BILL ANALYSIS Ó SB 481 Page 1 Date of Hearing: July 8, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair SB 481 (Hueso) - As Amended June 18, 2015 ----------------------------------------------------------------- |Policy |Local Government |Vote:|9 - 0 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: YesReimbursable: No SUMMARY: This bill prohibits local agency employees who work on internal audits from being directly overseen by a local agency's general SB 481 Page 2 counsel. FISCAL EFFECT: Negligible state costs. COMMENTS: 1)Purpose. According to the author, "Audits provide essential accountability and transparency over government programs and it is important that the public has access to them. Some organizations require their internal auditors (to) be supervised by their general counsel. This structure weakens the independence and transparency of an auditor's work by making it easier for organizations to claim that a particular audit report is a privileged communication between an attorney and client, meaning the public no longer has access to it. This bill would address this issue by prohibiting a general counsel from having direct supervision over an auditor, thereby ensuring greater public access to these audit reports." 2)Background. Existing law requires local employees who perform audits or audit activities to operate under one of two sets of professional auditing standards. 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. While both standards indicate that auditors should be independent of the activities they audit, neither standard prohibits audits from being reported to a general counsel. SB 481 Page 3 The California Public Records Act (CPRA) requires public records to be open to inspection during office hours and gives every person a right to inspect public records, with specific exceptions. One exception applies to records that are subject to the "attorney client privilege," which allows communications between a public agency and its lawyers to be kept confidential. Generally, the final reports of local agencies' internal audits are public records that are open to inspection pursuant to the CPRA. 3)Previous Legislation. SB 1452 (Speier), Chapter 452, Statutes of 2006, enacted a number of provisions to update auditing standards for local and state auditors, and to ensure the independence of internal auditors for state agencies specifically. Analysis Prepared by:Jennifer Swenson / APPR. / (916) 319-2081