BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 252 (Vargas)
Hearing Date: 5/16/2011 Amended: 5/10/2011
Consultant: Bob Franzoia Policy Vote: G O 7-4, Judiciary
3-2
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BILL SUMMARY: SB 252 would enact the California Oversight and
Fiscal Accountability Review Act of 2011 and require a state
agency that enters into a privatization contract, as defined in
the bill, to report to the Department of General Services
(department). The department would be required to compile a
report available for public inspection. This bill would provide
that a subcontract executed under a privatization contract is a
public record and would require the contractor to submit these
contracts to the contracting agency, which would be required to
make the records public. State agencies would also be required
to prepare, as part of their budget requests, a document
containing information relating to their use of privatization
contractors. The bill would make privatization contracts
subject to audit or review by the Bureau of State Audits (BSA),
at the discretion of the State Auditor.
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
Reporting requirements
- administration Estimated $1,000 to $2,000
annuallySpecial*
- increased contract costs Unknown, potentially
multimillions Special*
- contracting departments $255 $520
$520General/
Special
Bureau of State Audits review $75 $150
$150General
* Service Revolving Fund (a combination of General Funds and
special funds)
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
At this time, the department does not track privatization
contracts as defined by this bill. To implement an oversight
SB 252 (Vargas)
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and reporting process would require the department to establish
program guidelines, maintain a new information technology (IT)
database, respond to public records requests and compile and
publish department reports. Costs for each of these activities
could range from $200,000 to $500,000 and in aggregate could
exceed $2,000,000 annually, not including IT costs.
In 2008, the state awarded $6.98 billion in service contracts.
Almost any change that may increase reporting or reduce the
number of qualified bidders will increase contract costs.
Individual departments will be required to provide quarterly and
annual reporting of all such contracts to the department. This
will require staff to obtain required data from contractors,
maintain and track reporting data, monitor compliance with the
department's standards and respond to internal and department
inquiries and requests for information. This would likely
require one staff services analyst at a cost of up to $65,000
annually. Estimating four to eight departments with significant
contracting activities may have such workload, costs could be
$260,000 to $520,000 annually.
While the bill would collect valuable data on privatization
contracts, it does not specify a use for, or an analysis of the
data.
This bill provides that a privatization contract shall be
subject to audit or review, by the BSA. An audit of review
shall be conducted in compliance with generally accepted
auditing standards. It is unclear whether the reference to
American Institute of Certified Public Accounts (AICPA) is a
general direction to conduct the audit or review according to
generally accepted standards or a specific portion of AICPA
standards. Generally, the BSA relies on AICPA standards for
financial audits and federal compliance audits and relies
on"Yellowbook" (General Accounting Office) standards for
performance audits.
Audits of the contracting process are conducted by the State
Personnel Board pursuant to Government Code 19131 which provides
that any state agency proposing to execute a contract shall
notify the board. All organizations that represent state
employees who perform the type of work to be contracted, and any
person or organization which has filed with the board, a request
SB 252 (Vargas)
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for notice, shall be contacted immediately so they may be given
a reasonable opportunity to comment on the proposed contract.
Any employee organization may request, within ten days of
notification, the board review any contract proposed or executed
pursuant to Government Code 19130.
Joint Rule 37.4 (b) requires that any bill requiring action by
the BSA shall contain an appropriation for the cost of any study
or audit. In order to comply with JR 37.4, when the number of
studies or audits annually cannot be determined, staff
recommends the bill be amended to appropriate up to $150,000
from the General Fund and that this provision sunset on January
1, 2014 which would allow for two years of BSA study or audit.