OFFICE OF THE INSPECTOR GENERAL __________________________________________________________________________________________ TO FROM SUBJECT by epmd

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									                                                                                                        OFFICE OF THE
                                                                                                     INSPECTOR GENERAL


__________________________________________________________________________________________



TO:            Members of the Finance and Audit Committee

FROM:          Robin J. Kempf, Inspector General

SUBJECT:       Proposal regarding the governance of the Office of Inspector General

DATE:          December 5, 2007



Summary and Inspector General’s Recommendation

Because the Kansas Health Policy Authority’s (KHPA) Office of Inspector General (OIG) is so new, a formal
discussion of how the OIG will relate to the KHPA Board and the Board’s Finance and Audit Committee has
not yet taken place. As a practical matter, this has caused some confusion in terms of determining which OIG
activities might be reported to the Committee and the Board, or only to the Committee, and at what time. For
example, should the Inspector General (IG) provide a status update of OIG activities to the Committee each
month? Should the IG also provide such update to the Board each month? Alternatively, should the OIG only
bring issues to the Committee and the Board that require approval or acceptance? Establishing guidelines for
the relationship between the OIG, the Board and the Finance and Audit Committee would provide structure for
those operations.

The IG recommends addressing the relationship in the Board’s Bylaws, which are currently silent as to the OIG.
 These rules will provide a structure within which the OIG can begin to operate. Proposed draft language can be
found at the end of this memo.

Background

Statutory framework: The KHPA OIG was created in 2007 Senate Bill 11. That legislation provides that “the
Inspector General shall have general managerial control over the Office of the Inspector General and shall
establish the organization structure of the office as the Inspector General deems appropriate to carry out the
responsibilities and functions of the office.” Yet, the statute also states that “The Inspector General shall report
to the executive director of the Kansas Health Policy Authority.” As was brought to the attention of the
Committee a couple months ago, a technical amendment to this reporting language will clarify that the IG
reports directly to the KHPA Board, with the exception of reporting to the KHPA executive director for
administrative purposes, in order to provide for organizational independence. Assuming that this technical
amendment can pass during the next Legislative Session with ease, the issue of clarifying what “reports to”
entails then arises.
                     Landon State Office Building, 900 SW Jackson Street, Suite 900-N, Topeka, Kansas 66612-1220
                                            Phone: 785-296-3981           Fax: 785-296-4813
                                                           www.khpa.ks.gov
Governance framework: In June 2006, the KHPA Board adopted Bylaws to govern its activities. The Bylaws
establish four committees including the Finance and Audit Committee, the Human Capital and Compensation
Committee, the Governance and Nominating Committee, and the Executive Committee. Because the Bylaws
preceded the creation of the OIG, the Finance and Audit Committee’s mandate is silent as to the OIG. An
amendment to the Bylaws would be an appropriate method to delineate how the OIG will report to the
Committee and to the Board. In addition, it would establish specific authority to the Chair of the Committee to
evaluate the IG’s performance, which process was endorsed at the last Board meeting.

This approach would provide some framework around the OIG’s relationship to the Board and its committee
that is similar to an approach commonly found in the private sector. Frequently, a board of directors will adopt
an audit charter that defines the relationship between the internal audit unit and the board’s audit committee.

Amending the Bylaws: The Bylaws state that they “may be altered, amended or repealed and new Bylaws may
be adopted by the Board at any regular or special meeting of the Board provided that twenty (20) days written
notice of the proposed amendment shall be given to each of the members of the Board prior to any regular or
special meeting of the Board at which the proposed amendment is to be considered and acted upon.”

Proposal

The amendment is shown with underlined text.

       ARTICLE III. STANDING COMMITTEES

               SECTION 1. Standing Committees. There shall be four standing committees of the Board
       as follows:
               (a) Finance and Audit Committee. This Committee shall work with the Executive Director
                     in the development of an annual budget for the Authority to be presented for review and
                     approval by the Board. The Committee shall also review the results of operations for
                     each year after the close of the fiscal year and report its findings, conclusions and
                     recommendations to the full Board.
                        With regard to the Office of Inspector General (OIG) , the Committee shall review
                     and recommend to the Board for approval an annual audit plan and other governing
                     documents of the OIG, and shall receive and review communications from the OIG on
                     the results of audit and investigation activities prior to acceptance by the Board. The
                     determination of whether other informal communications from the OIG are also heard by
                     the Board shall be in the discretion of the Chair of the Committee. Additionally, the
                     Chair of the Committee shall have primary responsibility for evaluating the performance
                     of the Inspector General.




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