BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 481|
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THIRD READING
Bill No: SB 481
Author: Hueso (D)
Amended: 4/8/15
Vote: 21
SENATE GOVERNANCE & FIN. COMMITTEE: 5-0, 4/15/15
AYES: Hertzberg, Beall, Hernandez, Lara, Pavley
NO VOTE RECORDED: Nguyen, Bates
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
SUBJECT: Local government: auditors: independence
SOURCE: Author
DIGEST: This bill prohibits local agency employees who work on
internal audits from reporting to, or being directly overseen
by, a local agency's general counsel.
ANALYSIS:
Existing law:
1)Requires local government employees who conduct audits or
audit activities of their respective local government must
conduct their work under the general and specified standards
prescribed by the Institute of Internal Auditors or the
Government Auditing Standards issued by the Comptroller
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General of the United States.
2)Enumerates the following general standards for local
governments' internal audits and audit activities:
a) Auditors should be independent of the activities they
audit.
b) Audits should be performed with proficiency and due
professional care.
c) The scope of the audit should encompass the examination
and evaluation of the adequacy and effectiveness of the
organization's system of internal control and the quality
of performance in carrying out assigned responsibilities.
d) Audit work should include planning the audit, examining
and evaluating information, communicating results, and
following up.
e) The chief auditor should properly manage the auditing
department.
3)Declares that these internal audit standards do not limit the
rights or obligations of auditors to conduct audits and audit
activities in accordance with other laws and regulations that
may apply to a particular entity.
4)Requires public records to be open to inspection during office
hours and gives every person a right to inspect public
records, with specific exceptions.
5)Creates an exception for records that are subject to the
"attorney client privilege," which allows communications
between a public agency and its lawyers to be kept
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confidential.
This bill:
1)Prohibits the general counsel of a city, county, city and
county, or district, or the general counsels' employees, from
having direct oversight over city, county, city and county, or
district employees who conduct audits or audits activities of
the respective agency.
2)Prohibits all city, county, city and county, or district
employees who conduct audits or audit activities of those
respective agencies from being required to report to the
general counsel or any employees of the general counsel.
Comments
Audits provide essential accountability and transparency over
government programs. Given their importance, the public's
ability to access these reports is paramount. Currently, there
are two sets of professional auditing standards that employees
who perform audits must choose from. One standard, known as the
yellow book, is published by the US Government Accountability
Office. The other standard, known as the red book, is published
by the Institute of Internal Auditors. Statute authorizes
internal auditors to follow either standard. However, both
standards fail to preserve complete transparency of internal
audit reports. Some local governments are reporting their
internal auditors' reports to their General Counsel. By doing
so, those reports are being classified as attorney-client
privileged communications, which limits public disclosure of the
audit reports. Neither the red book nor the yellow book
prohibits this practice. This bill augments the auditing
standards that apply to local governments' internal audits to
prevent local officials from using the attorney-client privilege
to conceal audit information from members of the public.
FISCAL EFFECT: Appropriation: No Fiscal
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Com.:YesLocal: Yes
SUPPORT: (Verified4/27/15)
Berkeley City Auditor Ann-Marie Hogan
City of Calexico
City of El Centro
El Centro Chamber of Commerce & Visitor's Bureau
Imperial County
San Diego City Auditor Eduardo Luna
OPPOSITION: (Verified4/27/15)
None received
Prepared by:Brian Weinberger / GOV. & F. / (916) 651-4119
4/28/15 15:31:08
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