Amended in Senate July 1, 2015

Amended in Senate June 17, 2015

Amended in Assembly May 6, 2015

Amended in Assembly April 16, 2015

Amended in Assembly March 26, 2015

California Legislature—2015–16 Regular Session

Assembly BillNo. 625


Introduced by Assembly Member Bonta

February 24, 2015


An act to amend Section 41320.1 of the Education Code, relating to school finance.

LEGISLATIVE COUNSEL’S DIGEST

AB 625, as amended, Bonta. School finance: emergency apportionments: compliance audits.

Existing law authorizes the governing board of a school district to request an emergency apportionment through the Superintendent of Public Instruction if the governing board of the school district determines during a fiscal year that its revenues are less than the amount necessary to meet its current year expenditure obligations. Under existing law, if a school district accepts an emergency apportionment, that acceptance constitutes agreement by the school district to numerous conditions, among which is an agreement that the Controller, or his or her designee, or an auditor selected by the school district and approved by the Controller shall conduct an annual audit of the books and accounts of the school district, as specified. This provision requires these audits to continue until the Controller determines, in consultation with the Superintendent, that the school district is financially solvent, but in no event earlier than one year following the implementation of the school district’s fiscal plan or later than the time the apportionment is repaid, including interest.

This bill, for an audit conducted by the Controller, or his or her designee, would require the Controller, the Superintendent, and the school district superintendent, or their respective designees, to meet before the audit to discuss the terms of the audit and the timeline under which it will proceed.

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

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

P2    1begin insert

begin insertSECTION 1.end insert  

end insert

begin insertSection 41320.1 of the end insertbegin insertEducation Codeend insertbegin insert, as
2amended by Section 34 of Chapter 19 of the Statutes of 2015, is
3amended to read:end insert

4

41320.1.  

Acceptance by the school district of the
5apportionments made pursuant to Section 41320 constitutes the
6agreement by the school district to all of the following conditions:

7(a) The Superintendent shall appoint a trustee who has
8recognized expertise in management and finance and may employ,
9on a short-term basis, staff necessary to assist the trustee, including,
10but not limited to, certified public accountants, as follows:

11(1) The expenses incurred by the trustee and necessary staff
12shall be borne by the school district.

13(2) The Superintendent shall establish the terms and conditions
14of the employment, including the remuneration of the trustee. The
15trustee shall serve at the pleasure of, and report directly to, the
16Superintendent.

17(3) The trustee, and necessary staff, shall serve until the school
18district has adequate fiscal systems and controls in place, the
19Superintendent has determined that the school district’s future
20compliance with the fiscal plan approved for the school district
21under Section 41320 is probable, and the Superintendent decides
22to terminate the trustee’s appointment, but in nobegin delete event,end deletebegin insert eventend insert for
23less than three years. The Superintendent shall notify the county
24superintendent of schools, the Legislature, the Department of
P3    1Finance, and the Controller no less than 60 days before the time
2that the Superintendent expects these conditions to be met.

3(4) Before the school district repays the loan, including interest,
4the recipient of the loan shall select an auditor from a list
5established by the Superintendent and the Controller to conduct
6an audit of its fiscal systems. If the fiscal systems are deemed to
7be inadequate, the Superintendent may retain the trustee until the
8deficiencies are corrected. The cost of this audit and any additional
9cost of the trustee shall be borne by the school district.

10(5) Notwithstanding any other law, all reports submitted to the
11trustee are public records.

12(6) To facilitate the appointment of the trustee and the
13employment of necessary staff, for purposes of this section, the
14Superintendent is exempt from the requirements of Article 6
15(commencing with Section 999) of Chapter 6 of Division 4 of the
16Military and Veterans Code and Part 2 (commencing with Section
1710100) of Division 2 of the Public Contract Code.

18(7) Notwithstanding any other law, the Superintendent may
19appoint an employee of the department to act as trustee for up to
20the duration of the trusteeship. The salary and benefits of that
21employee shall be established by the Superintendent and paid by
22the school district. During the time of appointment, the employee
23is an employee of the school district, but shall remain in the same
24retirement system under the same plan as if the employee had
25remained in the department. Upon the expiration or termination
26of the appointment, the employee shall have the right to return to
27his or her former position, or to a position at substantially the same
28level as that position, with the department. The time served in the
29appointment shall be counted for all purposes as if the employee
30had served that time in his or her former position with the
31department.

32(b) (1) The trustee appointed by the Superintendent shall
33monitor and review the operation of the school district. During the
34period of his or her service, the trustee may stay or rescind an
35action of the governing board of the school district that, in the
36judgment of the trustee, may affect the financial condition of the
37school district.

38(2) After the trustee’s period of service, and until the loan is
39repaid, the county superintendent of schools that has jurisdiction
40over the school district may stay or rescind an action of the
P4    1governing board of the school district that, in his or her judgment,
2may affect the financial condition of the school district. The county
3superintendent of schools shall notify the Superintendent, within
4five business days, if he or she stays or rescinds an action of the
5governing board of the school district. The notice shall include,
6 but not be limited to, both of the following:

7(A) A description of the governing board of the school district’s
8intended action and its financial implications.

9(B) The rationale and findings that support the county
10superintendent of school’s decision to stay or rescind the action
11of the governing board of the school district.

12(3) If the Superintendent is notified by the county superintendent
13of schools pursuant to paragraph (2), the Superintendent shall
14report to the Legislature, on or before December 30 of every year,
15whether the school district is complying with the fiscal plan
16approved for the school district.

17(4) The Superintendent may establish timelines and prescribe
18formats for reports and other materials to be used by the trustee to
19monitor and review the operations of the school district. The trustee
20shall approve or reject all reports and other materials required from
21the school district as a condition of receiving the apportionment.
22The Superintendent, upon the recommendation of the trustee, may
23reduce an apportionment to the school district in an amount up to
24two hundred dollars ($200) per day for each late or unacceptable
25report or other material required under this part, and shall report
26to the Legislature a failure of the school district to comply with
27the requirements of this section. If the Superintendent determines,
28at any time, that the fiscal plan approved for the school district
29under Section 41320 is unsatisfactory, he or she may modify the
30plan as necessary, and the school district shall comply with the
31plan as modified.

32(c) At the request of the Superintendent, the Controller shall
33transfer to the department, from an apportionment to which the
34school district would otherwise have been entitled pursuant to
35Section 42238.02, as implemented by Section 42238.03, the amount
36necessary to pay the expenses incurred by the trustee and associated
37costs incurred by the county superintendent of schools.

38(d) For the fiscal year in which the apportionments are disbursed
39and every year thereafter, the Controller, or his or her designee,
40shall cause an audit to be conducted of the books and accounts of
P5    1the school district, in lieu of the audit required by Section 41020.
2At the Controller’s discretion, the audit may be conducted by the
3Controller, his or her designee, or an auditor selected by the school
4district and approved by the Controller. The costs of these audits
5shall be borne by the school district. These audits shall be required
6until the Controller determines, in consultation with the
7Superintendent, that the school district is financially solvent, but
8in no event earlier than one year following the implementation of
9the plan or later than the time the apportionment made is repaid,
10including interest.begin insert For an audit conducted by the Controller, or
11his or her designee, the Controller, the Superintendent, and the
12school district superintendent, or their respective designees, shall
13meet before the audit to discuss the terms of the audit and the
14timeline under which it will proceed.end insert
In addition, the Controller
15shall conduct quality control reviews pursuant to subdivision (c)
16of Section 14504.2.

17(e) For purposes of errors and omissions liability insurance
18policies, the trustee appointed pursuant to this section is an
19employee of the local educational agency to which he or she is
20assigned. For purposes of workers’ compensation benefits, the
21trustee is an employee of the local educational agency to which
22he or she is assigned, except that a trustee appointed pursuant to
23paragraph (7) of subdivision (a) is an employee of the department
24for those purposes.

25(f) Except for an individual appointed by the Superintendent as
26trustee pursuant to paragraph (7) of subdivision (a), the
27state-appointed trustee is a member of the State Teachers’
28Retirement System, if qualified, for the period of service as trustee,
29unless the trustee elects in writing not to become a member. A
30person who is a member or retirant of the State Teachers’
31Retirement System at the time of appointment shall continue to
32be a member or retirant of the system for the duration of the
33appointment. If the trustee chooses to become a member or is
34already a member, the trustee shall be placed on the payroll of the
35school district for the purpose of providing appropriate
36contributions to the system. The Superintendent may also require
37that an individual appointed as trustee pursuant to paragraph (7)
38of subdivision (a) be placed on the payroll of the school district
39for purposes of remuneration, other benefits, and payroll
40deductions. For purposes of workers’ compensation benefits, the
P6    1state-appointed trustee is deemed an employee of the local
2educational agency to which he or she is assigned, except that a
3trustee who is appointed pursuant to paragraph (7) of subdivision
4(a) is an employee of the department for those purposes.

begin delete
5

SECTION 1.  

Section 41320.1 of the Education Code is
6amended to read:

7

41320.1.  

Acceptance by the school district of the
8apportionments made pursuant to Section 41320 constitutes the
9agreement by the school district to all of the following conditions:

10(a) The Superintendent shall appoint a trustee who has
11recognized expertise in management and finance and may employ,
12on a short-term basis, staff necessary to assist the trustee, including,
13but not limited to, certified public accountants, as follows:

14(1) The expenses incurred by the trustee and necessary staff
15shall be borne by the school district.

16(2) The Superintendent shall establish the terms and conditions
17of the employment, including the remuneration of the trustee. The
18trustee shall serve at the pleasure of, and report directly to, the
19Superintendent.

20(3) The trustee, and necessary staff, shall serve until the school
21district has adequate fiscal systems and controls in place, the
22Superintendent has determined that the school district’s future
23compliance with the fiscal plan approved for the school district
24under Section 41320 is probable, and the Superintendent decides
25to terminate the trustee’s appointment, but in no event for less than
26three years. The Superintendent shall notify the county
27superintendent of schools, the Legislature, the Department of
28Finance, and the Controller no less than 60 days before the time
29that the Superintendent expects these conditions to be met.

30(4) Before the school district repays the loan, including interest,
31the recipient of the loan shall select an auditor from a list
32established by the Superintendent and the Controller to conduct
33an audit of its fiscal systems. If the fiscal systems are deemed to
34be inadequate, the Superintendent may retain the trustee until the
35deficiencies are corrected. The cost of this audit and any additional
36cost of the trustee shall be borne by the school district.

37(5) Notwithstanding any other law, all reports submitted to the
38trustee are public records.

39(6) To facilitate the appointment of the trustee and the
40employment of necessary staff, for purposes of this section, the
P7    1Superintendent is exempt from the requirements of Article 6
2(commencing with Section 999) of Chapter 6 of Division 4 of the
3Military and Veterans Code and Part 2 (commencing with Section
410100) of Division 2 of the Public Contract Code.

5(7) Notwithstanding any other law, the Superintendent may
6appoint an employee of the department to act as trustee for up to
7the duration of the trusteeship. The salary and benefits of that
8employee shall be established by the Superintendent and paid by
9the school district. During the time of appointment, the employee
10is an employee of the school district, but shall remain in the same
11retirement system under the same plan as if the employee had
12remained in the department. Upon the expiration or termination
13of the appointment, the employee shall have the right to return to
14his or her former position, or to a position at substantially the same
15level as that position, with the department. The time served in the
16appointment shall be counted for all purposes as if the employee
17had served that time in his or her former position with the
18department.

19(b) (1) The trustee appointed by the Superintendent shall
20monitor and review the operation of the school district. During the
21period of his or her service, the trustee may stay or rescind an
22action of the governing board of the school district that, in the
23judgment of the trustee, may affect the financial condition of the
24school district.

25(2) After the trustee’s period of service, and until the loan is
26repaid, the county superintendent of schools that has jurisdiction
27over the school district may stay or rescind an action of the
28governing board of the school district that, in his or her judgment,
29may affect the financial condition of the school district. The county
30superintendent of schools shall notify the Superintendent, within
31five business days, if he or she stays or rescinds an action of the
32governing board of the school district. The notice shall include,
33but not be limited to, both of the following:

34(A) A description of the governing board of the school district’s
35intended action and its financial implications.

36(B) The rationale and findings that support the county
37superintendent of school’s decision to stay or rescind the action
38of the governing board of the school district.

39(3) If the Superintendent is notified by the county superintendent
40of schools pursuant to paragraph (2), the Superintendent shall
P8    1report to the Legislature, on or before December 30 of every year,
2whether the school district is complying with the fiscal plan
3approved for the school district.

4(4) The Superintendent may establish timelines and prescribe
5formats for reports and other materials to be used by the trustee to
6monitor and review the operations of the school district. The trustee
7shall approve or reject all reports and other materials required from
8the school district as a condition of receiving the apportionment.
9The Superintendent, upon the recommendation of the trustee, may
10reduce an apportionment to the school district in an amount up to
11two hundred dollars ($200) per day for each late or unacceptable
12report or other material required under this part, and shall report
13to the Legislature a failure of the school district to comply with
14the requirements of this section. If the Superintendent determines,
15at any time, that the fiscal plan approved for the school district
16under Section 41320 is unsatisfactory, he or she may modify the
17plan as necessary, and the school district shall comply with the
18plan as modified.

19(c) At the request of the Superintendent, the Controller shall
20transfer to the department, from an apportionment to which the
21school district would otherwise have been entitled pursuant to
22Section 42238, the amount necessary to pay the expenses incurred
23by the trustee and associated costs incurred by the county
24superintendent of schools.

25(d) For the fiscal year in which the apportionments are disbursed
26and every year thereafter, the Controller, or his or her designee,
27shall cause an audit to be conducted of the books and accounts of
28the school district, in lieu of the audit required by Section 41020.
29At the Controller’s discretion, the audit may be conducted by the
30Controller, his or her designee, or an auditor selected by the school
31district and approved by the Controller. The costs of these audits
32shall be borne by the school district. These audits shall be required
33until the Controller determines, in consultation with the
34Superintendent, that the school district is financially solvent, but
35in no event earlier than one year following the implementation of
36the plan or later than the time the apportionment made is repaid,
37including interest. For an audit conducted by the Controller, or his
38or her designee, the Controller, the Superintendent, and the school
39district superintendent, or their respective designees, shall meet
40before the audit to discuss the terms of the audit and the timeline
P9    1under which it will proceed. In addition, the Controller shall
2conduct quality control reviews pursuant to subdivision (c) of
3Section 14504.2.

4(e) For purposes of errors and omissions liability insurance
5policies, the trustee appointed pursuant to this section is an
6employee of the local educational agency to which he or she is
7assigned. For purposes of workers’ compensation benefits, the
8trustee is an employee of the local educational agency to which
9he or she is assigned, except that a trustee appointed pursuant to
10paragraph (7) of subdivision (a) is an employee of the department
11for those purposes.

12(f) Except for an individual appointed by the Superintendent as
13trustee pursuant to paragraph (7) of subdivision (a), the
14state-appointed trustee is a member of the State Teachers’
15Retirement System, if qualified, for the period of service as trustee,
16unless the trustee elects in writing not to become a member. A
17person who is a member or retirant of the State Teachers’
18Retirement System at the time of appointment shall continue to
19be a member or retirant of the system for the duration of the
20appointment. If the trustee chooses to become a member or is
21already a member, the trustee shall be placed on the payroll of the
22school district for the purpose of providing appropriate
23contributions to the system. The Superintendent may also require
24that an individual appointed as trustee pursuant to paragraph (7)
25of subdivision (a) be placed on the payroll of the school district
26for purposes of remuneration, other benefits, and payroll
27deductions. For purposes of workers’ compensation benefits, the
28state-appointed trustee is deemed an employee of the local
29educational agency to which he or she is assigned, except that a
30trustee who is appointed pursuant to paragraph (7) of subdivision
31(a) is an employee of the department for those purposes.

end delete


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