This bill requires contractors bidding on public projects to verify that they have used the E-Verify program for a period of time in their bid. Beginning on January 1, 2013, they must have been using E-Verify for the previous 24 months and must participate in the federal IMAGE, in order to be considered for public bids. They must also verify that they will contract only with subcontractors that have also been using E-Verify.  Counties shall submit annual compliance reports to the state auditor certifying compliance and must maintain records that include: the number and date of authorization and the legal name, address, and E-Verify user number of or proof of participation in the federal employment verification system by contractors and subcontractors. The state auditor shall conduct annual compliance audits on at least half of the reporting local governments and publish audit results. Local governments that are in violation of this law shall lose their qualified local government status.