BILL ANALYSIS �
SB 584
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Date of Hearing: June 12, 2013
ASSEMBLY COMMITTEE ON EDUCATION
Joan Buchanan, Chair
SB 584 (Wyland) - As Amended: April 15, 2013
SENATE VOTE : 32-0
SUBJECT : School facilities: financial and performance audits
SUMMARY : Requires the State Controller, on or before January 1,
2015, in consultation with the State Allocation Board (SAB), the
Department of Finance (DOF), and the California Department of
Education (CDE), to submit content to the Education Audit
Appeals Panel (EAAP) to be included in the audit guide,
Standards and Procedures for Audits of California K-12 Local
Educational Agencies, beginning in the 2015-16 fiscal year, that
is related to the financial and performance audits required for
school facility projects pursuant to Proposition 39 of 2000.
EXISTING LAW :
1)Authorizes, under Section 1 of Article XIII A of the
California Constitution, school districts, community college
districts, or county offices of education to pass a general
obligation bond by a 55% vote, provided that the local
initiative includes the following accountability measures:
a) A requirement that the proceeds from the sale of the
bonds be used only for the construction, reconstruction,
rehabilitation, or replacement of school facilities,
including the furnishing and equipping of school
facilities, or the acquisition or lease of real property
for school facilities, and not for any other purpose;
b) Provide a list of the specific school facilities
projects to be funded and certification that the school
district board, community college board, or county office
of education has evaluated safety, class size reduction,
and information technology needs in developing that list;
c) A requirement that the school district board, community
college board, or county office of education conduct an
annual, independent performance audit to ensure that the
funds have been expended only on the specified projects;
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and,
d) A requirement that the school district board, community
college board, or county office of education conduct an
annual, independent financial audit of the proceeds from
the sale of the bonds until all of those proceeds have been
expended for the school facilities projects.
2)Requires the annual, independent financial and performance
audits for the preceding fiscal year to be submitted to the
citizens' oversight committee by March 31 of each year and
requires the audits to be conducted in accordance with the
Government Auditing Standards issued by the Comptroller
General of the United States for financial and performance
audits.
3)Requires each county superintendent of schools to provide for
an audit of all funds under his or her jurisdiction and
control. Requires governing board of each local educational
agency (LEA) to either provide for an audit of the books and
accounts of the LEA or make arrangements with the county
superintendent of schools to provide for that auditing.
Requires the audit to comply fully with the Government
Auditing Standards issued by the Comptroller General of the
United States.
FISCAL EFFECT : According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
COMMENTS : In 2000, voters passed Proposition 39, a
Constitutional Amendment which, among others, gave districts the
opportunity to seek approval of a local education bond based on
a 55% vote rather than a 2/3 vote, provided that the local bond
initiative meets the following accountability measures:
1)The initiative identifies a list of the specific school
facilities projects that will be funded by bond proceeds;
2)A requirement that the school board, community college board,
or county office of education conduct an annual, independent
performance audit to "ensure that the funds have been expended
only on the specific projects listed;" and,
3)A requirement that the school board, community college board,
or county office of education conduct an annual, independent
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financial audit of the proceeds from the sale of the bonds
until all of those proceeds have been expended for the school
facilities projects.
Both the financial audit and performance audits must be reviewed
by an independent citizens' oversight committee. AB 1908
(Lempert), Chapter 44, Statutes of 2000, a companion bill to
Proposition 39, requires each district, within 60 days of the
passage of a local bond with 55% to appoint a citizens'
oversight committee to monitor and review expenditures to ensure
compliance with Proposition 39 requirements, and to keep the
public informed about bond expenditures. SB 1473 (Wyland),
Chapter 294, Statutes of 2010, requires the audits to be
conducted in accordance with the generally accepted government
auditing standards (GAGAS), informally known as the "Yellow
Book", issued by the comptroller general of the United States,
and SB 423 (Wyland), Chapter 237, Statutes of 2011, requires the
audits to be submitted to the citizens' oversight committee by
March 31 of each year.
This bill requires the Controller, in consultation with the SAB
(the ten-member body that oversees state education bond funds),
DOF and CDE, to develop content on the audit of the Proposition
39 financial and performance audits for submission to the EAAP
to be included in the audit guide of financial and performance
audits of LEAs, beginning in the 2015-16 fiscal year. The audit
guide - Standards and Procedures for audits of California K-12
Local Educational Agencies - is adopted by the EAAP, pursuant to
the rulemaking procedures of the Administrative Procedure Act,
by July 1 of the fiscal year to be audited (and any supplement,
as authorized, before March 1 of the audit year), based on
content proposed by the Controller in consultation with the DOF
and the CDE. This bill would incorporate the financial and
performance audits of local education bonds passed with a 55%
vote within the audit guide.
The author states, "While there is a clearly laid out and
functional process for non-Propositional 39 school audits, there
are currently no explicit guidelines crafted specifically for
constitutionally required financial and performance audits."
Vicenti, Lloyd & Stutzman, LLP opposes this bill and argues that
it makes sense to have a clearly defined audit guide for K-12
annual district financial and compliance audits because the
Education Code provides uniformity for expenditures of funds.
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However, "the needs of a Prop 39 audit differ from District to
District and even differ within the same District over time,
making a performance audit more appropriate. A performance
audit under GAGAS can take a variety of forms and should be
designed to meet the objectives of the audited organization.
Every District in California has different objectives to be
addressed, especially as General Obligation Bond activities
differ greatly based on the life cycle of the bond. Each phase
- planning, construction, equipping, etc - of a project is
different. Complying with a "one-size fits all" audit guide
does not meet the needs of the COC [citizens' oversight
committee], the Board of Education or any other users of the
audit reports."
Related legislation . SB 581 (Wyland), also on this Committee's
June 12, 2013 agenda, requires a school district to provide the
citizens' oversight committee a response to any findings,
recommendations and concerns raised in the Proposition 39
financial and performance audits of local education bond funds
within three months of receiving the audits and requires the
draft and final audits to be submitted to the citizens'
oversight committee at the same time they are submitted to
school or community college districts.
Prior related legislation . SB 423 (Wyland), Chapter 237,
Statutes of 2011, requires the Proposition 39 financial and
performance audits for the preceding fiscal year to be submitted
to the citizens' oversight committees by March 31 of each year.
SB 1473 (Wyland), Chapter 294, Statutes of 2010, requires the
annual, independent financial and performance audits required by
Proposition 39 to be conducted in accordance with the
Government Auditing Standards issued by the Comptroller General
of the United States, to the extent required by Proposition 39.
REGISTERED SUPPORT / OPPOSITION :
Support
California League of Bond Oversight Committees (co-sponsor)
Howard Jarvis Taxpayers Association (co-sponsor)
Opposition
SB 584
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Vicenti, Lloyd & Stutzman LLP
Analysis Prepared by : Sophia Kwong Kim / ED. / (916) 319-2087