Lawmakers return state audit outsourcing bill to committee without recommendation
A bill allowing state agencies to have annual audits performed by private accountants was returned without recommendation to the House State Government Committee by a subcommittee Tuesday.
Critics of Senate File 2311 said at the subcommittee meeting the bill would hurt the Auditor of State’s ability to ensure government funds are not being misused, as well as costing the state more for duties currently performed by state auditor staff.
The legislation would allow state agencies to employ a certified public accountant (CPA) to conduct their required yearly audits — audits currently performed by the state auditor’s office — and require audit results be submitted to the state auditor for review.
In Senate discussions on the legislation, the bill’s author, Sen. Mike Bousselot, R-Ankeny, said the measure would give state government entities the same ability to work with CPAs that local governments, such as cities and school boards, currently have, and would bring more “efficiency” to state audits. Bousselot repeatedly denied claims that the bill was politically motivated and targeting Auditor Rob Sand, the only Democrat to currently hold a statewide elected office in Iowa.
John McCormally, chief of staff of the auditor’s office, said at the subcommittee meeting that the legislation would circumvent the will of Iowa voters, who elected Sand to oversee state government.
“It gets problematic to have a state auditor elected by voters and have a Legislature allow departments to choose someone else to audit the state,” McCormally said.
He also said the measure could result in higher costs for Iowa taxpayers. According to the bill’s fiscal note from the Legislative Services Agency, the auditor’s office currently audits the state of Iowa and state departments at a rate of $85 per hour, costing an average of $5.3 million a year for about 65,000 hours of auditing. According to information from the state auditor’s office, billing rates for cities that work with private CPA firm range from $95 to $183 per hour. State government audits performed by outside CPA firms have cost as much as $260 per hour, according to the fiscal note.
Rep. Michael Bergan, R-Dorchester, questioned McCormally about how federal auditing requirements would be impacted by using outside CPAs. McCormally said if the bill were signed into law, audits conducted by private CPA firms of state departments and agencies using federal funds would have to be “somehow homogenized” into the federal audit to meet the requirements of the federal Single Audit Act.
“So that might actually cause inefficiencies and some extra costs,” Bergan said.
Brad Epperly with the Iowa Society of CPAs said that while the group is registered as neutral on the bill, he did not know of any Iowa accounting firms or CPAs that would have the ability to conduct state audits — meaning state government entities would have to look outside of Iowa for firms to work with.
Des Moines Register/Mediacom Iowa Poll results released Tuesday found a majority, 51%, of Iowans opposed the measure, while 43% were in support of allowing state agencies to outsource annual audits and 7% were not sure. The poll of 804 Iowa adults, conducted by Selzer & Co from Feb. 25-28, has a margin of error of plus or minus 3.5 percentage points.
The legislation is available for consideration by the full House State Government Committee at the chair’s discretion, but does not have the support of representatives who served on the subcommittee. The bill needs committee approval by the end of this week to remain eligible for consideration.
