Lawmakers on the Joint Management Audit Committee took a look at executive programs and audit reports on July 9, trying to better understand the state’s finances and potentially cut inactive or old programs.
This is the committee’s second meeting during the interim, with one more meeting scheduled for Oct. 21.
Members heard reports from the Department of Audit’s Public Funds Division, reviewed new programs, delayed effective dates and heard an assessment from a former regulatory reduction task force.
Audits, LSO and separation of powers
Sen. Darin Smith (R-Cheyenne) led the charge for an audit of the Legislative Service Office (LSO). The LSO acts as the legal and administrative support for the Legislature, helping to craft bills and review reports.
Speaking to Department of Audit Director Justin Chavez, Smith asked about reviewing the Legislature’s own spending.
“I'm getting a lot of questions from my constituents … [They] just don't trust the government right now,” said Smith. “Specifically, who looks over the Legislature? Who audits us? Have you ever audited us?
“We have authority over state and local government entities, but statutorily, we don't have authority to audit the Legislature,” said Chavez.
“Ok, so we would have to direct you to audit us?” replied Smith.
“Yes, we could do something like that by request, but we couldn’t do it on our own,” answered Chavez.
This exchange would lead to some light political sparring between two Republicans and one Democrat on the committee. Rep. Jayme Lien (R-Casper) supported Smith’s inquiry by quoting from a 1977 bill.
“It says here, ‘to this end, the legislative auditor shall periodically conduct post audits,’ and then further on through, it says, ‘an audit report to the Management Council and to each member of the Legislature. When directed, the legislative auditor shall audit any entity receiving state funds.’ So to go along with the good senator's question about who audits LSO, they received state funding. Would you be willing to audit the LSO department?” said Lien.
Chavez responded, “If we were asked to, sure.”
Smith, suggesting that the Legislature should “clean its own porch” before it looks at anyone else’s, proposed a motion to “[direct] this Department of Audit right here to perform a performance audit of the LSO and to look at expenditures, revenues, contracts, procedures and controls.”
The motion was seconded by Lien. But before the motion could move to a vote, Sen. Chris Rothfuss (D-Laramie) raised two concerns.
First, the Legislature couldn't “direct” the services of an executive branch department. Instead, he said they could “request,” citing that “even though we asked them before, and they did, they could have said no.”
Rothfuss’s second disagreement was that the motion did not respect the separation of powers.
“From a separation of powers standpoint, typically we, the Legislature … would not use the executive branch as our auditing entity. We would do something internal or hire external and contract for that service,” said Rothfuss.
Smith disagreed, quoting Article Four, Section 13 of the Wyoming Constitution, which deals with the Legislature’s ability to examine accounts, and Wyoming Statute 28-8-107, regarding audits of state agencies.
Rothfuss's response suggested that the referenced laws did not necessarily make the move constitutional.
“Even if it is constitutional,” said Rothfuss, “is it the advisable approach to have the executive branch having oversight over the legislative branch? The answer is no, it's not. Nor is it appropriate for the Legislature to come in and do the same thing … It’s a typical separation of powers.”
Rothfuss suggested that the committee seek more consultation, take some time and make a decision during the next meeting.
Smith said the auditors should probably be under legislative control. But, as they currently aren’t, he said, “We’re following the proper steps.” Smith once more pushed for the motion to be moved forward.
Lein jumped back in, asking Rothfuss if this was not simply a matter of checks and balances. Rothfuss said it could be “thought of as a check or balance,” but that he did not understand “what the hurry is.”
Working with Rothfuss, Smith suggested they change the wording from “direct” to “request.”
Ultimately, the motion was amended to read, “Direct LSO to request the Department of Audit” to audit the LSO.
The motion passed with nine ayes and two nays coming from Rothfuss and Rep. Trey Sherwood (D-Laramie).
Subpoena requests
The committee also voted to subpoena several town and special district leaders over irregularities in their local bookkeeping.
Much of this conversation was driven by questions from Rep. Lien and Rep. Rachel Rodriguez-Williams (R-Cody) about the Department of Audit and non-compliances in the state. Lien requested information from the town of Bear River.
“This report that I'm reading, it says internal controls lack, no policies or procedures, lack of segregation of duties … It says that the census report was not accurate. We as a Legislature use that report for many purposes,” said Lien.
Rodriguez-Williams was equally, if not more, shocked at the report for the town of Manderson.
“Mind-boggling,” said Rodriguez-Williamss. “The amount of negligence, I'm just appalled by the audit. Obviously, there's some potential federal consequences, specifically when it comes to, like, the IRS and failing to produce W-4s, I-9s on file for any member of the town, any employee, 941 forms not on file, no copies of bank account statements. It's a big wow.”
According to reporting by the Basin Republican, the Division of Criminal Investigation is evaluating Manderson's audit for the 2022 fiscal year for fraud. The audit found "found significant internal control weaknesses, lack of governing body oversight, accuracy issues with the town’s census report, accounting errors and information technology weaknesses that may have led to missing money. The town allegedly violated 16 state and federal regulations."
Lien and Rodriguez-Williams asked Rich Cummings, the administrator for the Public Funds Division of the Department of Audit, about timelines for compliance, follow-up investigations by the department and what – if any – action the department could take.
Cummings said they can do follow-up audits, give towns time to catch up on their finances and give them “high-risk entity” status for future audits.
Lien and Rodreguiz-Williams questioned further what actions were statutorily required in a situation like this.
“There really isn't a specific requirement in terms of how regularly we go back and conduct an audit of a particular entity, and additionally, there really isn't a requirement for us to go back and actually do a follow-up as well. We tend to do that just because it's just good practice to do that,” said Cummings. “It really is a matter of resources. We have six auditors. We have over 600 entities out there that we are looking to try and get out and conduct audits. And so it's just a matter of trying to find time to get out and do some of those based on the risk.”
Cummings referenced the Reagan-era joke: The worst nine words someone can hear are, "I’m from the government and I’m here to help."
But he said in this case, it “really is true.” Cummings said the department was primarily operating as a reporting mechanism for the governing body and as assistance for towns and municipalities to help get things in order. As far as teeth, there wasn’t much muscle for the department to flex. At most, some money could be withheld if the local census was not submitted on time.
Lawmakers still wanted to see action. In addition to continued financial scrutiny, Rodriguez-Williams asked Department of Audit officials, “If the legislative body chose to defund a town, municipality or a county, because of severe negligence, misappropriating, misusing state funds: What is the default mechanism for that town? What happens? Does it just go away? Who takes over?”
“I don't know the answer to that question,” Chavez said. ”For our census process, it's only a portion of their funding that's withheld, and historically, that's been enough to get them to act on things. But I don't know what happens if all of their funding is withheld.”
Towards the end of the meeting, Lien proposed a motion.
“Given our ability to be able to review our duties, to conduct audits, I would like to make a motion that we subpoena Riverton Recreation District #25 and the Fremont County clerk. The town of Bear River, their mayor, clerk and treasurer, and the town of Manderson, its mayor, clerk and treasurer, are to all come to the Management Audit Committee and explain why we haven't found any compliance.”
Rodriguez-Williams seconded the motion, saying the committee was the perfect forum to address the situation, and that these towns were basically giving the state the “middle finger.”
The motion passed.
Looking ahead
Committee Chair Rep. Christopher Knapp (R-Gillette) said he was pleased with the relative productivity of the July meeting, seeing the large workload, the subpoena request and the move to audit LSO.
Additionally, lawmakers put forth a motion to begin a bill draft to bring the public funds division of the Department of Audit into the realm of the LSO.
Lawmakers also asked for reports from the Wyoming Business Council, seeking more information on some of the grants and awards handed out by the council.
Sherwood emphasized that the committee has one day left to get quite a lot done, as they plan to review the Wyoming Business Council, potentially craft legislation, question public officials, and continue to review executive branch agencies.
Sherwood asked lawmakers to seek out some information themselves instead of waiting for LSO.
This reporting was made possible by a grant from the Corporation For Public Broadcasting, supporting state government coverage in the state. Wyoming Public Media and Jackson Hole Community Radio are partnering to cover state issues both on air and online.
Editor's Note: This story has been updated to include more information about Manderson's audits.
