GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1993

S	3 

SENATE BILL 252
Government Performance Audit Select Committee Substitute Adopted 4/8/93
Appropriations Committee Substitute Adopted 7/23/93

Short Title:  GPAC Omnibus.	(Public)
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Sponsors:
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Referred to:  
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February 19, 1993

A BILL TO BE ENTITLED
AN ACT TO IMPLEMENT VARIOUS RECOMMENDATIONS OF THE GOVERNMENT PERFORMANCE AUDIT COMMITTEE.
The General Assembly of North Carolina enacts:

PART I.–-STATE STRATEGIC PLANNING PROCESS AND OUTCOME MEASURES.
Section 1.1.  G.S. 143A-17 is repealed.
Sec. 1.2.  G.S. 143-3.5 reads as rewritten:
"§ 143-3.5.  Coordination of statistics.
It shall be the duty of the Director, through the Office of State Budget and Management to coordinate the efforts of governmental agencies in the collection, development, dissemination and analysis of official economic, demographic and social statistics pertinent to State budgeting.  The Director shall:
(1)	Prepare and release the official demographic and economic estimates and projections for the State;
(2)	Conduct special economic and demographic analyses and studies to support statewide budgeting;
(3)	Develop and coordinate cooperative arrangements with federal, State and local governmental agencies to facilitate the exchange of data to support State budgeting;
(4)	Compile, maintain, and disseminate information about State programs which involve the distribution of State aid funds to local governments including those variables used in their allocation; and,
(5)	Develop and maintain in cooperation with other State and local governmental agencies, an information system providing comparative data on resources and expenditures of local governments.
Every fiscal analysis prepared by the Director or the Office of State Budget and Management addressing the State budget outlook shall encompass the upcoming five-year period.  Every fiscal analysis prepared by the Director or the Office of State Budget and Management addressing the impact of proposed legislation on the State budget shall estimate the impact for the first five fiscal years the legislation would be in effect.  To minimize duplication of effort in collecting or developing new statistical series pertinent to State planning and budgeting, including contractual arrangements, State agencies must submit to the Director proposed procedures and funding requirements.
This section shall not apply to the General Assembly, any of its committees and subcommittees, the Legislative Research Commission, the Legislative Services Commission, or any other committee or commission in the legislative branch."
Sec. 1.3.  Article 1 of Chapter 143 of the General Statutes is amended by adding the following sections to read:
"§ 143-10.3.  Strategic planning process.
(a)	The Director, through the Office of State Budget and Management, shall establish and implement a strategic planning process for State government.  The strategic planning process shall be designed to produce statewide goals, and State agencies shall develop agency goals and objectives that are consistent with those statewide goals.  The Director, in conjunction with State agencies,  shall prepare and apply performance measures and indicators of program impact, and shall require agency performance to be periodically reviewed to determine progress toward statewide goals and agency goals.  Results of the strategic planning process and agency performance reviews shall be reflected in the budget document proposed by the Governor, as provided in G.S. 143-10.4(b).
The performance measures and indicators of program impact for each agency shall be based upon goals that are established by that agency.  The Director shall be responsible for developing and implementing statewide comprehensive performance measures and indicators of program impact in a standardized format applicable across agency lines.
(b)	If a member of the Council of State does not agree with the performance measures, departmental operations plans, and indicators of program impact developed in accordance with this section, G.S. 143-10.4, and G.S. 143-10.5, that apply to the member's department, the member of the Council of State shall submit to the Director of the Budget a statement of specific objections to the program measures and indicators of program impact.  The Director of the Budget shall submit the statement to the General Assembly in accordance with G.S. 143-11(5)."
"§ 143-10.4.  Departmental operations plans.
The Director, through the Office of State Budget and Management and in conjunction with State agencies,  shall have prepared biennially in the even-numbered years, a comprehensive operations plan for each department, agency, and institution, for which the Director may recommend an appropriation of State funds in the next biennial period.  The operations plans shall address the statewide and agency goals contained in the strategic plans developed in accordance with G.S. 143-10.3.  The operations plans shall provide objectives, activities, and supporting statistics for the current biennium and for the following three biennial periods.  The operations plans shall also provide performance measures and outcome indicators, which measures and indicators shall be used for program evaluation and shall be reported in the  Governor's biennial budget submission.
The Director shall provide unified planning and budgeting instructions to the departments, agencies, and institutions for use in developing operations plans and biennial budgets.
"§ 143-10.5.  Development of performance measures for major programs.
(a)	The Director of the Budget, through the Office of State Budget and Management and through State agencies, departments, and institutions, shall develop performance measures for the major programs for each State agency, department, and institution.  These performance measures shall be developed as part of the biennial comprehensive plan and shall serve as the basis for the development of the biennial budget, beginning with the 1995-97 fiscal biennium.
(b)	The Director shall institute a standard process for developing program performance measures and for evaluating performance results, uniform performance measurement terms, and a standardized format for presentation.
(c)	The program performance measurement system shall include:
(1)	A description of the key performance measures for the program.  The performance measures should include: program efficiency or unit cost, outputs or program activity, and outcomes or performance results, with emphasis on the use of program outcome measures.
(2)	Identification of the current level of performance.
(3)	Targets for the desired level of performance.
(4)	Identification of future performance measures that should be developed and a time frame for development.
(5)	A methodology for regular monitoring of departmental, agency, and institutional performance in relation to the measure.
(6)	A methodology for assessing programs that have achieved the desired performance targets through innovative management actions.
(d)	The Director of the Budget shall prepare a comprehensive plan for the implementation of a performance measurement system and shall present the plan to the General Assembly by October 1, 1993.  With regard to programs for which it is anticipated that performance measures will not be fully developed by that date, the Director of the Budget shall submit to the General Assembly by May 1, 1994, a plan and timetable for the development and implementation of performance measures.  In developing the plan, consideration shall be given to any recommendations and reports of the Governmental Accounting Standards Board.  In the event the Director shall conclude that it is not feasible to develop performance measures for particular programs, the Director shall set forth detailed reasons for the conclusion in the report.
(e)	The Director of the Budget shall report to the General Assembly no later than February 1 in odd-numbered years and no later than April 1 in even-numbered years on:
(1)	The status of the development of the program performance measurement system.
(2)	The programs that have not achieved the desired level of performance and the reasons performance targets were not achieved.
(3)	The programs that have achieved performance targets through management innovation.
"§ 143-10.6.  Responsibilities of other State agencies.
All State agencies, departments, and institutions shall cooperate with the Director of the Budget to assist in the implementation of strategic planning, departmental planning, and performance budgeting.  The Director of the Budget may assign any responsibility to any State agency, department, or institution as appropriate or needed to implement strategic planning, departmental planning, and performance budgeting."
Sec. 1.4.  G.S. 143-11 reads as rewritten:
"§ 143-11.  Survey of departments.
On or before the fifteenth day of December, biennially in the even-numbered years, the Director shall make a complete, careful survey of the operation and management of all the departments, bureaus, divisions, officers, boards, commissions, institutions, and agencies and undertakings of the State and all persons or corporations who use or expend State funds, in the interest of economy and efficiency, and of obtaining a working knowledge upon which to base recommendations to the General Assembly as to appropriations for maintenance and special funds and capital expenditures for the succeeding biennium.  If the Director and the Commission shall agree in their recommendations for the budget for the next biennial period, he shall prepare their report in the form of a proposed budget, together with such comment and recommendations as they may deem proper to make.  If the Director and Commission shall not agree in substantial particulars, the Director shall prepare the proposed budget based on his own conclusions and judgment, and the Commission or any of its members retain the right to submit separately to the General Assembly such statement of disagreement and the particulars thereof as representing their views.  The budget report shall contain a complete and itemized plan of all proposed expenditures for each State department, bureau, board, division, institution, commission, State agency or undertaking, person or corporation who receives or may receive for use and expenditure any State funds, in accordance with the classification adopted by the State Controller, and of the estimated revenues and borrowings for each year in the ensuing biennial period beginning with the first day of July thereafter.  Opposite each item of the proposed expenditures, the budget shall show in separate parallel columns the amount expended for the last preceding appropriation year, for the current appropriation year, and the increase or decrease.  The budget shall clearly differentiate between general fund expenditures for operating and maintenance, special fund expenditures for any purpose, and proposed capital outlays.
The Director shall accompany the budget with:
(1)	A budget message supporting his recommendations and outlining a financial policy and program for the ensuing biennium.  The message will include an explanation of increase or decrease over past expenditures, a discussion of proposed changes in existing revenue laws and proposed bond issues, their purpose, the amount, rate of interest, term, the requirements to be attached to their issuance and the effect such issues will have upon the redemption and annual interest charges of the State debt.
(2)	State Controller reports including:
a.	An itemized and complete financial statement for the State at the close of the last preceding fiscal year ending June 30.
b.	A statement of special funds.
(2a)	A statement showing the itemized estimates of the condition of the State treasury as of the beginning and end of each of the next two appropriation years.
(3)	A report on the fees charged by each State department, bureau, division, board, commission, institution, and agency during the previous fiscal year, the statutory or regulatory authority for each fee, the amount of the fee, when the amount of the fee was last changed, the number of times the fee was collected during the prior fiscal year, and the total receipts from the fee during the prior fiscal year.
(4)	A statement showing the State Board of Education's request, in accordance with G.S. 115C-96, for sufficient funds to provide textbooks to public school students.
(5)	Statements of the objections of members of the Council of State received pursuant to G.S. 143-10.3(b) to the performance measures, departmental operations plans, and indicators of program impact prepared in accordance with G.S. 143-10.3, 143-10.4, and 143-10.5.
(6)	A list of the budget requests of members of the Council of State that are not included in the proposed budget.
It shall be a compliance with this section by each incoming Governor, at the first session of the General Assembly in his term, to submit the budget report with the message of the outgoing Governor, if he shall deem it proper to prepare such message, together with any comments or recommendations thereon that he may see fit to make, either at the time of the submission of the said report to the General Assembly, or at such other time, or times, as he may elect and fix."
The function of the Advisory Budget Commission under this section applies only if the Director of the Budget consults with the Commission in preparation of the budget."

PART II.–-IMPLEMENT PERFORMANCE BUDGETING
Sec. 2.1.  To the extent feasible, the Director of the Budget shall develop a plan for preparing the 1995-97 fiscal biennium budget in a performance budget format.   In developing  the plan, consideration shall be given to the program areas of health and safety, environment, correction, justice, social and economic well-being, and cultural resources, for which funding shall be provided.  The performance budget format shall include the following:
(1)	A description of the resources previously expended and proposed for each major program, including expenditures and numbers of employees.
(2)	A description of the goals, objectives, and need for programs, including statutory requirements.
(3)	A description of the principal program services and activities performed in order to meet program goals and the resources allocated to the major program services.
(4)	A description of the efficiency, or unit cost, of providing program services and activities.
(5)	A presentation of information on program performance and accomplishments in relation to performance measures established by the Director of the Budget in the department plan, as prescribed in G.S. 143-10.4 and G.S. 143-10.5.
(6)	Line item detail on expenditure data for the following:  salaries, employee benefits, contracted services, State aid, other costs, and any other object of expenditure that represents a significant portion of the budget of a program, subprogram, or element as prescribed by the Director.  The source of funding for each program shall be identified by each major State fund, federal funds, special funds, and other receipts.
(7)	Any changes in the proposed scope of any budget elements, other than to provide for increases in costs due to inflation, shall include explanations as to the impact of the expected changes upon the outputs and performance outcomes of that element subprogram or program.

PART III.–-ANNUAL FINANCIAL MODEL REQUIRED.
Sec. 3.1.  G.S. 143-15.1 reads as rewritten:
"§ 143-15.1.   Current Operations Appropriations Act.
The General Assembly shall enact the Current Operations Appropriations Act by June 15 of odd-numbered years and by June 30 of even-numbered years in which a Current Operations Appropriations Act is enacted.  The Current Operations Appropriations Act shall state the amount of General Fund appropriations availability upon which the General Fund budget is based.  The statement of availability shall list separately the beginning General Fund credit balance, General Fund revenues, and any other components of the availability amount.
The Current Operations Appropriations Act shall incorporate by reference the General Fund Financial Model.  The General Assembly shall set out with the financial model the assumptions of the model and the impact over five years on the budget that is anticipated by the model.
The General Fund operating budget appropriations, including appropriations for local tax reimbursements and local tax sharing, for the second year in a Current Operations Appropriations Act that contains a biennial budget shall not be more than two percent (2%) greater than the General Fund operating budget appropriations for the first year of the biennial budget."

PART IV.–-STUDY STATE EMPLOYEE CLASSIFICATION AND COMPENSATION/EVALUATE STATE EMPLOYEE BENEFITS.
Sec. 4.1.  The State Personnel Commission shall retain a consultant to conduct a study of job classifications and compensation of all employees of the State departments, institutions, and agencies of the executive branch.  The following shall be excluded from the study:
(1)	The instructional staff, research staff, chancellors, provosts, vice-chancellors, deans, and head librarians of the constituent and affiliated institutions of The University of North Carolina;
(2)	The President and Vice-Presidents of The University of North Carolina General Administration; and
(3)	Officers and employees whose salaries are set directly by the General Assembly in the Current Operations Appropriations Act.
The consultant retained by the State Personnel Commission shall be selected through a competitive procurement process.  The request for proposals shall be submitted to the Joint Legislative Commission on Governmental Operations for review before a consultant is selected.
The State Personnel Commission shall assemble a Task Force to assist the consultant.  The Task Force shall be comprised of staff from the Office of State Personnel, at least three agency personnel directors, three agency program managers, and three members from the private sector with management-level personnel administration experience.  The Director of the Office of State Personnel shall serve as the study coordinator.  To minimize costs in conducting the study, each State agency shall, upon the request of the Director of the Office of State Personnel, provide data, personnel analysts, and other assistance to the Task Force, provided that the assistance does not impair the ability of the agency to perform and manage its own personnel functions.
The study shall include the recommendation and development of the following components:  classification system (including job descriptions), compensation philosophy, salary structure, pay delivery, and external and internal job evaluations.  The study shall determine which State jobs are paid below, at, or above the market rates.
In addition to its other responsibilities, the Task Force shall review the current performance appraisal procedure to assure that it is consistent with the new classification system.
Beginning October 1, 1993, the consultant shall make quarterly reports on the study's progress to the Joint Legislative Commission on Governmental Operations.  The consultant shall complete the study and present its findings to the State Personnel Commission and the Joint Legislative Commission on Governmental Operations no later than December 15, 1994.
Sec. 4.2.  Article 1 of Chapter 143 of the General Statutes is amended by adding a new section to read:
"§ 143-11.2.  Comprehensive compensation and benefit program evaluation.
(a)	On or before the fifteenth day of December of each year, the Director shall have conducted a comprehensive compensation and benefit program evaluation for all full-time, part-time, and temporary employees supported by funds appropriated by the State.  This comprehensive evaluation shall include, but not be limited to, a review of:
(1)	Benefit programs offered by other states and employers within the southeast region;
(2)	Employer costs associated with benefit programs provided;
(3)	Benefit levels provided by the programs; and
(4)	Compensation program and respective salary levels.
(b)	This evaluation shall include health, retirement, payment for time not worked (including vacations, holidays, and sick leave), and salary levels.
(c)	A Total Benefits Index shall be calculated from the results of the evaluation to enable the State to compare its benefits to those of other southeastern states and employers."
Sec. 4.3.  To avoid duplication of effort, the Director of the Budget, when performing the evaluation required under section 4.2., shall solicit from the Office of State Personnel and other State agencies information already available concerning compensation and benefits analysis.  Copies of the evaluation results shall be provided to all State agencies.

PART V.–-STATE HUMAN RESOURCES MANAGEMENT.
Sec. 5.1.  Article 1 of Chapter 126 of the General Statutes is amended by adding two new sections to read:
"§ 126-4.1.  State human resources management coordination.
(a)	The Office of State Personnel shall be responsible for planning, guiding, and coordinating the State's ongoing human resources management effort and shall, with the participation of each State department, agency, and institution determine the mission and future of the State's human resources management programs and functions.  Human resources management coordination shall include planning and coordination with regard to the recruitment, selection, organization, training, and development of the State employee work force.
(b)	The Office of State Personnel shall coordinate the State's management of human resources so as to ensure that all State human resources management programs are integrated fully within a comprehensive overall human resources management system.
"§ 126-4.2.  State human resources management monitored.
(a)	The Office of State Personnel shall determine appropriate performance measures to monitor and evaluate the human resources function within State government.  The overall effectiveness of State policies and programs pertaining to human resources management within State departments, agencies, and institutions shall be evaluated by considering performance measures in each of the following areas:
(1)	Absence and Turnover. – Performance  measures to signal potential problems with workforce absenteeism and dissatisfaction with pay and turnover rates.
(2)	Hiring and Staffing. – Performance measures to evaluate the rate at which persons are entering State employment, the cost of hiring, the time taken to fill jobs, and the ratio of job offers to acceptances.
(3)	Equal Employment. – Performance measures to evaluate inequities in hiring, promotions, and compensation as they relate to minorities, women, and the disabled.
(4)	Training and Development. – Performance measures to evaluate the cost per unit of training delivered, change in knowledge and skill based on pre- and post-competency scores, and the number of hours of training available to trainees.
(b)	The Office of State Personnel shall develop an automated system to track and monitor on an ongoing basis the human resources management function.
(c)	Each State department, agency, and institution shall utilize the automated system to assess the effectiveness of the human resources management of the department, agency, or institution.
(d)	The human resources management function performance measures shall be benchmarked in relation to individual agencies, departments, and institutions as well as against other state governments.  The Office of State Personnel may solicit other state and local governments to participate in a survey of performance measures.
(e)	The Office of State Budget may assist the Office of State Personnel in developing the performance monitoring systems required in subsection (a) of this section."

PART VI.–-STATE EMPLOYEE TRAINING FOR PERFORMANCE MANAGEMENT AND EQUAL OPPORTUNITY TRAINING.
Sec. 6.1.  The Office of State Personnel shall implement appropriate training programs in the areas of performance management training and equal employment opportunity training.

PART VII.–-ORGANIZATIONAL AND STAFFING ANALYSES OF STATE AGENCIES.
Sec. 7.1. (a)	The Governor shall conduct organizational and staffing analyses of State agencies, except as provided in subsection (b) of this section.  The analyses shall use the following guidelines:
(1)	Eliminate one-on-one reporting relationships at middle management and supervisory levels.
(2)	Achieve spans of control of supervisors to employees within the range of 1:4 to 1:7, with a span of control of 1:4 applying to highly technical, policy-sensitive, or nonrepetitive functions.
(3)	Consolidate units with small numbers of staff into larger, more efficient units.
(b)	Each member of the Council of State shall be responsible for conducting the organizational and staffing analyses of the member's own department in accordance with guidelines set out in subsection (a) of this section and for submitting the reports required under subsection (c) of this section to the Governor.
(c)	The Governor shall make an initial report to the General Assembly no later than March 1, 1994, on the implementation of subsection (a) of this section, and shall make annual progress reports to the General Assembly by January 1 of each year thereafter.

PART VIII.–-LEGISLATIVE AUDIT SUBCOMMITTEE/JOINT LEGISLATIVE COMMISSION ON GOVERNMENTAL OPERATIONS.
Sec. 8.1.  Article 13 of Chapter 120 of the General Statutes is amended by adding the following new sections to read:
"§ 120-80.  Legislative Audit Subcommittee established.
There is hereby established the Legislative Audit Subcommittee of the Commission (hereinafter the 'Subcommittee').  Except as provided in G.S. 120-80.1, the Subcommittee shall consist of four Senate members of the Commission appointed by the President Pro Tempore of the Senate, one of whom shall be designated to cochair the Subcommittee, and four House members of the Commission appointed by the Speaker of the House of Representatives, one of whom shall be designated to cochair the Subcommittee.
"§ 120-80.1.  Additional members.
The cochairmen of the Commission, in order to accommodate the need for membership on the Subcommittee, may enlarge the membership of the Commission under G.S. 120-74 by two additional members from each house, or they may enlarge the membership of the Subcommittee under G.S. 120-80 by two additional members from each house who are not members of the Commission.  Appointments made under either method are subject to the applicable provisions of G.S. 120-74.  Members of the General Assembly who serve on the Subcommittee but not on the Commission are entitled to reimbursement and compensation as provided for Commission members under G.S. 120-78.
"§ 120-81.  Duties and powers.
Subject to the approval of the cochairmen of the Commission, the Subcommittee may:
(1)	Exercise the powers and duties of the Commission under G.S. 120-76 with respect to evaluations of State agency programs;
(2)	Evaluate requests for audits by members and committees of the General Assembly and recommend to the State Auditor and the Commission which of the audits the subcommittee would like to have undertaken by the State Auditor;
(3)	Review agency compliance with performance audit findings and recommendations made by the State Auditor that the subcommittee would like to have undertaken by the State Auditor; and
(4)	Meet periodically with the State Auditor to review work plans and work in progress, discuss potential audit plans, and review the status of follow-up work on completed performance audits.  The State Auditor shall not be required to include any information that, if made public, would jeopardize the integrity of any program review or performance audit.
Nothing in this Article is intended nor shall it be construed to limit the duties, powers or independence of the State Auditor as set forth in Article 5A of Chapter 147 of the General Statutes."
"§ 120-82.  Compliance review.
The Subcommittee shall monitor agency compliance with recommendations made by the State Auditor as follows:
(1)	Compliance Reports. – The State Auditor shall report to the Subcommittee within 12 months of the issuance of the State Auditor's report  on the progress made by agencies in implementing recommendations made by the State Auditor.  Each agency reviewed shall have the opportunity to respond in writing to the findings on their progress.
(2)	Public Hearing. – After review of the State Auditor's report and of an agency's response, if the Subcommittee is not satisfied that the agency has addressed or is making substantial progress in addressing the audit findings and recommendations, it shall schedule a public hearing, prior to issuing a final report, to receive additional testimony on agency noncompliance.  The attendance of the head of the affected department or institution or other appropriate officials may be compelled in accordance with the provisions of G.S. 120-19.2.  Additionally, the Subcommittee, while in the discharge of its official duties, may exercise all of the powers of a joint committee of the General Assembly provided for under the provisions of G.S. 120-19, and G.S. 120-19.1 through G.S. 120-19.4.
(3)	Final Report. – The final report shall contain the findings concerning agency noncompliance and recommendations for further action or legislation.  The Subcommittee may issue one report that covers several audits.  The Subcommittee may at any time conduct a follow-up review of agency compliance.  All Subcommittee reports shall be issued to the Commission.  The Commission shall review each report of the Subcommittee and may approve, disapprove, or modify the report.
"§ 120-83.  Government Performance Audit legislation.
(a)	The State Auditor shall issue a report to the Subcommittee no later than April 15, 1994, on agency compliance with enacted legislation recommended by the Government Performance Audit Committee.  Each agency reviewed shall have the opportunity to respond in writing to the findings on their progress, subject to deadlines imposed by the State Auditor.
(b)	The Subcommittee shall issue a report to the Commission on agency compliance with enacted legislation recommended by the Government Performance Audit Committee.  With the approval of the Commission, the Subcommittee may follow the procedures outlined in G.S. 120-82 or it may adopt a different review procedure.  With regard to any additional review and audit that the subcommittee determines is needed, the resources of the State Auditor's office shall be made available for that purpose.  If the agency has been specifically directed by the Government Performance Audit legislation to report to any other legislative commission created pursuant to this Chapter, it shall also report to the Subcommittee.  The Subcommittee may review and report on the agency's compliance notwithstanding review by other legislative commissions.  The Subcommittee shall issue a final report to the Commission no later than December 1, 1994.  The Commission shall review the reports of the Subcommittee and may approve, disapprove, or modify them."
Sec. 8.2.  G.S. 147-64.6(c) reads as rewritten:
"(c)	The Auditor shall be responsible for the following acts and activities:
(1)	Audits made or caused to be made by the Auditor shall be conducted in accordance with generally accepted auditing standards as prescribed by the American Institute of Certified Public Accountants, the United States General Accounting Office, or other professionally recognized accounting standards-setting bodies.
(2)	Financial and compliance audits may be made at the discretion of the Auditor without advance notice to the organization being audited.  Audits of economy and efficiency and program results shall be discussed in advance with the prospective auditee unless an unannounced visit is essential to the audit.
(3)	The Auditor, on his own initiative and as often as he deems necessary, or as requested by the Governor or the General Assembly, shall, to the extent deemed practicable and consistent with his overall responsibility as contained in this act, make or cause to be made audits of all or any part of the activities of the State agencies.  Audit requests from members or committees of the General Assembly shall be submitted to the Joint Legislative Commission on Governmental Operations, or, at the direction of the Commission chairmen, to the Commission's Legislative Audit Subcommittee.
(4)	The Auditor, at his own discretion, may, in selecting audit areas and in evaluating current audit activity, consider and utilize, in whole or in part, the relevant audit coverage and applicable reports of the audit staffs of the various State agencies, independent contractors, and federal agencies.  He shall coordinate, to the extent deemed practicable, the auditing conducted within the State to meet the needs of all governmental bodies.
(5)	The Auditor is authorized to contract with federal audit agencies, or any governmental agency, on a cost reimbursable basis, for the Auditor to perform audits of federal grants and programs administered by the State Departments and institutions in accordance with agreements negotiated between the Auditor and the contracting federal audit agencies or any governmental agency.  In instances where the grantee State agency shall subgrant these federal funds to local governments, regional councils of government and other local groups or private or semiprivate institutions or agencies, the Auditor shall have the authority to examine the books and records of these subgrantees to the extent necessary to determine eligibility and proper use in accordance with State and federal laws and regulations.
		The Auditor shall charge and collect from the contracting federal audit agencies, or any governmental agencies, the actual cost of all the audits of the grants and programs contracted by him to do.  Amounts collected under these arrangements shall be deposited in the State Treasury and be budgeted in the Department of State Auditor and shall be available to hire sufficient personnel to perform these contracted audits and to pay for related travel, supplies and other necessary expenses.
(6)	The Auditor is authorized and directed in his reports of audits or reports of special investigations to make any comments, suggestions, or recommendations he deems appropriate concerning any aspect of such agency's activities and operations.
(7)	The Auditor shall charge and collect from each examining and licensing board the actual cost of each audit of such board.  Costs collected under this subdivision shall be based on the actual expense incurred by the Auditor's office in making such audit and the affected agency shall be entitled to an itemized statement of such costs.  Amounts collected under this subdivision shall be deposited into the general fund as nontax revenue.
(8)	The Auditor shall examine as often as may be deemed necessary the accounts kept by the Treasurer, and if he discovers any irregularity or deficiency therein, unless the same be rectified or explained to his satisfaction, report the same forthwith in writing to the General Assembly, with copy of such report to the Governor and Attorney General.  In addition to regular audits, the Auditor shall check the treasury records at the time a Treasurer assumes office (not to succeed himself), and therein charge him with the balance in the treasury, and shall check the Treasurer's records at the time he leaves office to determine that the accounts are in order.
(9)	The Auditor may examine the accounts and records of any bank or financial institution relating to transactions with the State Treasurer, or with any State agency, or he may require banks doing business with the State to furnish him information relating to transactions with the State or State agencies.
(10)	The Auditor may, as often as he deems advisable, conduct a detailed review of the bookkeeping and accounting systems in use in the various State agencies which are supported partially or entirely from State funds.  Such examinations will be for the purpose of evaluating the adequacy of systems in use by these agencies and institutions.  In instances where the Auditor determines that existing systems are outmoded, inefficient, or otherwise inadequate, he shall recommend changes to the State Controller.  The State Controller shall prescribe and supervise the installation of such changes, as provided in G.S. 143B-426.39 (2).
(11)	The Auditor shall, through appropriate tests, satisfy himself concerning the propriety of the data presented in the Comprehensive Annual Financial Report and shall express the appropriate auditor's opinion in accordance with generally accepted auditing standards.
(12)	The Auditor shall provide in a written statement to the Governor and Attorney General, and other appropriate officials, such facts as are in his possession which pertain to the apparent violation of penal statutes or apparent instances of malfeasance, misfeasance, or nonfeasance by an officer or employee.
(13)	At the conclusion of an audit, the Auditor or his designated representative shall discuss the audit with the official whose office is subject to audit and submit necessary underlying facts developed for all findings and recommendations which may be included in the audit report.  On audits of economy and efficiency and program results, the auditee's written response shall be included in the final report if received within 30 days from receipt of the draft report.
(14)	The Auditor shall provide copies of each audit report to the Joint Legislative Commission on Governmental Operations of the General Assembly, the Governor, the Chief Executive Officer of each agency audited, and other persons as the Auditor deems appropriate.  He shall also file a copy of the audit report in the Auditor's office, which will be a permanent public record; Provided, nothing in this subsection shall be construed as authorizing or permitting the publication of information whose disclosure is otherwise prohibited by law.
(15)	It is not the intent of the audit function, nor shall it be so construed, to infringe upon or deprive the General Assembly and the executive or judicial branches of State government of any rights, powers, or duties vested in or imposed upon them by statute or the Constitution.
(16)	The Auditor shall be responsible for receiving reports of allegations of the improper governmental activities set forth in G.S. 126-84.  The Auditor shall provide a telephone hotline to receive such allegations and informant may choose whether to remain anonymous.  The Auditor shall implement the necessary policies and procedures to investigate hotline allegations and recommend appropriate action.  When the allegation involves issues of substantial and specific danger to the public health and safety, the Auditor shall notify the appropriate agency immediately.  In addition, the Auditor shall publicize the hotline number periodically and shall report findings to the agencies involved.
		All records maintained by the State Auditor which involve unsubstantiated allegations of improper governmental activities set forth in G.S. 126-84 shall be destroyed within four years from the date such allegation was received."
Sec. 8.3.  G.S. 147-64.5 reads as rewritten:
"§ 147-64.5.  Cooperation with Joint Legislative Commission on governmental operations and other governmental bodies.
(a)	Joint Legislative Commission on Governmental Operations. – The Auditor shall furnish copies of any and all audits requested by the Joint Legislative Commission on Governmental Operations or its Legislative Audit Subcommittee.  Accordingly, the Auditor shall, upon request by the chairmen, appear before the Commission or the Subcommittee to present findings and answer  questions concerning the results of these audits.  The Commission and the Subcommittee are hereby authorized to use these audit findings in their inquiries concerning the operations of State agencies and are empowered to require agency heads to advise the Commission or Subcommittee of actions taken or to be taken on any recommendations made in the report or explain the reasons for not taking action.
(b)	Requests for Auditor Assistance. – Committees of the General Assembly, the Governor, and other State officials may make written requests that the Auditor undertake, to the extent deemed practicable and within the resources provided, a specific audit or investigation; provide technical assistance and advice; and provide recommendations on management systems, finance, accounting, auditing, and other areas of management interest.  Requests from members or committees of the General Assembly shall be submitted to the Joint Legislative Commission on Governmental Operations, or, at the direction of the Commission chairmen, to the Commission's Legislative Audit Subcommittee.
(c)	Cooperation with Other Governmental Bodies. – The Auditor shall cooperate, act, and function with other audit or evaluation organizations in the State, with appropriate councils or committees of other states, with governing bodies of the political subdivisions of the State, and with federal agencies in an effort to maximize the extent of intergovernmental audit coordination and thereby avoid unnecessary duplication and expense of audit effort.  Nothing in this Article is intended nor shall it be construed as giving the Auditor control over the internal auditors of any agency."
Sec. 8.4.  G.S. 120-74 reads as rewritten:
"§ 120-74.  Appointment of members; terms of office.
	Except as provided in G.S. 120-80.1, the Commission shall consist of 22 members.  The President pro tempore of the Senate, the Speaker pro tempore of the House, and the Majority Leader of the Senate and the Speaker of the House shall serve as ex officio members of the Commission.  The Speaker of the House of Representatives shall appoint nine members from the House.  The President pro tempore of the Senate shall appoint nine members from the Senate.  Vacancies created by resignation or otherwise shall be filled by the original appointing authority.  Members shall serve two-year terms beginning and ending on January 15 of the odd-numbered years, except that initial appointments shall begin on July 1, 1975.  Members shall not be disqualified from completing a term of service on the Commission because they fail to run or are defeated for reelection.  Resignation or removal from the General Assembly shall constitute resignation or removal from membership on the Commission.  The terms of the initial members of the Commission shall expire January 15, 1977."
Sec. 8.5.  Requirements as to program-based budgeting and program evaluation based on outcome measures necessitate that certain performance audit functions be conducted by personnel who have unique blends of skills and experiences that do not fall within the traditional classifications for auditors.  Accordingly, the State Auditor may establish up to three positions that are exempt from the State Personnel Act for persons who conduct performance audits.  These positions may be established as exempt positions if the State Auditor determines that there is no adequate classification for such positions within the State personnel system.

PART IX.–-STUDY GENERAL ASSEMBLY OPERATIONS.
Sec. 9.1.  The Legislative Services Commission shall retain a consultant to conduct a study of job classifications and compensation of all legislative employees.
Under the direction of the Legislative Services Commission, the Legislative Administrative Officer shall provide assistance to the consultant.
The study shall include the development of the following components:  classification system (including job descriptions), compensation philosophy, salary structure, pay delivery, and external and internal job evaluations.  The study shall determine which jobs are paid below, at, or above the market rates.
The consultant retained by the Legislative Services Commission shall be selected through a competitive procurement process.
Beginning April 1, 1994, the consultant shall make quarterly reports on the study's progress to the Legislative Services Commission.  The consultant shall complete the study and present its findings to the Legislative Services Commission no later than October 1, 1994.
Sec. 9.2.  The Legislative Services Commission shall study the following issues and implement any recommendations regarding those issues:  (i) the benefits provided to temporary legislative employees, (ii) the appointment of a Human Resources Management Officer for the General Assembly, and (iii) the overall organizational structure and staffing of the General Assembly.
Sec. 9.3.  The General Assembly shall have conducted a peer review of the organizational structure and staffing capabilities and levels required to serve the General Assembly in the future.  The review shall be completed by July 1, 1994.
Sec. 9.4.  The Legislative Services Commission shall develop a facilities plan that defines current space needs and plans for future needs for facilities and storage space.  This plan shall be completed by July 1, 1994.
Sec. 9.5.  G.S. 120-31 is amended by adding a new subsection to read:
"( f)	The Legislative Services Commission shall meet at least quarterly, but may provide for cancellation of a meeting if there is no business to transact."

PART IX-A.––-REVIEW BY JOINT LEGISLATIVE COMMISSION ON GOVERNMENTAL OPERATIONS.
Sec. 9A.1.  The Director of the Budget shall report to the Joint Legislative Commission on Governmental Operations not later than December 1, 1993, on implementation progress of Parts I through III, Sec. 4.1. of Part IV, and Parts V through IX of this act and shall make a final report to the Joint Legislative Commission on Governmental Operations not later than March 1, 1994, on those Parts.

PART X.––PART HEADINGS FOR REFERENCE ONLY
Sec. 10.1.  The Part headings contained in this act are for reference only and they in no way limit, define, or prescribe the scope or application of the text of the act.

PART XI.––EFFECTIVE DATE
Sec. 11.1.  Sections 4.2 and 4.3 of this act become effective January 1, 1995.  The remaining sections of this act are effective upon ratification and shall expire June 30, 1994.  Personnel positions for which funds have been appropriated to implement this act shall be time-limited permanent positions and shall expire June 30, 1994.