BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 625|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
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CONSENT
Bill No: AB 625
Author: Bonta (D)
Amended: 7/1/15 in Senate
Vote: 21
SENATE EDUCATION COMMITTEE: 9-0, 6/24/15
AYES: Liu, Runner, Block, Hancock, Leyva, Mendoza, Monning,
Pan, Vidak
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
ASSEMBLY FLOOR: 76-0, 5/26/15 - See last page for vote
SUBJECT: School finance: emergency apportionments:
compliance audits
SOURCE: Superintendent of Public Instruction
DIGEST: This bill requires the State Controller, the
Superintendent of Public Instruction (SPI), and the school
district superintendent to meet before each audit of a school
district that has received an emergency apportionment to discuss
the terms of the audit and the timeline under which it will
proceed.
ANALYSIS:
Existing law:
1)Provides the authority for emergency loans to be given to
school districts that are unable to meet their current
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operating expenses. Such loans are provided by legislation
enacted at the request of the district. Existing law requires
districts that receive an emergency loan to agree to statutory
terms and conditions regarding repayment of the loan and the
steps to be taken to return the district to financial
solvency.
2)Requires, if a district receives an emergency loan of up to
200% of its recommended budget reserve, the SPI to appoint a
trustee who has the authority to stay and rescind any action
of the school district governing board. Further, the
appointed trustee serves until the loan is repaid and the
district has adequate fiscal systems and controls in place.
3)Requires, if a school district receives an emergency loan of
more than 200% of its recommended budget reserve, the SPI to
assume all legal rights, duties, and powers of the governing
board and to appoint an administrator to act on his or her
behalf in exercising this authority. The SPI may return power
to the governing board after specified conditions are met.
The costs of the trustee and administrator and other related
oversight and monitoring activities are borne by the district.
Since 1991, nine school districts have received emergency
loans, including: Oakland Unified, Vallejo City Unified, King
City Joint Union High School District (formerly South Monterey
County Joint Union High School District), West Fresno, and
most recently, Inglewood Unified.
4)Requires an annual audit for a school district that has
received an emergency apportionment due to an inability to
meet its financial obligations.
5)Provides that the audit may be conducted by the State
Controller or his or her designee or an auditor selected by
the school district and approved by the State Controller.
6)Requires the SPI, in the case of an appeal, to either approve
or disapprove of the school district's budget.
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7)Requires the SPI, if he or she disapproves the budget, to
notify the school district in writing of the decision.
8)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 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;
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
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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.
This bill requires the State Controller, the SPI, and the school
district superintendent, or their respective designees, to meet
before each audit of a school district that has received an
emergency apportionment to discuss the terms of the audit and
the timeline under which it will proceed.
Comments
Need for the bill. According to the author's office, the annual
audit process for school districts that have been taken over by
the state and received an emergency apportionment has been a
recent point of contention. In prior years, because of the
unique difficulties posed by school audits and the exceptional
workload placed upon the State Controller, audits took
consistently longer than their private sector counterparts and
were more expensive. While a single late audit would be a
surmountable challenge, the delay of subsequent audits had the
effect of compounding the adverse impacts and increasing the
burden on the audited district.
Late audits. The author's office indicates that of 38 audits
for five different school 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. Late audits may occur
for several reasons such as problems with locating old records
or failure for school districts to submit information. The late
audits can cause several problems for districts, including a
lower credit rating resulting in higher interest rates,
difficulties in projecting financial needs because the current
financial condition is not known, and compounded audit
exceptions because problems are not identified in time to be
corrected prior to the next year's audit.
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FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
SUPPORT: (Verified7/7/15)
Superintendent of Public Instruction (source)
Oakland Unified School District
OPPOSITION: (Verified7/7/15)
None received
ARGUMENT IN SUPPORT: The sponsor of this measure, the
Superintendent of Public Instruction, has indicated its intent
to establish communication between the State 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.
ASSEMBLY FLOOR: 76-0, 5/26/15
AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bonilla,
Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau,
Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd,
Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia,
Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray,
Grove, Hadley, Roger Hernández, Holden, Irwin, Jones,
Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low,
Maienschein, Mayes, McCarty, Medina, Melendez, Mullin,
Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea,
Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago,
Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber,
Wilk, Williams, Wood, Atkins
NO VOTE RECORDED: Bloom, Chávez, Harper, Mathis
Prepared by:Lenin Del Castillo / ED. / (916) 651-4105
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7/8/15 10:30:33
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