S.9 AN ACT RELATING TO THE AUTHORITY OF THE STATE AUDITOR TO EXAMINE THE BOOKS AND RECORDS OF STATE CONTRACTORS

PASSED
in the State Senate
on March 2, 2023, by a vote of
23-6

Purpose: To give Vermont’s State Auditor the authority to examine the financial records of Vermont companies and individuals who enter a contract to do work for the state.

It had been assumed for years that contractors were subject to the State Auditor’s oversight under Bulletin 3.5 (Procurement and Contracting Procedures), which reads “types of compliance monitoring processes and steps may include: (i) periodic contractor reports; (ii) invoice reviews; (iii) on-site visits; (iv) scheduled meetings; (v) audits; (vi) independent performance reviews; (vii) surveys of users/clients; and (viii) post-contract audit or review.” However, this assumption of oversight was shown to be false by the Vermont Supreme Court in the 2022 decision “Vermont State Auditor v. OneCare” (see below).

S.9 would amend state-contractor law to include the provision that the auditor would, “have discretion to examine the records, accounts, books, papers, reports, and returns in all formats of any contractor that provides services to the State, provided that the examination of records, accounts, books, papers, reports, and returns shall be limited to those that are relevant to the contract with the State.” OneCare and other organizations would then be subject to auditing oversight under S.9.

S.9 includes confidentiality protections, so that the audit would:

1. Be specific to records related to “performance under State contracts”
2. Would exclude legally protected personal information
3. Exempt records examined by the State Auditor from Vermont’s Public Records Act.

Background- “Vermont State Auditor v. OneCare.” In 2021, Vermont’s State Auditor Doug Hoffer tried to gain access to the financial records of Vermont’s all-payer healthcare system designer corporation OneCare, which had contracted with the state. In 2022, Vermont’s Supreme Court denied Hoffer’s request, arguing “nothing in these provisions authorizes the Auditor to audit private nongovernmental entities,” effectively closing the financial records of OneCare to oversight of government.

Analysis:  Those voting YES believe S.9 will protect Vermont taxpayers from contractors cutting corners or committing fraud. They note that states from all across the political landscape with state auditors (e.g. Texas, Massachusetts and Iowa) have provisions in statute that are similar to what Vermont is considering.

Those voting NO expressed willingness to vote for S.9 if their questions were answered to their satisfaction. Bulletin 3.5 is unclear about the process for obtaining a waiver exempt from auditing. Others noted that Vermont is currently struggling to receive bids on contracts as it is. Many projects receive only a single bid. S.9 could scare off those who already see the process as too tedious, leaving important government work unfinished.

As Recorded in the Senate Journal, Thursday, March 2, 2023: " Thereupon, the bill was read the second time by title only pursuant to Rule 43, the recommendation of amendment was agreed to, and third reading of the bill was ordered, on a roll call, Yeas 23, Nays 6.” (Read the Journal, p. 248 – 250).

View the floor debate on YouTube.

How They Voted

Philip Baruth (D-Chittenden Southeast) – PRESIDING
Christopher Bray (D-Addison) – YES
Randy Brock (R-Franklin) – YES
Brian Campion (D-Bennington) – YES
Thomas Chittenden (D-Chittenden Southeast) – YES
Alison Clarkson (D-Windsor) – YES
Brian Collamore (R-Rutland) – NO
Ann Cummings (D-Washington) – YES
Martine Gulick (D-Chittenden Central) - YES
Ruth Hardy (D-Addison) – YES
Wendy Harrison (D-Brattleboro) - YES
Nader Hashim (D-Windham) - YES
Russ Ingalls (R-Essex-Orleans) – NO
Jane Kitchel (D-Caledonia) – YES
Virginia Lyons (D-Chittenden Southeast) – NO
Mark MacDonald (D-Orange) – YES
Richard Mazza (D-Grand Isle) – NO
Richard McCormack (D-Windsor) – YES
Robert Norris (R-Franklin) - NO
Andrew Perchlik (D-Washington) – YES
Kesha Ram Hinsdale (D-Chittenden Central) – YES
Richard Sears (D-Bennington) – YES
Robert Starr (D-Essex-Orleans) – YES
Tanya Vyhovsky (D-Chittenden Central) – YES
Anne Watson (D-Washington) - YES
Dave Weeks (R-Proctor) - YES
Richard Westman (R-Lamoille) – YES
Rebecca White (D-Windsor) - YES
Terry Williams (R-Rutland) - NO
Irene Wrenner (D-Chittenden North) -YES

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