BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 481|
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UNFINISHED BUSINESS
Bill No: SB 481
Author: Hueso (D)
Amended: 6/18/15
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
SENATE FLOOR: 29-0, 4/30/15
AYES: Allen, Anderson, Beall, Block, Cannella, De León,
Fuller, Galgiani, Hall, Hancock, Hertzberg, Hill, Hueso, Huff,
Jackson, Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell,
Monning, Nielsen, Pan, Pavley, Roth, Wieckowski, Wolk
NO VOTE RECORDED: Bates, Berryhill, Gaines, Hernandez,
Moorlach, Morrell, Nguyen, Runner, Stone, Vidak
ASSEMBLY FLOOR: 75-0, 7/16/15 - See last page for vote
SUBJECT: Local government: auditors: independence
SOURCE: Author
DIGEST: This bill prohibits local agency employees who work on
internal audits from being directly overseen by a local agencys
general counsel.
Assembly Amendments delete language prohibiting local agency
employees who work on audits from being required to report to a
general counsel or employees of the general counsel.
ANALYSIS:
SB 481
Page 2
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
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
SB 481
Page 3
between a public agency and its lawyers to be kept
confidential.
This bill 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.
Background
Audits provide essential accountability and transparency over
government programs. Given their importance, the public's
ability to access these reports is paramount. Employees who
perform audits must choose from 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. Statute authorizes internal auditors to
follow either standard. However, both standards fail to
preserve complete transparency of internal audit reports. Some
local governments are conducting internal audits under the
direction of a 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
Com.:YesLocal: Yes
SUPPORT: (Verified7/21/15)
City of Berkeley City Auditor Ann-Marie Hogan
City of Calexico
City of El Centro City Manager Ruben A. Duran
City of San Diego City Auditor Eduardo Luna
SB 481
Page 4
El Centro Chamber of Commerce and Visitors Bureau
Imperial County Board of Supervisors
OPPOSITION: (Verified7/21/15)
None received
ASSEMBLY FLOOR: 75-0, 7/16/15
AYES: Achadjian, Alejo, Baker, Bigelow, Bloom, Bonilla, Bonta,
Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez,
Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd,
Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia,
Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gray, Grove,
Hadley, Harper, Roger Hernández, Holden, Irwin, Jones,
Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low,
Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin,
Nazarian, O'Donnell, Olsen, Perea, Quirk, Ridley-Thomas,
Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond,
Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins
NO VOTE RECORDED: Travis Allen, Gordon, Obernolte, Patterson,
Rendon
Prepared by:Brian Weinberger / GOV. & F. / (916) 651-4119
8/13/15 13:24:42
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