Bill Text: TX HB12 | 2025-2026 | 89th Legislature | Enrolled

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Bill Title: Relating to the review and audit of certain state agency operations.

Sponsorship: Strong Partisan Bill (Republican 45-4)

Status: (Passed) 2025-06-20 - Effective on 9/1/25 [HB12 Detail]

Download: Texas-2025-HB12-Enrolled.html

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H.B. No. 12

AN ACT
relating to the review and audit of certain state agency
operations.
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
government;
(C) has statewide authority; and
(D) has authority to deny, grant, renew, revoke,
or suspend a license, certification, or other authorization to
engage in an activity.
SECTION 2. Section 325.008, Government Code, is amended by
adding Subsections (d), (e), and (f) to read as follows:
(d) 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.
(e) 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
website informing the public:
(A) that the state agency is being reviewed by
the commission; and
(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) to the extent practicable, if the state agency
being reviewed is a regulatory agency:
(A) notify each person licensed, certified, or
otherwise authorized by the regulatory agency to engage in an
activity regulated by the agency of a public hearing under Section
325.009 at which the agency will be reviewed; and
(B) solicit input from persons provided notice
under Paragraph (A) regarding the regulatory agency's performance.
(f) Subsection (e)(2) does not apply to a river authority
subject to review under this chapter.
SECTION 3. Section 325.010(b), Government Code, is amended
to read as follows:
(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 measures and related targets, including those listed in
the General Appropriations Act;
(4) an evaluation of the agency's performance measures
and related targets, including whether the targets are:
(A) aligned with the mission, goals, and
objectives of the agency; 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
to read as follows:
(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
agencies under review;
(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
law; and
(5) after consulting the Legislative Budget Board,
make recommendations to improve the agency's key performance
measures through the addition, amendment, or removal of the
performance measures and related targets, including those listed in
the General Appropriations Act.
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) In the commission's recommendations to the
legislature under Section 325.012, the commission may recommend
that a limited review of a regulatory agency be conducted prior to
the regulatory agency's next sunset review.
(b) If the commission's recommendations to the legislature
under Section 325.012 include any identified deficiencies or
recommendations for improvement in the regulatory agency's
rulemaking process, the commission shall recommend that a limited
review of a regulatory agency be conducted prior to the next sunset
review.
(c) For the commission's recommendation for a limited
review to take effect, the legislature must include the
recommendation in its legislation for the regulatory agency under
Section 325.012(c). Such review shall be limited to:
(1) an assessment of the regulatory agency's
rulemaking process and the extent to which the regulatory 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 public;
(2) the extent to which the regulatory agency adopts
and enforces rules relating to potential conflicts of interest of
its employees;
(3) an assessment of the regulatory agency's efforts
to identify rules that are unnecessary, ineffective, or
inefficient;
(4) any commission recommendations under Section
325.012(a)(3) that the legislature adopted in the legislation for
the regulatory agency under Section 325.012(c); and
(5) any additional rulemaking-related recommendations
adopted by the legislature and included in the legislation for the
regulatory agency under Section 325.012(c).
(d) The regulatory agency shall report to the commission its
progress on addressing the items described in Subsection (c) not
later than September 1 of the odd-numbered year specified by the
legislature in its legislation for the regulatory agency under
Section 325.012(c).
(e) Not later than January 1 of the odd-numbered year after
the date the regulatory agency report is due under Subsection (d),
the commission shall prepare a written report on the commission's
review under this section.
(f) The report prepared by the commission under this section
is a public record.
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
321.001.
(2) "Commission" means the Sunset Advisory
Commission.
(3) "Efficiency audit" means an evaluation of the
economy, efficiency, and effectiveness of state agency operations,
including:
(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
manner;
(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
fairly presented;
(D) determining whether the objectives and
intended benefits of the agency's program are being achieved
efficiently and effectively, according to:
(i) established or designated:
(a) program objectives;
(b) responsibilities or duties;
(c) program performance criteria; or
(d) program evaluation standards; or
(ii) statutes and rules; and
(E) determining whether 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
agency.
(5) "Legislative audit committee" means the committee
described by Section 321.002.
(6) "State agency" means an entity expressly made
subject to Chapter 325 (Texas Sunset Act) other than an entity
listed in Section 325.025(b).
Sec. 327.002. REQUIRED EFFICIENCY AUDIT. (a) Each state
agency shall undergo an efficiency audit in accordance with this
chapter.
(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
(Texas Sunset Act).
(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
under this chapter.
(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
beneficiaries; and
(B) are 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
audited programs; and
(3) identify opportunities for improving services
through consolidation of functions, outsourcing, and elimination
of duplicative efforts.
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
recommendations; and
(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
declines to implement.
SECTION 7. 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 8. This Act takes effect September 1, 2025.
______________________________ ______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 12 was passed by the House on April 9,
2025, by the following vote: Yeas 147, Nays 0, 1 present, not
voting; and that the House concurred in Senate amendments to H.B.
No. 12 on May 23, 2025, by the following vote: Yeas 137, Nays 0, 2
present, not voting.
______________________________
Chief Clerk of the House
I certify that H.B. No. 12 was passed by the Senate, with
amendments, on May 19, 2025, by the following vote: Yeas 31, Nays
0.
______________________________
Secretary of the Senate
APPROVED: __________________
Date
__________________
Governor