Senate Bill No. 584

Introduced by Senator Wyland

February 22, 2013

An act to amend Section 14502.1 of, and to add Section 17076.12 to, the Education Code, relating to school facilities.

LEGISLATIVE COUNSEL’S DIGEST

SB 584, as introduced, Wyland. School facilities: financial and performance audits.

(1) Existing law requires the Controller, in consultation with the Department of Finance, the State Department of Education, and representatives of certain nongovernmental organizations, to recommend the statements and other information to be included in the audit reports filed with the state, and to propose the content of an audit guide that is required to be submitted by the Controller to the Education Audits Appeal Panel for review and possible amendment.

This bill would require the Controller, on or before January 1, 2015, and in consultation with the State Allocation Board, the Department of Finance, and the State Department of Education, to submit content to the Education Audits Appeal Panel to be included in the audit guide, Standards and Procedures for Audits of California K-12 Local Educational Agencies 2015-16, that is related to specified financial and performance audits required for school facility projects.

(2) The California Constitution limits the maximum amount of any ad valorem tax on real property to 1% of the full cash value of the property except for ad valorem taxes or assessments that pay the interest and redemption charges on bonded indebtedness incurred by a school district, community college district, or county office of education for the construction, rehabilitation, or replacement of school facilities approved by 55% of the voters if the proposition includes specified accountability requirements, including, but not limited to, a requirement that the governing board of either the school district or community college district or county office of education conduct annual independent performance and financial audits. Existing law requires, by March 31 of each year, the annual, independent financial and performance audits for the preceding fiscal year to be submitted to a citizens’ oversight committee that is required to be established if a proposition is approved by the voters, as described above.

Existing law also requires a school district that has received any funds pursuant to the Leroy F. Greene School Facilities Act of 1998 (the act) to submit an annual summary report of the expenditure of state funds and of district matching funds until all state funds and district matching funds are expended, and then the school district is required to submit a final report to the State Allocation Board.

This bill would also require a school district that has received any funds or apportionments pursuant to the act to submit annual independent financial and performance audits to the State Allocation Board for the preceding fiscal year to ensure that the funds have been expended only in accordance with the act. The bill would prohibit a school district that does not annually submit these audits from receiving funds or apportionments pursuant to the act.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 14502.1 of the Education Code is
amended to read:

14502.1.  

(a) The Controller, in consultation with the
Department of Finance and the State Department of Education,
shall develop a plan to review and report on financial and
compliance audits. The plan shall commence with the 2003-04
fiscal year for audits of school districts, other local education
agencies, and the offices of county superintendents of schools.
The Controller, in consultation with the Department of Finance,
the State Department of Education, and representatives of the
California School Boards Association, the California Association
of School Business Officials, the California County
Superintendents Educational Service Association, the California
Teachers Association, the California Society of Certified Public
Accountants, shall recommend the statements and other information
to be included in the audit reports filed with the state, and shall
propose the content of an audit guide to carry out the purposes of
this chapter. A supplement to the audit guide may be suggested in
the audit year, following the above process, to address issues
resulting from new legislation in that year that changes the
conditions of apportionment. The proposed content of the audit
guide and any supplement to the audit guide shall be submitted by
the Controller to the Education Audits Appeal Panel for review
and possible amendment.

(b) The audit guide and any supplement shall be adopted by the
Education Audits Appeal Panel pursuant to the rulemaking
procedures of the Administrative Procedure Act as set forth in
Chapter 3.5 (commencing with Section 11340) of Part 1 of Division
3 of Title 2 of the Government Code. It is the intent of the
Legislature that, for the 2003-04 fiscal year, the audit guide be
adopted by July 1 of the fiscal year to be audited. A supplemental
audit guide may be adopted to address legislative changes to the
conditions of apportionment. It is the intent of the Legislature that
supplements be adopted before March 1 of the audit year.
Commencing with the 2004-05 fiscal year, and each fiscal year
thereafter, the audit guide shall be adopted by July 1 of the fiscal
year to be audited. A supplemental audit guide may be adopted to
address legislative changes to the conditions of apportionment.
The supplements shall be adopted before March 1 of the audit
year. To meet these goals and to ensure the accuracy of the audit
guide, the process for adopting emergency regulations set forth in
Section 11346.1 of the Government Code may be followed to
adopt the guide and supplemental audit guide. It is the intent of
the Legislature that once the audit guide has been adopted for a
fiscal year, as well as any supplement for that year, thereafter only
suggested changes to the audit guide and any additional
supplements need be adopted pursuant to the rulemaking
procedures of the Administrative Procedure Act. The audit guide
and any supplement shall be issued in booklet form and may be
made available by any means deemed appropriate. The Controller
and consultants in the development of the suggested audit guide
and any supplement shall work cooperatively on a timeline that
will allow the education audits appeal panel to meet the July 1 and
March 1 issuance dates. Consistent with current practices for
development of the audit guide before the 2003-04 fiscal year, the
Controller shall provide for the adoption of procedures and
timetables for the development of the suggested audit guide, any
supplement, and the format for additions, deletions, and revisions.

(c) For the audit of school districts or county offices of education
electing to take formal action pursuant to Sections begin delete 22714, 22714.5, end delete
begin insert 22714 and end insert 44929, begin delete and 44929.1, end delete the audit guide content proposed
by the Controller shall include, but not be limited to, the following:

(1) The number and type of positions vacated.

(2) The age and service credit of the retirees receiving the
additional service credit provided by Sections begin delete 22714,22714.5,
44929, and 44929.1 end delete begin insert 22714 and 44929 end insert .

(3) A comparison of the salary and benefits of each retiree
receiving the additional service credit with the salary and benefits
of the replacement employee, if any.

(4) The resulting retirement cost, including interest, if any, and
postretirement health care benefits costs, incurred by the employer.

(d) The Controller shall annually prepare a cost analysis, based
on the information included in the audit reports for the prior fiscal
year, to determine the net savings or costs resulting from formal
actions taken by school districts and county offices of education
pursuant to Sections begin delete 22714, 22714.5, 44929, and 44929.1 end delete begin insert 22714
and 44929 end insert , and shall report the results of the cost analysis to the
Governor and the Legislature by April 1 of each year.

(e) All costs incurred by the Controller to implement subdivision
(c) shall be absorbed by the Controller.

begin delete

(f) This section shall become operative July 1, 2003 and shall
apply to the preparation of the audit guide for school district audits
commencing with the 2003-04 fiscal year.

end delete begin insert

(f) On or before January 1, 2015, the Controller, in consultation
with the State Allocation Board, the Department of Finance, and
the State Department of Education, shall submit content to the
Education Audits Appeal Panel to be included in the audit guide,
Standards and Procedures for Audits of California K-12 Local
Educational Agencies 2015-16, that is related to the financial and
performance audits required for school facility projects, as
described in Sections 15286 and 17076.12.

end insert

SEC. 2.  

Section 17076.12 is added to the Education Code, to
read:

17076.12.  

(a) A school district that has received any funds or
apportionments pursuant to this chapter shall submit annual,
independent financial and performance audits for the preceding
fiscal year to the board to ensure that the funds have been expended
only in accordance with this chapter.

(b) If a school district fails to annually submit the audits required
by subdivision (a), the school district shall be prohibited from
receiving funds or apportionments pursuant to this chapter.