BILL ANALYSIS Ó Bill No: AB 1218 SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION Senator Roderick D. Wright, Chair 2013-2014 Regular Session Staff Analysis AB 1218 Author: Gray As Amended: April 16, 2013 Hearing Date: June 25, 2013 Consultant: Art Terzakis SUBJECT California State Auditor DESCRIPTION AB 1218 adds clarity to existing law by authorizing the California State Auditor (CSA), after performing an audit, to conduct follow-up audit work that is related to the audits' original findings and recommendations. EXISTING LAW Senate Bill 37 (Maddy) Chapter 12, Statutes of 1993, (Government Code 8543), created the Bureau of State Audits (BSA) as part of the Executive Branch. [SB 1395 - Rubio, Chapter 281 of 2012 renamed the BSA as the "California State Auditor's Office" (CSA).] To assure its independence, the CSA is free from the control of the Executive and Legislative branches; the Milton Marks "Little Hoover" Commission oversees its administrative operations. The CSA, under the direction of the State Auditor, performs an annual examination (single audit) of the State's general-purpose financial statements as prepared by the State Controller's Office. The federal government, as a condition of receiving federal funds, requires this audit. The single audit also includes a review of major federal programs for compliance with federal laws and regulations, and recommendations to improve the State's financial systems and internal control. The CSA also conducts financial and performance audits as AB 1218 (Gray) continued Page 2 directed by statute, and other government audits requested by the Joint Legislative Audit Committee (JLAC). The CSA has the explicit authority to audit any entity that receives state funds. Consequently, it sometimes audits at the local government level. In addition, the CSA administers the "Reporting of Improper Governmental Activities Act," which includes a hotline for anonymous reporting. Existing law provides that the State Auditor is appointed by the Governor, from a list submitted by the Joint Legislative Audit Committee, to a four-year term. BACKGROUND Purpose of AB 1218: This measure, sponsored by the California State Auditor's Office, would authorize the CSA to conduct follow-up work related to original audit findings and recommendations. While the CSA conducts follow-up work under current authority granted by the Government Code, this measure would clarify that authority by making it explicit. According to the CSA, this change is sought so entities subject to follow-up work clearly understand the authority and grant the CSA appropriate access. PRIOR/RELATED LEGISLATION SB 1395 (Rubio), Chapter 281, Statutes of 2012. Renamed the "Bureau of State Audits" as the "California State Auditor's Office" and made other minor code maintenance changes. AB 187 (Lara) Chapter 451, Statutes of 2011. Subject to specified conditions, authorized the State Auditor to establish a high-risk local government agency audit program to identify, audit, and issue reports on any local government agency, including any city, county, or special district, or any publicly created entity that the State Auditor identifies as being at high risk for the potential of waste, fraud, abuse, or mismanagement or that has major challenges associated with its economy, efficiency, or effectiveness. SB 1314 (Wyland) 2007-08 Session. Would have transferred audit and evaluation duties within the Department of AB 1218 (Gray) continued Page 3 Finance to the BSA and renamed the BSA as the Bureau of State Audits and Evaluations (BSAE) with responsibility for auditing the performance of state programs and managers and for recommending actions to correct any inefficiencies or ineffectiveness. (Held in this Committee at Author's Request) SB 1452 (Speier) Chapter 452, Statutes of 2006. Updated the auditing standards for state and local agencies and enacted the Omnibus Audit Accountability Act of 2006 which established a process whereby the Legislature would be informed when auditor recommendations are being ignored or not implemented by state agencies. SB 1437 (Speier) Chapter 251, Statutes of 2004. Authorized the State Auditor to establish a high-risk government agency audit program for the purpose of identifying, auditing, and issuing reports on any state agency that the auditor identifies as high risk for the potential of waste, fraud, abuse, and mismanagement, or that has major challenges associated with its economy, efficiency, or effectiveness. SB 37 (Maddy) Chapter 12, Statutes of 1993. Created the Bureau of State Audits under the direction of the Little Hoover Commission - many of the duties and power of the Office of Auditor General were passed to the Bureau of State Audits. This was done in response to the passage of Proposition 140 which had the effect of greatly reducing the size and scope of the Auditor General's office. SUPPORT: As of June 21, 2013: California State Auditor's Office OPPOSE: None on file as of June 21, 2013. FISCAL COMMITTEE: Senate Appropriations Committee **********