HB-5457, As Passed Senate, November 10, 2004                                

SENATE 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.  As used in this                    

26  subdivision, "competitively bid" means that a contract was                  

27  entered into through a request for information, a request for               

1   proposal, or a formal competitive bid process that was advertised           

2   and open to the public, and includes a contract entered into on             

3   behalf of the intermediate school district by a federal, state,             

4   or local governmental entity that performed a request for                   

5   information, request for proposal, or formal competitive bid                

6   process or by a nonprofit corporation or nonprofit association              

7   that performed a request for information, request for proposal,             

8   or formal competitive bid process.                                          

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

10  practices for responding to requests received under the freedom             

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

12  intermediate school district's actual responses to requests made            

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

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

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

16  responding to requests exceeded the costs permitted under that              

17  act.                                                                        

18      (e) Whether intermediate school board members, intermediate                 

19  school district administrators, and intermediate school district            

20  employees are adhering to travel guidelines and practices adopted           

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

22      (f) Whether the intermediate school district has accurately                 

23  accounted for and reported all information relating to stipends,            

24  salaries, benefits, or other compensation paid to intermediate              

25  school district administrators.                                             

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

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

1   that are not used for instructional purposes, as defined by the             

2   intermediate school board.                                                  

3       (h) Whether proceeds from a tax levied under section 681 for                

4   area vocational-technical education operating purposes or from a            

5   tax levied under section 1724a for special education operating              

6   purposes have been expended for a purpose other than the purpose            

7   for which the tax was levied.                                               

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

9   of intermediate school districts under this section as follows:             

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

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

12  basis.                                                                      

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

14  and July 15 of each calendar year the intermediate school                   

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

16  section for the immediately preceding school fiscal year.                   

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

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

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

20  intermediate school district shall notify the department of                 

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

22  independent auditor selected by the intermediate school board to            

23  perform the annual financial audit for the intermediate school              

24  district.  The department of treasury shall enter into an                   

25  agreed-upon procedures agreement with the selected independent              

26  auditor, identifying the matters to be audited and establishing             

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

1   department would charge for the same type of audit.  The                    

2   department of treasury shall oversee the conduct of the audit by            

3   the independent auditor to the extent the department of treasury            

4   considers necessary to meet the purposes of this section.                   

5       (e) An intermediate school board and intermediate school                    

6   district officials shall provide all information requested by the           

7   independent auditors or the department of treasury and shall                

8   cooperate with them to the fullest extent possible.                         

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

10  the audit to the center for educational performance and                     

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

12  educational performance and information.  The center for                    

13  educational performance and information shall submit a copy of              

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

15  the department of treasury, to the applicable intermediate school           

16  board, to the senate and house standing committees having                   

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

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

19  department of treasury considers it appropriate.                            

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

21  conducted under this section has disclosed that the intermediate            

22  school board or any intermediate school district official or                

23  employee has violated any state law governing the financial                 

24  operations of an intermediate school district, the department of            

25  treasury shall notify the intermediate school district of that              

26  determination.  If the intermediate school district disputes the            

27  determination or claims that the situation has been corrected,              

1   within 15 days after receipt of the determination the                       

2   intermediate school district may submit an appeal of the                    

3   determination to the department of treasury.  Within 90 days                

4   after receipt of the appeal, the department of treasury shall               

5   consider the appeal and make a determination of whether the                 

6   initial determination was correct or incorrect and of whether the           

7   situation has been corrected.  If the department of treasury                

8   finds that the initial determination was correct and that the               

9   situation has not been corrected, then the department of treasury           

10  shall file a copy of the report with the attorney general.  The             

11  attorney general shall review the report and, if the attorney               

12  general considers it appropriate, shall commence or direct the              

13  prosecuting attorney for the county in which the violations                 

14  occurred to commence appropriate proceedings against the                    

15  intermediate school board or the official or employee.  These               

16  proceedings shall include at least a civil action in a court of             

17  competent jurisdiction for the recovery of any public money                 

18  determined by the audit to have been illegally expended and for             

19  the recovery of any public property determined by the audit to              

20  have been converted or misappropriated.                                     

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

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

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

24  additional intermediate school districts selected by the                    

25  department of treasury if the department of treasury considers              

26  that additional audit or audits to be appropriate.  Subsection              

27  (2)(d), (e), (f), and (g) applies to an audit under this                    

1   subsection.                                                                 

2       (4) The department and the department of treasury, in                       

3   consultation with intermediate school districts, shall develop              

4   and make available to intermediate school districts the auditing            

5   criteria to be used for the purposes of this section.                       

6   (5) An audit under this section shall be performed in                       

7   accordance with standards issued by the American institute of               

8   certified public accountants and with government audit standards            

9   issued by the United States general accounting office.                      

10      (6) The department of treasury shall pay the costs of the                   

11  audit conducted under this section.  The department of treasury's           

12  obligation under this section is limited to the amount of a                 

13  separate line item appropriation identified for the purpose of              

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

15  and included in the annual appropriations act making                        

16  appropriations for the department of treasury.                              

17      (7) The department shall post on its website the audit                      

18  reports it receives under subsection (2)(f).

19      Enacting section 1.  This amendatory act takes effect                       

20  July 1, 2006.