OSA Office of the State Auditor Fraud Hotline

Legislative Audit Committee. Section 1 of the bill requires the state auditor (auditor) to establish and administer a telephone number, fax number, email address, mailing address, or internet-based form whereby any individual may report an allegation of fraud committed by a state employee (employee) or an individual acting under a contract with a state agency (contracted individual). This system is referred to in the bill as the 'fraud hotline' or 'hotline' and any report to the hotline as a 'hotline call'.

Section 1 defines 'fraud' to mean occupational fraud or the use of one's occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization's resources or assets.

Section 1 prohibits the auditor from disclosing publicly, or when making a referral to another state agency, the identity of any individual who contacts the fraud hotline unless the individual grants the auditor express permission to make such disclosure. These restrictions do not apply when the auditor makes a disclosure to a law enforcement agency, a district attorney, or the attorney general in connection with a criminal investigation.

Under the bill, the auditor is responsible for administering the hotline, including the screening of hotline calls and consulting and coordinating with state agencies to refer allegations of fraud by an employee or contracted individual that are reported to the hotline. In connection with the administration of the hotline, the bill requires the auditor to:

• Publicize the existence and purpose of the hotline on the official website of the office of the state auditor; and
• Prepare and maintain workpapers for the purpose of documenting the activities of his or her office in connection with hotline calls and investigations.

All workpapers prepared or maintained by the auditor in connection with hotline calls and investigations must be held as strictly confidential by the auditor and not for public release. These restrictions shall not prevent communication by and among the auditor, a state agency, the governor, the legislative audit committee (committee), a law enforcement agency, a district attorney, or the attorney general in accordance with the requirements of the bill. The bill specifies that all workpapers prepared or maintained by the auditor in connection with hotline calls shall not constitute public records for purposes of the 'Colorado Open Records Act'.

Upon receiving a hotline call, the auditor must conduct an initial screening of the call to determine whether the matter being reported constitutes an allegation of fraud committed by an employee or a contracted individual. The auditor is required to forward all hotline calls alleging fraud by a medicaid recipient to the department of health care policy and financing and all calls alleging fraud by a medicaid provider or contractor to the medicaid fraud control unit of the office of the attorney general.

If the auditor determines that a hotline call constitutes an allegation of fraud committed by an employee or contracted individual, the auditor is required to consult and coordinate with the management or designee of the affected state agency or, in the case of alleged fraud involving a gubernatorial appointee, the governor's office for the purpose of referring the hotline call and any related workpapers to the affected agency. Upon receiving a referred hotline call from the auditor, the state agency is responsible for determining and taking appropriate action to respond to the referred hotline call and reporting back to the auditor. In determining appropriate action, the state agency may request either the assistance of the auditor to participate in an investigation or request that the auditor conduct the entire investigation.

When, at the request of a state agency, the auditor either participates in or conducts an investigation of a hotline call, the following additional requirements apply:

• The auditor is granted complete access to all of the books, accounts, reports, vouchers, or other records or information maintained by the agency that are directly related to the scope of the investigation;
• The auditor is required to report the results of the investigation to the head of the affected agency or, in the case of alleged fraud involving a gubernatorial appointee, to the governor's office. The auditor is also required to provide any workpapers prepared or maintained by the auditor during the investigation.
• If the investigation finds evidence that the amount of the alleged fraud exceeds $100,000, the auditor is also required to report the results of the investigation to the committee and, with the approval of the committee, to the governor; and
• If the investigation finds evidence of apparently illegal transactions or misuse or embezzlement of public funds or property, the auditor is required to immediately report the matter to a law enforcement agency, a district attorney, or the attorney general, as appropriate.

When a state agency is referred a hotline call by the auditor and has not requested that the auditor either participate in or conduct the entire investigation, the state agency is required to report back to the auditor within 90 days on the disposition of the referral, including action the agency has taken to respond to the fraud allegation and the results of any subsequent investigation by the agency. If the state agency has not reached a disposition of the referred hotline call within 90 days, the agency must report to the auditor the current status of the referral as of the 90-day deadline. This reporting requirement continues every 90 days thereafter until the agency has reached a disposition of the referred hotline call.

Commencing with state fiscal year 2018-19, section 1 also requires the auditor to prepare an annual report to the committee providing an aggregate summary of activity relating to the fraud hotline during the preceding state fiscal year.

Section 2 adds the administration of the hotline to existing statutory provisions specifying the auditor's powers and duties.

Sections 3 and 4 prohibit retaliation against either a state employee or an entity under contract with a state agency resulting from the employee's disclosure of information to the hotline except where the employee discloses information with disregard for its truth or falsity.
(Note: This summary applies to the reengrossed version of this bill as introduced in the second house.)