MINUTES OF THE ASSEMBLY COMMITTEE ON ELECTIONS AND PROCEDURES Sixty-eighth Session February 2, 1995 The Committee on Elections and Procedures was called to order at 3:35 p.m., on Thursday, February 2, 1995, Chairman Giunchigliani presiding in Room 331 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Mr. Jack D. Close, Chairman Ms. Chris Giunchigliani, Chairman Mrs. Joan A. Lambert, Vice Chairman Mr. Joseph E. Dini, Jr. Mrs. Jan Evans Mr. Thomas A. Fettic Mrs. Vivian L. Freeman Mr. David E. Humke Mrs. Jan Monaghan Mr. Bob Price COMMITTEE MEMBERS ABSENT: Mr. Richard Perkins, Vice Chairman (Excused) Mr. Dennis L. Allard (Excused) GUEST LEGISLATORS PRESENT: Lieutenant Governor Lonnie Hammargren Assemblyman Douglas A. Bache, District No. 11 STAFF MEMBERS PRESENT: Mr. Robert Erickson, Research Director OTHERS PRESENT: Mr. Richard Jarvis/Chancellor, University and Community College System of Nevada Mr. Thomas K. Anderes/Vice Chancellor, Finance and Administration, University and Community College System of Nevada Ms. Ana Dawson/Citizen Ms. Thelma Clark/Citizen Ms. Janice Goodhue/Literacy Volunteer Tutor, University of Nevada Reno Ms. Dorothy Gallagher/Regent, University and Community College System of Nevada Mr. Joe Crowley/President, University of Nevada Reno Mr. Allen Jones/Citizen Mrs. Nancy Price/Citizen Mr. Jim Richardson/Nevada Faculty Alliance Ms. Linda Johnson/State of Nevada Employees Association ASSEMBLY BILL 79 - Requires legislative auditor to conduct performance audit of University and Community College System of Nevada. Assemblyman Joseph E. Dini, Jr., District No. 38, addressed the committee reading from prepared text (Exhibit C). Since the legislature provided funding for a sizable portion of the system's budget, he told committee the legislature was accountable and should be assured proper controls were in place. He then introduced Mr. Gary Crews, Legislative Auditor, Legislative Counsel Bureau. At the request of Chairman Giunchigliani, Mr. Crews defined "performance audit" which specified the scope and objective of the particular engagement. A common understanding would be to search for economical ways to operate and detect whether operations were efficient and programs effective. A.B. 79 audit would look at management controls to assure a total and comprehensive understanding of the budgetary and expenditure activities of the system existed, and that management and legislature were provided with information necessary to fulfill their oversight responsibility. The audit would assure information was valid and reliable, and no constraints existed which would inhibit the university system from appropriately controlling its operations. Mr. Richard Jarvis, Chancellor of the University and Community College System of Nevada, and Mr. Thomas Anderes, Vice Chancellor for Finance and Administration, University and Community College System of Nevada, attended the meeting in support of A.B. 79. Mr. Jarvis testified he welcomed the audit which would prove accountability, credibility with the public and sense of well-being on the part of the public. He elaborated on accountability and said appropriate planning was necessary. The planning report for the next few years had been submitted with detailed examples of the method for determining goals which included intent to meet goals for the future. Mr. Jarvis discussed performance indicators which were included in the planning report. Indicators included efforts of present students and faculty, and in the next few years performance indicators would include where students went to work, how well students met needs of employers, and how well learning of students and work of faculty accomplished the mission of the University. Management actions needed to be taken which would give confidence to the public in the University's use of funds. He discussed recent problems dealt with by the University which were reassignment of administrators, the golden parachute policy, tuition policy, fiscal system and workload of faculty. Chairman Giunchigliani questioned whether an external audit was performed as standard practice when change of management occurred as was done in many organizations and businesses. Mr. Jarvis thought an external audit at such a time was not standard in educational institutions. Mr. Tom Anderes, Vice Chancellor for Finance and Administration, University and Community College System of Nevada, discussed present audit system at U.C.C.S.N. (Exhibit D). Concluding, he discussed costs of audits. A.B. 79 presently suggested a cost of $70,000 for the legislative auditor to perform an audit of the system. If the intent of the legislation was to perform an audit of each institution in the system, cost would be significantly higher. Presently, external audit which was not an intensive performance audit, would cost $140,000 to $160,000 annually for the system. A performance audit for every institution in the system would cost more than $200,000 annually, Mr. Anderes believed. Performance audits were not typically done in higher educational systems, and, therefore, a cost estimate was difficult to make. He asked for information regarding the scope of the performance audit of A.B. 79 in order for present practices and costs to be assessed. Assemblywoman Freeman asked Mr. Anderes the name of the firm which performed the audit, and he replied, "Deloitte and Touche." At this time, Chairman Giunchigliani asked committee to note newspaper articles pertaining to A.B. 79, (Exhibit E), which had been faxed from Las Vegas. Ms. Anna Dawson, 4827 Tamalpias Avenue, Las Vegas, Nevada 89120, testified via telephone conference from Las Vegas in support of A.B. 79. She believed there should be total accountability for all monies going into the University and for how the money was spent. Chairman Giunchigliani reiterated Assemblyman Dini's statement of intent that A.B. 79 was to assure public accountability for public tax dollars going into the University system. Ms. Thelma Clark, 3901 East George, Las Vegas, Nevada 89110, also testified via telephone conference in support of A.B. 79. She stated copies of the audit by Deloitte and Touche and copies of audit response from the interim audit could be obtained from the Board of Regents office in Reno, phone number 784-4958. She suggested the word "detailed" be inserted prior to the word "audit" even though more money would be required for a detailed audit. Chairman Giunchigliani told Ms. Clark committee would not call for a vote on A.B. 79 this date. She expressed her appreciation to Ms. Clark for her time and commitment. Chairman Giunchigliani then asked for testimony in opposition to A.B. 79. There was none. Ms. Janice Goodhue, Literacy Volunteer Tutor, University of Nevada Reno, advised committee she supported A.B. 79. She asked for an addition to A.B. 79 which would be the inclusion of a requirement to conduct a performance audit for the Board of Regents. Responding to Ms. Goodhue's suggestion, Assemblyman Dini advised he would clarify the Board of Regents was part of the system. Ms. Dorothy Gallagher, Regent, University and Community College System of Nevada, spoke as an individual in support of A.B. 79. She pointed out she was not speaking for the Board, but as an individual who was experienced as a Regent and as a member and a chairman of audit committees. She considered the audit committee the most important committee of a Board of Regents, and all audit committees with which she was familiar thought they needed more internal auditors. She pronounced she had never been in any organization who had as few auditors who handled as much money and had as complex a system as the University and Community College System of Nevada. Many areas were not audited for ten years because of lack of personnel. The most critical areas, therefore, were selected for audit. She felt $70,000 was not enough money, and she believed the audit would require four or five times that amount. Ms. Gallagher expressed concern relative to the effectiveness of the audit with that amount of funding. She asked committee to tell the University System what was wanted which would allow the University's internal auditors to assist legislative auditors. Assemblywoman Evans then asked Mr. Crews how far back in time the performance audit would cover. Mr. Crews conveyed the time frame would vary with each audit. If problems existed, the audit would need to cover the past three or four years to determine how the situation arose. Chairman Giunchigliani believed Ways and Means and probably Senate Finance would discuss if a need for additional staff in Auditing was required. Assemblyman Close asked Mr. Crews to comment on the amount of money (which was $70,000) appropriated for the audit. Responding to Mr. Close, Mr. Crews discussed various audits and the costs of the audits and believed $70,000 would adequately fund the audit unless the committee wanted to go further than an overview of the system and management controls presently in place. Mrs. Gallagher hoped the audit would cover present problems, and money allocated for the audit would not be wasted on prior problems. Mr. Crews pointed out the audit would not cover effectiveness reviews of a particular program; the audit would cover the cross-section of the top structure of the system and how it functioned. Mr. Joe Crowley, President, University of Nevada Reno, addressed the committee outlining assessments the University had undertaken to determine effectiveness of its educational programs after 1990 when the University adopted a new and controversial core curriculum. He described surveys which were taken of alumni, recent graduates, and employers, and student interviews. Material relating to those surveys had been published every year. He continued with a discussion of new programs. Beginning in the fall of 1994 a math placement test was given to each new student and a chart of the student's progress would be kept. Another program, which was in the second year, focussed on the ability of students to write well. A pilot project was started this year in the Electrical Engineering and Criminal Justice Departments wherein writing samples would be collected from students at the beginning of their courses and would again be collected when students had accomplished their majors to compare their progress. Mr. Crowley discussed focus groups where faculty members met with criminal justice students to talk about the effectiveness of criminal justice measures. Information obtained from the assessment work showed a weakness was the advisement of students. A survey of students was then done to determine whether the anecdotal evidence was correct. The survey showed the information was correct, and steps had been taken to assist in alleviating the problem. Mr. Crowley then discussed program review work the University was doing, noting that since 1992, 150 program reviews had been done, 74 of which were done in 1994. He described the programs and stated the efforts determined how well the University measured in terms of quality measurement standards. He added the University was interested as a system in developing more rigorous and measurable performance indicators in order to do a better job of being accountable. At this point in Mr. Crowley's testimony, Chairman Giunchigliani interjected the legislation would not get into the program areas. She asked Mr. Crowley to focus his remarks on the performance audit and questioned whether he supported the audit covering only the area of management controls. Mr. Crowley replied he was asked to testify because the focus of the audit was not clear. He concluded his remarks by stating the Athletic Departments of both Universities were compelled to participate in a program called "Certification" which was an N.C.A. requirement. A part of the program was financial integrity where institutions were required to perform a self-study and review how well the institution was controlling athletics financially. Since the "Certification" program was related to management controls, Mr. Crowley felt the program would be of interest to the committee as part of the audit. Lieutenant Governor Lonnie Hammargren testified he was speaking as an individual in favor of A.B. 79. He told committee he had been on the University Board of Regents for six years and during the last portion of the term, he had been on the Audit Committee. He believed the $70,000 should be considered as better management control of the University systems and better responsibility for associated foundations. He asked to go on record as supporting the legislation. Mr. Allen Jones, citizen, stated he lived in Las Vegas. He testified in support of A.B. 79 advising management comparisons could be made of the controls which presently existed. In terms of a performance audit of the controls and suggestions about the controls, any amount of money the legislature would spend would save money for the public by putting in better controls and management, by going forward and having fewer things to append on the particular administrator in charge of a particular program. A.B. 79 would build a system responsive to the needs of the young men and women who would be educated in Nevada and to the citizens of Nevada. He concluded his remarks by strongly urging the committee to vote for the legislation. Mrs. Nancy Price, citizen, North Las Vegas, testified in support of A.B. 79. She told committee she was not speaking for the Board, but was a Regent of the University system. She stressed a performance audit would address decision making being done and felt it was imperative the legislation be passed at this time because it coexisted with other legislation being addressed. Mrs. Price pointed out Nevada had a unique system, and the Board of Regents had an enormous amount of power. The audit function, which was a third party type of oversight, was important on a regular basis and was particularly important at this time because the Federal Government was turning its attention to universities and community colleges across the country. Audits were being done by the Internal Revenue Service where single institutions were being fined tens of millions of dollars. It was important that the system have a record that the State and the University System were correcting situations which arose. Mrs. Price felt A.B. 79 performance audit would show concern for fiscal responsibility. Mr. Jim Richardson, representing the Nevada Faculty Alliance, testified on behalf of A.B. 79. He questioned the ability to perform an audit for $70,000 but urged committee not to increase the amount. Chairman Giunchigliani closed the hearing on A.B. 79. ASSEMBLY BILL 78 - Requires legislative auditor to conduct performance audit of state's program of group health insurance that is provided by committee on benefits through plan of self-insurance. Assemblyman Douglas A. Bache, District No. 11, prime sponsor, stated the legislation had its origins in the 1993 legislative session. The bill was processed by the Elections and Procedures Committee in 1993, was passed by Ways and Means and sent to the Senate where it died at the end of the session. The request for an audit came because a number of constituents were concerned about insurance costs incurred through Committee on Benefits, he continued. The audit reflected a cost of $7,500. After the legislation died during the interim, he received another request for the audit this session. In the interim, the Committee on Benefits had contracted privately for an audit of its own system to be conducted at a cost of $125,000 to $130,000. Audit results would be released at the end of February 1995. Since an audit was in process, Assemblyman Bache asked committee to hold action on A.B. 78 until committee received the Audit Report from the Committee on Benefits, and determined after review whether a need existed to process A.B. 78. Assemblyman Bache closed his testimony by stating cost of the audit done by the Committee on Benefits was of great concern to him. He informed the committee in 1993 Mr. Dave Thomas, Risk Management, was the only person who testified against the legislation. Chairman Giunchigliani asked for questions from committee. There were none. At this time Ms. Linda Johnson, representing State of Nevada Employees Association, testified the Committee on Benefits did hire an outside qualified accounting firm to conduct an in-depth audit. If the legislature would feel more comfortable with an additional audit, S.N.E.A. would support the audit as they did two years ago. She suggested, however, the amount of $7,500 appeared to be too small for an in-depth study. Ernst and Young was contracted for $130,000 to perform the in-depth study. In the legislation, S.N.E.A. would like to see the scope of the study expanded in Section 1 to include the Benefit Services Fund in order to assure cost allocations would not cause the health insurance package to subsidize other programs in the budget. Chairman Giunchigliani asked for further testimony on A.B. 78. There being none, she closed the hearing on A.B. 78 and informed committee at request of the sponsor, committee would postpone action until a copy of audit was received. There being no further business to come before committee, the meeting was adjourned at 4:50 p.m. RESPECTFULLY SUBMITTED: Bobbie Mikesell, Committee Secretary APPROVED BY: Assemblyman Jack D. Close, Chairman Assemblywoman Chris Giunchigliani, Chairman Assembly Committee on Elections and Procedures February 2, 1995 Page