BILL ANALYSIS Ó SENATE COMMITTEE ON EDUCATION Carol Liu, Chair 2013-2014 Regular Session BILL NO: AB 1825 AUTHOR: Nazarian INTRODUCED: February 18, 2014 FISCAL COMM: Yes HEARING DATE: June 4, 2014 URGENCY: No CONSULTANT:Lenin Del Castillo SUBJECT : Office of the Inspector General. SUMMARY This bill proposes to extend the sunset date of the Los Angeles Unified School District's Office of the Inspector General by ten years from January 1, 2015, to January 1, 2025. BACKGROUND Current law authorizes the Los Angeles Unified School District's Office of Inspector General until January 1, 2015, to conduct audits and investigations, as specified, including the ability to subpoena witnesses, administer oaths or affirmations, take testimony, and compel the production of all information and documentary evidence deemed material and relevant and that reasonably relate to the inquiry or investigation undertaken by the Inspector General when there is reasonable suspicion that a law, regulation, rule, or district policy has been violated or is being violated. Current law provides that "reasonable suspicion" means that the circumstances known or apparent to the Inspector General include specific and articulable facts causing him or her to suspect that a material violation of law, regulation, or school district policy has occurred or is occurring, and that the facts would cause a reasonable officer in a similar position to suspect that a material violation of a law, regulation, rule, or school district policy has occurred or is occurring. Current law provides that any person who, after the administration of an oath or affirmation, states or affirms AB 1825 Page 2 as true any material matter that he or she knows to be false, is a misdemeanor publishable by imprisonment in a county jail not to exceed six months or by a fine of up to $5,000 or both for the first offense, and that each subsequent violation shall be punishable by imprisonment not to exceed one year or by a fine of up to $10,000 or both. Additionally, the Inspector General is required to submit annual reports to the Legislature and a final cumulative report by December 1, 2014, on all of the following: 1) The use and effectiveness of the subpoena power in the successful completion of the Inspector General's duties; 2) Any use of the subpoena power in which it was quashed, including the basis for the court's order; and 3) Any referral to the local district attorney or Attorney General where the district attorney or Attorney General declined to investigate the matter further or declined to prosecute. ANALYSIS This bill extends the sunset date of January 1, 2015, for the Office of the Inspector General by ten years to January 1, 2025. Additionally, this bill changes the deadline for the Inspector General to submit a final cumulative report, as specified, from December 1, 2014, to December 1, 2024 STAFF COMMENTS 1) Office of the Inspector General . The Los Angeles Unified School District's Office of the Inspector General was originally established by Chapter 295, Statutes of 1999, SB 1260 (Hayden), at the request of the school district with the primary mission of detecting and preventing waste, fraud, and abuse. It was also established in response to criticism over the district's attempt to build a new downtown school on expensive property that later turned out to be AB 1825 Page 3 contaminated. At that time, the district's Internal Audits and Special Investigation Unit had been in existence for one year, but it was difficult or impossible to conduct investigations, especially those that involve an outside party such as a contractor, and that the unit had no authority to compel to provide documents or other types of information. The Office of Inspector General originally had a sunset date of January 1, 2001, but subsequent legislation extended the sunset date-Chapter, 750, Statutes of 2000, SB 1360 (Hayden), and Chapter 462, Statutes of 2002, AB 2425 (Richman). The Office of the Inspector General consists of 52 employees and operates within a $7.2 million budget that is fully funded at the local level. The Los Angeles Unified School District has indicated that since its inception, the Inspector General has saved the district a total of approximately $585 million as a result of greater efficiencies, from the identification of disallowed or unsupported costs related to contracts and grants, and from restitution recovered via the courts. 2) Need for the bill . According to the Los Angeles Unified School District, the Inspector General's subpoena power may compel the production of information deemed material and relevant in situations that the Inspector General has reasonable suspicion that a law, regulation, rule, or policy has been violated. The bill would ensure the Inspector General maintains its subpoena power to compel private individuals and entities to collaborate and ensure that audits and investigations are conducted in a timely manner. The Los Angeles Unified School District has indicated that absent the subpoena authority, the Inspector General could not effectively perform its mission and would be limited in its efforts to provide law enforcement with sufficient information to determine if a prosecution should be pursued. 3) Senate Office of Oversight and Outcomes report . The Senate Office of Oversight and Outcomes report, AB 1825 Page 4 "Food Fight: Small team of state examiners no match for schools that divert student meal funds" discussed weaknesses and gaps in the oversight system for student meal funds. According to the report, school districts have been illegally dipping into student meal funds and misappropriating them when they are intended to feed low income students. The misappropriations are in most cases attempts by school districts to use cafeteria funds to pay for a greater share of personnel, utility, and other costs. The Inspector General documented the district's misappropriation of cafeteria funds. As part of the report, the Senate Office of Oversight and Outcomes recommended that the Legislature should consider eliminating or extending the sunset date for the Los Angeles Unified School District's Office of Inspector General. 4) Committee amendments . Staff recommends that the bill be amended to retain the deadline for the Office of the Inspector General to submit a cumulative report on December 1, 2014, and require that a final cumulative report be submitted on December 1, 2024. SUPPORT Los Angeles Unified School District (sponsor) OPPOSITION None on file.