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Key: (1) language to be deleted (2) new language

                            CHAPTER 99-H.F.No. 1003 
                  An act relating to legislature; prescribing the powers 
                  and duties of the legislative audit commission and the 
                  legislative auditor; making various technical changes; 
                  amending Minnesota Statutes 1998, sections 3.97; 
                  3.971; 3.974; 3.975; 6.74; 10.48; 13.46, subdivision 
                  8; 16A.27, subdivision 2; 37.06; 37.07; 85A.02, 
                  subdivision 5c; 89.05; 161.08; 192.551; 352.03, 
                  subdivision 6; 353.03, subdivision 3a; 353A.05, 
                  subdivision 1; 354.06, subdivision 2a; 360.015, 
                  subdivision 19; 574.20; and 609.456; Laws 1990, 
                  chapter 535, section 5; repealing Minnesota Statutes 
                  1998, sections 3.973; 116.072, subdivision 12; 
                  469.207, subdivision 1; and 574.02. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
           Section 1.  Minnesota Statutes 1998, section 3.97, is 
        amended to read: 
           3.97 [AUDIT POLICY; CREATION OF COMMISSION; TRANSFER OF 
        FUNCTIONS OF PUBLIC EXAMINER; DUTIES OF LEGISLATIVE AUDITOR; 
        ACCESS TO DATA.] 
           Subdivision 1.  Continuous legislative review of the effect 
        of grant-in-aid programs, the spending of public funds and their 
        financing at all levels of government is required in the public 
        interest to enable the enactment of appropriate legislation.  
           Subd. 2.  The legislative audit commission is created.  The 
        commission consists of: 
           (1) the majority leader of the senate and the president of 
        the senate or their designees; 
           (2) the chair of the senate committee on taxes or a 
        designee who is a member of the committee; 
           (3) the chair of the senate committee on governmental 
        operations and reform or a designee who is a member of the 
        committee; 
           (4) (3) the a chair of the a senate committee on 
        finance or a designee who is a member of the 
        committee designated by the majority leader; 
           (5) (4) five four members of the senate appointed by the 
        senate minority leader; 
           (6) (5) the speaker of the house and the chair of the house 
        committee on rules or their designees; 
           (7) the chair of the house committee on taxes or a designee 
        who is a member of the committee; 
           (8) (6) the chair of the house committee on governmental 
        operations and gaming or a designee who is a member of the 
        committee; 
           (9) (7) the chair of the house ways and means committee or 
        a designee who is a member of the committee; and 
           (10) (8) five four members of the house appointed by the 
        house minority leader.  
        The appointed members of the commission shall serve for a term 
        commencing upon appointment and expiring at the opening of the 
        next regular session of the legislature in the odd-numbered year 
        and until a successor is appointed.  A vacancy in the membership 
        of the commission shall be filled for the unexpired term in a 
        manner that will preserve the representation established by this 
        subdivision.  
           The commission shall meet in January of each odd-numbered 
        year to elect its chair and other officers as it may determine 
        necessary.  A chair shall serve a two-year term, expiring on 
        January 1 in the odd-numbered year following election, and until 
        a successor is elected.  The chair shall alternate biennially 
        between the senate and the house.  The commission shall meet at 
        the call of the chair or the executive secretary.  The members 
        shall serve without compensation but be reimbursed for their 
        reasonable expenses as members of the legislature.  The 
        commission may exercise the powers prescribed by section 3.153. 
           Subd. 3.  The department of public examiner is transferred 
        from the executive to the legislative branch.  
           Subd. 4.  The legislative auditor is the executive 
        secretary of the commission.  The legislative auditor shall be 
        appointed by the commission for a six-year term and serve in the 
        unclassified service.  When in office, the legislative auditor 
        shall may not at any time while in office hold any other public 
        office.  The legislative auditor shall may not be removed from 
        office before the expiration of the term of service except for 
        cause after public hearing.  
           Subd. 5.  The legislative auditor shall establish a 
        financial audits division and a program evaluation division to 
        fulfill the duties prescribed in this section.  Each division 
        shall must be supervised by a deputy auditor, appointed by the 
        legislative auditor, with the approval of the commission, for a 
        term coterminous with the legislative auditor's term.  The 
        deputy auditors may be removed before the expiration of their 
        terms only for cause.  The legislative auditor and deputy 
        auditors may each appoint a confidential secretary to serve at 
        pleasure.  The commission shall fix the salaries and benefits of 
        the legislative auditor, deputy auditors and confidential 
        secretaries shall be determined by the compensation plan 
        approved by the legislative coordinating commission.  The deputy 
        auditors may perform and exercise the powers, duties and 
        responsibilities imposed by law on the legislative auditor when 
        authorized by the legislative auditor.  The deputy auditors and 
        the confidential secretaries serve in the unclassified civil 
        service, but all other employees of the legislative auditor are 
        in the classified civil service.  While in office, a person 
        appointed deputy for the financial audit division must hold an 
        active license as a certified public accountant. 
           Subd. 6.  All the powers, duties, and responsibilities of 
        the department of public examiner relating to the state of 
        Minnesota, its departments and agencies as described in 
        Minnesota Statutes 1971, section 215.03, and any other law 
        concerning powers, duties, and responsibilities of the public 
        examiner not otherwise dealt with by Laws 1973, chapter 492, are 
        transferred to the legislative auditor.  Nothing in this 
        subdivision shall supersede the powers conferred upon the 
        commissioner of finance under section 16A.055.  
           Subd. 7.  In addition to the legislative auditing duties 
        concerning state financial matters, the legislative auditor 
        shall also exercise and perform duties prescribed by rule of the 
        legislature or either body of it or by the commission.  The 
        legislative auditor shall review department policies and 
        evaluate projects or programs requested by the commission.  Any 
        standing legislative committee having legislative jurisdiction 
        may request the commission to review projects or programs.  
           Subd. 8.  The legislature may, by rule, provide to the 
        legislative auditor the testimonial powers that are conferred by 
        law on legislative standing commissions or committees. 
           Subd. 9.  The legislative auditor is subject to the 
        Government Data Practices Act, chapter 13, and shall protect 
        from unlawful disclosure data classified as not public.  If data 
        provided by the legislative auditor to the commission is 
        disseminated by the commission or its members or agents in 
        violation of section 13.05, subdivision 4, the commission is 
        subject to liability under section 13.08, subdivisions 1 and 3.  
           Subd. 10.  Members of the commission have access to data 
        that is collected or used by the legislative auditor and 
        classified as not public or as private or confidential only as 
        authorized by resolution of the commission.  The commission 
        shall may not authorize its members to have access to private or 
        confidential data on individuals collected or used in connection 
        with the collection of any tax.  
           Subd. 11.  (a) "Audit" as used in this subdivision means a 
        financial audit, a review, program evaluation, a best practices 
        review, or an investigation.  Data relating to an audit are not 
        public or with respect to data on individuals are confidential 
        until the final report of the audit has been published released 
        by the legislative auditor or the audit is no longer being 
        actively pursued.  Upon release of a final audit report by the 
        legislative auditor, data relating to an audit are public except 
        data otherwise classified as not public.  
           (b) Data that support the conclusions of the related to an 
        audit but not published in the audit report and that the 
        legislative auditor reasonably believes will result be used in 
        litigation are not public and with respect to data on 
        individuals are confidential until the litigation has been 
        completed or is no longer being actively pursued.  
           (c) Data on individuals that could reasonably be used to 
        determine the identity of an individual supplying data for an 
        audit are private if the data supplied by the individual were 
        needed for an audit and the individual would not have provided 
        the data to the legislative auditor without an assurance that 
        the individual's identity would remain private, or the 
        legislative auditor reasonably believes that the subject would 
        not have provided the data.  
           (d) The definitions of terms provided in section 13.02 
        apply for purposes of this subdivision.  
           Subd. 11a.  If, before releasing a report, the legislative 
        auditor provides a person with data relating to the audit for 
        the purpose of review and verification of the data, the person 
        must protect the data from unlawful disclosure or be subject to 
        the penalties and liabilities provided in sections 13.08 and 
        13.09. 
           Subd. 12.  The commission shall periodically select topics 
        for the legislative auditor to evaluate.  Topics may include any 
        agency, program, or activity established by law to achieve a 
        state purpose, or any topic that affects the operation of state 
        government, but the commission shall give primary consideration 
        to topics that are likely, upon examination, to produce 
        recommendations for cost savings, increased productivity, or the 
        elimination of duplication among public agencies.  Legislators 
        and legislative committees may suggest topics for evaluation, 
        but the legislative auditor shall only conduct evaluations 
        approved by the commission. 
           Sec. 2.  Minnesota Statutes 1998, section 3.971, is amended 
        to read: 
           3.971 [POWERS AND DUTIES OF LEGISLATIVE AUDITOR.] 
           Subdivision 1.  To perform financial audits The legislative 
        auditor shall postaudit and make a complete examination and 
        verification of all accounts, records, inventories, vouchers, 
        receipts, funds, securities, and other assets of audit the 
        financial statements of the state of Minnesota required by 
        section 16A.50 and, as resources permit, shall audit Minnesota 
        state colleges and universities, the University of 
        Minnesota, all state agencies, departments, boards, commissions, 
        courts, and other state agencies at least once a year, if money 
        and personnel permit, and oftener if deemed necessary or as 
        directed by the legislature or the legislative audit 
        commission.  Audits may include detailed checking of every 
        transaction or test checking as the legislative auditor deems 
        best.  The books of the state treasurer and commissioner of 
        finance may be examined monthly. organizations subject to audit 
        by the legislative auditor, including the state agricultural 
        society, agricultural utilization research institute, Minnesota 
        Technology, Inc., Minnesota historical society, labor 
        interpretive center, Minnesota partnership for action against 
        tobacco, metropolitan sports facilities commission, metropolitan 
        airports commission, and metropolitan mosquito control 
        district.  Financial audits must be conducted according to 
        generally accepted government auditing standards.  The 
        legislative auditor shall see that all provisions of law 
        respecting the appropriate and economic use of public funds are 
        complied with by all and may, as part of a financial audit or 
        separately, investigate allegations of noncompliance by 
        employees of departments and agencies of the state 
        government and the other organizations listed in this 
        subdivision.  
           A copy of all postaudits, reports, and results of 
        examinations made by the legislative auditor shall be deposited 
        with the legislative reference library.  
           Subd. 2.  To perform program evaluation, The legislative 
        auditor shall conduct program evaluations to determine the 
        degree to which the activities and programs entered into or 
        funded by the state are accomplishing their goals and 
        objectives, including a critical analysis of goals and 
        objectives, measurement of program results and effectiveness, 
        alternative means of achieving the same results, and efficiency 
        in the allocation of resources.  The legislative auditor shall 
        recommend ways to improve the effectiveness of the programs, 
        reduce the cost of providing state services, and to eliminate 
        services of one agency that overlap with or duplicate the 
        services performed by another agency.  At the direction of the 
        commission the legislative auditor may perform conduct program 
        evaluations of any state department, board, commission, or 
        agency and any metropolitan agency, board, or commission created 
        under chapter 473; or any program or activity established or 
        funded, in whole or in part, by the state.  After an evaluation 
        report has been released, the legislative auditor may 
        periodically conduct a follow-up review to assess what changes 
        have occurred. 
           Subd. 4.  (a) To perform best practices reviews, The 
        legislative auditor through the program evaluation division 
        shall conduct best practices reviews that examine the procedures 
        and practices used to deliver local government 
        services, including those of municipalities and counties, 
        determine the methods of local government service delivery, 
        identify variations in cost and effectiveness, and identify 
        practices to save money or provide more effective service 
        delivery.  The legislative auditor shall recommend to local 
        governments service delivery methods and practices to improve 
        the cost-effectiveness of services.  The legislative auditor and 
        the board of government innovation and cooperation shall notify 
        each other of projects being conducted relating to improving 
        local government services. 
           (b) The commission shall identify approve local government 
        services to be reviewed with advice from an advisory council 
        appointed by the legislative auditor and consisting of: 
           (1) three representatives from the Association of Minnesota 
        Counties; 
           (2) three representatives from the League of Minnesota 
        Cities; 
           (3) two representatives from the Association of 
        Metropolitan Municipalities; 
           (4) one representative from the Minnesota Association of 
        Townships; and 
           (5) one representative from the Minnesota Association of 
        School Administrators.  
           (c) This subdivision expires June 30, 1999. 
           Sec. 3.  Minnesota Statutes 1998, section 3.974, is amended 
        to read: 
           3.974 [TO FILE WRITTEN REPORTS.] 
           For each audit done, evaluation, or other review completed, 
        the legislative auditor shall file provide a written report with 
        to the department, agency, society, or association 
        concerned, organization or individual audited, evaluated, or 
        reviewed; the legislative reference library; and the legislative 
        audit commission for its consideration and action.  
           Each audit report shall set forth: 
           (1) whether all funds have been expended for the purposes 
        authorized in their appropriation; 
           (2) whether all receipts have been accounted for and paid 
        into the state treasury as required by law; 
           (3) all illegal and unbusinesslike practices, if any; 
           (4) an assessment of the financial control practices used 
        in the agency, a measurement of performance, and recommendations 
        for improved effectiveness; and 
           (5) other data, information, and recommendations as the 
        legislative auditor may deem advisable and necessary.  
           Sec. 4.  Minnesota Statutes 1998, section 3.975, is amended 
        to read: 
           3.975 [DUTIES WHEN VIOLATIONS MISUSE OF PUBLIC MONEY OR 
        OTHER RESOURCES ARE DISCOVERED.] 
           If a legislative auditor's examination discloses 
        malfeasance, misfeasance, or nonfeasance in office on the part 
        of an officer or employee, a copy of the report shall be signed 
        and verified, and it shall be the duty of misuse of public money 
        or other public resources, the legislative auditor to shall file 
        the a report with the legislative audit commission and, the 
        attorney general, and the appropriate county attorney.  It shall 
        be the duty of The attorney general to institute and prosecute 
        civil proceedings against the delinquent officer or employee, or 
        upon the officer's or employee's official bond, or both, as 
        appropriate to secure to the state the shall seek recovery of 
        funds or money and other assets misappropriated resources as the 
        evidence may warrant.  The attorney general county attorney 
        shall cause criminal proceedings to be instituted by the proper 
        authorities as the evidence may warrant.  
           Sec. 5.  Minnesota Statutes 1998, section 6.74, is amended 
        to read: 
           6.74 [INFORMATION COLLECTED FROM LOCAL GOVERNMENTS.] 
           The state auditor, or a designated agent, shall collect 
        annually from all city, county, and other local units of 
        government, information as to the assessment of property, 
        collection of taxes, receipts from licenses and other sources, 
        the expenditure of public funds for all purposes, borrowing, 
        debts, principal and interest payments on debts, and such other 
        information as may be needful.  The data shall be supplied upon 
        blanks prescribed by the state auditor, and all public officials 
        so called upon shall fill out properly and return promptly all 
        blanks so transmitted.  The state auditor or assistants, may 
        examine local records in order to complete or verify the 
        information.  Copies of all reports so received shall be 
        forwarded by the state auditor to the legislative auditor.  
           Sec. 6.  Minnesota Statutes 1998, section 10.48, is amended 
        to read: 
           10.48 [EXPENSE REPORTS.] 
           The house of representatives and senate shall by rule 
        require detailed quarterly reports of expenditures by the house 
        of representatives and senate to their respective committees on 
        rules and legislative administration.  Each constitutional 
        officer, the district courts, court of appeals, and supreme 
        court shall submit detailed quarterly reports of their 
        expenditures to the legislative auditor.  These reports are 
        public information. 
           Sec. 7.  Minnesota Statutes 1998, section 13.46, 
        subdivision 8, is amended to read: 
           Subd. 8.  [ACCESS FOR AUDITING.] To the extent required by 
        state or federal law, representatives of federal, state, or 
        local agencies shall have access to data maintained by public or 
        private community mental health centers, mental health divisions 
        of counties, and other providers under contract to deliver 
        mental health services which is necessary to achieve the purpose 
        of auditing.  Public or private community mental health centers, 
        mental health divisions of counties, and other providers under 
        contract to deliver mental health services shall not permit this 
        data to identify any particular patient or client by name or 
        contain any other unique personal identifier, except data 
        provided to the legislative auditor.  Notwithstanding any 
        statute or rule to the contrary, and solely for the purposes of 
        conducting an audit approved by the legislative audit commission 
        in 1988, the legislative auditor shall be given access to all 
        data, records, and files classified as not public.  The 
        legislative auditor shall maintain all data collected under this 
        subdivision in accordance with chapter 13 and may not disclose 
        data that identify a patient or client by name or that contain 
        any other personal identifier. 
           Sec. 8.  Minnesota Statutes 1998, section 16A.27, 
        subdivision 2, is amended to read: 
           Subd. 2.  [DAILY REPORT.] By 9:00 a.m. every business day, 
        a depository holding a total of over $100,000 in 
        non-interest-bearing state deposits shall report the balances as 
        of the close of the last business day to the treasurer and the 
        commissioner.  The commissioner shall record the balances, and 
        send a copy of them to the legislative reference library, and 
        report them monthly to the legislative audit commission.  
           Sec. 9.  Minnesota Statutes 1998, section 37.06, is amended 
        to read: 
           37.06 [SECRETARY; LEGISLATIVE AUDITOR; DUTIES; REPORT.] 
           The secretary shall keep a complete record of the 
        proceedings of the annual meetings of the state agricultural 
        society and all meetings of the board of managers and any 
        committee of the board, keep all accounts of the society other 
        than those kept by the treasurer of the society, and perform 
        other duties as directed by the board of managers.  On or before 
        December 31 each year, the secretary shall report to the 
        governor for the fiscal year ending October 31 all the 
        proceedings of the society during the current year and its 
        financial condition as appears from its books.  This report must 
        contain a full, detailed statement of all receipts and 
        expenditures during the year.  
           The books and accounts of the society for the fiscal year 
        must be examined and audited annually by the legislative 
        auditor.  The cost of the examination must be paid by the 
        society to the state and credited to the legislative auditor's 
        revolving general fund.  
           A summary of this examination, certified by the legislative 
        auditor, must be appended to the secretary's report, along with 
        the legislative auditor's recommendations and the proceedings of 
        the first annual meeting of the society held following the 
        secretary's report, including addresses made at the meeting as 
        directed by the board of managers.  The summary, 
        recommendations, and proceedings must be printed in the same 
        manner as the reports of state officers.  Copies of the report 
        must be printed annually and distributed as follows:  to each 
        society or association entitled to membership in the society, to 
        each newspaper in the state, and the remaining copies as 
        directed by the board of managers. 
           Sec. 10.  Minnesota Statutes 1998, section 37.07, is 
        amended to read: 
           37.07 [MONTHLY STATEMENTS BY SECRETARY; PURCHASES, 
        EXPENDITURES.] 
           The secretary of the state agricultural society shall 
        prepare a signed statement each month summarizing receipts and 
        expenditures for the preceding month, which must be approved by 
        the president or a vice-president of the board of managers.  The 
        secretary's affidavit must be attached to this statement.  The 
        affidavit must state:  
           (1) that all articles were purchased by or under the 
        secretary's direction, and that to the secretary's best 
        information and belief, all articles purchased by the board of 
        managers were purchased at a fair cash market value and received 
        by the society, and that all services charged for were actually 
        provided; 
           (2) that neither the secretary nor any person in the 
        secretary's behalf, or the board of managers, to the secretary's 
        best information and belief, had any pecuniary or other interest 
        in any purchase made or services rendered, or received any 
        pecuniary or other benefit from the purchases or services, 
        directly or indirectly, by commission, percentage, deduction, or 
        otherwise; and 
           (3) that the articles specified conformed in every respect 
        to the goods ordered, in both quality and quantity.  
           The report must also show the amount of money in the hands 
        of the treasurer of the society.  
           Copies of the secretary's monthly report must be furnished 
        to the commissioner of finance and the office of the legislative 
        auditor and to each member of the board of managers no later 
        than the tenth of the month following the month's activities 
        reported.  
           The board of managers shall designate one or more national 
        or state banks, or trust companies authorized to do a banking 
        business, as official depositories for the society's money, and 
        shall then require the treasurer to deposit all or part of that 
        money in the designated bank or banks.  The designation must be 
        in writing and must set forth all the terms and conditions upon 
        which the deposits are made, and it must be signed by the 
        president and secretary and made a part of the minutes of the 
        board.  Any bank or trust company designated must qualify as a 
        depository by furnishing a corporate surety bond or collateral 
        as required by section 118A.03, and must, as long as any of the 
        society's money is on deposit with it, maintain the bond or 
        collateral in the amounts required by that section.  No bond or 
        collateral is required to secure any deposit if it is insured 
        under federal law, as provided in section 118A.03.  
           Sec. 11.  Minnesota Statutes 1998, section 85A.02, 
        subdivision 5c, is amended to read: 
           Subd. 5c.  [FINANCIAL REPORT.] The board shall employ a 
        certified public accountant to audit and examine its financial 
        records each year.  The board shall submit to the legislative 
        auditor a report of the accountant's examination or audit.  The 
        legislative auditor shall review the report and accept it or may 
        make additional examinations if these would be in the public 
        interest.  The working papers of the certified public accountant 
        relating to the board must be made available to the legislative 
        auditor on request.  
           Sec. 12.  Minnesota Statutes 1998, section 89.05, is 
        amended to read: 
           89.05 [ACCOUNTING SYSTEM.] 
           The department of natural resources shall consolidate and 
        simplify the accounting system within the department for 
        receipts from department managed lands, disbursements made on a 
        regular basis, and the program for federal aids and grant 
        reimbursements.  The new accounting system shall be implemented 
        with the cooperation and under the supervision of the department 
        of finance, utilizing the assistance and recommendations of the 
        office of the legislative auditor. 
           Sec. 13.  Minnesota Statutes 1998, section 161.08, is 
        amended to read: 
           161.08 [BOOKS OF ACCOUNT.] 
           The commissioner shall keep accurate and complete books of 
        account of such character as may be prescribed by the 
        legislative auditor commissioner of finance, the same to show in 
        detail itemized receipts and disbursements of the trunk highway 
        fund.  The books of account shall show the following facts, 
        among others: 
           (1) The expenses of maintaining the transportation 
        department, including the salaries and expenses of the 
        individual members thereof; 
           (2) The amounts of money expended in each county of the 
        state for the construction of trunk highways, and when, where, 
        and upon what job or portion of road expended so that the cost 
        per mile of such construction can be easily ascertained; 
           (3) Any other money expended by the state in connection 
        with any roads other than trunk highways and when, where, and 
        upon what portion of road so expended; and 
           (4) The amount of road equipment and materials purchased, 
        and when, where, and from whom purchased, and the price paid for 
        each item.  The original invoices shall form a part of the 
        permanent files and records in the department of transportation 
        and be open to public inspection. 
           Sec. 14.  Minnesota Statutes 1998, section 192.551, is 
        amended to read: 
           192.551 [ARMY REGULATIONS TO APPLY.] 
           All money and property received from any source for the 
        military forces shall must be kept, disbursed, and accounted for 
        as prescribed by army regulations, where applicable, otherwise 
        as prescribed by state rules.  All such accounts shall must be 
        examined and audited at least once annually by officers of the 
        military forces detailed by the adjutant general as military 
        auditors.  The legislative auditor may appoint any military 
        auditor as an assistant examiner, with all the powers incident 
        thereto, in connection with the examination of such accounts.  
        The provisions of the state Civil Service Act shall not be 
        applicable to such appointments also audit those activities of 
        the accounts that are subject to state law or rule. 
           Sec. 15.  Minnesota Statutes 1998, section 352.03, 
        subdivision 6, is amended to read: 
           Subd. 6.  [DUTIES AND POWERS OF EXECUTIVE DIRECTOR.] The 
        management of the system is vested in the director, who is the 
        executive and administrative head of the system.  The director 
        shall be advisor to the board on matters pertaining to the 
        system and shall also act as the secretary of the board.  The 
        director shall: 
           (1) attend meetings of the board; 
           (2) prepare and recommend to the board appropriate rules to 
        carry out this chapter; 
           (3) establish and maintain an adequate system of records 
        and accounts following recognized accounting principles and 
        controls; 
           (4) designate an assistant director with the approval of 
        the board; 
           (5) appoint any employees, both permanent and temporary, 
        that are necessary to carry out the provisions of this chapter; 
           (6) organize the work of the system as the director deems 
        necessary to fulfill the functions of the system, and define the 
        duties of its employees and delegate to them any powers or 
        duties, subject to the control of the director and under 
        conditions the director may prescribe.  Appointments to exercise 
        delegated power must be by written order and shall be filed with 
        the secretary of state; 
           (7) with the advice and consent of the board, contract for 
        the services of an approved actuary, professional management 
        services, and any other consulting services as necessary and fix 
        the compensation for those services.  The contracts are not 
        subject to competitive bidding under chapter 16C.  Any approved 
        actuary retained by the executive director shall function as the 
        actuarial advisor of the board and the executive director, and 
        may perform actuarial valuations and experience studies to 
        supplement those performed by the actuary retained by the 
        legislative commission on pensions and retirement.  Any 
        supplemental actuarial valuations or experience studies shall be 
        filed with the executive director of the legislative commission 
        on pensions and retirement.  Professional management services 
        may not be contracted for more often than once in six years.  
        Copies of professional management survey reports must be 
        transmitted to the secretary of the senate, the chief clerk of 
        the house of representatives, and the legislative reference 
        library as provided by section 3.195, and to the executive 
        director of the commission and to the legislative auditor at the 
        time as reports are furnished to the board.  Only management 
        firms experienced in conducting management surveys of federal, 
        state, or local public retirement systems are qualified to 
        contract with the director; 
           (8) with the advice and consent of the board provide 
        in-service training for the employees of the system; 
           (9) make refunds of accumulated contributions to former 
        state employees and to the designated beneficiary, surviving 
        spouse, legal representative, or next of kin of deceased state 
        employees or deceased former state employees, as provided in 
        this chapter; 
           (10) determine the amount of the annuities and disability 
        benefits of employees covered by the system and authorize 
        payment of the annuities and benefits beginning as of the dates 
        on which the annuities and benefits begin to accrue, in 
        accordance with the provisions of this chapter; 
           (11) pay annuities, refunds, survivor benefits, salaries, 
        and necessary operating expenses of the system; 
           (12) certify funds available for investment to the state 
        board of investment; 
           (13) with the advice and approval of the board request the 
        state board of investment to sell securities when the director 
        determines that funds are needed for the system; 
           (14) prepare and submit to the board and the legislature an 
        annual financial report covering the operation of the system, as 
        required by section 356.20; 
           (15) prepare and submit biennial and annual budgets to the 
        board and with the approval of the board submit the budgets to 
        the department of finance; and 
           (16) with the approval of the board, perform other duties 
        required to administer the retirement and other provisions of 
        this chapter and to do its business. 
           Sec. 16.  Minnesota Statutes 1998, section 353.03, 
        subdivision 3a, is amended to read: 
           Subd. 3a.  [EXECUTIVE DIRECTOR.] (a)  [APPOINTMENT.] The 
        board shall appoint, with the advice and consent of the senate, 
        an executive director on the basis of education, experience in 
        the retirement field, and leadership ability.  The executive 
        director shall have had at least five years' experience in an 
        executive level management position, which has included 
        responsibility for pensions, deferred compensation, or employee 
        benefits.  The executive director serves at the pleasure of the 
        board.  The salary of the executive director is as provided by 
        section 15A.0815. 
           (b)  [DUTIES.] The management of the association is vested 
        in the executive director who shall be the executive and 
        administrative head of the association.  The executive director 
        shall act as adviser to the board on all matters pertaining to 
        the association and shall also act as the secretary of the 
        board.  The executive director shall: 
           (1) attend all meetings of the board; 
           (2) prepare and recommend to the board appropriate rules to 
        carry out the provisions of this chapter; 
           (3) establish and maintain an adequate system of records 
        and accounts following recognized accounting principles and 
        controls; 
           (4) designate, with the approval of the board, up to two 
        persons who shall serve in the unclassified service and whose 
        salary is set in accordance with section 43A.18, subdivision 3, 
        appoint a confidential secretary in the unclassified service, 
        and appoint employees to carry out this chapter, who are subject 
        to chapters 43A and 179A in the same manner as are executive 
        branch employees; 
           (5) organize the work of the association as the director 
        deems necessary to fulfill the functions of the association, and 
        define the duties of its employees and delegate to them any 
        powers or duties, subject to the control of, and under such 
        conditions as, the executive director may prescribe; 
           (6) with the approval of the board, contract for the 
        services of an approved actuary, professional management 
        services, and any other consulting services as necessary to 
        fulfill the purposes of this chapter.  All contracts are subject 
        to chapter 16C.  The commissioner of administration shall not 
        approve, and the association shall not enter into, any contract 
        to provide lobbying services or legislative advocacy of any 
        kind.  Any approved actuary retained by the executive director 
        shall function as the actuarial advisor of the board and the 
        executive director and may perform actuarial valuations and 
        experience studies to supplement those performed by the actuary 
        retained by the legislative commission on pensions and 
        retirement.  Any supplemental actuarial valuations or experience 
        studies shall be filed with the executive director of the 
        legislative commission on pensions and retirement.  Copies of 
        professional management survey reports shall be transmitted to 
        the secretary of the senate, the chief clerk of the house of 
        representatives, and the legislative reference library as 
        provided by section 3.195, and to the executive director of the 
        commission and to the legislative auditor at the same time as 
        reports are furnished to the board.  Only management firms 
        experienced in conducting management surveys of federal, state, 
        or local public retirement systems shall be qualified to 
        contract with the director hereunder; 
           (7) with the approval of the board provide in-service 
        training for the employees of the association; 
           (8) make refunds of accumulated contributions to former 
        members and to the designated beneficiary, surviving spouse, 
        legal representative or next of kin of deceased members or 
        deceased former members, as provided in this chapter; 
           (9) determine the amount of the annuities and disability 
        benefits of members covered by the association and authorize 
        payment of the annuities and benefits beginning as of the dates 
        on which the annuities and benefits begin to accrue, in 
        accordance with the provisions of this chapter; 
           (10) pay annuities, refunds, survivor benefits, salaries, 
        and necessary operating expenses of the association; 
           (11) prepare and submit to the board and the legislature an 
        annual financial report covering the operation of the 
        association, as required by section 356.20; 
           (12) prepare and submit biennial and annual budgets to the 
        board for its approval and submit the approved budgets to the 
        department of finance for approval by the commissioner; 
           (13) reduce all or part of the accrued interest payable 
        under section 353.27, subdivisions 12, 12a, and 12b, or 353.28, 
        subdivision 5, upon receipt of proof by the association of an 
        unreasonable processing delay or other extenuating circumstances 
        of the employing unit.  The executive director shall prescribe 
        and submit for approval by the board the conditions under which 
        such interest may be reduced; and 
           (14) with the approval of the board, perform such other 
        duties as may be required for the administration of the 
        association and the other provisions of this chapter and for the 
        transaction of its business.  
           Sec. 17.  Minnesota Statutes 1998, section 353A.05, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [COMMISSION ACTIONS.] Upon initiation of 
        consolidation as provided in section 353A.04, the executive 
        director of the commission shall direct the actuary retained by 
        the commission to undertake the preparation of the actuarial 
        calculations necessary to complete the consolidation.  
           These actuarial calculations shall include for each active 
        member, each deferred former member, each retired member, and 
        each current beneficiary the computation of the present value of 
        future benefits, the future normal costs, if any, and the 
        actuarial accrued liability on the basis of the existing relief 
        association benefit plan and on the basis of the public 
        employees police and fire fund benefit plan.  These actuarial 
        calculations shall also include for the total active, deferred, 
        retired, and benefit recipient membership the sum of the present 
        value of future benefits, the future normal costs, if any, and 
        the actuarial accrued liability on the basis of the existing 
        relief association benefit plan, on the basis of the public 
        employees police and fire fund benefit plan, and on the basis of 
        the benefit plan which produced the largest present value of 
        future benefits for each person.  The actuarial calculations 
        shall be prepared using the entry age actuarial cost method for 
        all components of the benefit plan and using the actuarial 
        assumptions applicable to the fund for the most recent actuarial 
        valuation prepared under section 356.215, except that the 
        actuarial calculations on the basis of the existing relief 
        association benefit plan shall be prepared using an interest 
        rate actuarial assumption during the postretirement period which 
        is in the same amount as the interest rate actuarial assumption 
        applicable to the preretirement period.  The actuarial 
        calculations shall include the computation of the present value 
        of the initial postretirement adjustment anticipated by the 
        executive director of the state board as payable after the 
        effective date of the consolidation from the Minnesota 
        postretirement investment fund under section 11A.18.  
           The chief administrative officer of the relief association 
        shall, upon request, provide in a timely manner to the executive 
        director of the commission and to the actuary retained by the 
        commission the most current available information or documents, 
        whichever applies, regarding the demographics of the active, 
        deferred, retired, and benefit recipient membership of the 
        relief association, the financial condition of the relief 
        association, and the existing benefit plan of the relief 
        association.  
           Upon completion of the actuarial calculations required by 
        this subdivision, the actuary retained by the commission shall 
        issue a report in the form of an appropriate summary of the 
        actuarial calculations and shall provide a copy of that report 
        to the executive director of the commission, the executive 
        director of the public employees retirement association, the 
        chief administrative officer of the relief association, the 
        chief administrative officer of the municipality in which the 
        relief association is located, and the state auditor, and the 
        legislative auditor. 
           Sec. 18.  Minnesota Statutes 1998, section 354.06, 
        subdivision 2a, is amended to read: 
           Subd. 2a.  [DUTIES OF EXECUTIVE DIRECTOR.] The management 
        of the association is vested in the executive director who shall 
        be the executive and administrative head of the association.  
        The executive director shall act as advisor to the board on all 
        matters pertaining to the association and shall also act as the 
        secretary of the board.  The executive director shall: 
           (1) attend all meetings of the board; 
           (2) prepare and recommend to the board appropriate rules to 
        carry out the provisions of this chapter; 
           (3) establish and maintain an adequate system of records 
        and accounts following recognized accounting principles and 
        controls; 
           (4) designate an assistant executive director in the 
        unclassified service and two assistant executive directors in 
        the classified service with the approval of the board, and 
        appoint such employees, both permanent and temporary, as are 
        necessary to carry out the provisions of this chapter; 
           (5) organize the work of the association as the director 
        deems necessary to fulfill the functions of the association, and 
        define the duties of its employees and delegate to them any 
        powers or duties, subject to the director's control and under 
        such conditions as the director may prescribe; 
           (6) with the approval of the board, contract and set the 
        compensation for the services of an approved actuary, 
        professional management services, and any other consulting 
        services.  These contracts are not subject to the competitive 
        bidding procedure prescribed by chapter 16C.  An approved 
        actuary retained by the executive director shall function as the 
        actuarial advisor of the board and the executive director and 
        may perform actuarial valuations and experience studies to 
        supplement those performed by the actuary retained by the 
        legislative commission on pensions and retirement.  Any 
        supplemental actuarial valuations or experience studies shall be 
        filed with the executive director of the legislative commission 
        on pensions and retirement.  Copies of professional management 
        survey reports must be transmitted to the secretary of the 
        senate, the chief clerk of the house of representatives, and the 
        legislative reference library as provided by section 3.195, and 
        to the executive director of the commission and to the 
        legislative auditor at the same time as reports are furnished to 
        the board.  Only management firms experienced in conducting 
        management surveys of federal, state, or local public retirement 
        systems are qualified to contract with the executive director; 
           (7) with the approval of the board, provide in-service 
        training for the employees of the association; 
           (8) make refunds of accumulated contributions to former 
        members and to the designated beneficiary, surviving spouse, 
        legal representative, or next of kin of deceased members or 
        deceased former members, under this chapter; 
           (9) determine the amount of the annuities and disability 
        benefits of members covered by the association and authorize 
        payment of the annuities and benefits beginning as of the dates 
        on which the annuities and benefits begin to accrue, under this 
        chapter; 
           (10) pay annuities, refunds, survivor benefits, salaries, 
        and necessary operating expenses of the association; 
           (11) prepare and submit to the board and the legislature an 
        annual financial report covering the operation of the 
        association, as required by section 356.20; 
           (12) certify funds available for investment to the state 
        board of investment; 
           (13) with the advice and approval of the board, request the 
        state board of investment to sell securities on determining that 
        funds are needed for the purposes of the association; 
           (14) prepare and submit biennial and annual budgets to the 
        board and with the approval of the board submit those budgets to 
        the department of finance; and 
           (15) with the approval of the board, perform such other 
        duties as may be required for the administration of the 
        association and the other provisions of this chapter and for the 
        transaction of its business.  The executive director may: 
           (i) reduce all or part of the accrued interest and fines 
        payable by an employing unit for reporting requirements under 
        section 354.52, based on an evaluation of any extenuating 
        circumstances of the employing unit; 
           (ii) assign association employees to conduct field audits 
        of an employing unit to ensure compliance with the provisions of 
        this chapter; and 
           (iii) recover overpayments, if not repaid to the 
        association, by suspending or reducing the payment of a 
        retirement annuity, refund, disability benefit, survivor 
        benefit, or optional annuity under this chapter until the 
        overpayment, plus interest, has been recovered. 
           Sec. 19.  Minnesota Statutes 1998, section 360.015, 
        subdivision 19, is amended to read: 
           Subd. 19.  [KEEP BOOKS AND RECORDS.] The commissioner shall 
        keep accurate and complete books of account of such character as 
        may be prescribed by the legislative auditor, the same accounts 
        to show in detail itemized receipts and disbursements of the 
        airports fund.  The books shall show, and it shall be the duty 
        of the legislative auditor to so prescribe, the following facts, 
        among others: 
           (a) The expenses of maintaining the department, including 
        the salaries and expenses of the individual members thereof; 
           (b) The amounts of money expended in each county of the 
        state for the construction or maintenance of airports or 
        restricted landing areas, when, where, and upon what airport or 
        restricted landing area expended, so that the cost for each such 
        airport or restricted landing area can be easily ascertained; 
           (c) The amount of equipment and materials purchased and 
        when, where, and from whom purchased; these books shall show the 
        price paid for each item; the original invoice shall form a part 
        of the permanent files and records in the department and shall 
        be open to public inspection. 
           Sec. 20.  Minnesota Statutes 1998, section 574.20, is 
        amended to read: 
           574.20 [BONDS, BY WHOM APPROVED.] 
           Except as otherwise provided by law in particular cases, 
        bonds shall be approved as follows: 
           (1) The official bonds of all state officers, including 
        those of the treasurers, superintendents, and other officials, 
        and employees of the several public educational, charitable, 
        penal, and reformatory institutions belonging to the state, 
        shall be approved, as to form, by the attorney general, and in 
        all other respects by the governor and the legislative auditor, 
        or one of them; 
           (2) The official bonds of county, town, city, and school 
        district officers and employees by the governing body of the 
        political subdivision for whose security they are, respectively, 
        given; and 
           (3) Those required or permitted by law to be given in any 
        court, by the judge or justice of the court in which the 
        proceeding is begun or pending.  
           No officer, official, or employee required to give bond 
        shall enter upon duties until the bond is duly approved and 
        filed. 
           Sec. 21.  Minnesota Statutes 1998, section 609.456, is 
        amended to read: 
           609.456 [REPORTING TO STATE AUDITOR AND LEGISLATIVE AUDITOR 
        REQUIRED.] 
           Subdivision 1.  [STATE AUDITOR.] Whenever a public employee 
        or public officer of a political subdivision discovers evidence 
        of theft, embezzlement, or unlawful use of public funds or 
        property, the employee or elected official shall, except when to 
        do so would knowingly impede or otherwise interfere with an 
        ongoing criminal investigation, promptly report in writing to 
        the state auditor a detailed description of the alleged incident 
        or incidents. 
           Subd. 2.  [LEGISLATIVE AUDITOR.] Whenever an employee or 
        officer of the state, University of Minnesota, or other 
        organization listed in section 3.971, subdivision 1, discovers 
        evidence of theft, embezzlement, or unlawful use of public funds 
        or property, the employee or officer shall, except when to do so 
        would knowingly impede or otherwise interfere with an ongoing 
        criminal investigation, promptly report in writing to the 
        legislative auditor a detailed description of the alleged 
        incident or incidents. 
           Sec. 22.  Laws 1990, chapter 535, section 5, is amended to 
        read: 
           Sec. 5.  [ACCOUNTS; AUDITS.] 
           The corporation may establish funds and accounts that it 
        finds convenient.  The board shall provide for and pay the cost 
        of an independent annual audit of its official books and records 
        by the legislative state auditor subject to Minnesota Statutes, 
        sections 3.971 and 3.972.  A copy of this audit shall be filed 
        with the secretary of state. 
           Sec. 23.  [REVISOR INSTRUCTION.] 
           The revisor of statutes shall renumber each section of 
        Minnesota Statutes listed in column A with the number listed in 
        column B.  The revisor shall make necessary cross-reference 
        changes consistent with the renumbering.  The revisor shall 
        provide appropriate section and subdivision headnotes in 
        Minnesota Statutes, sections 3.97, 3.971, and 3.979. 
              Column A                      Column B 
              3.97, subd. 4                 3.971, subd. 1       
              3.97, subd. 5                 3.971, subd. 2       
              3.97, subd. 6                 3.971, subd. 3a      
              3.97, subd. 7                 3.971, subd. 4      
              3.97, subd. 8                 3.971, subd. 5      
              3.97, subd. 9                 3.979, subd. 1      
              3.97, subd. 10                3.979, subd. 2      
              3.97, subd. 11                3.979, subd. 3      
              3.97, subd. 11a               3.979, subd. 4       
              3.97, subd. 12                3.97, subd. 3a
              3.971, subd. 1                3.971, subd. 6
              3.971, subd. 2                3.971, subd. 7
              3.971, subd. 4                3.971, subd. 8
           Sec. 24.  [REPEALER.] 
           Minnesota Statutes 1998, sections 3.973; 116.072, 
        subdivision 12; 469.207, subdivision 1; and 574.02, are repealed.
           Sec. 25.  [EFFECTIVE DATE.] 
           The amendments made to Minnesota Statutes 1998, section 
        3.97, subdivision 2, in section 1, are effective January 1, 
        2001.  The remainder of the act is effective the day following 
        final enactment. 
           Presented to the governor April 22, 1999 
           Signed by the governor April 26, 1999, 1:12 p.m.

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