89R14926 MCK-F     By: Parker S.B. No. 1943       A BILL TO BE ENTITLED   AN ACT   relating to the review and audit of certain state agency   operations.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Section 325.002, Government Code, is amended by   adding Subdivision (4) to read as follows:                (4)  "Regulatory agency" means a department,   commission, board, or other agency that:                      (A)  is created by the constitution or by statute;                      (B)  is in the executive branch of state   government;                      (C)  has statewide authority; and                      (D)  has authority to deny, grant, renew, revoke,   or suspend a license, certification, or other authorization to   engage in an activity.          SECTION 2.  Section 325.009, Government Code, is amended by   adding Subsections (b-1) and (b-2) to read as follows:          (b-1)  The commission shall provide information on how the   public may participate in the commission's review of a state agency   and provide input on a state agency's performance. The commission   shall, to the extent practicable, solicit input from parties   interested in a state agency's operations.          (b-2)  Each state agency being reviewed by the commission   under this chapter shall at the beginning of the review:                (1)  post a notice on the state agency's Internet   website informing the public:                      (A)  that the state agency is being reviewed by   the commission; and                      (B)  how the public may participate in the   commission's review of the state agency and provide input on the   state agency's performance; and                (2)  if the state agency being reviewed is a regulatory   agency:                      (A)  notify each person licensed, certified, or   otherwise authorized by the regulatory agency to engage in an   activity regulated by the agency of the public hearing under this   section at which the agency will be reviewed; and                      (B)  solicit input from persons provided notice   under Paragraph (A) regarding the regulatory agency's performance.          SECTION 3.  Section 325.010(b), Government Code, is amended   to read as follows:          (b)  In the report the commission shall include:                (1)  its findings regarding the criteria prescribed by   Section 325.011, except Section 325.011(14);                (2)  its recommendations based on the matters   prescribed by Section 325.012, except recommendations relating to   criteria prescribed by Section 325.011(14); [and]                (3)  if the agency being reviewed is a regulatory   agency, an analysis of the regulatory agency's performance during   the preceding 10 years or since the last review of the agency under   this chapter, whichever is longer, based on the agency's   performance measure targets as listed in the General Appropriations   Act;                (4)  an evaluation of the agency's performance measure   targets listed in the General Appropriations Act, including whether   the targets are:                      (A)  aligned with the mission, goals, and   objectives of the agency; and                      (B)  appropriate for assessing the agency's   achievement of the goals listed; and                (5)  other information the commission considers   necessary for a complete review of the agency.          SECTION 4.  Section 325.012(a), Government Code, is amended   to read as follows:          (a)  In its report on a state agency, the commission shall:                (1)  make recommendations on the abolition,   continuation, or reorganization of each affected state agency and   its advisory committees and on the need for the performance of the   functions of the agency and its advisory committees;                (2)  make recommendations on the consolidation,   transfer, or reorganization of programs within state agencies not   under review when the programs duplicate functions performed in   agencies under review;                (3)  make recommendations to improve the operations of   the agency, its policy body, and its advisory committees, including   management recommendations that do not require a change in the   agency's enabling statute; [and]                (4)  make recommendations on the continuation or   abolition of each reporting requirement imposed on the agency by   law; and                (5)  make recommendations to improve the agency's key   performance measures through the addition, amendment, or removal of   the performance measure targets listed in the General   Appropriations Act.          SECTION 5.  Chapter 325, Government Code, is amended by   adding Section 325.016 to read as follows:          Sec. 325.016.  LIMITED REVIEW OF CERTAIN REGULATORY   AGENCIES. (a)  During the two-year period beginning on September 1   of the sixth year after the date a regulatory agency was last   continued under Section 325.015, the commission shall conduct a   limited review of the agency's rulemaking, including:                (1)  an assessment of the agency's rulemaking process   and the extent to which the agency has encouraged participation by   the public in making its rules and decisions and the extent to which   the public participation has resulted in rules that benefit the   public;                (2)  the extent to which the agency adopts and enforces   rules relating to potential conflicts of interest of its employees;   and                (3)  the necessity and effectiveness of rules adopted   by the agency.          (b)  Not later than September 1 of the sixth year after the   date a regulatory agency was last continued under Section 325.015,   the agency shall report to the commission the information in   Subsection (a) related to rulemaking and rule review activities of   the agency.          (c)  Not later than September 1 of the year that is two years   after the date the review under this section begins, the commission   shall prepare a written report on the commission's review under   this section.          (d)  The report prepared by the commission under this section   is a public record.          SECTION 6.  Subtitle C, Title 3, Government Code, is amended   by adding Chapter 327 to read as follows:   CHAPTER 327. EFFICIENCY AUDITS OF STATE AGENCIES          Sec. 327.001.  DEFINITIONS. In this chapter:                (1)  "Audit plan" has the meaning assigned by Section   321.001.                (2)  "Commission" means the Sunset Advisory   Commission.                (3)  "Efficiency audit" means an evaluation of the   economy, efficiency, and effectiveness of state agency operations,   including:                      (A)  determining whether the state agency is   managing or using its resources, including state money, personnel,   property, equipment, and space, in an economical and efficient   manner;                      (B)  identifying causes of inefficiencies or   uneconomical practices, including inadequacies in management   information systems, internal and administrative procedures,   organizational structure, use of resources, allocation of   personnel, purchasing, agency policies, and equipment;                      (C)  determining whether financial, program, and   statistical reports of the state agency contain useful data and are   fairly presented;                      (D)  determining whether, according to   established or designated program objectives, responsibilities or   duties, statutes and rules, program performance criteria, or   program evaluation standards, the objectives and intended benefits   of the agency's program are being achieved efficiently and   effectively; and                      (E)  determining whether, according to   established or designated program objectives, responsibilities or   duties, statutes and rules, program performance criteria, or   program evaluation standards, the agency's program duplicates,   overlaps, or conflicts with another state program.                (4)  "External auditor" means a private entity selected   by the state auditor to conduct an efficiency audit of a state   agency.                (5)  "Legislative audit committee" means the committee   described by Section 321.002.                (6)  "State agency" means an entity expressly made   subject to Chapter 325 (Texas Sunset Act).          Sec. 327.002.  REQUIRED EFFICIENCY AUDIT. (a) Each state   agency shall undergo an efficiency audit in accordance with this   chapter.          (b)  The state auditor, subject to the legislative audit   committee's approval, shall adopt a schedule for conducting the   efficiency audits required by this chapter and include the annual   portion of the schedule in the audit plan under Section 321.013.   The schedule must provide for each state agency to be audited during   the two-year period beginning on September 1 four years before the   date the state agency is scheduled to be abolished under Chapter 325   (Texas Sunset Act).          (c)  A state agency required by law to perform an internal   efficiency audit is not required to perform the audit in any year   the state agency is audited under this chapter.          (d)  A state agency shall pay the costs incurred by the state   auditor relating to an efficiency audit required by this chapter.     The state auditor shall determine the costs of the audit and the   state agency shall pay the amount of those costs promptly on receipt   of a statement from the state auditor regarding those costs.          (e)  The state auditor, subject to the legislative audit   committee's approval, may determine, in the interests of   efficiency, whether the audit should be performed by the state   auditor or an external auditor.          Sec. 327.003.  SELECTION AND SUPERVISION OF AUDITOR. (a)   Not later than March 1 of the year in which an efficiency audit of a   state agency is scheduled under this chapter, the state auditor may   contract with an external auditor to conduct the audit.          (b)  The state auditor, in cooperation with the Legislative   Budget Board, shall oversee the external auditor and ensure that   the efficiency audit is conducted in accordance with the   requirements of this chapter and the scope of the audit established   under this chapter.          (c)  The external auditor is not subject to direction from   the state agency being audited.          Sec. 327.004.  SCOPE OF AUDIT. (a) The state auditor, in   cooperation with the Legislative Budget Board, shall establish the   scope of each efficiency audit conducted under this chapter.          (b)  At a minimum, an efficiency audit must:                (1)  examine state resources, including financial   resources, staff, personal property, real property, and   technology, to determine whether those resources:                      (A)  are used effectively and efficiently to   achieve the desired outcome for a state agency's program   beneficiaries; and                      (B)  are not used for purposes other than the   intended goals of the audited programs;                (2)  identify and make recommendations for cost savings   and reallocation of resources to improve the effectiveness of   audited programs; and                (3)  identify opportunities for improving services   through consolidation of functions, outsourcing, and elimination   of duplicative efforts.          Sec. 327.005.  REPORT TO LEGISLATURE. (a) Not later than   November 1 of the year an efficiency audit is conducted under this   chapter, the state auditor, in cooperation with the Legislative   Budget Board and in consultation with any external auditor   contracted to perform the audit, shall:                (1)  prepare a report of the audit with the   recommendations; and                (2)  submit the report, recommendations, and complete   audit to the commission, the governor, the lieutenant governor, the   speaker of the house of representatives, the legislative audit   committee, the chairs of the standing committees of each house of   the legislature with primary jurisdiction over the audited state   agency, and the audited state agency.          (b)  The state auditor and the audited state agency shall   publish the report, recommendations, and complete efficiency audit   on the entity's Internet website.          Sec. 327.006.  REQUIRED IMPLEMENTATION PLAN. Not later than   the 90th day after the date of receiving the complete audit and   recommendations, the administrative head of the audited state   agency shall deliver a plan for implementing the recommendations to   the commission, the governor, the lieutenant governor, the speaker   of the house of representatives, the legislative audit committee,   and the chairs of the standing committees of each house of the   legislature with primary jurisdiction over the audited state   agency.  The implementation plan must include a reasoned   justification for any recommendation the audited state agency   declines to implement.          SECTION 7.  Section 322.017, Government Code, is repealed.          SECTION 8.  Not later than January 1, 2026, the state auditor   shall adopt the schedule required by Section 327.002, Government   Code, as added by this Act, for conducting efficiency audits of each   state agency subject to that section.          SECTION 9.  This Act takes effect September 1, 2025.