BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     SB 481  


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          Date of Hearing:  July 8, 2015


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                                 Jimmy Gomez, Chair


          SB 481  
          (Hueso) - As Amended June 18, 2015


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          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  


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          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  


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            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