BILL ANALYSIS Ó
AB 625
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Date of Hearing: April 29, 2015
ASSEMBLY COMMITTEE ON EDUCATION
Patrick O'Donnell, Chair
AB 625
Bonta - As Amended April 16, 2015
SUBJECT: School finance: emergency apportionments: compliance
audits
SUMMARY: Requires the State Controller and Superintendent of
Public Instruction (SPI) or their respective designees to meet
before each audit, develop an audit plan, and coordinate the
audit before the Controller conducts an audit of the books and
accounts of a school district that has received an emergency
apportionment.
EXISTING LAW:
1)Requires an annual audit of the books and accounts of a school
district that has received an emergency apportionment due to
an inability to meet its financial obligations.
2)Provides that the audit may be conducted by the Controller or
his or her designee or an auditor selected by the school
district and approved by the Controller.
3)Requires the SPI, in the case of an appeal, to either approve
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or disapprove of the school district's budget.
4)Requires the SPI, if he or she disapproves the budget, to
notify the school district in writing of the decision.
5)Requires the county superintendent of schools, in the case of
a district with a disapproved budget, and until the county
superintendent of schools certifies the district's first
interim report, to do the following as necessary:
a) Develop and adopt, by November 30, in consultation with
the SPI and the district governing board, a fiscal plan and
budget that will govern the district and will allow the
district to meet its financial obligations, both in the
current fiscal year and with regard to the district's
multiyear financial commitments;
b) Cancel purchase orders, prohibit the issuance of
non-salary warrants, and otherwise stay or rescind any
action that is inconsistent with the budget.
c) Monitor and review the operation of the district;
d) Determine the need for additional staff and may employ,
subject to approval by the SPI, short-term analytical
assistance or expertise to validate financial information
if the district staff does not have the expertise or staff;
e) Require the school district to encumber all contracts
and other obligations, to prepare appropriate cash flow
analyses and monthly or quarterly budget revisions, and to
appropriately record all receivables and payables;
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f) Determine whether there are any financial problem areas
and may employ, subject to approval by the SPI, a certified
public accounting firm to investigate financial problem
areas; and
g) Withhold compensation of the members of the governing
board of the district and the superintendent of the
district for failure to provide requested financial
information.
6)Makes technical, nonsubstantive changes.
FISCAL EFFECT: Legislative counsel has keyed this bill as a
state mandated local program
COMMENTS: The annual audits that are required of districts that
have received an emergency apportionment are in lieu of the
annual audits otherwise required. Information provided by the
author's office shows that these audits are usually late. In
fact, of the 38 due dates of audits for five different districts
in receivership, only four have been completed by the due date.
The others have been late by periods ranging from 43 to 961 days
(more than two and a half years). Late audits can cause several
problems for districts, including:
A lower credit rating, resulting in higher interest
rates (a credit rating agency did not give the Oakland
Unified School District credit rating at all, due to the
absence of a current audit).
Difficulty in projecting financial needs, because the
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current financial condition is not known.
Compounded audit exceptions, because problems are not
identified in time to be corrected prior to the next year's
audits.
Difficulty in locating old records, especially in
districts that has experience excessive staff turnover due
to being in receivership.
This bill is sponsored by the SPI, whose intent is to establish
communication between the SPI and the Controller prior to an
audit to develop a plan, establish coordination, and help ensure
that needed documentation is available and shared in order to
meet the audit's deadline.
Committee amendment. According to the State Controller's Office
(SCO), this bill could be interpreted to sign-off or approval of
an audit plan. This, in turn, could jeopardize the independence
of the audit, especially since the district being audited is
under the control of the SPI. The SCO recommends the following
alternative language: "The Controller, the Superintendent, and
the head of the affected district's governing board, or their
respective designees, shall meet before each audit to discuss
the terms of the audit and the timeline under which it will
proceed." Staff recommends that the bill be amended make this
change.
REGISTERED SUPPORT / OPPOSITION:
Support
AB 625
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Oakland Unified School District
Superintendent of Public Instruction, Tom Torlakson
Opposition
None received
Analysis Prepared by:Rick Pratt / ED. / (916) 319-2087