SB 490, as amended, Beall. Regional centers: audits.
Under existing law, the Lanterman Developmental Disabilities Services Act, the State Department of Developmental Services is authorized to contract with regional centers to provide services and supports to individuals with developmental disabilities. Existing law requires an entity that receives payments between $250,000 and $500,000 per year from one or more regional centers to obtain an independent audit or review of its financial statements and requires an entity that receives payments that are equal to or more than $500,000 per year to obtain an independent audit. Existing law exempts payments made using usual and customary rates for services provided by regional centers from these requirements.
This bill would instead require an entity to obtain an independent audit or review report of its financial statements relating to payments made by regional centers if it receives payments between $500,000 and $2,000,000 from one or more regional centers and would authorize these entities to apply for, and require the regional center to grant, a 2-year exemption from this requirement if the regional center does not find issues in the audit or review that have an impact on regional center services. The bill would also require an entity to obtain an independent audit if it receives payments that are equal to or more than $2,000,000 and would authorize these entities to apply for, and require the regional center to grant, a 2-year exemption from the audit requirement if the audit resulted in an unmodified opinion, an unmodified opinion with additional communication, or a qualified opinion with issues that are not material and pervasive. The bill would require a regional center to notify the department of any exemption it grants to an entity that receives a qualified opinion report. The bill would also exempt social security benefit payments from these requirements.
Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.
The people of the State of California do enact as follows:
Section 4652.5 of the Welfare and Institutions
2Code is amended to read:
(a) (1) An entity that receives payments from one or
4more regional centers shall contract with an independent accounting
5firm to obtain an independent audit or review of its financial
6statements relating to payments made by regional centers subject
7to all of the following:
8(A) If the amount received from the regional center or regional
9centers during the entity’s fiscal year is more than or equal to five
10hundred thousand dollars ($500,000) but less than two million
11dollars ($2,000,000), the entity shall obtain an independent audit
12or independent review report of its financial statements for the
13period. Consistent with Subchapter 21 (commencing with Section
1458800) of
Title 17 of the California Code of Regulations, this
15subdivision shall also apply to work activity program providers
16receiving less than two hundred fifty thousand dollars ($250,000).
17(B) If the amount received from the regional center or regional
18centers during the entity’s fiscal year is equal to or more than two
19million dollars ($2,000,000), the entity shall obtain an independent
20audit of its financial statements for the period.
21(2) This requirement does not apply to payments made using
22usual and customary rates, as defined by Title 17 of the California
P3 1Code of Regulations, for services provided by regional centers or
2social security benefit payments.
3(3) This requirement does not apply to state and local
4governmental
agencies, the University of California, or the
5California State University.
6(b) An entity subject to subdivision (a) shall provide copies of
7the independent audit or independent review report required by
8subdivision (a), and accompanying management letters, to the
9vendoring regional center withinbegin delete 30 days
after completion of the
10audit or review.end delete
11entity.end insert
12(c) Regional centers that receive the audit or review reports
13required by subdivision (b) shall review and require resolution by
14the entity for issues identified in the report that have an impact on
15regional center services. Regional centers shall take appropriate
16action, up to termination of vendorization, for lack of adequate
17resolution of issues.
18(d) Regional centers shall notify the department of all qualified
19opinion reports or reports noting significant issues that directly or
20indirectly impact regional center services within 30 days after
21receipt. Notification shall
include a plan for resolution of issues.
22(e) For purposes of this section, an independent review of
23financial statements shall be performed by an independent
24accounting firm and shall cover, at a minimum, all of the following:
25(1) An inquiry as to the entity’s accounting principles and
26practices and methods used in applying them.
27(2) An inquiry as to the entity’s procedures for recording,
28classifying, and summarizing transactions and accumulating
29information.
30(3) Analytical procedures designed to identify relationships or
31items that appear to be unusual.
32(4) An inquiry about budgetary actions taken at
meetings of the
33board of directors or other comparable meetings.
34(5) An inquiry about whether the financial statements have been
35properly prepared in conformity with generally accepted accounting
36principles and whether any events subsequent to the date of the
37financial statements would have a material effect on the statements
38under review.
P4 1(6) Working papers prepared in connection with a review of
2financial statements describing the items covered as well as any
3unusual items, including their disposition.
4(f) For purposes of this section, an independent review report
5shall cover, at a minimum, all of the following:
6(1) Certification that the review was
performed in accordance
7with standards established by the American Institute of Certified
8Public Accountants.
9(2) Certification that the statements are the representations of
10management.
11(3) Certification that the review consisted of inquiries and
12
analytical procedures that are lesser in scope than those of an audit.
13(4) Certification that the accountant is not aware of any material
14modifications that need to be made to the statements for them to
15be in conformity with generally accepted accounting principles.
16(g) The department shall not consider a request for adjustments
17to rates submitted in accordance with Title 17 of the California
18Code of Regulations by an entity receiving payments from one or
19more regional centers solely to fund either anticipated or
20unanticipated changes required to comply with this section.
21(h) (1) An entity required to obtain an independent audit or
22independent review of its financial statement pursuant to
23subparagraph
(A) of paragraph (1) of subdivision (a) may apply
24to the regional center for, and the regional center shall grant, a
25two-year exemption from the independent audit or independent
26review requirement if the regional center does not find issues in
27the prior year’s independent audit or independent review that have
28an impact on regional center services.
29(2) An entity required to obtain an independent audit of its
30financial statements pursuant to subparagraph (B) of paragraph
31(1) of subdivision (a) may apply to the regional center for an
32exemption from the independent audit requirement, subject to all
33of the following conditions:
34(A) If the independent audit for the prior year resulted in an
35
unmodified opinion or an unmodified opinion with additional
36communication, the regional center shall grant the entity a two-year
37exemption.
38(B) If the independent audit for the prior year resulted in a
39qualified opinion and the issues are not material and pervasive,
40the regional center shall grant the entity a two-year exemption.
P5 1However, the entity and the regional center shall continue to
2address issues raised in this independent audit, regardless of
3whether the exemption is granted.
4(3) A regional center shall notify the department of any
5exemption it grants to an entity that receives a qualified opinion
6report.
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