HB 12

relating to the review and audit of certain state agency
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1.  Section 325.002, Government Code, is amended by
adding Subdivision (4) to read as follows:
(4)  "Regulatory agency" means a department,
commission, board, or other agency that:
(A)  is created by the constitution or by statute;
(B)  is in the executive branch of state
(C)  has statewide authority; and
(D)  has authority to deny, grant, renew, revoke,
or suspend a license, certification, or other authorization to
SECTION 2.  Section 325.009, Government Code, is amended by
adding Subsections (b-1) and (b-2) to read as follows:
(b-1)  The commission shall provide information on how the
public may participate in the commission's review of a state agency
and provide input on a state agency's performance.  The commission
shall, to the extent practicable, solicit input from parties
interested in a state agency's operations.
(b-2)  Each state agency being reviewed by the commission
under this chapter shall at the beginning of the review:
(1)  post a notice on the state agency's Internet
(A)  that the state agency is being reviewed by
(B)  how the public may participate in the
commission's review of the state agency and provide input on the
state agency's performance; and
(2)  if the state agency being reviewed is a regulatory
(A)  notify each person licensed, certified, or
otherwise authorized by the regulatory agency to engage in an
activity regulated by the agency of the public hearing under this
section at which the agency will be reviewed; and
(B)  solicit input from persons provided notice
under Paragraph (A) regarding the regulatory agency's performance.
SECTION 3.  Section 325.010(b), Government Code, is amended
(b)  In the report the commission shall include:
(1)  its findings regarding the criteria prescribed by
Section 325.011, except Section 325.011(14);
(2)  its recommendations based on the matters
prescribed by Section 325.012, except recommendations relating to
criteria prescribed by Section 325.011(14); [and]
(3)  if the agency being reviewed is a regulatory
agency, an analysis of the regulatory agency's performance during
the preceding 10 years or since the last review of the agency under
this chapter, whichever is longer, based on the agency's
performance measure targets as listed in the General Appropriations
(4)  an evaluation of the agency's performance measure
targets listed in the General Appropriations Act, including whether
(A)  aligned with the mission, goals, and
(B)  appropriate for assessing the agency's
achievement of the goals listed; and
(5)  other information the commission considers
necessary for a complete review of the agency.
SECTION 4.  Section 325.012(a), Government Code, is amended
(a)  In its report on a state agency, the commission shall:
(1)  make recommendations on the abolition,
continuation, or reorganization of each affected state agency and
its advisory committees and on the need for the performance of the
functions of the agency and its advisory committees;
(2)  make recommendations on the consolidation,
transfer, or reorganization of programs within state agencies not
under review when the programs duplicate functions performed in
(3)  make recommendations to improve the operations of
the agency, its policy body, and its advisory committees, including
management recommendations that do not require a change in the
agency's enabling statute; [and]
(4)  make recommendations on the continuation or
abolition of each reporting requirement imposed on the agency by
(5)  make recommendations to improve the agency's key
performance measures through the addition, amendment, or removal of
the performance measure targets listed in the General
SECTION 5.  Chapter 325, Government Code, is amended by
adding Section 325.016 to read as follows:
Sec. 325.016.  LIMITED REVIEW OF CERTAIN REGULATORY
AGENCIES.  (a)  During the two-year period beginning on September 1
of the sixth year after the date a regulatory agency was last
continued under Section 325.015, the commission shall conduct a
limited review of the agency's rulemaking, including:
(1)  an assessment of the agency's rulemaking process
and the extent to which the agency has encouraged participation by
the public in making its rules and decisions and the extent to which
the public participation has resulted in rules that benefit the
(2)  the extent to which the agency adopts and enforces
rules relating to potential conflicts of interest of its employees;
(3)  the necessity and effectiveness of rules adopted
(b)  Not later than September 1 of the sixth year after the
date a regulatory agency was last continued under Section 325.015,
the agency shall report to the commission the information in
Subsection (a) related to rulemaking and rule review activities of
(c)  Not later than September 1 of the year that is two years
after the date the review under this section begins, the commission
shall prepare a written report on the commission's review under
(d)  The report prepared by the commission under this section
SECTION 6.  Subtitle C, Title 3, Government Code, is amended
by adding Chapter 327 to read as follows:
CHAPTER 327.  EFFICIENCY AUDITS OF STATE AGENCIES
Sec. 327.001.  DEFINITIONS.  In this chapter:
(1)  "Audit plan" has the meaning assigned by Section
(2)  "Commission" means the Sunset Advisory
(3)  "Efficiency audit" means an evaluation of the
economy, efficiency, and effectiveness of state agency operations,
(A)  determining whether the state agency is
managing or using its resources, including state money, personnel,
property, equipment, and space, in an economical and efficient
(B)  identifying causes of inefficiencies or
uneconomical practices, including inadequacies in management
information systems, internal and administrative procedures,
organizational structure, use of resources, allocation of
personnel, purchasing, agency policies, and equipment;
(C)  determining whether financial, program, and
statistical reports of the state agency contain useful data and are
(D)  determining whether, according to
established or designated program objectives, responsibilities or
duties, statutes and rules, program performance criteria, or
program evaluation standards, the objectives and intended benefits
of the agency's program are being achieved efficiently and
(E)  determining whether, according to
established or designated program objectives, responsibilities or
duties, statutes and rules, program performance criteria, or
program evaluation standards, the agency's program duplicates,
overlaps, or conflicts with another state program.
(4)  "External auditor" means a private entity selected
by the state auditor to conduct an efficiency audit of a state
(5)  "Legislative audit committee" means the committee
(6)  "State agency" means an entity expressly made
subject to Chapter 325 (Texas Sunset Act).
Sec. 327.002.  REQUIRED EFFICIENCY AUDIT.  (a)  Each state
agency shall undergo an efficiency audit in accordance with this
(b)  The state auditor, subject to the legislative audit
committee's approval, shall adopt a schedule for conducting the
efficiency audits required by this chapter and include the annual
portion of the schedule in the audit plan under Section 321.013.
The schedule must provide for each state agency to be audited during
the two-year period beginning on September 1 four years before the
date the state agency is scheduled to be abolished under Chapter 325
(c)  A state agency required by law to perform an internal
efficiency audit is not required to perform the audit in any year
the state agency is audited under this chapter.
(d)  A state agency shall pay the costs incurred by the state
auditor relating to an efficiency audit required by this chapter.
The state auditor shall determine the costs of the audit and the
state agency shall pay the amount of those costs promptly on receipt
of a statement from the state auditor regarding those costs.
(e)  The state auditor, subject to the legislative audit
committee's approval, may determine, in the interests of
efficiency, whether the audit should be performed by the state
auditor or an external auditor.
Sec. 327.003.  SELECTION AND SUPERVISION OF AUDITOR.  (a)
Not later than March 1 of the year in which an efficiency audit of a
state agency is scheduled under this chapter, the state auditor may
contract with an external auditor to conduct the audit.
(b)  The state auditor, in cooperation with the Legislative
Budget Board, shall oversee the external auditor and ensure that
the efficiency audit is conducted in accordance with the
requirements of this chapter and the scope of the audit established
(c)  The external auditor is not subject to direction from
the state agency being audited.
Sec. 327.004.  SCOPE OF AUDIT.  (a)  The state auditor, in
cooperation with the Legislative Budget Board, shall establish the
scope of each efficiency audit conducted under this chapter.
(b)  At a minimum, an efficiency audit must:
(1)  examine state resources, including financial
resources, staff, personal property, real property, and
technology, to determine whether those resources:
(A)  are used effectively and efficiently to
achieve the desired outcome for a state agency's program
(B)  are not used for purposes other than the
intended goals of the audited programs;
(2)  identify and make recommendations for cost savings
and reallocation of resources to improve the effectiveness of
(3)  identify opportunities for improving services
through consolidation of functions, outsourcing, and elimination
Sec. 327.005.  REPORT TO LEGISLATURE.  (a)  Not later than
November 1 of the year an efficiency audit is conducted under this
chapter, the state auditor, in cooperation with the Legislative
Budget Board and in consultation with any external auditor
contracted to perform the audit, shall:
(1)  prepare a report of the audit with the
(2)  submit the report, recommendations, and complete
audit to the commission, the governor, the lieutenant governor, the
speaker of the house of representatives, the legislative audit
committee, the chairs of the standing committees of each house of
the legislature with primary jurisdiction over the audited state
agency, and the audited state agency.
(b)  The state auditor and the audited state agency shall
publish the report, recommendations, and complete efficiency audit
on the entity's Internet website.
Sec. 327.006.  REQUIRED IMPLEMENTATION PLAN.  Not later than
the 90th day after the date of receiving the complete audit and
recommendations, the administrative head of the audited state
agency shall deliver a plan for implementing the recommendations to
the commission, the governor, the lieutenant governor, the speaker
of the house of representatives, the legislative audit committee,
and the chairs of the standing committees of each house of the
legislature with primary jurisdiction over the audited state
agency.  The implementation plan must include a reasoned
justification for any recommendation the audited state agency
SECTION 7.  Section 322.017, Government Code, is repealed.
SECTION 8.  Not later than January 1, 2026, the state auditor
shall adopt the schedule required by Section 327.002, Government
Code, as added by this Act, for conducting efficiency audits of each
state agency subject to that section.
SECTION 9.  This Act takes effect September 1, 2025.