HB 2058
In CommitteeHouse
Private entity audits
Concerning third-party audits of private entities receiving public moneys.
This status may be delayed. See Action History below for the latest updates.
How does a bill become law?
- Introduced: The bill is filed and assigned a number.
- Committee: A subject-matter committee holds hearings, takes public testimony, and decides whether to advance the bill.
- Floor Vote: The full chamber (House or Senate) debates and votes on the bill.
- Opposite Chamber: The bill repeats the committee and floor vote process in the other chamber.
- Governor: The Governor reviews the bill and decides whether to sign or veto it.
- Signed: The bill has been signed into law.
AI Analysis
This bill requires private entities that receive public grants to undergo annual third-party audits approved by the State Auditor, with strict rules on how grant money can be spent and reported. It also limits administrative costs and requires annual reapplication for grants.
- Private entities receiving public grants must hire a third-party auditor approved by the State Auditor to conduct an annual audit.
- Audits must include details on total public funds received, itemized spending, financial statement reviews, program effectiveness, goal achievement, and community buy-in (e.g., local government resolution support).
- No more than 15% of grant funds may be used for administrative expenses.
- Grants must be renewed annually—entities must reapply and be re-approved each year.
- Audits must be submitted to the State Auditor within six months of the fiscal year-end and posted publicly on the State Auditor’s website.
- The private entity pays for the audit—costs are not covered by public funds.
Who is affected
- Private entities (e.g., nonprofits, businesses, or organizations) that receive state or federal grant money — Must hire a state-approved third-party auditor and pay for the audit; must submit detailed financial and program reports annually.
- Office of the State Auditor — Must ensure audits meet legal requirements and are posted publicly; responsible for oversight and enforcement.
- Local governments and community members — May see increased transparency and accountability in how grant-funded programs operate in their communities.
- Grant recipients (especially nonprofits and small businesses) — May face stricter reporting and spending rules, especially for administrative costs and grant renewals.
Pro/Con Analysis
Potential Benefits (3)
Mandating itemized spending, outcome verification, and public posting of audits significantly increases transparency and accountability for how public funds are used—reducing fraud risk and enabling communities and watchdogs to hold grantees accountable, especially in high-risk areas like behavioral health, homelessness services, or law enforcement contracts.
Public SafetyPeopleRef: Sec. 1(1)(a)-(f) & Sec. 1(4)Requiring evaluation of program effectiveness and annual reapplication incentivizes evidence-based service delivery—ensuring education, workforce, or early learning grants fund only proven programs, improving ROI for taxpayer investment and preventing perpetuation of ineffective or outdated initiatives.
EducationPeopleRef: Sec. 1(1)(e)-(f) & Sec. 1(2)(b)Requiring local government resolution support for “community buy-in” strengthens democratic oversight and ensures grant-funded programs align with local priorities—empowering cities, counties, and tribal nations to shape services rather than having them imposed top-down by state agencies or large nonprofits.
Local GovernmentPeopleRef: Sec. 1(1)(g)
Potential Concerns (3)
The 15% cap on administrative expenses may constrain nonprofits and small service providers’ ability to maintain qualified staff, invest in infrastructure, or scale effective programs—especially in complex or rural areas where overhead is inherently higher; this could reduce program quality or force consolidation, reducing local employment flexibility.
Business & EmploymentPeopleRef: Sec. 1(2)(a)Requiring private entities to bear full audit costs (not covered by grant funds) disproportionately burdens small nonprofits and micro-businesses, which lack economies of scale to absorb $5K–$20K+ audit fees—potentially forcing them to reduce service delivery or exit the grant ecosystem entirely.
Business & EmploymentPeopleRef: Sec. 1(3) & Fiscal ImpactMandating local government resolution support for “community buy-in” and annual reapplication creates bureaucratic friction for small jurisdictions (e.g., rural counties or towns) with limited staff capacity, potentially delaying or blocking access to critical grant funding for public health, safety, or economic development programs.
Local GovernmentLean peopleRef: Sec. 1(1)(g) & Sec. 1(2)(b)
Who Is Most Affected
Small and mid-sized nonprofits (e.g., food banks, housing shelters, workforce training orgs) will face higher compliance costs and may be squeezed out of grant competitions if they cannot afford audits or lack staff to manage annual reapplications—potentially reducing service access in underserved communities.
Large national nonprofits with in-house finance teams or contracted auditors may absorb costs easily and benefit from reduced competition—potentially consolidating grant dominance while smaller local orgs are priced out.
Local governments (counties, cities, towns) gain stronger oversight tools and can require local buy-in before state funds flow—enhancing accountability but also adding administrative burden to small jurisdictions without dedicated grant compliance staff.
State agencies that distribute grants (e.g., DSHS, ESD, OSPI) gain stronger data on program outcomes and spending, enabling better oversight—but may face pushback from grantees over increased reporting demands.
Residents who rely on grant-funded services (e.g., housing vouchers, job training, mental health counseling) benefit from increased accountability and reduced fraud—but may lose access if smaller providers exit due to compliance costs.