BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
548 (Krekorian)
Hearing Date: 07/13/2009 Amended: 06/01/2009
Consultant: Mark McKenzie Policy Vote: L Gov 5-0
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BILL SUMMARY: AB 548 would revise the timeframe within which
the State Controller's Office (SCO) is authorized to audit
claims for reimbursement of state-mandated costs. Specifically,
this bill would:
Extend the timeframe within which the SCO may audit a
reimbursement claim from three years of the filing or
amendment of a claim to within four years of that filing.
Eliminate the authority of the SCO to audit a reimbursement
claim within three years of the payment of a claim if no funds
are appropriated or payment made for the fiscal year for which
the claim is filed.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
SCO audits unknown costs due to elimination of
auditGeneral
authority based upon timing of payments,
offset
by potential savings related to extension
of audit
window based upon timing of filing of
claims.
----------(see staff
comments)---------
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STAFF COMMENTS:
Section 6 of Article XIII B of the California Constitution
generally requires the state to reimburse local governments
(including school districts) for the costs of a new program or
higher level of service mandated by the Legislature or a state
agency. Existing law requires the Commission on State Mandates
(COSM) to hear and decide upon local government test claims for
state reimbursement of mandated costs. After issuing claiming
instructions to local governments and school districts, the SCO
receives, pays, and audits mandate reimbursement claims.
Existing law authorizes the SCO to audit claims for
reimbursement of actual costs filed by a local agency or school
district. These audits must be initiated within three years of
date the claim is filed or last amended, whichever is later. If
no funds are appropriated by the Legislature or payments are not
made to a claimant during the fiscal year in which a claim is
filed, the audit must be initiated within three years of the
initial payment of the claim by the state.
AB 548 would extend the timeframe within which the SCO must
initiate an audit from three years after the date a claim is
filed or last amended to within four years of that date. This
bill would also delete the provisions that authorize an audit to
be initiated within three years of the initial payment of the
claim by the state if funds are not appropriated or payment is
not made during the fiscal year in which a claim is filed.
Page 2
AB 548 (Krekorian)
This bill is intended to provide certainty to local governments
and school districts regarding the legitimacy of claimed
reimbursements. Over the last several years state and local
officials have expressed significant concerns over the mandate
claims process, especially the length and complexity of the
reimbursement claiming methodologies. The Legislative Analyst's
Office (LAO) reports that the decision on test claims averages
approximately three years from the initial filing of the claim,
and funding of the mandate can lag behind enactment of
legislation by six to seven years.
SCO audits of local governments' claims for mandated costs often
result in reductions of allowable reimbursements. In recent
years, the SCO has disallowed over one-third of all
reimbursement claims filed by local governments and school
districts, when an audit is performed. The SCO indicates that
it audits approximately 12 percent of the claims received, and
that it chooses which claims to audit based upon a desk review
and an assessment of potential for disallowed claims related to
audit costs. This bill would eliminate the SCO's authority to
initiate an audit within three years of initial payment of a
claim, which could preclude the performance of some audits, and
potentially result in General Fund revenue losses.
Generally, the SCO audits claims based upon when the claim is
received, rather than when the state pays a claim. The SCO
indicates that most claims are audited within three years of the
date the claim is filed, but sometimes auditors need additional
time. This bill provides an additional year for the SCO to
initiate a claim when the timeframe is based upon when a claim
is received. Staff notes that extending the SCO's authority to
audit claims within four years of the filing or amendment of a
claim, rather than within three years, would likely result in
General Fund savings to the extent that additional audits are
conducted in the fourth year after a claim is filed. Since
potential gains are less certain when audits are conducted on
older claims, staff estimates that revenue gains related to the
extension of the audit period based upon when a claim is filed
would outweigh any potential losses related to eliminating the
authority to audit within three years of the payment of a claim.