AUDITS.

(a) A state agency may not use appropriated money to contract with a person to audit the financial records or accounts of the agency except as provided by:

(1) Subsections (b), (c), and (d);

(2) Chapter 466, pertaining to the state lottery;

(3) Chapter 2306, pertaining to the Texas Department of Housing and Community Affairs; and

(4) Chapter 361, Transportation Code, pertaining to the Texas Turnpike Authority division of the Texas Department of Transportation.

(b) A state agency may use appropriated money to finance a supplemental audit of payments received from the government of the United States if the audit is required as a condition of receipt of the money and an amount for the audit is provided by the federal grant, allocation, aid, or other payment.

(c) A state agency providing grants, loans, or other money to an entity other than a state agency may require, as a condition of receipt of the money, that the recipient have an annual, independent audit performed and submitted to the agency. An agency may require its internal audit staff to make an annual inspection visit to the recipient of the money. After notice of the meeting of the governing body of an agency at which the matter will be included on the agenda, the agency shall take action on any exceptions noted in independent audits received under this subsection and provide documentation of that action to the state auditor, the Legislative Audit Committee, the Legislative Budget Board, and the budget division of the governor's office.

(d) Subsection (a) does not apply to the appointment of an internal auditor under Section 2102.006 or to a contract with the state auditor.