       (b) Whether intermediate school board members, intermediate                 

5   school district administrators, and intermediate school district            

6   employees are adhering to conflict of interest policies adopted             

7   by the intermediate school board or required by state law.  This            

8   includes, but is not limited to, policies and practices with                

9   regard to contracts in which an intermediate school board member,           

10  an intermediate school district administrator, or an intermediate           

11  school district employee who is involved in the contracting                 

12  process, or a family member of an intermediate school board                 

13  member, an intermediate school district administrator, or an                

14  intermediate school district employee who is involved in the                

15  contracting process, has a substantial conflict of interest; and            

16  policies and practices with regard to an intermediate school                

17  district administrator negotiating, handling, presenting, or                

18  recommending a contract in which the administrator or a family              

19  member of the administrator has a substantial conflict of                   

20  interest.  As used in this subdivision, "substantial conflict of            

21  interest" means that term as defined in section 634(5).                     

22      (c) Whether a modification to an existing contract was made                 

23  during the audit period that resulted in an additional financial            

24  obligation to the intermediate school district and the                      

25  modification was not competitively bid.                                     

26  (d) Whether the intermediate school district's policies and                 

27  practices for responding to requests received under the freedom             

1   of information act, 1976 PA 442, MCL 15.231 to 15.246, and the              

2   intermediate school district's actual responses to requests made            

3   during the audit period under that act, were in compliance with             

4   that act.  This part of the audit shall include, but is not                 

5   limited to, an examination of whether the costs charged for                 

6   responding to requests exceeded the costs permitted under that              

7   act.                                                                        

8       (e) Whether intermediate school board members, intermediate                 

9   school district administrators, and intermediate school district            

10  employees are adhering to travel guidelines and practices adopted           

11  by the intermediate school board or required by state law.                  

12      (f) Whether the intermediate school district has accurately                 

13  accounted for and reported all information relating to stipends,            

14  salaries, benefits, or other compensation paid to intermediate              

15  school district administrators.                                             

16      (g) Whether the intermediate school district has used public                

17  funds in violation of law to pay for food, gifts, or other items            

18  not used for instructional purposes.                                        

19      (2) The department of treasury shall direct the random audits               

20  of intermediate school districts under this section as follows:             

21      (a) The department of treasury shall select the intermediate                

22  school districts to be audited under this section on a random               

23  basis.                                                                      

24      (b) The department of treasury shall announce between July 1                

25  and July 15 of each calendar year the intermediate school                   

26  districts that will be subject that year to an audit under this             

27  section for the immediately preceding school fiscal year.                   

1   (c) The department of treasury shall select 5 intermediate                  

2   school districts for audit under this section every 2 years.                

3       (d) Upon request by the department of treasury, the                         

4   intermediate school district shall notify the department of                 

5   treasury of the name, address, and contact person of the                    

6   independent auditor selected by the intermediate school board to            

7   perform the annual financial audit for the intermediate school              

8   district.  The department of treasury shall enter into an                   

9   auditing procedures agreement with the selected independent                 

10  auditor, identifying the matters to be audited and establishing             

11  the rate of payment, which shall be no more than the rate the               

12  department would charge for the same type of audit unless the               

13  intermediate school board is already under contract with an                 

14  independent auditing firm for the year to be audited, to oversee            

15  the conduct of the audit by the independent auditor to the extent           

16  the department of treasury considers necessary to meet the                  

17  purposes of this section.                                                   

18      (e) An intermediate school board and intermediate school                    

19  district officials shall provide all information requested by the           

20  independent auditors or the department of treasury and shall                

21  cooperate with them to the fullest extent possible.                         

22      (f) The independent auditor shall submit an audit report of                 

23  the audit to the center for educational performance and                     

24  information in the form and manner prescribed by the center for             

25  educational performance and information.  The center for                    

26  educational performance and information shall submit a copy of              

27  the audit report of each audit conducted under this section to              

1   the department of treasury, to the applicable intermediate school           

2   board, to the senate and house standing committees having                   

3   jurisdiction over education legislation, to the department, and,            

4   subject to subdivision (g), to the attorney general if the                  

5   department of treasury considers it appropriate.                            

6       (g) If the department of treasury determines that an audit                  

7   conducted under this section has disclosed that the intermediate            

8   school board or any intermediate school district official or                

9   employee has violated any state law governing the financial                 

10  operations of an intermediate school district, then the                     

11  department of treasury shall file a copy of the report with the             

12  attorney general.  The attorney general shall review the report             

13  and, if the attorney general considers it appropriate, shall                

14  commence or direct the prosecuting attorney for the county in               

15  which the violations occurred to commence appropriate proceedings           

16  against the intermediate school board or the official or                    

17  employee.  These proceedings shall include at least a civil                 

18  action in a court of competent jurisdiction for the recovery of             

19  any public money determined by the audit to have been illegally             

20  expended and for the recovery of any public property determined             

21  by the audit to have been converted or misappropriated.                     

22      (3) In addition to the intermediate school districts selected               

23  for a random audit under subsection (2), the department of                  

24  treasury may also direct an audit under this section of 1 or more           

25  additional intermediate school districts selected by the                    

26  department of treasury if the department of treasury considers              

27  that additional audit or audits to be appropriate.  Subsection              

1   (2)(d), (e), (f), and (g) apply to an audit under this                      

2   subsection.                                                                 

3       (4) An audit under this section shall be performed in                       

4   accordance with standards issued by the American institute of               

5   certified public accountants and with government audit standards            

6   issued by the United States general accounting office.                      

7       (5) The department of treasury shall pay the costs of the                   

8   additional audit conducted under this section.  The department of           

9   treasury's obligation under this section is limited to the amount           

10  of a separate line item appropriation identified for the purpose            

11  of funding the department of treasury's duties under this section           

12  and included in the annual appropriations act making                        

13  appropriations for the department of treasury.